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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.
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Kenya signs customs agreement with US
Kenya has signed a Customs Mutual Assistance Agreement (CMAA) with the United States marking a significant milestone in collaboration on security and trade facilitation between the two countries.
CMAAs are bilateral agreements between countries and are enforced by their respective customs administrations which in Kenya’s case will be Kenya Revenue Authority (KRA).
The deal was signed between the acting US Customs and Border Protection Deputy Commissioner Kevin McAleenan and Kenya’s Treasury Cabinet Secretary Henry Rotich.
“Customs Mutual Assistance Agreements are valuable tools in the enforcement of our laws as they facilitate information sharing between international partners, “McAleenan said. “This agreement will expand our efforts to combat illicit cross-border activities and will enable us to continue our work to prevent, detect and investigate customs offenses.”
CMAAs provide the legal framework for the exchange of information and evidence to assist countries in the enforcement of customs laws, including duty evasion, trafficking, proliferation, money laundering, and terrorism-related activities.
The United States has so far signed 71 Customs Mutual Assistance Agreements with other customs administrations across the world.
The agreements also serve as foundational documents for subsequent information sharing arrangements, including mutual recognition arrangements on authorized economic operator programs.
The US- Kenya Customs Mutual Assistance Agreement was signed at US Customs and Border Protection headquarters as part of the just concluded US-Africa Leadership Summit in Washington, DC. The Summit included meetings between President Barack Obama and 51 African heads of state.
Custom and Border Protection (CBP) is one of the US Department of Homeland Security’s largest and most complex components, with a priority mission of keeping terrorists and their weapons out of the US.
It also has a responsibility for securing the border and facilitating lawful international trade and travel while enforcing hundreds of US laws and regulations, including immigration and drug laws.
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AGOA: Observations on Competitiveness and Diversification of U.S. Imports from Beneficiary Countries
What GAO Found
U.S. imports from African Growth and Opportunity Act (AGOA) countries have increased since 2001, but AGOA countries’ share of overall U.S. imports remained small and experienced declines in recent years. GAO analyzed total U.S. imports from AGOA countries, including both imports under AGOA (i.e., imports that received duty-free access claiming AGOA preference benefits) and other imports (i.e., imports that received duty-free access under other preference programs and international trade agreements, and imports with tariffs). From 2001 to 2008, total U.S. imports both under AGOA and other imports from these countries grew from $20 billion to $82 billion, an increase of 300 percent. However, since 2008, total imports have decreased by 53 percent. With regard to U.S. imports under AGOA, since 2008, they have also declined, from $56 billion to $25 billion, a decrease of 56 percent. GAO also found that AGOA countries’ share of U.S. imports remains small, and in 2013, this market share was 2 percent.
U.S. imports from AGOA countries are dominated by petroleum; however, the share of non-petroleum imports has increased, leading to higher diversification in recent years. From 2001 to 2013, petroleum products accounted for over 80 percent of U.S. imports under AGOA. The share of non-petroleum products during the same period increased from 9 to 14 percent. In 2013, the top three non-petroleum products imported under AGOA were machinery and transportation equipment (59 percent), textiles and apparel (25 percent), and minerals and resources (8 percent). Diversification of U.S. imports under AGOA, as measured by the index that GAO constructed, has increased since 2001, but there were declines in the earlier years. From 2002 to 2011, the diversification of these imports declined from 24 percent to a low of 8 percent, grew to 10 percent in 2009, then declined to 9 percent in 2011. However, since 2011, the diversification of imports of products under AGOA has increased from 9 to 21 percent as measured by GAO’s index of commodity concentration.
Why GAO Did This Study
Signed into law in 2000, AGOA is a U.S. trade preference program intended to stimulate economic development through export-led growth and help integrate Africa into the global economy. AGOA allows eligible Sub-Saharan Africa (SSA) countries to export qualifying goods to the United States without import duties. Prior U.S. government reports have indicated that integrating SSA countries into the global economy will require greater competitiveness of their exports. In addition, as GAO reported in 2008, an important goal of trade preferences is to help developing countries diversify the range of products that they export, and preferences are of little use in countries lacking the ability to produce goods desired by importers.
GAO was asked to examine a number of issues relating to AGOA countries’ trade expansion and economic development, and factors affecting their trade with the United States and other countries. This report is the first in a series responding to the request and provides GAO’s observations on AGOA countries’ trade expansion as shown by import competitiveness and diversification.
To estimate competitiveness and diversification of U.S. imports from AGOA countries, GAO used U.S. Census data on U.S. imports from 40 countries in SSA that were participating in the AGOA program as of January 2014. GAO analyzed these data for calendar years 2001 to 2013. To estimate competitiveness, GAO calculated the share of total U.S. imports from AGOA countries from 2001 to 2013. In addition, GAO analyzed total U.S. imports of these countries’ products under AGOA and other imports. GAO’s analysis of diversification of U.S. imports under AGOA uses a measure of trade and commodity concentration to chart the level of diversification from 2001 to 2013. The index shows a value of 0 percent when imports are extremely concentrated and a value of 100 percent when imports are most diversified.
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Trade with African economies and investment in Africa offer big rewards
In his famous piece ‘How to write about Africa’, the Kenyan author Binyavanga Wainaina satirically advised pundits to ‘treat Africa as if it were one country… 900 million people who are too busy starving and dying and warring and emigrating to read your book…so keep your descriptions romantic and evocative and un-particular.’ While Wainanina was writing firmly tongue in cheek, he elegantly expressed a major challenge facing African governments and business people aiming to engage as equals with the world economy, establish mutually beneficial trade relationships, and attract investment. Africa is still often perceived in the West mainly as a recipient of pity and aid dollars, a source of raw materials, and a very risky bet for the bravest of investors. Fortunately, all this has been changing since the turn of the century.
