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President Obama engages with African leaders on final day of the U.S.-Africa Leaders Summit
President Obama and African leaders took part in three action-oriented sessions today [6 August 2014] as part of the U.S.-Africa Leaders Summit in Washington, D.C. The summit is the largest event any U.S. president has held with African heads of state and government, and builds on President Obama’s trip to Africa last summer.
In remarks at this morning’s opening session, the President explained the purpose of the event and noted the progress across the African continent – and what that means for America:
We come together this week because, even as the continent faces significant challenges, as I said last night, I believe a new Africa is emerging. With some of the world’s fastest-growing economies, a growing middle class, and the youngest and fastest-growing population on Earth, Africa will help shape the world as never before.
Moreover, Africa’s progress is being led by Africans, including leaders represented here today. More governments are embracing economic reforms, attracting record levels of investment. Gains in development, increasing agricultural production, declining rates in infectious diseases are being driven by African plans. African security forces and African peacekeepers are risking their lives to meet regional threats. A new generation of young Africans is making its voice heard.
Africa’s rise means opportunity for all of us – including the opportunity to transform the relationship between the United States and Africa. As I said in Cape Town last year, it’s time for a new model of partnership between America and Africa – a partnership of equals that focuses on African capacity to solve problems, and on Africa’s capacity to grow. And that’s why we’re here.
The President called the summit “an opportunity to focus on three broad areas” where the U.S. and Africa can make progress together: expanding trade that creates jobs; strengthening governance; and deepening our security cooperation against common threats.
“We are here not just to talk,” he said. “We are here to take action – concrete steps to build on Africa’s progress and forge the partnerships of equals that we seek; tangible steps to deliver more prosperity, more security, and more justice to our citizens.”
At a press conference this evening, President Obama thanked the African leaders for taking part in the summit, noting that today’s sessions were “genuine discussions – a chance to truly listen and to try to come together around some pragmatic steps that we can take together.”
Here’s what he covered at the press conference:
Expanding trade
Yesterday, the President announced $33 billion in new trade and investment commitments that will help spur African development and support tens of thousands of U.S. jobs. And as a result of new commitments to the Power Africa initiative, the U.S. now aims to bring electricity to 60 million homes and businesses across the African continent.
At the press conference, the President emphasized that Africa’s prosperity depends on the people of Africa:
Ultimately, Africa’s prosperity depends on Africa’s greatest resource – its people. And I’ve been very encouraged by the desire of leaders here to partner with us in supporting young entrepreneurs, including through our Young African Leaders Initiative. I think there’s an increasing recognition that if countries are going to reach their full economic potential, then they have to invest in women – their education, their skills, and protect them from gender-based violence. And that was a topic of conversation this afternoon. And this week the United States announced a range of initiatives to help empower women across Africa.
Our New Alliance for Food Security and Nutrition continues to grow, aiming to lift 50 million Africans from poverty. In our fight against HIV/AIDS, we’ll work with 10 African countries to help them double the number of their children on lifesaving anti-retroviral drugs. And even as the United States is deploying some of our medical first responders to West Africa to help control the Ebola outbreak, we’re also working to strengthen public health systems, including joining with the African Union to pursue the creation of an African Centers for Disease Control.
I also want to note that the American people are renewing their commitment to Africa. Today, InterAction – the leading alliance of American NGOs – is announcing that over the next three years its members will invest $4 billion to promote maternal health, children’s health, and the delivery of vaccines and drugs. So this is not just a government effort, it is also an effort that’s spurred on by the private sector. Combined with the investments we announced yesterday – and the commitments made today at the symposium hosted by our spouses – that means this summit has helped to mobilize some $37 billion for Africa’s progress on top of, obviously, the substantial efforts that have been made in the past.
Good governance
President Obama went on to explain that good governance is “a foundation of economic growth and free societies,” noting that while some African countries are making “impressive progress,” there are also “troubling restrictions on universal rights.”
Today was an opportunity to highlight the importance of rule of law, open and accountable institutions, strong civil societies, and protection of human rights for all citizens and all communities. And I made the point during our discussion that nations that uphold these rights and principles will ultimately be more prosperous and more economically successful.
In particular, we agreed to step up our collective efforts against the corruption that costs African economies tens of billions of dollars every year – money that ought to be invested in the people of Africa. Several leaders raised the idea of a new partnership to combat illicit finance, and there was widespread agreement. So we decided to convene our experts and develop an action plan to promote the transparency that is essential to economic growth.
Deepening our security cooperation
The President also detailed how the U.S. and Africa will deepen security cooperation, in order to “meet common threats, from terrorism to human trafficking.”
We’re launching a new Security Governance Initiative to help our African countries continue to build strong, professional security forces to provide for their own security. And we’re starting with Kenya, Niger, Mali, Nigeria, Ghana and Tunisia.
