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Botswana: Energy Policy to be in place by 2015
The Minister of Minerals, Energy and Water Resources Kitso Mokaila has revealed that government is currently drafting an energy policy. The policy is expected to map out a successful way forward for Botswana’s renewable energy landscape.
Speaking at a two-day renewable energy conference in Gaborone on Monday, Mokaila said the policy is expected to be finalised and be ready for approval by 2015. The Energy Policy will provide a policy framework to guide effectiveness and sustainability in energy planning, development and provision. The plan is also to develop a detailed renewable energy strategy.
He said that government, in collaboration with the Japanese government, is undergoing a research project to cultivate a Jatropha carcus that will be resistant to Botswana’s extreme weather conditions.
“It is hoped that the species cultivated through this project will provide feedstock for Biodiesel production. I am first to admit the deficiency of the policy framework for the energy sector in general, and the renewable energy sub-sector in particular,” he said.
Currently, there is only one Biodiesel Plant in Lobatse with a capacity to produce at least one million litres per annum and about seven biogas installations nationwide.
However, the Minister stressed that there are other potential energy sources that can be harnessed such as; bi-energy for bio-diesel production, municipal solid waste for electricity generation and biogas for heating.
Botswana sees, on average, 320 clear sunny days per year, but the resource so abundantly available has not been utilised due to some key barriers with regard to information, finance, policy and framework, institutional arrangements and perceptions.
“At the country level, there was insufficient knowledge about available technologies and technological developments but we need to significantly harness this resource with respect to which we have a comparative advantage,” Mokaila added.
In order to successfully incorporate renewable energy into the main steam energy mix, the government has been working on initiatives to use natural resource to generate energy.
Earlier, government embarked on several initiatives aimed at introducing renewable energy into the mainstream energy mix. Unfortunately, some weren’t successful enough to become long term sustainable solutions.
Some such initives included the Botswana Renewable Energy Technology project, which was in operation during the 1980s, the Manyana PV Rural Electrification Programme, which started in 1992, as well as the National PV Rural Electrification Programme, which was implemented in 1997 with the aim of disseminating PV electrification throughout the country.
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Mega roads project targets 137,000 jobs in three years
Nearly 137,000 direct jobs are set to be created during the construction of a 10,000-kilometre road network over the next three years, government estimates show.
The Transport and Infrastructure ministry reckons the ambitious road plan will create demand for engineers, surveyors, technicians, machine operators and labourers, easing biting unemployment among Kenya’s growing population.
The project is expected to start in December to enhance connectivity, promote trade and attract investment by reducing the cost of doing business.
A new financing model dubbed annuity concessions has been crafted to accelerate the construction and will see contractors design, build, finance, operate and maintain the roads for some time, with the Treasury acting as a guarantor for their bank loans.
“We expect about 137,000 jobs to be created directly by the annuity programme during the construction,” said Kenya Rural Roads Authority’s (Kerra) director general Mwangi Maingi in an interview.
Aside from accelerating the pace of infrastructure development through a steady flow of cash upfront, the annuity model will see the State transfer construction, operation and maintenance risks to the private sector.
Road construction in Kenya has often lagged due to cash shortfalls, with only 14,100km or 8.7 per cent of the total network being tarmacked.
Skills gap in technical fields has also been a problem, prompting private investors to set up technical training centres.
Toyota Kenya last month opened an academy in Nairobi to train youth on earthmoving machinery and car maintenance.
Kerra, which is the agency in charge or rural roads construction, noted that about 3060 units of construction equipment would be needed. They include earth-movers, excavators, rollers and concrete equipment, watering the market for dealers in these products.
New demand will also be created with the construction of the Sh327 billion new railway line linking Mombasa to Nairobi that is targeted to employ about 30,000 local workers. Their recruitment will start in October.
The first phase of the roads upgrade in this fiscal year will create 29,000 jobs during which time a fifth of the total network is expected to be built, ministry estimates show.
The jobs will increase in the subsequent phases with 43,750 workers earmarked for a 3,000km stretch in the 2015/16 fiscal year and another 64,250 employees to build the remaining 5,000km by 2017.
Highways will account for a fifth of the proposed roads meant to boost interconnectivity and open up remote areas and cut transport costs for business growth.
The new jobs will help ease the pain of unemployment, especially among youth and women for whom 30 per cent of the contracts will be reserved as part of government efforts to deal with the jobs crisis.
The project, whose bidding window is open until August 29, is valued at Sh260 billion.
Kwame Owino of the Institute of Economic Affairs said the investments will help stimulate demand by households and encourage firms to produce more, impacting positively on the economy.
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Is Aid for Trade still viable?
At a time of economic and financial stress, the aid budgets of the main donor countries are under pressure. Aid for Trade (AfT) will not be spared, as shown by the decline in AfT spending in 2011 – the first ever decline since the launch of the AfT Initiative back in 2005.
To maintain any momentum, AfT’s supporters need to show results and value for money. And to do that, they must develop a culture of evaluation.
The question then becomes: what is AfT trying to achieve?
This question has not been raised for years, at least not in terms that allowed any proper monitoring of results or measurement of the aid effectiveness of AfT against agreed performance indicators.
In fact, the AfT Initiative has been, for the most part, a vast operation of aid repackaging, with old projects re-labeled as AfT when they happened to have trade-related aspects. No surprise, then, that a 2011 meta-evaluation of AfT revealed that objectives assigned to AfT projects were often only remotely – if at all – related to trade.
For example, 97pc of total AfT spending since the 2005 launch of the Initiative (around 200 billion dollars) went to economic infrastructure (53pc) and building productive capacities (44pc) – in other words, traditional aid projects that happened to have an impact on trade. Only three percent went to trade policy and regulations and trade-related adjustment. It seems that donors had been ‘doing’ AfT before 2005 without even knowing it and, while real (a 57pc increase in AfT commitments), the AfT success has been, very largely, the result of a statistical fine-tuning.
This does not mean that the AfT Initiative has been useless: it is important to assess the trade, as well as, say, the environmental or gender dimensions of aid. The AfT concept is also crucial for advocacy, for mainstreaming trade in country development strategies, and for resource mobilisation. So if the case for AfT has to be made in the competition for shrinking aid budgets, donors should agree on the objectives of the initiative and be able to measure its impact.
This is not an easy task. For instance, trade agreements are often used as foreign policy instruments to promote peace among nations. For example, the construction of Europe, which started with a trade agreement on coal and steel, helped make another war between France and Germany impossible. It is often hard to measure their impact in pure economic terms.
International trade patterns have also changed. With the prevalence of global value chains (GVCs) in business strategies, it appears that the development of fully-integrated domestic industries is no longer the best path to trade integration, and that developing countries should make every effort to join major GVCs and capture as much of the value-added as possible along these chains.
This means that AfT should not be all about promoting exports anymore, but about creating a business environment conducive to attracting segments of GVCs and moving up value chains. In a context full of GVCs, a country cannot become a competitive exporter unless it is an efficient importer. Trade facilitation has become the key to success, and an easy start for consensus, benefiting both importers and exporters.
Ultimately, what matters is not so much the value of trade, but rather the value for trade, which entails what is left in the country once the trade transaction has taken place. Trade and development strategies should facilitate intra-chain transfers (capital, technology, know-how and knowledge), and build up domestic backward and forward linkages that trigger socio-economic upgrading.
Who better than those who ‘do’ trade every day – the private sector – to determine the objectives of AfT and help to measure the impact of AfT projects?
A first step in the right direction was made at the Fourth Global AfT Review in July, 2013, when private companies were asked about the major incentives and obstacles to investment and sourcing in developing countries. The good news is that AfT priorities often match those of the private sector on, for example, trade facilitation (reduction of transport costs and customs delays or burdens), trade finance, or standard compliance.
However, some factors, such as business environment, governance (corruption), and skills, to name a few, often fall outside the scope and ambit of AfT. More efforts should be made to link the private sector to trade capacity-building efforts. Some lead firms already contribute to these efforts through intra-chain transfers, but there is a need for further synergy to maximise the spillover effects of foreign investment and trade integration.
At the same time, the prevalence of GVCs in business strategies presents new risks for developing countries (e.g. diffusion of private standards, higher trade volatility, vertical anticompetitive practices, land grab, etc.) that are also challenges to be addressed by public authorities, potentially with the aid of donors in the context of AfT.
A convenient political concept and bargaining chip in the negotiations for a reciprocal opening of markets, AfT is now passing the truth test: it will need to adjust to the reality of changing trade patterns in GVCs, and to the reality of shrinking aid budgets and increased demand for accountability. It will not be enough to continue looking backward at how the aid money was spent – countries now need to identify clear targets and objectives. Otherwise, AfT will remain a pure statistical illusion and political hoax.
By Olivier Cattaneo, an Adjunct Professor and research associate at Sciences Po, a public Higher Education Institution based in Paris, France.
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Structural transformation exacts smart industrialisation
Africa’s economic rise over the past two decades is no longer news. In the decade from 2003, the region’s output expanded by over five percent a year, in spite of a protracted slowdown in many of its biggest export markets. The African Development Bank (AfDB) is projecting even faster growth of 6.4pc this year.
At this rate, the continent’s economy would double in size before 2030. No wonder foreign investors are looking to cater to the growing African market. Even more important, intra-African investment – an event long awaited to create more growth across the continent – is expanding, led by companies such as South Africa’s Massmart and Nigeria’s Dangote Group.