Wainiana’s warning about generalisations is important. Africa is indeed extraordinarily heterogeneous. But it is permissible to sum macroeconomic aggregates. The continent’s growth rate has exceeded five per cent a year for more than a decade now. Foreign direct investment into Africa has increased dramatically in the last decade and a half, and continues to grow. In 2013, FDI to Africa increased by 9.6% to an estimated $56.6 billion, representing 5.7% of global FDI. FDI is forecast to exceed $60 billion in 2014.Total foreign inflows to the continent reached $186 billion in 2013, and are expected to top $200 billion in 2014. Africa, in other words, has become one of the world’s most favoured investment destinations.
Emerging economies – and the BRICS in particular – are seizing the African opportunity. China-Africa trade has surged from $10 billion in 2000 to more than $200 billion in 2013, making China Africa’s largest trading partner. A wide range of firms from India, Brazil and South Africa are also expanding quickly in Africa, often with strong support from their governments.
US-Africa trade has also been increasing, although on a gentler trajectory – doubling from about $50 billion in the early 2000s to $110 billion in 2013. Major private equity firms, including the Carlyle Group, have launched Africa-focused funds valued in the hundreds of millions. And leading technology companies are investing in new ventures and start-ups across the continent. IBM has invested at least $100 million, with new Innovation Centres in Lagos and Casablanca. Microsoft and Intel Capital are embarking on partnerships with African tech companies, and Google is working on delivering broadband to remote communities.
Africa, in other words, has come a very long way from its era of aid-dependence. As former President of Ghana John Kufuor memorably put it, ‘Africa is being courted vigorously by China and the other emerging economies, while our traditional partners in the West are also holding on tight. Africa must ensure that it comes out of this tango better off.’
Trade with African economies and investment in Africa offer big rewards – but it requires sound local knowledge, strong local partnerships, and a long term view, to ensure that both Africa and her dance partners maximise their returns.
A sceptic might well reply that we’ve been here before. Is the present moment really different from previous bursts of Afro-optimism? Won’t growth tail off as commodity prices soften? Isn’t it true that Africa lacks the internal growth needed to supplement external demand? Aren’t Africa’s governance institutions still too weak to support sustained growth?
On the first question, there’s a precise quantitative answer, courtesy of the wonks at the IMF. While the era of steep commodity price increases does indeed appear to be over, the IMF is projecting, at worst, mild declines in most commodity prices until 2018. What’s more, even a quite significant decline in commodity prices would have a surprisingly limited impact on African growth. Even if commodity prices fall by as much as 25%, Africa’s growth would only slow by around half a percentage point a year.
Of course, as Wainaina would remind us, the impact would vary by country. Major oil producers such as Angola would suffer a more serious decline in growth. But even in big oil exporters, economic growth would remain positive. In more diversified economies, such as Ethiopia and Uganda, a dip in the commodities cycle is unlikely to have any meaningful impact on their growth.
About that internal growth engine: Africa has youth, improving health and education, and rapid urbanisation on its side. Between 2000 and 2012, the UN’s Human Development Index for Sub-Saharan Africa rose by 7 percentage points. By 2030, 46% of Africans will live in urban areas, rising to 57% by 2050. Across the continent, a rapidly expanding middle class is changing historic patterns of consumption. The trend is particularly apparent in Nigeria, where the middle class has swelled by 600% since 2000. Today, Nigeria is home to 4.1 million middle-class households, containing 11% of the total population. Other economies doing particularly well on this measure include Angola, where 21% of households are considered middle class, Sudan, at 14%, and Zambia, at 10%.
This rising middle class is driving a rapid diversification of Africa’s economies. Natural resources remain important, but sectors such as wholesale and retail trade, transportation, manufacturing and services are growing fast. The IT story is particularly striking. The number of mobile phone users in Africa has multiplied 33 times since 2000. Within the next five years, it is likely that almost every adult African will have a mobile phone. Over 50% of urban Africans are already online. If they don’t like what you’re writing about the continent, expect to get a lot of tweets about it.
On governance, there’s a lot of work to be done. But the direction is correct. Macro-economic conditions have improved – inflation, foreign debt and budget deficits are largely under control; state-owned enterprises are being privatised; trade is increasingly open; and regulatory and legal systems are stronger. Many countries have taken convincing measures to strengthen government efficiency. According to the World Bank’s 2013 Doing Business report, 17 of the 50 fastest-improving regulatory environments for business are in sub-Saharan Africa.
In other words, this time really is different. We’re seeing a combination of internal dynamism and far-reaching policy and regulatory reforms that are making many African countries very appealing dance partners indeed. Take the power sector, for example. The International Energy Agency has described Africa as being ‘ripe for a boom in renewable energy’. President Obama’s Power Africa programme is working to deliver just that. The programme, which aims to double access to power in sub-Saharan Africa, has identified six African countries which are making big strides in reforming their energy sectors and privatising aspects of power supply. The US is partnering with the governments of these countries – Tanzania, Kenya, Ethiopia, Ghana, Nigeria and Liberia – to create attractive investment opportunities for American and African firms. The US government has committed more than $7 billion in financial support and loan guarantees for the period 2013-2018 – a commitment doubled by the almost 30 private sector partners, who have pledged $14.7 billion in project finance through direct loans, guarantee facilities, and equity investments. These firms will be working with national governments and global experts to develop power resources responsibly, to build power generation and transmission, and to develop geothermal, hydro, wind and solar energy. They can be confident of a good return – all partners are incentivised to ensure that their projects deliver sustainable benefits to both investors and communities.