During our discussions, our West African partners made it clear that they want to increase their capacity to respond to crises. So the United States will launch a new effort to bolster the regions early warning and response network and increase their ability to share information about emerging crises.
We also agreed to make significant new investments in African peacekeeping. The United States will provide additional equipment to African peacekeepers in Somalia and the Central African Republic. We will support the African Union’s efforts to strengthen its peacekeeping institutions. And most importantly, we’re launching a new African peacekeeping rapid response partnership with the goal of quickly deploying African peacekeepers in support of U.N. or AU missions. And we’ll join with six countries that in recent years have demonstrated a track record as peacekeepers – Ghana, Senegal, Rwanda, Tanzania, Ethiopia and Uganda. And we’re going to invite countries beyond Africa to join us in supporting this effort, because the entire world has a stake in the success of peacekeeping in Africa.
President Obama then announced that, due to the success of this summit, U.S.-Africa Leaders Summits will now take place every four years “to hold ourselves accountable for our commitments and to sustain our momentum.”
“Africa must know that they will always have a strong and reliable partner in the United States of America.”
Meanwhile, at the Kennedy Center today, First Lady Michelle Obama partnered with former First Lady Laura Bush and the Bush Institute to host the day-long “Investing in Our Future” symposium on advancement for women and girls in Africa.
The symposium – which focused on the impact of investments in education, health, and public-private partnerships – brought the two First Ladies together with African first spouses from almost 30 countries, as well as leaders from nongovernmental and nonprofit organizations, private-sector partners, and other experts.
In her remarks kicking off the event, Mrs. Obama discussed the need to “lift up our young people,” as well as the importance of “bringing these young people to the table” and listening to their voices and views:
The question is, can we and our governments learn from them and follow their lead? Can we embrace their ideas and incorporate them into policies and strategies? And in our work as First Ladies, First Spouses, can we find new ways to be more inclusive of these young people and show them that we truly value their voices?
And so many of you are already embracing the young leaders in your countries through your work – whether it’s improving girls’ education, or fighting cervical cancer or HIV, or supporting microfinance. You all have the potential to inspire millions across the globe.
So it is my hope that today, we will rededicate ourselves to these efforts and commit to new efforts to lift up our young people. And I hope that you all will have a chance today to really connect with each other, and learn from each other, and hopefully be inspired by each other.
The symposium also included the announcement of more than $200 million in investments to support programs fostering improved education, health, and economic opportunity for more than 1 million Africans. Find out more about those investments here.
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Three reasons to worry about mega-regional trade deals
Trade liberalization has progressed with historically unprecedented speed in the 21st century: trade volumes are booming; and hundreds of millions have been lifted out of dire poverty.
The policy reforms that underpinned this liberalization were implemented by a tangled mess of regional trade agreements, unilateral reforms and bilateral investment treaties. The good news is that mega-regional trade deals, such as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), will tidy up the mess – turning tangled spaghetti into lasagne plates, so to speak.
The bad news is that mega-regionals also threaten to undermine world trade governance, and the WTO in particular. Trade liberalization in the past decades has had three parts: regional trade agreements, bilateral investment treaties and unilateralism. Unilateralism is not a systemic threat to the WTO and bilateral treaties have long coexisted with the WTO. But regional trade agreements – and even more so mega-regionals – are likely to erode the WTO’s central place in world trade governance. The threat is not on the tariff-cutting front; it is on rules-writing.
There are three main reasons to worry:
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First, the basic WTO trade norms are almost universally accepted and respected, but this universality stems in large part from the way they were created – in multilateral negotiations where the WTO consensus principle held sway.
The new trade rules were promulgated in settings of massive power asymmetries between larger countries and small to medium-sized developing nations. The mega-regionals are slightly less asymmetric since more than one giant is involved in each, but the small member and third nations still find themselves at a huge disadvantage. Lacking the legitimacy that comes from multilateralism and consensus, it is not at all clear that the new norms will be universally respected.
For example, some emerging markets – China, India and Brazil – are large enough to attract foreign investment and technology without signing regional trade agreements, and have so far shunned them. China in particular may decide to reject the rules, creating something like a “Cold War of deeper trade disciplines”. This sort of distrust could spread beyond the new rules, especially if China, India and Brazil believe that the US is practising what Fred Bergsten calls “competitive liberalization”; that is, encircling them with trade deals in a way that could be seen as an ultimatum.
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Second, a world where the WTO is irrelevant to trade’s most dynamic developments is not a world that fosters multilateral cooperation on other issues.
Without a single forum for all trade and investment issues, it will be difficult to arrange the trade-offs necessary to make progress on trade-related policies that help with climate mitigation and adaption, food shortages linked to drought or floods, etc. US, EU and Japanese interests may be served in the short term, and the interests of small to medium-sized emerging markets will likewise be served (if not evenly), but where do Brazil, India and China fit in?