Alongside all this optimism, there is also growing disquiet.
Can this growth be sustained?
The likely answer is: not without sufficient structural transformation. In Africa’s case, this requires shifting employment and resources out of traditional farming towards higher-productivity agriculture, manufacturing and services. As elsewhere, structural transformation is about boosting people’s skills and firms’ technological capabilities.
To succeed, this effort must be backed by nimble, more effective public institutions. If and when those elements fall into place, then transformation makes growth resilient, and hence durable.
Industrialisation, properly thought of, is a big part of that structural transformation. The word might still evoke images of cavernous factories and multinational corporations, but the fact is that industrialisation is by no means just about manufacturing or large companies.
Manufacturing today is about value addition. It interacts with the rest of the economy – both upstream with regard to energy and raw materials, and downstream, with distribution, logistics, environmental and financial services.
Economies around the world succeed because of their ability to build backward and forward links between the various sectors of the given country’s economy (as well as doing so across borders).
Independent of the level of economic development, this is the key to successful structural transformation. It applies to countries such as Germany, France and Italy just as much as for any African country.
In Africa’s case, a key aspect of industrialisation also concerns agriculture. The agro-processing sector, in particular, holds great promise for development in rural areas. But “classic” sectors such as natural resources and agriculture aside, how does Africa stack up with regard to services?
Recent evidence – mainly the gross domestic product (GDP) rebasing in Nigeria and Ghana – revealed that services accounted for more than half of their respective economies, far more than previously thought. Countries like Rwanda, Mauritius and Tanzania are also performing great on services trade. Tourism is in many countries an increasingly important driver of growth and employment.
As regards industrialisation, it has been long argued that Africa will have a hard time on this front because most of its firms lack proper size. However, this really is a common misconception about successful industrial activity.
Today, the prevailing approach is to operate on the basis of multi-country value chains. These integrate larger corporations with a myriad of small and medium enterprises (SMEs) across multiple sectors.
In Africa, SMEs account for over 80pc of private enterprises. That level is indeed very similar to the structure of many European economies. Already the largest employment creators, particularly for women and youth, their importance will only increase.
And they deserve much more attention on the global stage.
Why?
Because it will be these firms that will generate the bulk of the 500 million new jobs the world needs by 2030 – if poverty reduction is to stay ahead of population growth.
To be sure, this also represents vital challenges. Regulatory and administrative costs can impact SMEs up to ten times more than larger companies. Where the business environment is complex, and taxation systems unfair, SMEs will fail or go informal. That, in turn, means worse working conditions, lower innovation and a more limited contribution to growth and development.
Viewed in a positive light, Africa’s politicians have never had as much of an incentive to reduce stifling bureaucracy and anti-productive practices as they do now. It is not just a matter of better politics and policies, but of their young generation’s survival and their economies’ future growth path.
How about human resource development?
On education, the signs are promising. The percentage of Sub-Saharan African workers with a secondary school education is now around 40pc. That is about the level where Mexico and Turkey were in the 1980s when they began the industrialisation processes that eventually propelled them to membership in the Organisation for Economic Cooperation & Development (OECD).
The way that education and technology are combining to drive innovation is evident from the apps being churned out by start-ups from Dakar to Nairobi. Even Silicon Valley has taken notice.
African governments are under no illusions. They know that most of the heavy lifting for structural transformation will have to be done by Africans themselves. But the international community can play a very valuable role in supporting productivity growth and employment in Africa.
In its well-understood self-interest, it should look closely not just at whether, but how to integrate African firms into foreign markets. And for that the private sector will also have to take on a greater role in development efforts.
Why does participation in trade matter?
Tradable sectors tend to be more modern – and shifting economic activity towards them translates into making structural transformation a business and everyday reality.
There is much that the international community can do to help African SMEs internationalise. One key step we could take would be to ensure that United Nations’ post-2015 development agenda encourages trade integration, entrepreneurship and the economic empowerment of women.
Realising the African Union’s vision of prosperity, opportunity, health and sustainability will require healthy economic growth, sustained over decades. In the absence of structural transformation through smart industrialisation, growth is not likely to be possible.
In historical terms, the African Union’s “Agenda 2063” aims for the right target. It is intended to allow the AU’s member countries to celebrate the centenaries of their independence in an economically integrated continent that is free of hunger and poverty-related disease – not to mention free of aid donors.
By Arancha González, Former Chief of Staff at the World Trade Organisation (WTO) and current Executive Director of the Geneva-based International Trade Centre (ITC)
Intra-Africa trade: Going beyond political commitments
Progress will come when agreements are implemented
Among Africa’s policy wonks, underperforming trade across the continent is a favoured subject. To unravel the puzzle, they reel off facts and figures at conferences and workshops, pinpoint trade hurdles to overcome and point to the vast opportunities that lie ahead if only African countries could integrate their economies. It’s an interesting debate but with little to show for it until now.
The problem is partly the mismatch between the high political ambitions African leaders hold and the harsh economic realities they face. Case in point: they have set up no less than 14 trading blocs to pursue regional integration. Yet they have shown “a distinct reluctance to empower these institutions, citing loss of sovereignty and policy space as key concerns,” says Trudi Hartzenberg, executive director at the Trade Law Centre (TRALAC) for Southern Africa, an organization that trains people on trade issues. As a result of this reluctance, she says, “Regional institutions remain weak, performing mainly administrative functions.”
Trade flourishes when countries produce what their trading partners are eager to buy. With a few exceptions, this is not yet the case with Africa. It produces what it doesn’t consume and consumes what it doesn’t produce. It’s a weakness that often frustrates policy makers; it complicates regional integration and is a primary reason for the low intra-regional trade, which is between 10% and 12% of Africa’s total trade. Comparable figures are 40% in North America and roughly 60% in Western Europe. Over 80% of Africa’s exports are shipped overseas, mainly to the European Union (EU), China and the US. If you throw into the mix complex and often conflicting trade rules, cross-border restrictions and poor transport networks, it’s hardly surprising that the level of intra-Africa trade has barely moved the needle over the past few decades.
Not everybody agrees intra-Africa trade is that low. Some experts argue that a big chunk of the continent’s trade is conducted informally and at times across porous borders. Most borders, they point out, are often poorly managed or informal trade statistics are simply not included in the official flows recorded by customs officials. “We don’t have a way of capturing these types of activities because they’re informal,” said Carlos Lopes, the head of the UN Economic Commission for Africa, in an interview with Africa Renewal. The ECA, he explained, is planning to plug this information gap with a more precise picture of economic activities in Africa and give economic planners a better data set with which to work.
Regional economic blocs
To accelerate regional integration, the World Bank is advising African leaders to expand access to trade finance and reduce behind-the-border trade restrictions such as excessive regulations and weak legal systems. Nevertheless, saddled with weak economies, small domestic markets and 16 landlocked countries, governments believe they can achieve economic integration by starting at the regional level and working their way up, merging all the regional trading blocs into an African Free Trade Area. But with 14 different trading blocs, critics say that’s just too many. Some blocs have overlapping members and many countries belong to multiple blocs.
Yet, the challenge is not simply the number of trading blocs, experts say, but their track record. Governments need to implement their trade agreements. On this score, African countries perform poorly despite their strong political commitment to regional integration, notes Ms. Hartzenberg in her report, Regional Integration in Africa, published by the World Trade Organization, a global body on trade rules (download the paper here).
“In some cases, the challenge is that there may still not be a clear commitment to rules-based governance in African integration; [not] taking obligations that are undertaken in international agreements seriously,” says Hartzenberg in an email responding to questions from Africa Renewal. “Some argue that [African governments] need policy space to address the development challenges they face – but this does appear inconsistent with the signing of many regional agreements.” Lack of capacity to implement their obligations, she adds, is also to blame.
The African Development Bank (AfDB) shares this view. Its analysis of regional integration and intra-trade in Africa imputed slow progress to “a complex architecture of regional economic communities.” While this arrangement has yielded positive steps towards common regional targets, says the bank, “progress has been disappointing.”
Ms. Hartzenberg gave the example of the 15-member Southern African Development Community (SADC), a regional economic group, which launched a Free Trade Area in 2008. Despite SADC’s decision to remove trade restrictions, she says, some countries have not eliminated tariffs as stipulated by the agreement. Worse still, in some cases countries that removed the tariffs have since reinstated them.
To be fair, the SADC Trade Protocol has a provision that allows exemptions from phasing out tariffs. Some countries have applied for such exemptions, the TRALAC executive director said, but others have simply reintroduced the tariffs or alternative instruments such as domestic taxes. “This can be argued to demonstrate a lack of political will to implement agreed obligations. It could well be that some member states recognise belatedly the implications of the agreements they have signed and no longer want to be bound by these obligations.”
Poor infrastructure
Lack of progress in implementing agreements along with the absence of reliable transport, energy and information and technology infrastructure make the journey towards regional integration long and arduous. “Road freight moves incredibly slowly, while major ports are choked for lack of capacity,” observes the AfDB.
Even with the current gains Africa is making in upgrading regional infrastructure, Ibrahim Mayaki, the head of the New Partnership for Africa’s Development (NEPAD), the African Union’s development arm, finds the continent still faces serious infrastructure shortcomings across all sectors, both in terms of access and quality. NEPAD has just completed a 30-year plan that focuses on regional trans-border projects like the 4,500-km highway from Algiers in Algeria to Lagos, Nigeria.