But, of course, unquestioning optimism is as foolish as relentless pessimism. Most Africans are very poor by developed world standards. A great deal of new investment in infrastructure and productive capacity is still required if we are to fix that. Sub-Saharan Africa’s investment-to-GDP ratio remains the lowest among developing regions, at just 22%. Unsurprisingly, therefore, the average return on investment in Africa is very high. According to UNCTAD, the global average return on FDI was 7.2% in 2011; the return on FDI to Africa was 9.3%. US FDI showed a 20% return in Africa in 2010.
But, once again, those are averages. To do well on my home continent, US companies need to understand Africa’s markets in detail. The US-Africa summit and CEO forum are an important step towards deepening that understanding.
Tshabalala is the Chief Executive of Standard Bank Group
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Mines pay over Sh300billion in royalty
The government last year collected Sh310.66 billion as royalty and taxes from large scale mines, according to the Tanzania Minerals Audit Agency (TMAA) annual audit Report.
TMAA Director for Financial Audit and Analysis Elikana Petro mentioned the mines as Bulyanhulu, Buzwagi, Geita, Golden Pride, New Luika, North Mara, Tulawaka, Tanzaniate One and Williamson Diamonds Limited (WDL).
In an interview with this paper in Dar es Salaam this week, Petro described large scale mines to be ones with investment of more than $100 million
He said a total of Sh2.7 billion royalty was also collected from some medium and small scale mining operations as a result of TMAA strategic audits.
The official said they would continue aggressively to monitor and audit large, medium and small scale mining operations this fiscal year to ensure the owners make the required payments to the government as well as conduct activities in sound environmental manner.
The audit cites Geita Gold Mine (GGM) as leading gold producer in 2013 with 37% of total production. In 2013 gold output (from gold bars and copper concentrate products) by major gold mines was the same as the previous year at 1.25 million troy ounces.
Total mineral exports in 2013 from gold bars and copper concentrates produced by the seven major gold mines were 1.24 million troy ounces of gold worth $1.74 billion; 12.70 million pounds of copper worth $40.95 million and 0.38 million troy ounces of silver worth $8.93 million – making a total worth of $1.79 billion, down 17.7 per cent compared to $2.17 billion realized in 2012.
The mines are Bulyanhulu, Buzwagi, Geita,Golden Pride, New Luika, North Mara and Tulawaka,
According to the report, royalty to government by the seven major gold mines during the year under review was $ 70.76 million, representing a decrease of 4.47 per cent compared to $74.07 million realised in 2012.
He added that Tanzanite One Tanzanite Mine (TTM) produced 3.24 million grammes in 2013. It sold Tanzanite worth $10.97 million, with total royalty paid amounting to $229,545.
Diamonds output at Williamson Diamonds Limited (WDL) during the year was 158,562 carats, up 17.35per cent compared to 135,122 carats produced in 2012.
The mine exported 144,354 carats of diamonds worth $39.56 million in 2013, compared to 116,658 carats worth $29.85 million the previous year. A total of $1.91 million was total royalty paid for the exported diamonds.
Capital investment and operating expenditure was conducted on seven major mining companies, 15 medium scale mining companies and seven mineral dealers.
The audits revealed a number of significant queries which could lead to recovery of lost revenue by government once acted upon by the relevant authorities,
The auditing of minerals produced and exported by major gold mines conducted by TMAA in the year undwer review aimed at ascertaining the quality and quantity of gold, silver and copper production and exports by each mine.
The report says TMAA auditors inspected every smelting session performed in the respective gold rooms including the pouring, marking, weighing and sampling of ingots.
The total value of mineral exports by the seven major gold mines decreased by 17.7 per cent from $2.16 billion in 2012 to $1.79 billion in 2013, largely due to lower gold prices in the world market during the year.
The TMAA said monitoring and auditing coal production and sales activities continued at Ngaka Coal Mine (NCM). During the year, the mine produced 128,920 metric tonnes and sold 134,063 metric tonnes of coal worth $7.45 million.
Resolute Tanzania Limited (RTL) paid a total of Sh15.53 billion in 2013 as corporate tax. Cumulatively, the company has paid corporate tax amounting to Sh100.39 billion.
Geita Gold Mine Limited (GGML) paid a total of Sh8.97 billion as corporate tax. Cumulatively, the company has paid corporate tax amounting to Sh308.34 billion.
WDL paid alternative minimum tax amounting to Sh178.9 million, withholding tax amounting to Sh2.77 billion which was not paid from payments made to mineral rights holders and mining technical services.
Click here to view the Tanzania Minerals Audit Agency (TMAA) Annual Report 2013.
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US-Africa summit was positive – Minister Davies
South Africa and Africa in general benefitted immensely from the recent US-Africa Leaders’ Summit held in Washington last week, Trade and Industry Minister Rob Davies said on Tuesday.
“By and large, there are a lot of positive things we gained from the summit… The message from all of us was that the African continent needs to industrialise and there were a lot of echoes in that regard,” he told reporters during a media briefing in Pretoria.
Minister Davies said the major victory from the summit was the commitment by US President Barack Obama to support the renewal of the Africa Growth Opportunities Act (AGOA), and the various investments he announced to the tune of US$33 billion in Africa through the programme called Doing Business in Africa.