These countries are not in a position to set up their own systems of deeper disciplines for the trade-investment services nexus because they do not have advanced technology factories to offshore in exchange for host-nation reforms. By the time their multinationals are ready to make major outward pushes, the rules-of-the-road will have been written by the deep regional trade agreements of the US, the EU and Japan.
If the mega-regionals conclude, they will have been firmly embedded in international commerce; the members of TPP and TTIP account for over half of world trade. More precisely, they will be embedded in the domestic laws and regulations of all the host nations that the Chinese, Indian and Brazilian companies will be looking at. Like it or not, Chinese, Indian and Brazilian companies will have to play by the rules that are now being written by the mega-regionals.
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Third, the WTO’s adjudication function is still working well, but any dispute settlement system must “walk on two legs”.
The judges can connect the dots for particular cases, but the basic rules must be updated occasionally to match evolving realities. If the rules are being written in the mega-regionals, the only way to update the WTO rules is to multilateralize TPP and TTIP rules. That may be very difficult politically.
Mega-regionalism is not yet a disaster for the world trade system. The present trajectory, however, seems certain to undermine the WTO’s centricity – mega-regionals will take over as the main loci of global trade governance. Over the past 15 years, WTO members have “voted with their feet” for the regional trade agreement option. Without reform that brings existing agreements under the WTO’s aegis and makes it easier to develop new disciplines inside the system, the trend will continue, possibly taking it beyond the tipping point where nations ignore WTO rules.
In the best of cases, the WTO continues to thrive as the institution that underpins 21st-century trade flows. The Marrakesh Agreement would form a “first pillar” of a multi-pillar trade governance system. All the new issues would be addressed outside the WTO in a setting where power asymmetries are far less constrained. But this is not the only scenario. It is also possible that the WTO’s inability to update its rules gradually undermines the authority of the dispute settlement mechanism.
If the mega-regionals and their power asymmetries take over, there is a risk that the WTO could go down in future history books as a 70-year experiment in which world trade was rules-based instead of power-based. It would, at least for a few more years, be a world where the world’s rich nations write the new rules-of-the-road in settings marked by vast power asymmetries. This trend should worry all world leaders. In the first half of the 19th century, attempts by incumbent Great Powers to impose rules on emerging powers smoothed the path to humanity’s greatest follies – the two world wars.
Richard Baldwin is Professor of International Economics, Graduate Institute of International and Development Studies, Switzerland
Click here to download the new report: Mega-regional Trade Agreements – Game-Changers or Costly Distractions for the World Trading System?
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FG’s import policies responsible for NPA’s poor 2013 performance – NPA boss
The managing director of Nigeria Ports Authority (NPA), Mallam Habib Abdullahi, has blamed federal government’s fiscal measures that restricted some imports into the country and other sundry factors for the authority’s poor performance in 2013.
In the 2013 ports’ performance report released by the authority and signed by the NPA assistant general manager, Public Affairs, Mr Musa Iliya, the NPA boss blamed 2013 poor operations on government’s policies at discouraging importation of some goods to enable their local production and market viability.
In the 2013 scorecard released by the blue-chip parastatal, the Abdullahi also remarked that market forces were part of factors that limited the activities of the NPA in the year under review.
He said: “Recent research revealed that, generally, each port is being shaped by the market forces dictated by the commodity demand and by the particular port user.
“The decline experienced in some products can be linked to general economic factor. In dry bulk, for instance, there is ban on the importation of cement. Also, the increase in rice tariff has reduced the importation of the commodity to the country through Nigerian ports, but through smuggling by another route.”
The NPA boss also said the European debt crises gave birth to the decrease in Liquefied Natural Gas (LNG), noting that many of their industries had closed down which has led to a low demand for Nigeria’s LNG.
“They have also discovered an alternative means of production in the Middle East. The petroleum product liberalisation, growth in gross domestic product (GDP) and the transformation agenda of the President Goodluck Jonathan administration resulting in increase in construction works have had an unprecedented economic impact on the port industry,” he stated.
The performance report however, stated that, a cargo throughput, excluding crude oil terminals of 76,886,997 million metric tons (mt) was handled at all Nigerian ports in 2013, reflecting a marginal increase of 0.042.6 per cent over the 2012 figure of 76,855,754 mt.
A breakdown of the figure showed that container traffic amounted to 1,010,836 twenty-foot equivalent units (TEUs), reflecting a growth of 15.2 per cent over the 877,737 TEUs posted in 2012.
Also, a total of 291,824 units of vehicles were handled in the period under review, showing an increase of 8.9 per cent over the 268,026 units recorded in 2012.
LNG shipment handled in the period amounted to 19,341,663 metric tons, a drop of 12.7 per cent from the 22,146,908 mt posted in 2012.
On the other hand, refined petroleum shipment handled was in 2013 was 19,416,043 mt, showing an increase of 9.5 per cent over the 17,730,727 mt recorded in the previous year.