Africa requires huge investments to develop, upgrade and maintain its infrastructure. The AfDB estimates the region would need to spend an additional $40 billion a year on infrastructure to address not only current weaknesses but also to keep pace with economic growth.
Sophisticated protectionism versus EPAs
Many of the trade deals Africa signs with its partners ignore the continent’s efforts to promote intra-Africa trade, according to trade analysts. Nick Dearden, a former director of the Jubilee Debt Campaign and now with World Development Movement, a global advocacy group on poverty, accuses the West of pushing for free trade models that benefit their interests, not Africa’s. He complains that many African countries are “locked into trade agreements which keep them dependent on one or two commodities.”
Writing on his blog hosted by The Guardian, Mr. Dearden says the EU is attempting to foist Economic Partnership Agreements [EPAs] on African countries. EPAs require EU trading partners to lower their tariffs on imports and exports on a reciprocal basis. Mr. Dearden warns that EPAs thwart Africa’s integration efforts and he instead advises African leaders to follow South Korea’s example of using a “range of government interventions” to boost trade. These include, among others, protecting industries, controlling food production and banking, and passing strong regulations to ensure people benefit from trade and investment.
Mr. Lopes of the ECA makes the same point. “Protection is not a bad word,” he asserts. He favours what he calls “sophisticated protectionism” but cautions African leaders to “do it with sophistication, which means you need to strike the right balance.” The ECA boss views sophisticated or smart protectionism not as a choice between state and market as if they “were two opposites.” His argument is that there cannot be industrialization without some form of smart protectionism; and without industrialization, Africa’s efforts to integrate its economies and increase intra-regional trade are less likely to succeed. Free trade enthusiasts, however, argue that protectionist policies could shrink the size of the global economy, create few winners and leave everybody worse off.
Beyond commitments
There is much that African countries need to do to increase intra-regional trade. For instance, they need to reduce dependence on commodities by expanding the services sector, including telecommunications, transport, educational and financial. They need to increase investments in infrastructure. And they need to eliminate or significantly reduce non-tariff barriers that are major roadblocks to intra-African trade. The list of non-tariff barriers is as long as it is comprehensive, ranging from prohibitive transaction costs to complex immigration procedures, limited capacity of border officials and costly import and export licensing procedures. For this to happen, it will take much more than political commitments; it will require practical steps on the ground even if they come with some costs.
This article appears in the August 2014 edition of Africa Renewal, published by the United Nations.
» Trade in Africa: Unfinished business | Africa Renewal, August 2014 (PDF, 6.79 MB)
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Calls for Africa to beneficiate its minerals
Southern African leaders have made renewed calls for regional economic integration and cross-border infrastructure development as the Southern African Development Community (SADC) Summit got underway on Sunday.
SADC Heads of State are meeting for their two-day summit in the resort town of Victoria Falls as slow economic growth and high rates of employments continue to torment in the region.
The beneficiation of minerals coming out of SADC took centre stage, in opening on Sunday, with incoming SADC chairperson and Zimbabwean President Robert Mugabe saying the goal for SADC to drive short and long term economic growth could be realised if only the region could beneficiate its minerals.
“Our region has abundant resources, which resources, instead of being sold in raw form, at very low prices, must instead be exploited and beneficiated in order to add value and cost to those products which we eventually export,” President Mugabe said.
“This process should assist us in our efforts to industrialise and in turn, increase employment opportunities for our people.”
Zimbabwe is taking over the chairpersonship of SADC for the next year. The Summit in Victoria Falls is emphasising economic growth and food production in a year that the African Union has dedicated to food security for the continent.
In his first speech as the chairperson of the regional body, President Mugabe urged the 15-member states to move away from exporting raw materials to Europe, Asia and America.
“I am confident that in our discussions, we will lay a foundation for the necessary value addition of our natural resources. Our material resources are capable of playing a pivotal role in the development of all SADC member states,” President Mugabe said.
Having adopted its blueprint for infrastructure development in a summit in Maputo in August 2012, SADC’s goal is to target the development of high priority infrastructure projects such as rail and marine.
Africa the next growth path
Also speaking at the summit, African Union Commission Chairperson Nkosazana Dlamini Zuma said Africa was the next growth path and a continent of endless possibility.
“Indeed we are able to navigate our social and economic challenges. We are defining our own agenda and Africa will be seen as the place to invest and do business,” Dlamini Zuma said.
She also weighed in on the issue of beneficiation of the continent’s minerals, saying the only time Africa can realise its potential is when it scaled down on exporting raw material.
“Exporting raw material resources means exporting the high level jobs we should be creating. Africa is endowed with oil, gas, platinum, gold diamond, you name it, but with all that endowment most of African countries are still lacking economic progression and are behind by development standards,” said Dlamini Zuma.
For Africa to achieve its potential, it needed to transform its economy and the way the continent does things, added Dlamini Zuma.
The two-day summit ends on Monday.
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Outcome of the SADC Council of Ministers Meeting, 14-15 August 2014, Victoria Falls
The SADC Council of Ministers meeting held on August 14 and 15, 2014 at Victoria Falls, Zimbabwe was attended by Ministers from all SADC Member States. The meeting was chaired by Hon. Simbarashe S. Mumbngegwi, the Minister of Foreign Affairs of the Republic of Zimbabwe after receiving the Council chairpersonship from Hon. Dr. George Thapula Chaponda, the Minister of Foreign Affairs of Republic of Malawi. During this sitting, Council considered several issues as follows:
The Status of SADC Finances - Council noted that almost all SADC Member States have remitted their Member contributions to the SADC budget for the fiscal year April 2014/15 to the SADC Secretariat. Council commended the International Cooperating Partners (ICPs) for their support.
Medium Term Strategy and Expenditure Framework for 2014/15 to 2018/19 - Council adopted the conclusions of the annual Review of the MTS, which will inform 2015/16 annual plans; and adjustments of the MTS pending Council’s approval of the Draft Revised RISDP.
Mid-Term Review of the Regional Indicative Strategic Development Plan (RISDP) - Council directed the Secretariat to finalise draft RISDP by frontloading industrialisation and its implementation strategy for consideration in March 2013 and requested the Committee of Ministers of Trade to review the sequencing of targeted outputs on Industrial Development and Trade Liberalisation in order to accorded centre stage to industrialisation in the current stage of integration in SADC.
Council also directed the Secretariat to develop the Implementation Plan and Budget for the Revised RISDP 2015-2020 and present it for consideration and approval in March 2015.
Trade - Council endorsed the decisions taken by the Committee of Ministers of Trade to address some of the implementation challenges of the Free Trade Area; and directed the Secretariat to facilitate implementation of all pillars of the development integration agenda, in particular, fast- track the coordination of measures for effective implementation of the SADC Industrial Development Policy Framework and the Industrial Upgrading and Modernisation Programme, in order to boost the Region’s productive competitiveness and industrial capacity, and promote equity, fairness and balance in intra-regional trade.
Economic Performance in 2013 against the SADC Macroeconomic Convergence Targets - Council urged Member States to steadily converge on the macroeconomic targets by implementing sustainable economic policies and diversifying their economies through value addition and beneficiation of natural resources.
Status of Power Demand and Supply in the Region - Council urged Member States to implement planned power generation projects on schedule to effectively address power shortfalls in the Region in the short term; and provide the necessary policy support to implement the Demand Side Management programme, including banning of incandescent light bulbs.
Digital Terrestrial Television (DTT) - Council urged Member States to expedite the implementation of the SADC Roadmap on Digital Broadcasting Migration; and incorporate the SADC Resolution on Digital Terrestrial Television in their planning so as to ensure that the Region meets its international obligations and migrate before the deadline of 17 June 2015.
Food Agriculture and Natural Resources - Council considered reports of the Ministerial cluster for Agriculture and Food Security; and Natural Resources and Environment, and recommended it to Summit for consideration. Council also and reiterated its decision to urge Member States to continue implementing the Plan of Action of the Dar-es-Salaam Declaration on Agriculture and Food Security.
SADC Food and Nutrition Security Strategy - Council endorsed the SADC Food and Nutrition Security Strategy for implementation in the Region; and mandated the Joint Committee of Ministers responsible for Agriculture and Food Security and Ministers of Health established under this Strategy to oversee implementation and review of the Strategy and report to Council biennially. Council considered and endorsed the Regional Agricultural Policy
Social and Human Development and Special Programmes - Council considered a summary of policy issues and programmes in the Social and Human Development Cluster during the year under review that were approved by the Sectoral Ministers responsible for Education; Science and Technology and Innovation; and Health and HIV and AIDS approved that South Africa be confirmed to host the Pan African University on Space Science on behalf of Southern Africa.
On Ebola Virus Disease (EVD) Outbreak - Council commended South Africa for offering to share its technical capacity and experience on Ebola and encouraged Member States to take advantage of the offer; and directed the Finance Sub Committee to assess modalities for establishment of a regional fund to assist Member States in emergency situations of a medical nature including the possibility of utilising existing funds.
Gender and Development - Council urged Member States that have not yet achieved the set target for equal making positions to take appropriate measures to do so, including to consider the adoption of appropriate measures including legislation, policy and reform of the electoral systems to facilitate the achievement of the gender parity goal in political and decision making positions.