More than 40 Heads of State and Government, including President Jacob Zuma, attended the summit, which was convened by Obama from 4-6 August. The summit focused on peace and security as well as trade between Africa and the world’s economic giant.
On the renewal of AGOA, Minister Davies said the summit provided an indication that US believes a lengthy re-authorisation of AGOA was justified.
“They are looking at possibilities of improving AGOA. They said they are looking at the eligibility criteria… They are looking at countries that did not qualify… I think that was the message from our side that was pretty good news,” Minister Davies said.
Congress is scheduled to vote on the renewal of AGOA, whose current term expires in next year.
Obama last week said he was confident that congress will back the renewal of the scheme.
South Africa is the only country that makes extensive use of the tariff trade preferences provided by the US through AGOA and other schemes.
Film industry
Meanwhile, Minister Davies said there are a lot of partnerships South Africa can build from Hollywood studios to grow the local film industry.
This follows his visit to Hollywood, Los Angeles, last week where he visited Disney and 20th Century Fox, among other big names in the film industry.
A study conducted by the National Film and Video Foundation found that in 2012, the film industry in SA was employing around 25 000 compared to around 4 000 10 years ago.
Minister Davies attributed the growth in the local film industry to government’s role in developing capacity within the industry through rebates and investment in film studios.
The rebates programme, which is operated by the Department of Trade and Industry (dti), which seeks to promote South African productions. It allows producers to get 20%-25% in rebates for locally produced films.
“It has led to a substantial increase in the number of films produced in SA,” Minister Davies said.
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Morocco to host the 9th Africa Development Forum
Forum to focus on innovative financing for Africa’s transformation
The Ninth African Development Forum will be held in Marrakech, Morocco, from 12 to 16 October 2014 on the theme “Innovative financing for Africa’s transformation”. The Forum is the United Nations Economic Commission for Africa’s (ECA) flagship event and it is the first time it will be held outside Addis Ababa where the ECA is headquartered.
The ECA is Africa’s leading think tank and the Forum is known to bring together the experts from Africa and internationally to discuss and thrash out some of the most pressing issues relating to Africa. There is expected to be a strong private sector participation and it will provide a unique platform for business and political leaders to come up with some concrete solutions to some critical issues.
The theme is on innovative finance, which more specifically means accelerating the capital deployed in Africa by deepening capital markets, putting domestic capital to use, looking at new sources of investment such as private equity and also reversing and ending the financial flows through clearer and more structured tax regimes.
The ECA expressed the delight of holding the Forum in Marrakech. Morocco is a key centre for business development in Africa and the Moroccan private sector has been expanding its operation throughout the sub-region. It has a stable political environment, favourable geographic position, an operational legal framework, and a sufficiently development infrastructure of services.
Speaking about the 9th ADF, ECA Executive Secretary, Mr. Carlos Lopes, said, “The Forum seeks to enhance Africa’s capacity to explore innovative financing mechanisms as real alternatives for financing transformative development in Africa. The theme – Innovative financing for Africa’s transformation – stems from the recognition of the role of finance in attaining the structural transformation agenda premised on African-owned and African-driven developmental initiatives.”
Despite the positive growth outlook, Africa still faces an annual funding deficit of $31 billion for electrical power alone, while some donor countries have been falling short of their international commitments.
In the medium term, aid budgets are likely to be affected owing to fiscal consolidation in the traditional donor countries. This trend, coupled with Africa’s increasing domestic investment and funding needs, calls for a discussion on the strategic importance of financing development in Africa and the roles to be played by stakeholders. The theme for the Forum could not have been more timely as access to finance for development remains a critical challenge.
“Although foreign direct investment inflows have been rising, the continent still attracts only a small share of global equity funds, which are concentrated in a few countries and sectors such as business services and information and communications technologies. African countries must develop appropriate policies to attract private equity investment, particularly in sectors identified as key growth areas. The above issues will be discussed in depth at the Forum,” added Lopes.
The Forum will build on best practices, innovative policies and strategies, and institutional and governance frameworks. It will also aim to be guided by evidence-based knowledge and information on the range of options and their scope for leveraging opportunities for financing Africa’s sustainable development.
Background
The ADF Forum is a flagship biennial event of the Economic Commission for Africa, and offers a multi-stakeholder platform for debating, discussing and initiating concrete strategies for Africa’s development.
The Forum is convened in collaboration with the African Union Commission, the African Development Bank and other key partners with a view to establishing an African-driven development agenda that reflects consensus and leads to specific programmes for implementation.
This year’s theme is Innovative Financing for Africa’s Transformation, focusing on the below topics.
(a) Domestic resource mobilization;
(b) Illicit financial flows;
(c) Private equity;
(d) New forms of partnerships;
(e) Issues in climate financing.
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Trans-Kalahari railway on track
The tendering for the feasibility study for the construction of the multi-billion dollar railway line connecting Botswana’s Mmamabula coal field to the port of Walvis Bay is expected to start before the end of this year, National Planning Commission (NPC) Permanent Secretary, Leevi Hungamo, informed New Era yesterday.
“The tender process for the feasibility study will start this year and the report will be ready next year,” said Hungamo.
“The two governments are still working on logistics and setting up the project management office that will spearhead the project,” he said.
Asked whether there is any challenges faced by the project, Hungamo said currently there are no challenges facing the project and all planned activities are on course.
“So far the cost of the project has not yet been established as the feasibility study is yet to be conducted,” said Hungamo.
“Even if the cost will be that much, the parties concerned will be able to secure the funds,” he said.