Dry bulk cargo handled at the ports in the reviewed period totalled to 9,537,447 mt, a decline of 6.5 per cent from the 10,205,339 mt posted the previous year, even as general cargo handled was 11,964,978 mt, indicating a 5.8 per cent drop from the 12,702,826 mt recorded in 2012.
“In year 2013, the total of 5,185 oceans-going vessels with a total gross registered tonnage (GRT) of 131,674,337 gross tons called at Nigerian ports,” the statement indicated.
Similarly, in the period under review, the Lagos Port Complex (LPC) recorded 34,466,291GRT, reflecting an increase of 9.4 per cent over the 31,513,987 GRT posted in 2012, even as a total of 1,498 vessels were handled at same facility in 2013.
While 1,725 ocean-going vessels were handled at the Tin Can Island Port Complex (TCIP) in 2013, the statement added that the port recorded 42,758,161 GRT, which is 23.2 per cent increase over the 34,703,547 GRT of 2012.
Unlike the two Western ports, the LPC and the TCIP, which both experienced increased GRT in 2013 over the 2012 figures, their Eastern counterparts, Calabar Port Complex, Rivers Port Complex, and Onne Port Complex, suffered drops in GRT in 2013, when compared to 2012.
The Calabar Port Complex recorded 2,792,488 GRT, a decline of 2.8 per cent compared to the 2,871,622 GRT of 2012with same facility recording 197 ocean-going vessels in 2013.
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Moody’s says local banks to lead EAC in growth
Well-funded Kenyan banks are set to lead regional lenders in business expansion over the next two years owing to larger capital bases and investment in mobile technology, a new report by consultancy Moody’s says. Moody’s says it expects the East Africa Community banking sector to have balance sheet growth of between 15 and 20 per cent in each of the next two years.
The growth will be driven primarily by robust GDP growth – forecast by IMF at between 6.6 per cent this year and 6.7 per cent in 2015 – the ongoing regional integration, and the mobile money revolution which is helping increase banking penetration.
“The large Kenyan banks are best positioned to benefit from growth opportunities, given their dominant, cross-border networks and advanced mobile technology capabilities.
“The integration process is creating new business opportunities for the region’s banks, mainly in trade finance (letters of credit, letters of guarantee), infrastructure project lending, foreign exchange services, as well as credit growth,” said Constantinos Kypreos, Moody’s vice-president and senior credit officer, without giving a breakdown of growth projections for the countries.
EAC’s 2013 banking sector assets totalled about Sh4.8 trillion ($54 billion), with those of Kenyan banks alone currently standing at Sh2.97 trillion. Local banks have been more aggressive than their regional counterparts in tapping the EAC market for additional business.
Leading lenders, including Kenya Commercial Bank, Equity Bank and Cooperative Bank, have opened multiple branches in Uganda, Tanzania, Rwanda and South Sudan.
“In instances where (Kenyan) banks are faced with financing demands such as those of infrastructure projects that are beyond the capacity of a single lender, there is room to syndicate the loans among different banks,” the report titled East African Community: Credit Issues for Banks says.
Kenyan lenders have also led in integration of mobile money services with their banking systems, taking advantage of the accessibility of services such as M-Pesa to reach clients without an expensive brick-and-mortar branch network and with low transaction costs. The M-Shwari product developed by Safaricom and Commercial Bank of Africa, for instance, saw the bank increase its loan accounts to 897,000 last year up from 89,000 in 2012.
KCB and Safaricom have recently launched a suite of mobile services targeting SMEs, including bank account opening, website domains as well as talk-time and text message services.
Equity Bank is also set to launch its virtual mobile network (MVNO) which will give the bank a bigger opportunity in the money transfer business currently dominated by Safaricom’s M-Pesa.
“Regional uptake of mobile money, for example in Rwanda, has been high but it has been from a low base,” said Standard Investment Bank head of research Francis Mwangi.
Profitability
In spite of the increase in balance sheet size, the banks are not expected to see a corresponding rise in profitability, as increased revenues are offset by declining interest margins, rising operating costs and high loan-loss provisions.
According to the Moody’s report, non-performing loans (NPLs) for regional banks currently range between five and 10 per cent (Kenya’s sector average is 5.7 per cent) and loan-loss provisioning coverage is at a low 40 to 80 per cent of NPLs.
The second quarter 2014 banking sector report by the Central Bank of Kenya shows that non-performing loans for local banks have risen to Sh100 billion, although this is in tandem with a rise in their loan books. This comes at a time when CBK is demanding an increase in capital cushion to mitigate risks.
“CBK in raising capital adequacy ratios is taking a precautionary measure to protect local financial institutions from external shocks and secure customer deposits in line with global trends following the 2008-2010 global financial crisis,” said Genghis Capital analyst Silha Rasugu.
Moody’s also raised concern on regional bloc’s relatively small capital bases which limit participation in the region’s growth, while shallow bonds markets constrain the ability of banks to raise long-term funding.