Council: commended Member States that have developed and are implementing trafficking in persons specific legislation and urged Member States that do not have such legislation to develop and implement them to criminalise the practice and to support the implementation of the programme activities to effectively combat trafficking in persons, especially women and children, in the Region.
Council directed the Secretariat to set up a task force to facilitate the development of the draft Regional Multi-Dimensional Women’s Economic Empowerment Programme urged Member States to advocate for women’s access to land as it is key to food security and poverty alleviation in the Region; and ownership and control over productive resources such as finance, credit, technology to improve women’s economic capabilities.
Progress Report on the SADC Tribunal - Council considered and approved the draft new Protocol on the SADC Tribunal and recommended it to Summit for further consideration, approval and signature.
Status of signing, ratification of and accession to SADC Protocols
Legal Instruments - Council considered, approved and recommended the following legal instruments to Summit for adoption:
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Draft Protocol on Environment Management for Sustainable Development;
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Draft SADC Declaration on Regional Infrastructure Development and recommended it to Summit for adoption.
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Draft SADC Protocol on Employment and Labour.
Proposed Declaration on Small Island Developing States at the 34th Ordinary SADC Summit of Heads of State and Government - Council recommended to Summit to consider a Declaration on Small Island Developing States at the 34th Ordinary SADC Summit of Heads of State and Government and mandated the Secretariat to consult with a view to establishing a mechanism to better support Small Island Developing States.
Update on SADC-COMESA-EAC Tripartite Work Programme - Council directed the SADC Secretariat, in collaboration with the COMESA and EAC Secretariats to finalise the resource requirements of the Tripartite work programme and submit recommendations to its meeting in February 2015.
Update on Continental Integration Process - Council approved the recommendation of the Committee of Ministers of Trade that the target date for the establishment of the Continental Free Trade Area be sequenced with the completion of negotiations for the Tripartite Free Trade Area; and directed the Secretariat to communicate the same to the African Union Commission.
African Union and NEPAD - Council directed the SADC Secretariat to continue to ensure that the main strategic direction provided in the proposed strategy document on the Agenda 2063, is aligned with the Vision 2050 which will promote the SADC cooperation, integration and development agenda; and report regularly and accordingly on progress made on the development of the proposed strategy document on the Agenda 2063.
11th EDF Programming - Council approved the participation of SADC in the joint Regional Indicative Programme with COMESA, EAC, IGAD and IOC under the 11th EDF; and mandated the Secretariat to sign the 11th EDF Joint RIP with the relevant stakeholders by 30 September 2014.
Programming of the Euro 600 million funding for Regional Infrastructure - Council approved the SADC List of Potential Regional Infrastructure Investment Projects to be considered for financing under the 11th EDF 2015/16 Annual Action Plan.
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Trade row pits Kenya against Egypt
Kenya and Egypt are headed for a trade dispute that could affect the former’s tea exports following allegations that Cairo is importing sugar from Brazil and exporting it to Kenya as its own after repackaging.
The two are among the 19 members of the Common Market for Eastern and Southern Africa’s Free Trade Area, where products meeting the rules of origin enjoy preferential import taxes.
Under Comesa, a product must be fully produced in the exporting country, or the cost of landing at the port of destination must not exceed 60 per cent of the total cost of the materials used in the production of the product. The value added should account for at least 35 per cent of the ex-factory cost of the product.
Kenya says that just packaging sugar from Brazil does not meet the rules of origin threshold. Nairobi says Egypt is also exporting electronic equipment and paper materials from other countries under the same guise.
“The allegations by Kenya against Egypt were first about sugar. But the list has expanded to electronics and paper,” Comesa senior trade policy advisor Mwansa James Musonda, who is arbitrating in the dispute said.
Mumias East MP Benjamin Washiali said Egypt’s actions meant that other countries that are not members of Comesa were benefiting from the preferential incentives offered under the trade bloc.
Mr Washiali accused Comesa of weak policing of compliance with the rules of origin.
The MP spoke in Lusaka during a recent workshop organised by Comesa to discuss ways of ending the arbitrary food export and import bans within the bloc.
Egypt was not represented at the workshop but Mr Musando said Kenya lodged the complaint with Comesa, upon which the trading bloc instituted a fact-finding mission by Kenyan officials to Egypt.
Kenya Revenue Authority officials were part of the delegation, which visited several sugar factories in Egypt.
However, the report, which they presented to the Kenya government, was rejected on the grounds that it was not a reflection of Egypt’s true sugar production capacity.
The Kenya government appealed against the decision and was allowed to send a second fact finding mission that composed of international trade experts. It was during this visit that additional issues on electronics and paper arose, prompting protests from Egypt.
Comesa has now ordered Egypt to allow yet another fact finding mission from Kenya, which would also assess electronics and paper manufacturers. The dates for the mission are likely to be announced once the new Egyptian government settles in office.
The dispute, if not resolved immediately, could have ramifications for Kenya’s 600,000 small scale tea farmers as Egypt is one of the biggest buyers of Kenyan tea.
Kenya National Bureau of Statistics data shows that tea dominates Kenya’s trade with Egypt, accounting for 96 per cent of the Ksh21.4 billion ($251.7 million) worth of goods that it exports to Egypt (compared with imports worth $350.5 million).
Tea farmers in Kenya, the majority of whom are small scale, are yet to receive half year bonus payments because of what the Kenya Tea Development Agency, which manages over 64 factories says are poor prices at the world market partly due to the Egyptian crisis, instability in Pakistan and over production.
According to Mr Washiali, Egypt has been blackmailing Kenya threatening that in case of an escalation of the trade dispute, it will boycott buying Kenyan tea.
Data from the Tea Board of Kenya shows that the volume of tea shipped to export markets increased marginally to 42.7 million kilogrammes in June this year, compared with 42.3 million kilogrammes in the same period last year.
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US-Africa summit deals will benefit Kenya
Macharia Gaitho, among other critics of the recent Africa-US Leaders Summit, was recently sceptical in the press of the benefits the summit could be said to have brought.
His claim was apparently that little, other than Stetson hats, would be left to show for the effort that the government had put into preparing and attending the summit.
Other cynics had even more hardened views, but we need not trouble ourselves to look too closely at them.
The fact of the matter is that there were a wide range of substantial and important contacts, agreements, and discussions that resulted from the summit. Critics should also remember that this was the first meeting of its kind between African leaders and the American Government.
Here, I wish to review some of the main security-related outcomes of the trip. Perhaps the most important one was the security and governance initiative agreed at the summit.
The US Government committed to a partnership with six African countries, Kenya included. Over the next three to five years, the US and the six African countries will work together in a strategic partnership to strengthen their security sectors.
Under the terms of the agreement, the US and Kenya will conduct a joint assessment of the security threats and opportunities; before developing a strategic plan with priorities and specific goals to guide investments in the area; and then apply US technical expertise and other resources to advance the plan.
The initiative is a clear example of the full commitment of both the US and its African partners to genuine partnership in security matters for the common good.
CUSTOMS AGREEMENT
In addition, Treasury Cabinet Secretary Henry Rotich signed a Customs Mutual Assistance Agreement with the US Government. The agreement is especially timely given the challenges Kenya faces in managing its borders.
Illicit trade (in wildlife products, among others), illegal immigration, and revenue evasion are a grave danger to our nation’s economy, cohesion and security.
The agreement allows Kenya to benefit from American and other expertise by providing a framework for information sharing and co-operation between the two countries’ customs administrations as they fight transnational crime, customs offences, and terrorism. In brief, it makes it easier for both countries to defend their borders.
It also gives customs administrations, in both Kenya and the US, the legal framework we need for the exchange of information to assist in the prevention, detection and investigation of customs offences and crimes associated with goods crossing international borders.
Importantly, it also serves as a foundation for deeper engagement between the two customs administrations for many years to come.
TECHNICAL HELP
Interior Cabinet Secretary Joseph ole Lenku also met with senior figures in the hierarchy of IBM. In the recent past, the firm has installed a command and control centre for the National Police Service. It was resolved at the meeting that this technical help would be deepened.
IBM will now develop a targeted curriculum in intelligence and law enforcement, information management, big-data analytics, and cyber security as well as mobile computing.
In the first instance, the curriculum will be rolled out for new recruits at the Kiganjo Police College. The curriculum is expected to equip new recruits with the knowledge and skills that modern police officers must have if they are to deal with today’s crime.
IBM committed to supply security-related software for training in the curriculum, and to supply the curriculum at no cost to Kenya.
At another meeting with the chair of the Board of Visitors of the College of Computing, Mathematics and Natural Sciences at the University of Maryland, the Cabinet Secretary explored the need to step up the use of technology in the fight against crime.
It emerged, during the briefing, that useful results had been achieved once Unmanned Aerial Vehicles were combined with mathematical data and pattern analysis.
It was agreed the parties would meet in Kenya in September to discuss an implementation plan.
The writer is the chair of the National Assembly’s Security Committee.
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AU adopts report on the implementation of the African Minerals Development Center
The first Bureau Meeting of the third African Union Conference of Ministers Responsible for Mineral Resources Development (CAMRMRD) was held on 13 August 2014 in Luanda, Angola.