He further said it is important to note that this project will not be funded by the two governments but rather by a private sector developer.
However, given the distance and complexity of the project, it is anticipated that the construction may take three years.
The 1 500km railway line will traverse the vast semi-arid, sandy savannah of the Kalahari desert from Botswana to Namibia, with the sole benefit of connecting the landlocked Botswana to Namibia’s port of Walvis Bay, thus unlocking the value of coal mining in Botswana and power generation in the region.
The railway line mirrors the existing Trans-Kalahari Highway or corridor, which links Botswana to Walvis Bay, but stretches 1 900km from Walvis Bay through Windhoek, Gaborone in Botswana and Johannesburg to Pretoria in South Africa.
Construction of the project is expected to cost approximately N$100 billion (about US$9.2 billion). Financing will be sourced through private stakeholders. The Trans-Kalahari Highway was constructed at a cost of N$850 million and opened in 1998.
But Hungamo said that there has not been any study conducted to determine actual costing.
“The process to obtain financing from the private sector in order to secure the development has already commenced,” said Hungamo.
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Nigeria’s foreign trade increases to N5.51tn in first quarter
Imports down by 6.2%, India remains major trade partner
Nigeria’s total merchandise trade increased by 6.8 per cent to about N5.51 trillion in the first quarter of the year (Q1 2014) compared to about N5.16 trillion recorded in the fourth quarter of 2013, according to the National Bureau of Statistics (NBS).
When compared to the corresponding quarter of 2013 (Q1 2013), the value of the total merchandise trade also increased by N406 billion or 8.2 per cent, it added.
The NBS, in its Foreign Trade Statistics, Q1 2014, which was released yesterday said there had been rising exports and declining imports which resulted in greater trade surplus for the country.
It said trade surplus increased by 34.3 per cent or N618.6 billion in Q1 2014 following a decline in imports by 6.2 per cent while exports increased by 15 per cent when compared to the Q1 2013 figures.
The report stated that the total trade was dominated by crude oil exports which accounted for about N3.23 trillion, representing 81.5 per cent of total exports while the non-crude oil accounted for N735.9 billion or 18.5 per cent of total exports.
Conversely, total imports in Q1 2014 was valued at about N1.54 trillion, representing a 8.3 per cent decline compared to about N1.68 trillion recorded in the preceding quarter.
When compared to the corresponding quarter of 2013, the value of imports dipped by N101.3 billion or 6.2 per cent, according to the NBS.
It stated further that the structure of Nigeria’s import trade was dominated by the imports of boilers, machinery and appliances, which accounted for 23.7 per cent of the total value of import trade in Q1, 2014.
The value of export trade amounted to about N3.96 trillion in Q1 2014, representing an increase of N492.6 billion or 14.2 per cent over the value recorded in the preceding quarter.
Crude oil component of export trade grew by 8.4 per cent from the preceding quarter, contributing 51.1 per cent of the total growth in exports while the non-crude oil component of trade grew by 48.6 per cent and accounted for 48.9 per cent of the total export growth from the previous quarter.
Further analysis of the trade statistics showed India as the country’s major trade partner with exports to that country valued at N544 billion followed by the Netherlands, Brazil, Spain and France, whose values stood at N461.5 billion, N376.8 billion, N346 billion and N310.9 billion of total exports respectively.
On the other hand, import trade by country showed that Nigeria imported goods mostly from China, United States, India, Belgium and Netherlands, which accounted for N368.1 billion, N164.7 billion, N93.2billion, N91.7 billion and N76.4 billion respectively.
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New Zimbabwean permits announced
Home Affairs Minister Malusi Gigaba has announced the details of the new Zimbabwean Special Dispensation Permit (ZSP).
Outlining the particulars of the ZSP at a media briefing in Pretoria, the Minister said this marked the beginning of a new phase, as the Dispensation for Zimbabwe Project (DZP) will officially be closed on 31 December 2014.
Under the DZP, Zimbabwean nationals, who were in the country illegally, were granted an opportunity to legalise their stay.
The special dispensation was introduced in 2009 to regulate the stay of Zimbabweans working illegally in South Arica as a result of the political and socio-economic situation in their country.
Approximately 295 000 Zimbabweans applied for the permit. Just over 245 000 permits were issued, with the balance being denied due to lack of passports or non-fulfilment of other requirements.
Since then, the Department of Home Affairs developed a proposal with regard to the new ZSP and it was accepted by Cabinet on 6 August 2014.
At the briefing on Tuesday, Minister Gigaba said Zimbabwean nationals, who are in possession of the DZP permits, are eligible to apply for the new ZSP. However, this is only if they wish to extend their stay in South Africa.
The Minister said certain conditions, however, must be fulfilled.
“These conditions include, but are not limited to: a valid Zimbabwean passport; evidence of employment, business or accredited study and a clear criminal record,” said Minister Gigaba.
The ZSP will allow permit-holders to live, work, conduct business and study in South Africa for the duration of the permit, which is valid until 31 December 2017.
Applications for ZSP permits, will open on 1 October 2014, and close on 31 December 2014.
Applications
According to Minister Gigaba, applications will be managed by VFS Global, a worldwide outsourcing and technology services specialist for diplomatic missions and governments. However, applications will be adjudicated by the Department of Home Affairs.
VFS will open four new offices in provinces where it is anticipated that there will be large numbers of applicants. These are Gauteng, Western Cape, Limpopo and Mpumalanga.
The new offices will be in addition to the 11 offices already opened, all of which will deal with ZSP applications.