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South Africa’s Chairpersonship of BRICS – from Durban to Fortaleza
Speech by the Minister of International Relations and Cooperation, Ms Maite Nkoana-Mashabane, on the occasion of a Public Lecture on: “South Africa’s Chairpersonship of BRICS – from Durban to Fortaleza”
Institute for Global Dialogue (IGD)
Friday, 01 August 2014
It is a great honour and privilege for me to deliver this address today, in partnership with the Institute for Global Dialogue.
I must accordingly express my sincere gratitude to the IDG, in particular, Dr Siphamandla Zondi, for inviting us to give our perspective on South Africa’s chairpersonship of BRICS.
We at DIRCO have taken note of the work you do at IGD, and appreciate the volume of resources and sheer labour that goes into all your research and the many articles and books you produce. We thank you for sharing these resources with us – they will go a long way in helping us do our work smarter.
With such strong support from our alliance, we are hoping that this session will place us in a pole position to provide a much stronger, richer and vibrant account of the voyage we have covered with our BRICS partners from Durban to Fortaleza.
Programme Director;
Our journey from Durban to Fortaleza has not been an easy one, but it is from this journey that we have a good story to tell.
Amongst others, a good story worth telling is that we are proud members of an emerging group that represents 42,6% of the world’s population, 18% of global trade, attracts 53% of foreign capital, accounts for 20% of global GDP and generated 61% of economic growth in the world economy and has an estimated USD 4tr foreign reserves base.
Our own trade with BRICS countries increased from R297 billion (2012) to R381 billion (2013) – 20% of total South African trade. The BRICS Exchange Alliance is based on cross listing of shares from over 7000 BRICS companies with a total capitalisation of about $8 trillion.
When President Jacob Zuma addressed a session of business leaders from Brazil, Russia, India, China, South Africa (BRICS) member states on the side-lines of the BRICS Summit in New Delhi, India, he point out that our participation in this grouping of the world’s leading emerging economies is;
(I quote)
“designed to help us achieve inclusive growth, sustainable development and a prosperous South Africa”.
(Unquote)
Since New Delhi, we never looked back. To this day, we continue to strengthen the responsibility we have bestowed on ourselves to achieve inclusive growth, sustainable development and a prosperous South Africa, with Africa as our priority. We look at BRICS as a vehicle through which we could achieve some of our developmental goals.
Ladies and Gentlemen;
As you know, President Jacob Zuma has just returned from Brazil where he participated at the 6th BRICS Summit in Fortaleza.
At Fortaleza, South Africa ripped the benefits of its earlier engagements in Durban, where we successfully hosted the 5th BRICS Summit in March 2013.
In Durban, we had an opportunity to stimulate dialogue, and launch negotiations for the establishment of, namely;
- the New Development Bank (NDB), and
- the Contingent Reserve Agreement(CRA).
In Fortaleza, leaders agreed to move swiftly in order to process the Agreement on the New Development Bank (NDB); and the Treaty for the Establishment of a BRICS Contingent Reserve Agreement (CRA).
These are some, amongst the many, tangible outcomes of our BRICS chairpersonship – a legacy whose humble beginnings can be traced from Durban.
We are inspired by these outcomes. We have an urge to work twice as hard, and smarter. This is perhaps the reason why we want to continue our forward march, redouble our efforts to bring about more tangible and vibrant proposals, particularly on issues of common interest and mutual benefits within the field of development within emerging economies and like-minded states.
Programme Director;
The New Development Bank is by far the most powerful, single institution conceived by emerging economies for the sole benefit of their own development and prosperity. It has a solid vision inspired by ideals founded upon South-South Cooperation.
South Africa remains committed to these ideals that seek to position developing nations, and emerging economies, on a global map as key contributors to the global GDP, and overall growth and development.
Programme Director, having said that, please allow me to share with you and our esteemed guests some practical information on the proposed modalities and future operations of the New Development Bank. These are as follows:
- The headquarters of the Bank will be located in Shanghai, China;
- The establishment of the NDB’s first regional office will be in Johannesburg (the Africa Regional Centre) to be launched concurrently with the bank in Shanghai;
- The order of rotation of Presidents of the Bank who will serve for a five year term, non-renewable, will be India first to be followed by Brazil, Russia, South Africa and China;
- A Special Fund will be created within the Bank, with the participation of all founding members, for the purpose of helping project preparation and implementation;
- The first chair of the Board of Governors shall be from Russia; and
- The first chair of the Board of Directors shall be from Brazil.
At this stage, the only outstanding matter is for member states to ratify agreements for the New Development Bank and Contingency Reserve Agreement – we have made a commitment to give priority to this undertaking.
The Bank shall have an initial authorized capital of USD 100 billion and the initial subscribed capital shall be of USD 50 billion, equally shared among founding members.