Organized by the Department of Trade and Industry of the African Union Commission (AUC), the meeting composed of Algeria, Chad, Ethiopia, Ghana and Mozambique as well as Angola as host country, RECs and key partners, considered the Senior Officers’ report on the institutionalization and the sustainability of the African Minerals Development Center (AMDC). Under the monitoring and policy guidance of the AUC, the Center will implement the Africa Mining Vision (AMV) and foster stability and cooperation in the minerals sector in conjunction with key regional and national mineral development centers and facilitate the effective and predictable integration in the African minerals sector.
The main objectives of the Centre shall be to support African Union Member States in the development and implementation of coherent policies including licensing, contracting, taxation and regulatory frameworks. It will increase regional mapping and exploration activities to upgrade mineral inventories and geoscientific information data bases. It will also contribute to the Plan of Action for Accelerating Industrial Development of Africa (AIDA) through promotion of beneficiation, industrial linkages, responsible investments, innovation and diversification. The Africa Mining Development Center will promote the continent’s policy space to pursue local beneficiation, value addition and resource-based industrialization and harness the potential of artisanal and small-scale mining by integrating it into regional and global value chains for inclusive growth and sustainable social and economic development.
In her opening remarks, the Commissioner for Trade and Industry, Mrs. Fatima Haram Acyl recalled the OAU/AU 50 years celebration with the important contribution of Agenda 2063 as a road map for the next 50 years. She explained that the Mineral Resources and other traditional and non-traditional commodities where Africa has huge endowments, will need to play their transformative role in the achievement of the goals and aspirations of the people on the continent. She underscored the importance the Commission attaches to the Mineral Resources sector as a key sector for the realization of the Agenda 2063 and its vision of creating decent employment and wealth for African population especially the youth and women.
“The committed leadership of the African Union Commission is determined to ensure that African member States achieve social and economic development which is inclusive and sustainable. However, for this to happen, it requires a Paradigm Shift, strong Political Commitment at national, regional and continental levels, as well as change of mindset of African communities to own the entire development process of Africa using our natural and human resources. It requires revisiting the way we, as African do things and step out of the box and rethink about how to use our abundant natural resources for benefiting our people. This further requires owning our institutions and processes while working with our key and stakeholders, partners and allies who have Africa’s interests at heart”, she emphasized.
The Minister of Geology and Mines of Angola, Dr. Francisco Queiros thanked the African Union Commission for having chosen Angola to host the meeting. He explained the geological planning framework of Angola. “Our government has invested 405 million US dollars to conduct geological surveys, to establish a modern headquarters of the institute of Geology and to create three laboratories. We will soon conduct a geological mapping to identify the locations of all our mineral resources”, he said. According to the Minister, by investing in infrastructure, Africa will produce wealth and build a strong middle class. He welcomed the AMDC, a Center to be fully owned and controlled by Members States.
Amongst other recommendations to the Ministers, the proposal for the establishment of the African Minerals Development Centre as an organ of the African Union Commission has been endorsed for further recommendation to the upcoming extraordinary Session of Ministers.
As the way forward, the first extraordinary session of the AU Conference of Ministers responsible for mineral resources development will take place in Zambia/Zimbabwe in end of October 2014.
Food prices, road infrastructure, and market integration in Central and Eastern Africa
Market integration is key to ensuring sufficient and stable food supplies. This paper assesses the impediments to market integration in Central and Eastern Africa for three food staples: maize, rice, and sorghum.
The paper uses a large database on monthly consumer prices for 150 towns in 13 African countries and detailed data on the length and quality of roads linking the towns. The analysis finds a substantial effect of distance and share of paved road on the level of market integration, as measured by relative prices.
Furthermore, the paper evaluates the additional domestic and cross-border impediments to market integration in the region and represents them on a regional map. The analysis finds heterogeneous levels of domestic market integration across countries and significant “border effects” for the majority of contiguous countries in the sample, which reveal that markets are more integrated within than between countries. Countries that are members of the same regional trade agreement have substantially “thinner” borders with other members.
Finally, the analysis shows that countries with less integrated domestic markets and “thicker” borders with their neighbors also have a higher prevalence of food insufficiency. These findings support policy efforts in tackling domestic and border impediments to transactions such as reforming customs, simplifying nontariff measures, addressing corruption, improving the quality of roads, and deepening regional trade agreements.
World Bank Policy Research Working Paper No. 7003
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Climate change adaptation can help promote sub-Saharan African livelihoods – UN report
Investing in ways to adapt to climate change will promote the livelihood of 65 per cent of Africans, the United Nations environmental agency reported, warning also that failing to address the phenomenon could reverse decades of development progress on the continent.
Africa’s population is set to double to 2 billion by 2050, the majority of whom will continue to depend on agriculture to make a living, according to the UN Environment Programme (UNEP).
“With 94 per cent of agriculture dependent on rainfall, the future impacts of climate change – including increased droughts, flooding, and seal-level rise – may reduce crop yields in some parts of Africa by 15 - 20 per cent,” UN Under-Secretary-General and UNEP Executive Director Achim Steiner said.
“Such a scenario, if unaddressed, could have grave implications for Africa’s most vulnerable states,” he added.
In a new graphical report, Keeping Track of Adaptation Actions in Africa (KTAA) – Targeted Fiscal Stimulus Actions Making a Difference, UNEP details the implications of climate change, and provides examples of adaptation projects that range from forest ecosystem management to aquatics and agriculture.
The report describes sustainable examples of how countries in sub-Saharan Africa enhanced environmental and ecosystem resilience through the use of native plants and natural infrastructure, land plans and rainwater harvesting, among other examples.
The projects are integrated into national development policies which can strengthen and enhance the resilience communities against the impacts of climate change, while also contributing to the realization of the anti-poverty targets known as the Millennium Development Goals (MDGs), according to the report authors.
“By integrating climate change adaptation strategies in national development policies Governments can provide transitional pathways to green growth and protect and improve the livelihoods of hundreds of millions of Africans,” Mr. Steiner noted.
The projects also highlight the urgency to act now in adapting to challenges, especially in developing countries where capabilities to respond to the magnitude of the problem are limited.
This year’s Africa Environment Day, marked annually on 3 March, focused on combating desertification on the continent and enhancing its agriculture and food security. The continent has lost 65 per cent of its agricultural land since 1950 due to land degradation, according to figures cited by UNEP. Up to 12 per cent of its agricultural gross domestic product (GDP) is lost due to deteriorating conditions and 135 million people are at risk of having to move from their land by 2020 due to desertification.
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China beats Japan to become Kenya’s top foreign financier
China has replaced Japan as Kenya’s largest bilateral lender, helped by its participation in the East African nation’s mega infrastructure projects, the Treasury’s latest debt report shows.
Kenya, East Africa’s largest economy, now owes China a total of Sh80.9 billion, the debt pile having risen 30 per cent in 12 months to May, according to the Treasury’s 2014 Debt Bulletin (click here to download the May Bulletin).
This is the third consecutive year that Beijing’s lending to Kenya has expanded by a margin of 30 per cent annually.
The growth in Beijing’s lending to Nairobi is all the more striking given that it does not include the Sh327 billion standard gauge railway (SGR) loan that was signed in May and whose disbursement is expected to begin in October with the commencement of construction work.
The Treasury is expected to start showing part of the railway funds from China’s Ex-Im Bank in its loan book later this year – a move that is expected to push Beijing’s total bilateral lending to Kenya above Sh100 billion.
Japan has been Kenya’s leading bilateral lender in the past 10 years, only second to the World Bank – a multilateral donor.
Since 2011, however, Japan has gradually decreased its new lending to Kenya, keeping its total debt portfolio in Nairobi at Sh67.7 billion.
Kenya’s indebtedness to Japan first fell four per cent to Sh64.95 billion in the year to May 2012 but the amount still left Tokyo far ahead of the then second-largest bilateral donor Beijing’s Sh46.58 billion.
The continued decline in Japan’s bilateral lending to Kenya has been partly linked to economic reforms that the world’s third-largest economy has been undertaking in the past three years to reverse two decades of economic stagnation.
Tokyo has in the past couple of years embarked on a series of spending cuts and recruited new leadership for its central bank with the mandate to bring down interest rates and weaken the yen to increase exports.
The Treasury first separated China’s lending to Kenya from the non-Paris Club (mainly European) foreign debt book in 2012, giving a clear picture of Nairobi’s engagement with the Asian nation.
The Treasury’s May 2014 Debt Bulletin shows that despite the long-standing military and political links with the US, Washington’s bilateral lending to Kenya remains relatively small.
Kenya owes the US only Sh4.5 billion, according to the latest debt report, an amount that places it behind two European nations, Germany and Belgium – and Japan.
Germany’s total lending to Kenya stood at Sh26.58 billion in May, having risen gradually in the past five years from Sh17.2 billion in August 2010.
Economists said the change in Kenya’s sources of development finance is seen to be partly dictated by the ability of the lenders to read the growth path of East Africa’s largest economy in the long term.
“The ability to interpret economic intelligence data and future developments is a key determinant of the financing mix,” said Joseph Kieyah, the principal analyst at the Kenya Institute of Public Policy Research and Analysis (KIPPRA).
Prof Kieyah said that China has been able to identify Kenya’s financing needs and used the information to strategically position itself in the lending market.
Kenya signed multi-billion-shilling financing deals with China during the May visit of Premier Li Keqiang to Nairobi. The list of deals signed included the Sh327 billion SGR loan, wildlife conservation, agriculture, health, water, sports and culture.