Minister Gigaba said ZSP permit-holders, who wish to stay in South Africa after the expiry of their ZSP, should return to Zimbabwe to apply for mainstream visas and permits under the Immigration Act.
“We are appreciative of the many contributions made by Zimbabweans in our society and economy. Zimbabweans have made notable contributions in our education and health sectors, for example as teachers, health professionals and in many other sectors.
“We welcome Zimbabwe’s return to a path of stability and prosperity, and remain committed to cooperation and partnership with our valued neighbour,” Minister Gigaba said.
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Finally, light at end of the tunnel for 5,000mw dream thanks to US deal
While the agenda at the recently concluded US-Africa Summit included such things as governance and education, the underlying motivation was business with Africa.
But the first notion we must dismiss is that this was about America offering aid to Africa. The summit was more about aid to American companies to enable them get a foothold on the continent where Asian companies have entrenched themselves.
The so-called aid generally works like this: America provides funds towards certain projects. US firms implement those projects. Depending on the recipient country’s due diligence and proper cost-benefit analysis, both nations benefit.
For Kenya, the most visible outcome of this summit is funding for power projects. Under the US Power Africa Initiative, six African countries – Kenya, Tanzania, Ethiopia, Nigeria, Ghana and Liberia – will benefit from a $7 billion (Sh615bn) fund for power projects both on-grid and off-grid.
The World Bank announced during the summit that it would provide an additional $5 billion (Sh439bn) towards the initiative. Several other banks including Standard Bank of South Africa have also pledged funding for the same.
American companies such as General Electric, General Cables among others are gearing up to benefit from this funding to do business on the continent.
In need of serious funding
This is particularly significant for Kenya which is in the process of scaling up the installed power capacity to over 5,000mw. Currently we produce about 2,000mw.
This is hardly enough. Aliko Dangote, the Nigerian cement tycoon, for instance, told government officials the last time he was here that he would need about 1,000mw for a cement plant he plans to put up in Kitui.
The ministry of Transport, likewise, has indicated that it would need about 700mw for the standard gauge railway line service. These two ventures could thus gobble up what we produce currently.
Primary beneficiaries will be the big players in the energy sector – KenGen and GDC in exploration and generation, Kenya Electricity Transmission Company (Ketraco) in transmission, and Kenya Power in distribution and retail.
All these state players are in need of funding. KenGen, which recently added 140mw of geothermal power to the grid, and expects to add another 140mw by the end of the year, is looking to exploit a further 560mw in the same Ol Karia area. It needs funding and the Power Africa initiative could come in handy.
Ketraco, which was hived off from Kenya Power to focus on building power transmission lines, is fully-government owned unlike its siblings and, therefore, relies completely on state funding.
It is in need of serious funding especially because the amount of new power expected to come on stream cannot be handled by our fragile grid. Some of the proposed power plants will generate much more power than the current lines can handle.
There is 300mw coming from Loiyangalani – the Lake Turkana Wind Power project. We have 400mw coming via a high-voltage Direct Current line from Ethiopia to land at Suswa.
There is a 900mw liquefied natural gas power plant to be put up at Dongo Kundu in Mombasa; a 900mw coal fired plant in Kitui and an expected 1,200mw to be generated from Menengai. There is also the 61mw expected from the Kinangop Wind Park project to be commissioned next year.
Kenya can benefit from the US initiative immediately because these projects are ready for implementation if funding is there.
But crucially, government will need to have an organised end-to-end approach from generation to consumption.
It is one thing to generate the power but quite another to distribute it and to ensure it is taken up. Currently, 60 per cent of the power produced in Kenya is consumed by industry. Households barely consume 30 per cent. Along the way about 18 per cent of this power is lost through system leakages and theft.
It will be in order then for some of this funding to go to strengthening Kenya Power’s systems to reduce these losses. This will include removing bureaucratic barriers; for instance, power in Nairobi is unstable because Kenya Power cannot put up a ring around the region to stabilise it.
This is a responsibility that Ketraco has adamantly held onto yet it has to wait to get funding to do it. Kenya Power, which could build the ring with its own funds, is left to fire-fight blackouts. A holistic approach can deal with this.
The ministry of Industrialisation will also have to develop the market for the uptake of the generated power. This will include wooing industries to set up shop in the country to ensure we don’t have idle power plants.
Government could, for instance, insist that much of the funding from the US goes towards geothermal generation in Ol Karia and Menengai. Then it can partner with KenGen to put up an industrial area in Naivasha where companies will be fed power directly from generation, making it both cheaper and more reliable.
Private sector companies interested in the power sector also stand to benefit if they have their projects planned. The US Development Fund with General Electric are running competitions for innovative clean energy projects.
Opportunities exist especially in those areas that are not served by the national grid. Wind and solar initiatives in northern Kenya, for example, stand to benefit.
At the end of the day, the bottom line of these initiatives is business and Kenya must approach it as such and not as charity.
The writer is a financial communications consultant.
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Mozambique: Assembly passes Petroleum Bill
The Mozambican parliament, the Assembly of the Republic, on Monday passed the first reading of a bill amending the country’s law on petroleum and gas, intended, according to the government, “to make the legal framework more predictable and transparent for investors”.
The government bill seeks to convert matters that had previously been in contracts signed between the government and hydrocarbon companies into rights and obligations regulated by law.
The bill reiterates that all petroleum and gas resources are state property, and the state has the right to participate in all hydrocarbon operations at any phase. All data obtained under any of the concessions contracts envisaged by the law also become state property.