South Africa will contribute USD 2 billion within a 7 year period, which is broken down as 7 instalments of USD 150 Million for the first 6 months, USD 250 Million for the 18 month period, followed by USD 300 Million for years 3, 4 and 5 and then USD 350 for years 6 and 7.
Ladies and Gentlemen;
It will now be the responsibility of the BRICS Central Banks to work with speed to conclude an Inter-Central Bank Agreement (ICBA) which will operationalise the Contingency Reserve Agreement (CRA).
What is this Contingency Reserve Agreement (CRA)?
The CRA is a virtual foreign exchange reserves pool modelled along the lines of the Chiang Mai Initiative Multilateralisation Agreement with a USD 100 billion reserve.
In order to ensure that the CRA is activated, members are expected to advance financial contributions, with China contributing the most part at USD 51 billion, Brazil, Russia and India USD 18billion and South Africa USD 5 billion. These contributions are aimed at forestalling short-term balance of payments pressures, provide mutual support and also provide additional and supplementary support and insurance for global financial stability.
The Parties shall be able to access resources subject to maximum access limits equal to a multiple of each Party’s individual commitment - for China 0,5% and for Brazil, Russia and India 1%while South Africa benefits with 2%. This means, therefore, that South Africa will be able to call on USD 10 billion. These transactions bear no immediate or direct financial implication. They will only be activated once a member makes a call for capital and according to the agreed share. Under this arrangement, transactions come with strict conditions of repayment.
Ladies and gentlemen;
In Fortaleza, President Dilma Rousseff of Brazil also extended an invitation to the leaders from eleven South American countries i.e. Argentina, Bolivia, Chile, Columbia, Equator, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela to meet with the BRICS Leaders on 16 July 2014. On 27 March 2013 when we hosted the 5th BRICS Summit, President Jacob Zuma also extended the same gesture to African leaders.
Leaders from South America warmly endorsed and welcomed the Bank initiative. They indicated that they had project proposals ready. They also added that there have been many attempts since the Second World War to launch such and initiative and that the Bank is a first tangible outcome in this regard.
Other agreements concluded include a Memorandum of Understanding on Cooperation among BRICS Export Credit Insurance Agencies, and the Cooperation Agreement on Innovation under auspices of the BRICS Inter-bank Cooperation Mechanism under auspices of the BRICS Inter-Bank Cooperation Mechanism to which the Development Bank of Southern Africa is the South African party.
The Summit outcome documents, the Fortaleza Declaration and the Fortaleza Action Plan strengthens the BRICS willingness to shape the global discourse through leveraging its amplified voice on issues pertaining to Growth and Development, Global Governance and Peace and Security.
We reflected pertinently that international governance structures designed with a different power configuration show increasingly evident signs of losing legitimacy and effectiveness as transitional and ad hoc arrangements become increasingly prevalent, often at the expense of multilateralism. We reiterated that BRICS is intended as an important force for incremental change and reform of current institutions towards more representative and equitable governance, capable of generating more inclusive global growth and fostering a stable, peaceful and prosperous world.
Ladies and Gentlemen;
As the only African country with membership of BRICS, our role is very key and strategic. Our geo-strategic importance and influence is of critical importance to other member state of BRICS.
The rationale for the establishment of BRICS was anchored upon a shared vision to pursue the restructuring of the global political, economic and financial architecture into one that is more equitable, balanced and rests on the important pillar of multilateralism.
As a result, we proposed to our BRICS partners that it was imperative that likeminded countries, more than ever before, pursue the ideal of a new world order whose multilateral structures would be more representative and legitimate. We are humbled that since inception, BRICS has focused on the reform of the global financial and economic architecture.
Programme Director;
It will be recalled that BRICS leaders have always articulated that they “are committed to advance the reform of international financial institutions, so as to reflect changes in the global economy”. We will continue to support and leverage the amplified BRICS voice to ensure economic gains and developmental space for emerging as well as poorest and most vulnerable countries.
Peace and security remains a sore point in our developmental aspirations as a country, and indeed for the region. Working together with the UN, and our BRICS partners, we can silence the barrels of guns in the continent.
Programme Director;
President Zuma again briefed and engaged our BRICS partners on collaboration with the AU Peace and Security architecture at the Fortaleza Summit. This move sought to garner support for the vision of the AU leadership and its ongoing commitment for a conflict-free continent by 2020.
We believe that in achieving lasting peace, conditions must be created that to support development and share prosperity with those who less privileged. Our BRICS partners’ support was obtained. What remains is for our leadership to engage further, and mobilise resources and operationalisation of the African Capacity for Immediate Response to Crises (ACIRC). It is envisaged that the ACIRC will be launched in October 2014, and will serve as an interim mechanism until the African Standby Force is launched
Ladies and gentlemen;
In the regional context, President Zuma once again utilised this occasion to engage the BRICS Leaders on the importance and significance of the New Development Bank for the aspirations of the African continent as the African leadership.