“Beijing appears to be taking a long-term view of Kenya’s economic prospects unhindered by politics or the security concerns that some bilateral lenders may be seeing as a obstacles to continued engagement,” Prof Kieyah said, adding that Japan is being fettered by its own economic problems at home.
The bilateral lending mix is also seen as reflecting key concerns of each lender, including human rights records, political realities, as well as corruption that has seen some governments such as the US use other avenues to support Kenya financially.
Much of the US government’s development financing in Kenya, for instance, comes through non-governmental organisations and the private sector.
“China’s rise as the big lender is mainly linked to its large presence in the infrastructure sector, which consumes billions of shillings annually,” said Rose Wanjiru, the executive director of the Centre for Economic Governance.
An article on the German TV website appears to capture the essence of the Western nation’s emphasis on governance as a condition for financial engagement with Kenya.
“Germany’s development aid policy places high value on good governance in partner countries, coupled with a commitment to fight corruption. Future development aid from Germany will depend on Kenya’s political progress,” it says.
Germany has gradually increased its development financing to Kenya but much of the money has gone into humanitarian causes such as feeding refugees, fighting HIV/Aids and alleviating rural poverty.
Good governance is also one of the main conditions for American aid. “Even where the US has given aid to Kenya, they have tried to control the way it is spent as was the case with the HIV/Aids money,” said Ms Wanjiru.
US President Barack Obama, who hosted African leaders in Washington last week, sought to relax that rule of engagement, having extended invitation to nearly all African regardless of their human rights and democratic credentials.
Belgium’s financial aid to Kenya has averaged just over Sh7 billion over the past five years, but other European countries such as Denmark and the UK have seen their debt to Kenya decline over the same period.
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SADC bemoans ‘stagnant’ cereal production
The SADC Food, Agriculture and Natural Resources Department says production of cereals has remained stagnant in the past four years and resulted in shortfalls that have to be met by imports or crop substitution with non-cereals.
The region has also recorded deficits for sorghum, wheat, rice and millet while maize recorded a surplus of 326 000 tonnes during the 2013/2014 summer cropping season. However, projections for the maize surplus for the 2014/2015 summer cropping season are estimated to reach 4,1 million tonnes.
SADC Director for Food, Agriculture and Natural Resources, Ms Margaret Nyirenda said National Early Warning Units have been established in 12 of the 15 member states to collect, analyse and disseminate information at national level on impending food insecurity problems.
He added that small holder farmers in the rural areas across the region have contributed significantly to an increase in food production levels.
“Irrigation water harvesting technologies and conservation farming popular in Zimbabwe and Zambia and these will have more impact. We initially went for big technologies which we couldn’t sustain and our people were not capacitated enough to run those whether it was canal, drip irrigation or sprinkle irrigation. The majority of our people are in the rural areas, so we have to promote most of the small scale technologies to increase food production in those areas,” Ms Nyirenda said.
She said livestock production has been increasing by 4% annually while the production of animal products such as meat, milk and eggs has increased by 2,8%, 2,0% and 3% respectively due to training and strengthening of veterinary institutions in member states to better manage the risk posed by trans-boundary animal diseases.
Chronic malnutrition, whose level is above 30%, remains a challenge in the region especially among the vulnerable and poor. Food prices have been increasing due to higher demand for food crops for use in bio-fuels rather than human consumption while natural disasters have also affected food security.
The region has developed a Regional Agriculture Policy and a Regional Food and Nutrition Security Strategy for the 2015 to 2025 period and both will be considered by the Summit.
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Regional blocs meet to harmonize Rules of Origin
The meeting of SADC-EAC-COMESA rules of origin were held in Burundi on 4-7 August 2014. The purpose of the meeting was to harmonize the rules of origin in SADC, EAC, and COMESA in order to facilitate the launch of the Tripartite Free Trade Area by the end of 2014. The meeting adopted a three-stage approach to dealing with the rules of origin negotiations – namely:
- Rules of Origin that are common in the three bodies (SADC, EAC and COMESA);
- Rules of Origin that are Similar in SADC, EAC and COMESA;
- Rules of Origin that are different in SADC, EAC and COMESA.
All the 26 countries from SADC, EAC and COMESA were represented. Zambia was represented by officials from MCTI, Ministry of Finance, and ZNFU from the private sector.
As a result of slow progress on the common rules of origin negotiations, the meeting deferred discussions on the similar and different rules of origin to a later date. However, the meeting agreed on a wholly originating rule of origin to apply to the following agricultural products under the common rules of origin in SADC, EAC and COMESA in order to promote value addition in the region:
- All live animals (e.g cattle, goats, sheep, pigs, chicken etc);
- Cereals (maize, wheat, rice, rye etc);
- Oilseeds (soya, ground nuts, cotton, linseed, and sunflower);
- Sugar cane, chemically pure sucrose;
- Unmanufactured tobacco and tobacco refuse.
Regarding the outstanding negotiations for similar and different rules of origin in SADC, EAC, and COMESA, the meeting requested member states to send their comments to the COMESA Secretariat by 18th October 2014. Going forward, the Union should keep the pressure on government to ensure that our negotiating positions on agricultural products are not compromised.
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EU must be fair during EPAs negotiations
Recently, I led the East African Community-European Union delegation to a meeting in Kigali, Rwanda, that had been convened to resolve three outstanding issues on Economic Partnership Agreements (EPAs).
For some time now, the EAC-EU have been negotiating on how to engage in trade, and before Kigali, eight issues out of 11 had been resolved. The three outstanding issues include tax and duties on exports; export subsidies provided to farmers in the EU; and non-trade provisions in the Cotonou Partnership Agreement.
Although the meeting did not agree on these issues, we made a lot of progress. What remains now is to agree on a few points of concern, basically to do with the phrasing of some sentences.
The issues have now been escalated to the ministerial level. It is our hope that agreement shall be achieved quickly at this level and the parties will just initial the agreement and beat the October 1 deadline.
Basically, the EU wants to restrict 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.
The WTO has adopted an asymmetric approach to the treatment of exports and imports. It does not prohibit the use of export taxes; it considers such taxes a legitimate instrument.
‘PURELY DOMESTIC’
In relating with the EU, therefore, this has been one of the points of departure. Given that export taxes exist beyond the realm of the WTO, and the EPA trade regime is expected to be WTO-compatible, the EU seems to seek to discipline export taxes within the EAC region.
While the EU is putting a lot of pressure on this issue, its member states used the same instrument to industrialise. It would only be fair for it to grant the EAC policy space on this matter that is purely domestic. It should not insist that the EAC seeks approval from the EPA Council to impose a domestic policy.
In the policy of give-and-take used in negotiations, the EAC agreed to impose export taxes and at the same time allow the EPA Council to review them after an agreed time-frame.
The EAC has further offered a balanced deal on domestic support and export support to agricultural products in the EU. The EAC is pushing the EU to eliminate support to farmers that distorts the market both in the EU and in the EAC.
These are the issues that are still at abeyance and which we hope will be resolved this month. The EAC, chaired by Kenya, has neither been obstinate nor insensitive on the matter.
We are well aware of the many products that are at stake and why this whole issue is important to businesses, both locally and in Europe.
All we want is what will be good for the region and what will stand the test of time.
Dr Kibicho is the Foreign Affairs Permanent Secretary
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Resetting SADC priorities: RISDP review
SADC has completed the review process for the Regional Indicative Strategic Development Plan (RISDP) and the draft revised document is expected to be presented to the Council of Ministers during the 34th Ordinary Summit in Zimbabwe.
The RISDP is a 15-year plan approved by SADC Member States in 2003 as a blueprint for regional integration and development, and the review aims at enabling SADC to realise its integration and development agenda by realigning the region’s development plans with emerging global dynamics and refocusing on a few critical and realistic interventions.
The RISDP was developed following a decision by the SADC Summit of Heads of State and Government in 1999, in Maputo, Mozambique to streamline and rationalise the SADC Programme of Action with a view to increasing the effectiveness and efficiency of the SADC Common Agenda in achieving its overarching goals of achieving sustainable development and reducing poverty.
In pursuance of this decision, the RISDP identified the following priority areas of regional cooperation and integration:
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Trade and economic liberalization;
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Regional infrastructure and services development for regional integration;
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Food security and joint management of transboundary natural resources;
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Social and human development: and
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Crosscutting issues, including gender and development; HIV and AIDS; science and technology; sustainable environment; private sector; and statistics.
In 2007, following the realisation that the RISDP priorities were in excess of Member States’ capacity to fund regional cooperation and integration programmes, translating in an escalating SADC Secretariat budget, the Council of Ministers approved a re-prioritisation of SADC programmes and a framework for re-allocation of resources to comply with Summit decision on the review of SADC operations and institutions aimed at improving efficiency and increasing effectiveness.
The revised priorities were identified as:
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Trade/Economic liberalization and development;
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Infrastructure in support of regional integration;
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Peace and security cooperation (as a pre-requisite for achieving the regional integration agenda); and
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Special programmes of regional dimension, encompassing education and human resource development; health, HIV and AIDS and other communicable diseases; food security and transboundary natural resources; statistics; gender equality; science, technology and innovation; and research and development.
Since 2010, the plan has undergone a review process, starting with a desk review undertaken by the SADC Secretariat in 2011.