Petroleum and gas operations must be undertaken through a concession contract that may result from a public tender, or negotiations between the company and the government.
Introducing the bill, the Minister of Mineral Resources, Esperanca Bias, stressed that it is obligatory to publish all concession contracts.
Contracts signed by the companies to obtain goods and services above a minimum value must be preceded by a public tender, and the companies must give preference to local products and services when these are comparable in quality to imported goods and services, are available in due time, and are no more than 10 per cent more expensive.
Companies exploring for hydrocarbons must report any discovery in their concession area to the government within 24 hours. In the case of a commercial discovery, the company must submit to the government a plan to develop the deposit.
The bill states that a percentage of the revenue generated in hydrocarbon production must be channelled to the development of communities in the areas where these operations take place. The exact percentage will be fixed in the state budget each year, depending on the revenue envisaged from petroleum and gas.
Petroleum and gas companies must ensure that their operations cause no environmental damage as far as possible, and must take environmental measures that are in line with internationally accepted standards.
In particular, the companies must avoid oil spills or leaks, and if these do happen they are responsible for the subsequent clean-up operations, and must report to the government the amount of oil spilled. The companies must also pay compensation for any pollution or other damage caused.
In its written opinion on the bill, the Assembly's Commission on Agriculture, Economic Affairs and the Environment proposed amendments to the bill notably that some goods and services, to be defined in a specific regulation, should be provided exclusively by Mozambican nationals.
The commission stressed that some of the petroleum and gas produced must be directed to the development of the national economy and the industrialization of the country, and suggested that this should be at least 25 per cent of what was produced.
When people need to be resettled because of petroleum and gas operations, the commission called for “fair compensation” to be agreed in a memorandum of understanding between the company and the households and communities concerned, signed under the auspices of the government. Such a memorandum should be an indispensable condition for starting the exploitation of hydrocarbons.
Bias said the government accepts the thrust of the Commission's amendments, which will now be incorporated into the final version of the bill.
The first reading of the bill passed by 175 votes to 23. All deputies from the ruling Frelimo Party and from the Mozambique Democratic Movement (MDM) present voted in favour, while the 23 deputies of the former rebel movement Renamo voted against.
Renamo justified its vote on the grounds that the bill contains no mention of the High Authority on the Extractive Industry. This is a body that does not yet exist, but will be set up under a Mining Law passed last month.
Renamo objects to the fact that the High Authority as envisaged in the Mining Law will be set up by the government. It demands that the Assembly should elect members of the High Authority - which is just a way of ensuring that there will be some Renamo members on the new body, since “election” by the Assembly always means that the Frelimo parliamentary group appoints the majority of those being “elected” and Renamo appoints the minority.
Read the press statement here: http://www.parlamento.mz/noticias/575-parlamento-aprova-revisao-da-lei-dos-petroleos [Portuguese]
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African states must conclude double taxation pacts to attract investors
With the increasing Africa-wide trade efforts fronted by various governments, it is imperative that these governments offer supportive trade platforms for their nationals and investors by concluding Double Taxation Agreements.
At present, most of the African states do not have DTAs, making trade between and among them tax inefficient.
In East Africa, even though states have made gains in removing trade barriers among themselves, the East African DTA has not been concluded.
Kenya, for example, should aggressively seek to conclude as many DTAs with African countries, first so as to enable its nationals and residents to trade in those countries, and also to provide a springboard for investments into Africa where investments are routed through the country.
Mauritius and South Africa have concluded DTAs with many African countries.
A DTA is a treaty between states to co-ordinate the exercise of their taxing rights. It is signed by states (bilaterally or multilaterally) for several purposes, the most important being as a fiscal tool aimed at eliminating or reducing double taxation of taxpayers of those contracting states.
Since it is considered that double taxation hinders trade and the free flow of capital, goods and services between states, the conclusion of a double taxation treaty helps in eliminating or reducing this obstacle, thus fostering economic exchanges between those states.
In the absence of a DTA, a taxpayer doing business in two states would be taxed under domestic legislations of those states. Since those domestic legislations may be based on different fiscal systems, like taxing of territorial and worldwide incomes, often instances arise where there is double taxation.
This may be in the form of the same income being taxed in the hands of the same person by the two states, thus increasing the total tax burden of that person, or in situations where two different taxpayers are taxed in respect of the same income.
Where a DTA exists between these two states, it would provide taxing rights to one of the states or oblige one of the states to grant double taxation relief.
By way of a simple hypothetical example, a Kenyan company that is paid management fees by its Uganda subsidiary would be taxed as per table below.
Based on the above, it is clear that management fees payable to the company would suffer double taxation and cost the company tax of Ksh255,000, in comparison with Ksh 150,000 that the company would pay if there existed a DTA between Kenya and Uganda.
In such a case, the company’s total tax burden would be reduced. It should be noted that in most cases, a DTA would limit Uganda’s taxing rights to say 10 per cent. In such a case, the company’s total tax burden would be as per the last column.
DTAs also prevent the application of discriminatory tax treatments of one state to nationals or residents of the other state under certain situations, for example, in cases of a permanent establishment belonging to or enterprises owned by those nationals or residents, as well as on deductibility for tax of certain expenses paid to those nationals or residents.
DTA also may constitute the legal basis for co-operation between contracting states to prevent tax evasion by providing a platform for exchange of information or enforcement of the domestic laws of the contracting states.
Christopher Kirathe is the director tax services, at Ernst & Young. The views expressed here are his.