It could be recalled that the African Union Chairperson, the New Partnership for Africa’s Development (NEPAD) Chairperson as well as the AU Commission Chairperson had approached President Zuma in March 2012 to engage the BRICS Leaders on this initiative.
We are pleased to report that President Zuma has indeed successfully represented the mandate received from the African leadership in respect of the importance of the Bank for the continent’s own developmental aspirations.
When we consider that the aggregate price tag of the PIDA projects is estimated at USD 360-billion over the next 30 years, with at least USD 68-billion required by 2020 for 51 regional projects and programmes – and over 400 subprojects, the Bank is a timely response to these needs. Infrastructure and sustainable development projects will be the core focus of funding for the Bank.
The significant additional gain is that the regional office, which will be established in South Africa concurrently with the Headquarters in Shanghai, will pay particular attention to project preparation and implementation.
Programme Director;
Our country also has its own Infrastructure Plan. This plan requires funding beyond the means of our fiscus. This Bank will certainly bring complementary funding to facilitate the implementation of such projects, in line with our National Development Plan.
The Bank’s leverage to achieve impact will be multiplied by the multiplicity of currencies ranging from the Rand, Real, Rouble, Rupee and Renminbi investments made by the members.
Our contributions to the bank are in fact investments and not mere expenditure. It is expected that the Bank will function according to sound commercial terms with a view to obtain desired credit ratings. We have no doubt that its assets will grow and multiply over time as is the case with other similar Multilateral Development Banks..
Programme Director;
The BRICS Trade Ministers also met prior to the Summit, and welcomed the presentation of Joint Trade Study which was prepared during South Africa’s tenure. The latter made important recommendations for promoting value-added exports among our countries. Furthermore, it ensures that intra-BRICS trade is more sustainable and aims to foster economic cooperation and to promote trade and investment between the BRICS countries. The Ministers further highlighted the potential for forging closer links between the Micro, Small and Medium Enterprises (MSME) of the BRICS.
Your Excellencies;
The meeting of the BRICS Business Council and Business Forum took place from 14-15 July 2014 and attracted 700 business-persons. We were particularly pleased that the Council also focuses on promoting and increasing value-added trade and manufacturing amongst the BRICS countries and between the BRICS countries and Africa.
The proposed BRICS-Africa Council could add an additional dimension to augment trade and investment between BRICS and Africa, now the fastest growing region in the world. The UNCTAD’s World Investment Report of 2013 describes BRICS as significant investors in Africa. In 2010, the share of BRICS in FDI inward stock in Africa reached 14 per cent and their share in inflows reached 25 per cent. Most BRICS FDI projects in Africa are in manufacturing and services. South Africawas the fifth largest holder of FDI stock in Africa in 2011, with USD 18 billion.
Russia as the next Chair also highlighted priority focus areas for its tenure as from 2015, notably, BRICS Economic Cooperation proposal. The BRICS Sherpas will submit such a proposal by the next Summit.
On our part, we will continue to prioritise our domestic priorities, with a continuous review of our BRICS Strategy accordingly. We will continue to play a catalyst role to advance the required reforms of the global political and economic architecture. This commitment will ensure prosperity for all according to a new “win-win” global template, breaking with the previous zero-sum template.
The BRICS Leaders’ vision continues to resonate with the core foreign policy vision of South Africa.
Thank you.
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US-Africa Leaders Summit: Resource box
The inaugural U.S.-Africa Leaders Summit was held in Washington, D.C. from 4-6 August 2014. The Summit, the largest event any U.S. President has held with African heads of state and government, built on the President’s trip to Africa in the summer of 2013 and aimed to strengthen ties between the United States and one of the world’s most dynamic and fastest-growing regions.
Specifically, the Summit advanced the Administration’s focus on trade and investment in Africa and highlighted America’s commitment to Africa’s security, its democratic development, and its people. At the same time, it highlighted the depth and breadth of the United States’ commitment to the African continent, advanced our shared priorities, and enabled discussion of concrete ideas to deepen the partnership. At its core, the Summit was about fostering stronger ties between the United States and Africa.
The theme of the Summit was “Investing in the Next Generation”. Focusing on the next generation is at the core of a government’s responsibility and work, and this Summit provided an opportunity to discuss ways of stimulating growth, unlocking opportunities, and creating an enabling environment for the next generation.
» Statement by the Chair of the U.S.-Africa Leaders Summit
Leaders underscored their appreciation for the strong benefits and positive outcomes that deepened U.S.-Africa cooperation affords and reiterated the need for intensified cooperation to advance shared security interests and our common goals to increase prosperity for the United States and African countries and to advance the dignity, well-being, and freedom of our people.