The desk assessment analysed SADC’s performance and identified the challenges encountered as well as the lessons learnt during implementation of the RISDP from 2005 to2010. The assessment formed the basis for an independent mid-term review between 2012and 2013.
In August 2013, the Council of Ministers directed the SADC Secretariat to work with Member States in setting up a multi-stakeholder task force with the responsibility to finalize the process of review of the RISDP.
The task force had a series of meetings in 2014 to propose new priorities; main focal areas; milestones; outputs; targets and timeframes for the remainder of the implementation period. It also met to propose strategies for implementation of the RISDP; recommend any other strategies and implementation frameworks that may enhance its implementation, including an appropriate institutional and legal framework; and a sustainable resource mechanism, as well as a monitoring and evaluation mechanism for the remaining period of its implementation.
The result of this work is the proposed Revised RISDP (2015-2020) which has been reviewed by Member States as well as through sector and ministerial cluster meetings. The final document is expected to be presented to the Council of Ministers in August for approval.
The task force recognized that the SADC vision, principles, goals, objectives, and the Common Agenda – as enshrined in the Treaty and re-stated in the RISDP – have not changed. It recognized that SADC countries remained committed to integration aimed at achieving poverty eradication and sustainable development.
It took into account the experiences and lessons learnt as well as new developments that have occurred since 2007 when the Council of Ministers reprioritized the regional priorities at a meeting in Lusaka. The rationale for the reprioritization at the time was to sharpen the focus of the RISDP implementation and to establish a framework so as to allocate resources for greater impact.
The task force noted that notwithstanding the achievements made in the implementation of the regional integration agenda, the expectations of the regional blueprint exceeded the capacity of both the SADC Secretariat and Member States to deliver on all the agreed targets within the specified period.
It is estimated that implementation rates between 2005 and 2010 in terms of reaching stipulated targets range from 65 percent for Trade/Economic Liberalisation and Development; 64 percent for Food Security and Environment; and 60 percent for Infrastructure Support for Regional Integration and Poverty Eradication.
Other sectors which operate in areas where results can only become clearly visible over longer periods of time, have a greater percentages of partial achievements, such as Social and Human Development and Special Programmes with 38 percent achieved and 46 percent of partially achieved targets; or crosscutting issues with 14 percent achieved and 68 percent partially achieved targets.
Some remarkable achievements made in trade, industry and finance have contributed to the region’s integration process although the implementation of the SADC Free Trade Area Protocol is still limited and there have been cases of Member States reversing their commitment to comply with the requirements of the FTA.
One of the main challenges faced in this particularly area, but also across the range of areas covered by the RISDP, often relates to the lack of capacity to effectively monitor the implementation of agreed protocols to ensure compliance to commitments.
As a result and because of time lags and resource deficiencies, some of the original targets of the RISDP are not considered in the revised RISDP.
For example, the Customs Union has been deferred for the remaining period of the RISDP and more realistic targeted outputs will be implemented to facilitate the eventual establishment of the CU, as well as other steps targeting regional integration.
Infrastructure development remains a leading priority, with considerable preparatory work having been done to develop enabling policies, systems and processes that will greatly facilitate project preparation as well as help to attract private sector investments and further promote public-private partnerships.
Food security and the reduction of vulnerability will also be a priority and are dependent on sound agricultural policies and practices as well as on the accessibility of food in terms of availability and its price. The sustainable use and preservation of the environment and natural resources are therefore critical as is the need to take into account climate change in the formulation of agricultural and food security programmes.
Progress has also been made in areas related to social and human development and the revised RISDP recognizes that the development of the region can only occur if the workforce is healthy and able to operate at a level that makes progress possible, and if decision-makers and leaders in the public and private sectors, are knowledgeable.
While efforts have been made in gender mainstreaming at the level of policies, the revised blueprint recognizes that there is still much to be done to see these policies translated into action. Emerging issues that provide new opportunities for economic and social development have also been taken into account in this plan.
Examples of such emerging issues are the utilization of marine resources or the concept of the blue economy for Member States with access to the sea, and the special gains to be derived from the youthfulness of the region’s population.
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US-Africa Summit shifts relationship from aid to commercial partnership
A number of South African and international commentators have wondered whether there was any real substance to the US-Africa Summit in the first week of the month, or whether all the pomp and ceremony concealed nothing more than hot air.
Others were perhaps worried that the summit was a “neo-colonial” attempt by the US to lure Africa into exploitative contracts – a thought that may contain the unexpressed assumption that Africa’s business and political leaders are incompetent.
Standard Bank was fortunate enough to be able to send a delegation to the summit and its associated business forum, and we can confirm that there was indeed a great deal of hot air in Washington DC during the US-Africa Summit. But that was only because Washington in August is a very humid place.
In the efficiently air-conditioned conference halls and meeting rooms of the US-Africa Summit, we felt only the refreshing wind of economic change coming from Africa, the coolly rational response of the US government and American corporations, and the briskly effective way in which we Africans advanced our own interests.
As President Barack Obama said at the summit’s business forum: “We all know what makes Africa such an extraordinary opportunity.”
Certainly, most Africans – and many of our international trading and investment partners – know that the Africa of 2014 is a very different place from the colonial and post-colonial “lost continent” of the previous century.
Several major African countries have settled into a pattern of rapid growth. Economies including Ethiopia, Kenya, Mozambique, Nigeria and Zambia are likely to double in size over the next decade. Africa is expected to attract about $200 billion (R2.1 trillion) in foreign investment this year.
China-Africa trade has multiplied by 20 times since 2000, and China is now Africa’s leading trade partner, importing about $113bn worth of African products and selling us $85bn of Chinese goods and services in return.
These are not abstract numbers. They measure trends that are fundamentally changing how Africans live. For instance, the number of cellphone users in Africa has multiplied 33 times since 2000 and, within the next five years, it is likely that almost every adult in Africa will have a cellphone.
There are now probably about 8 million middle-class households in Africa north of South Africa – 4 million in Nigeria alone. They will be joined by another 14 million households by 2030. Anyone who has recently visited Lagos or Nairobi – or downtown Johannesburg for that matter – can feel the energy and see the growth all around them.
The US government and US companies are frankly worried that they’ve been losing out on this opportunity. The business sessions of the summit were all about fixing that. This was a truly remarkable gathering of business and government leaders.
The US administration attended in astounding force: their delegation included the president, the vice-president, five cabinet secretaries, the White House chief of staff, the US trade representative and the heads of all the US agencies responsible for trade and international development.
African political leaders present included the chairperson of the AU, 50 African heads of state (including President Jacob Zuma) and the president of the African Development Bank.
The list of major American companies that attended was almost equally remarkable and they were often represented by their chief executives. African business was similarly represented by senior executives of almost every major African company, including African Rainbow Minerals, Econet, Heirs Holdings, Mara Group, Massmart and Sasol.
None of us were there for show.
The agenda was highly concrete and led to equally concrete outcomes. The first session focused on finding specific partnership opportunities for US and African companies. The second session looked in detail at how to attract more US investment into African capital markets. The third session was an in-depth discussion of how to do the same for Africa’s energy, transport and information technology infrastructure. The fourth discussion brought together the African heads of state to reinforce the point that the continent is very much open for business.
A theme that ran through the business forum was that a better business climate and more investment can – and must – create a better life for ordinary Africans. More output needs to mean less poverty, more jobs and less inequality. In fact, Africa’s record on inclusive growth has been fairly good: since 2000, gross domestic product has expanded by about 5 percent a year and the continent’s human development index has risen by 7 percentage points. Good – but we can do better.
US commitments
Obama wrapped up the business forum not with vague statements but with five concrete commitments. First is to work to persuade Congress to renew and expand the Africa Growth and Opportunity Act (Agoa), which creates open access to US markets for many African exporters. The second is to expand financial and technical support to US companies wanting to invest in Africa. The third is to triple the size of the Power Africa public-private partnership to $26bn with the goal of bringing clean and safe electricity to 60 million African homes and businesses. Fourth is to expand the Trade Africa initiative, which is focused on promoting trade within the East African Community (EAC) and between the EAC and the US. Fifth is to provide training and support for young African entrepreneurs.
The summit and its business forum created many opportunities for African and US companies and government agencies to connect with each other and to start or continue very real business negotiations. For example, the government of Ghana and the Millennium Challenge Corporation signed a $500 million compact that will dramatically improve Ghana’s power supply.
The world’s largest asset manager, BlackRock, signed a deal with Nigeria’s Dangote Group to raise $5bn, also for investments in the power sector.
To use Standard Bank as an example, we were able to have useful conversations with governments from across the continent and the wider world. We spoke with multinational and US development agencies and with major companies including IBM, MasterCard, Symbion Power and General Electric (GE).
In fact, one of our sessions with GE illustrated just how real the conversations got. The Standard Bank team was approached by a very senior US official to discuss the furthest thing from hot air imaginable. We spoke about the technical details of the financing structure of a new power station in west Africa that is being built as partnership between a US and a west African company, with funding from the US Overseas Private Investment Corporation and a group of private sector financiers under the auspices of the Power Africa initiative. This isn’t a cosy deal between elites.
Focussing on Nigeria, we can say that it is already growing fast and the rich can afford generators. More reliable grid power in Nigeria will mean more inclusion and more sustainability. Less carbon will be generated; small and medium enterprises will be more competitive when they no longer have to include the price of diesel in everything they produce; and children will study more safely and effectively when their homes have reliable electricity instead of trying to learn under the flickering and dangerous light of kerosene lamps.