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Liberalisation of air transport can bolster countries’ GDP by $1.3b, says IATA
The International Air Transport Association (IATA) has disclosed that Nigeria and 11 other nations in Africa may earn at least $1.3billion as Gross Domestic Product (GDP) annually if they implement the liberalization of air transport in the continent.
According to IATA, Yamoussoukro Decision is the agreement for liberalisation of air transport for the West African region reached at a regional conference in 1999. The implementation of this agreement has however been slow due to lack of political will by African leaders, it noted.
Other factors militating against the implementation of the policy, according to the body include unnecessary restrictions on establishing air routes and the penetration of African skies by foreign carriers through obnoxious air agreements.
The Director-General, IATA, Mr. Tony Tyler said that potential five million passengers annually are being denied the chance to travel between these markets because of unnecessary restrictions on establishing air routes.
Statistics presented by IATA indicated that Nigeria would have additional 17,400 employments with $128.2m annual GDP.
Algeria is expected to generate about 15,300 jobs with revenue potentials netting $123.6m, while Angola is to generate about 15, 300 jobs with over $137.1m contribution to its GDP.
On its part, Egypt would be expected to generate over 11,300 jobs and $114.2m contribution to its GDP and Ethiopia to generate over 14,800 jobs and $59.8m GDP, Ghana would be expected to generate over 9,500 jobs and $46.8m contribution to its GDP, while Kenya, to generate about 15,900 jobs and $76.9m annual GDP.
“This report demonstrates beyond doubt the tremendous potential for African aviation if the shackles are taken off. The additional services generated by liberalisation between just 12 key markets will provide an extra 155,000 jobs and $1.3bn in annual GDP.
Tyler said: “A potential five million passengers a year are being denied the chance to travel between these markets because of unnecessary restrictions on establishing air routes.
“Furthermore, employment and economic growth are just the tip of the iceberg in terms of the benefits of connectivity. Aviation is a force for good, and plays a major role in helping to reach the African Union’s mission of an integrated, prosperous and peaceful Africa”, he added.
Tyler noted that aviation already supports 6.9 million jobs and more than $80 billion in GDP across Africa, adding that the InterVISTAS research demonstrates that liberalisation would create opportunities for further significant employment growth and economic development.
He insisted that the study clearly highlighted the crucial role air transport plays in driving economic and social development in Africa through enhanced connectivity .
He urged government in the continent to support the growth of the industry by fully liberalising African skies as intended by the Yamoussoukro Decision, while providing other facilitator assistance like implementing global standards in safety, security and regulations, reducing high charges, taxes and fees and removing visa requirements for ease of movement across the continent.
“Africa represents a huge potential market for aviation. It is therefore unfortunate that African states are opening their aviation markets to third countries but not to each other, which does not promote the spirit of the Yamoussoukro Decision”, he said.
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Harare plans could dent SA exports
Plans by Zimbabwe to drive a policy promoting vehicle assembly through the importation of knocked-down kits and the imposition of higher tariffs on imported vehicles will significantly dent exports by South Africa’s automotive industry.
Total automotive exports from South Africa to Zimbabwe were worth a total of R1.85 billion last year, of which R1.1bn was attributable to vehicle exports and R839 million to automotive component exports, according to the latest South African Automotive Export Manual published by the Automotive Industry Export Council.
Norman Lamprecht, the executive manager of the National Association of Automobile Manufacturers of SA, said on Friday that Zimbabwe had already introduced some surcharges on vehicle imports, which was similar to what Nigeria had done.
Lamprecht said this could have a significant negative impact on South African automotive exports because Zimbabwe was one of the top destinations in Africa for these exports. But he said any tariff increases by Zimbabwe applicable to South Africa would be in conflict with the Southern African Development Community (SADC) free trade agreement.
This agreement is between the 12 SADC member states with almost all tariff lines traded duty free.
Lamprecht said the agreement was subject to the rules of origin, which specified 40 percent local content and completely knocked-down vehicle assembly. In terms of the definition, this meant that all parts must be in unassembled format, which meant a production facility and paint plant were required.
Lamprecht said there was already some vehicle assembly taking place in Zimbabwe but it only amounted to a few hundred vehicles a year. He questioned whether it would be economically viable for Zimbabwe to produce vehicles on a small scale and protect its industry with high import duties.
Lamprecht added that Africa was the dumping ground for global used vehicles, which were the main competition for new vehicles and grey imports on the continent.
Reports from Zimbabwe suggest that used vehicle imports will still be permitted. He said used vehicle imports undermined any new vehicle manufacturing industry, which was the reason they were not allowed in South Africa.
Nigeria last year emerged as a potential competitor to South Africa for foreign direct investment by global multinational vehicle manufacturers.
This followed the Renault-Nissan alliance and west African conglomerate Stallion Group announcing their intention to jointly launch vehicle assembly in Nigeria and indicating there was potential to develop the plant into a major manufacturing hub for Nissan in Africa.
However, Nissan SA managing director Mike Whitfield, who is responsible for the sub-Saharan Africa region, including South Africa and Nigeria, stressed it did not pose any threat to the domestic motor industry and was an opportunity for co-operation and complementation.
This view was echoed by Trade and Industry Minister Rob Davies, who said last year the government had been working with its colleagues in Nigeria to support them in establishing motor manufacturing in that country because South Africa supported industrialisation of the entire African continent and believed there were synergies and complementarities South Africa could benefit from if Nigeria developed a motor manufacturing industry
Jeff Nemeth, the president and chief executive of Ford Motor Company of Southern Africa, confirmed in May that Ford was considering expanding its manufacturing footprint to other countries such as Nigeria.