South Africa did particularly well during the summit. The US-South Africa business forum at the US Chamber of Commerce was a major highlight – an illustration of just how impressive South Africans can be when we speak with one voice in the national and continental interest. One could feel the positive mood created by Zuma’s affirmation that US business was very important to South Africa, and his call for the extension of Agoa for 15 more years, including South Africa, had an equally palpable impact.
In fact, as Zuma himself put it on his return home: “There’s a good relationship already between Africa and the US but this summit has reshaped it and has taken it to another level.”
That’s exactly right. But, of course, it will take continued effort from both Africans and Americans to keep the relationship at this new higher level. Both sides will have to keep working hard to identify opportunities for mutually beneficial trade and investment. For our part, Africa will need to continue to strengthen our capacity to compete in global markets; to welcome investment while also regulating our economies fairly and efficiently; to strengthen our governance and our institutions so that growth is sustainable and its benefits are equitably distributed; and – crucially – to exercise the necessary firmness and skill to find good bargains for ourselves in our negotiations with the US and all our other trade and business partners.
We can and will do all these things, as it is very much in self-interest to do so. That is the final – and most compelling – reason why the summit really wasn’t a matter of hot air. We have moved from a time in which the US was largely a donor and Africa was mostly an aid recipient.
The US and Africa now increasingly encounter each other as equal commercial partners. That’s a much better place to be.
Sim Tshabalala is the joint chief executive at Standard Bank Group.
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Aligning Kenya to benefit from new foreign investment opportunities
It was interesting reading through the proceedings of the US-Africa forum, which focused mainly on business investment opportunities between the two continents.
America is at long last eyeing big opportunities in Africa, the same way the Asian giants have been doing over the past decade or so. Going forward, it looks like new, big business (and competition) for Africa.
It is those countries that adequately plan for these opportunities that will benefit most from the Eastern and Western investors. Kenya will need to position itself to maximise uptake of capital from both worlds.
For instance, Kenya will require scaling up its development planning to reflect the big opportunities that the rest of the world is seeing in Africa. Apart from natural resources, they are also focusing on a large consumer market supported by a fast-growing middle class endowed with huge spending power.
Vision 2030 has been an appropriate long-term planning tool from which sector master plans are being drawn. It is the readiness of such plans that will guide investors where to put their cash.
It is in preparing development blueprints that we need to stretch our imagination to fully capture and reflect the huge opportunities ahead of us. Piecemeal planning and small projects may not sufficiently excite external investors. We require bigger thinking and planning for the longer term national needs.
The Thika highway and other Nairobi bypasses were perhaps the pioneer projects that ushered Kenyans into the league of big projects that make huge transformational differences. Since then we have embarked on other huge projects, which include the new transnational railway.
The fact that we already have in place a 5,000MW-in-40-months power generation plan made it easy for the Americans and their 10,000MW Power Africa project to pick Kenya as an obvious partner for powering Africa.
Yes, a number of Kenyans thought that the 5,000MW power generation programme was too ambitious for the country. Without sufficient reserve power capacity, investments targeted by both the West and East will be elusive for Kenya. This is a good example of thinking and planning big, because we believe the opportunities ahead are huge.
The Lamu Port and South Sudan Ethiopia Transport (Lapsset) corridor is another large and integrated project which was flagged by our regional leaders as ready for investments by the Americans. When Lapsset was launched many thought it was too ambitious, but its time has now come and it is ready for outside investment participation.
Also, a 10,000km roads master plan was recently launched ready with a proposed public-private partnership financing model.
To go hand in hand with project planning is creation of a conducive investment climate that will give Kenya an edge over other African countries competing for the same investments.
Availability of reasonably priced energy, efficient infrastructure, sufficient relevant skills, transparent governance, investor friendly regulatory framework, sustainable security and political stability are all essential ingredients of a facilitative investment environment.
It is these factors that will determine the quantum and quality of investments that we shall clinch. From experience we know that the West is more particular about these facilitative factors than the East.
Kenyans should be confident that we can deliver what is required to be a credible destination for investments. We need to spend more time and energy thinking and discussing opportunities and development, and less on disruptive politics.
And it is not just big foreign investments that we are aspiring to lure, but also maximising associated value for the country.
This can be in the form of local jobs, training and technology transfer, investment and profit sharing with Kenyans and local processing of raw materials instead of exports, among others.
In respect to value addition, we shall need tough investment promoters and negotiators who will maximise investment benefits for Kenya.
With increased interest by the West, we need an investment template that will be seen to be fair and transparent to all investors and contractors.
Value addition should be our main guiding criterion. We are entering an era of competitive investor selection where East-West politics should not be allowed to influence our decision.
I think the Russians will also be knocking on the doors of Africa, too, especially after the recent trade and investment standoff with the West. Moscow will be looking to fill gaps left by the recent boycotts prompted by the Ukrainian crisis. They, too, should be welcome to Africa with open hands if they have value-adding opportunities to offer.
We should not forget that foreign investors are specifically targeting our counties for investments. Such investments should be seen to add, not dilute, value to the total national economy.
It is important for the national and county governments to coordinate over these investments because at the end of the day, we need every dollar we can get.
Yes, foreign investors are thinking big about Africa, and so should we. That is the only way we shall be seen to be equal and credible partners in the investment game.
Mr Wachira is the director, Petroleum Focus Consultants
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Using innovative technologies to break barriers in regional trade
A World Bank Report called “Defragmenting Africa” describes Africa’s borders as thick. This thickness is attributed to “mountains of documents that exporters and importers and transitors brave in trading in Africa.
Similarly, the United Nations Economic Commission for Africa shows in its 2013 report “Trade facilitation from an African perspective,” that Africa had the highest cost of doing business in the world in contrast to other regions. This has significantly contributed to the perceived unattractiveness of Africa:
On average, according to this report, there are eight documents to export, nine to import, 31 days to export, 37 days to import, $1,990 to export a container, $2,567 to import a container.
These figures are twice or three times those of some other regions of the world.
It is for this reason, that improving the business environment in order to reduce the cost of doing business has been an important priority for governments at home and acting jointly within the framework of regional economic communities (RECs).
The Common Market for Eastern and Southern Africa (Comesa) has been the trailblazer, both in terms of overarching programmes and of specific projects within the framework of regional economic integration.
What is Trade facilitation? It is about freedom of transit for goods. It is about reduction of the number of documents, simplification of the complexity, of documentation; shortening of time spent at border crossings for goods vehicles and persons; publication and easy access to information and applicable rules; use of tested international best practices in management of customs operations; and efficient border agencies that address constraints faced by importers, exporters and logistics people.
The overall framework for trade facilitation programs in Comesa for example, is the Free Trade Area (FTA). The Comesa FTA operates as a rule-based duty-free, quota-free, exemption-free regime with a clear prohibition of non-tariff barriers (NTBs).
In 2000, when the FTA was established, intra-Comesa trade in goods (merchandise trade) stood at $3.1 billion and has grown phenomenally to $19.3 billion in 2013.
This excludes informal cross-border trade in goods estimated at about 40% of total trade and services. These on average contribute to 60% of the GDP of COMESA member states.
This performance has generated regional investments and attracted foreign direct investment into the Comesa region. For example, the Comesa Competition Commission processed mergers and acquisitions in the region estimated at $ 1 billion in 2013 alone. Intra-Comesa investment flows have also been on the rise, and rose by 86% between 2011 and 2012.
This success has been underpinned by a rule-based system enforced by the COMESA Court of Justice which has assisted in promoting predictability and better planning, and confidence in the regional market.
Also contributing to trade facilitation is an effective system for removing non-tariff barriers (NTBs). A success rate of at least 80% of reported barriers has been achieved in the region through an online reporting system which is in place.
Short Messaging Service (SMS) is being developed to complement the online reporting system that will allow economic operators report NTBs instantly using their mobile phones
All these mechanisms on addressing NTBs together have a success rate of over 99%. To date for instance, of all reported NTBs in Comesa, a total of about 220, have been removed, except for five of them relating to trade in milk from Kenya into Zambia (health standards), palm oil from Kenya into Zambia (rules of origin), soap from Madagascar into Mauritius (rules of origin), fridges and freezers from Swaziland into Zimbabwe (rules of origin), and electronic products from Egypt into Kenya (rules of origin).
The One-Stop-Border-Post (OSBP) has been another runaway success as demonstrated on the Zambia-Zimbabwe border at Chirundu. For about two years now, waiting time at the border for trucks has reduced from up to nine days to a mere 20 minutes for accredited clients or two hours for importers that use the advance declaration system, and not more than two days for others.
However, beneath the success of all the trade facilitation initiatives is political commitment at the highest level and resources to formulate and implement policy and institutional reforms.
Greg Mills, in his book Why Africa is Poor cites success stories where determined political leadership was what it took to turn round apparently insurmountable trade facilitation nightmares at ports and along trade corridors.
He concluded that the only thing still keeping Africa poor is leaders who choose to keep Africa poor; a stunning indictment.
It took the resolve of the heads of State in the Northern Corridor (Kenya-Uganda-Rwanda) recently, to bring down cargo transit time from the Port of Mombasa to Kigali from 21 days to seven.
The author is the Director of Trade, Customs and Monetary Affairs, at COMESA.