» Remarks by the President at Press Conference After U.S.-Africa Leaders Summit
» Remarks by the President at Opening Session of the U.S.-Africa Leaders Summit
» Joint Statement on the U.S. Africa Leaders Summit and the 13th Annual AGOA Forum
The bipartisan leaders of the Senate Finance and Foreign Relations Committees and House Ways and Means and Foreign Affairs Committees issued a joint statement on the U.S. Africa Leaders Summit and the 13th Annual AGOA Forum.
» U.S. Secretary of Commerce Penny Pritzker Highlights New Commerce Department Efforts to Strengthen Trade And Investment Between The United States and Africa
U.S. Secretary of Commerce Penny Pritzker highlighted a number of Department of Commerce efforts and future commitments under President Obama’s Doing Business in Africa (DBIA) campaign at the U.S.-Africa Business Forum. The Forum, a day focused on trade and investment opportunities on the continent, is a part of President Obama’s broader U.S.-Africa Leaders Summit, the largest event that any U.S. president has ever convened with African heads of state or government.
» Remarks by the President at the U.S.-Africa Business Forum
» John Kerry, Secretary of State: Remarks at the U.S.-Africa Business Forum Leaders Forum Session on “Game Plan: Shaping the Future of a Fast-Growing Continent”
» Treasury Secretary Lew at U.S.-Africa Business Forum
» U.S. Secretary of Commerce Penny Pritzker Delivers Remarks at U.S.-Africa Business Forum
» Mike Bloomberg: Opening Remarks at the U.S.-Africa Business Forum
» John Kerry: Remarks at the U.S.-Africa Clean Energy Finance Initiative Signing Ceremony
» Remarks by Ambassador Michael Froman at the African Growth and Opportunity Act (AGOA) Ministerial
» John Kerry: Remarks at the African Growth and Opportunity Act (AGOA) Ministerial
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» U.S.-Sub Saharan Africa Trade and Investment: An Economic Report by the International Trade Administration, U.S. Department of Commerce, August 2014
In June 2012, the White House issued the U.S. Strategy Toward Sub-Saharan Africa, committing the United States to elevating efforts to strengthen democratic institutions and spur economic growth, trade, and investment in the region. To advance the Strategy, federal trade agencies undertook a Doing Business in Africa (DBIA) campaign with the goal of helping more U.S. businesses take advantage of the growing export and investment opportunities available in the region. The main objectives include engaging more U.S. companies in trade and investment with sub-Saharan Africa, addressing market barriers, and expanding the availability of trade financing.
This report examines recent economic data related to U.S. commercial engagement with sub-Saharan Africa to produce a full picture of the U.S.-Africa trade relationship and recent trends.
Click here to download the report.
» 5 Takeaways about Doing Business in Africa
ITA’s Report on U.S.-Africa Trade and Investment examines the economic statistics related to U.S. commercial involvement in sub-Saharan Africa (SSA) – one of the world’s fastest-growing economic regions. The report is part of the Doing Business in Africa (DBIA) campaign, through which federal trade agencies are joining forces with U.S. businesses to take advantage of the growing export and investment opportunities available in the region. Here are the five key takeaways of the report.
» Presidential Memorandum: Establishing a Comprehensive Approach to expanding Sub-Saharan Africa’s capacity for trade and investment
The African Growth and Opportunity Act (AGOA) is a cornerstone of the trade relationship between the United States and Sub-Saharan Africa. Since AGOA went into effect 14 years ago, exports from Sub-Saharan Africa to the United States have more than doubled and non-oil and non-mineral exports in particular have increased nearly fourfold. The growth of new export industries has supported the creation of hundreds of thousands of jobs in Sub-Saharan Africa. However, my Administration's recent review of AGOA has revealed that, while the tariff preferences provided under AGOA are important, they alone are not sufficient to promote transformational growth in trade and investment. Read more.
» Fact Sheet: Investing in African Trade for our Common Future
Increased regional and international trade has been one of the drivers of Africa’s extraordinary average annual GDP growth rate of 5.1 percent over the last decade. President Obama and his Administration are committed to sustaining and accelerating this growth through a comprehensive strategy to realize the potential of a renewed African Growth and Opportunity Act (AGOA). Read more.
» Fact Sheet: The Doing Business in Africa Campaign
Through the Doing Business in Africa (DBIA) Campaign, the U.S. government is strengthening its commercial relationship with the continent of Africa, a diverse region that offers substantial trade and investment opportunities across national and regional markets. With a 5.4 percent growth rate predicted for 2014, Africa is outpacing global growth. U.S. goods and services exports to Africa reached a record high of $50.2 billion in 2013, up 40 percent since 2009. These exports supported 250,000 U.S. jobs. Read more.
» Fact Sheet: Powering Africa: Increasing Access to Power in Sub-Saharan Africa
On June 30, 2013, President Obama launched Power Africa, an innovative private sector-led initiative aimed at doubling electricity access in sub-Saharan Africa, where more than 600 million people currently lack access to electricity. Power Africa set an ambitious initial goal of adding more than 10,000 megawatts (MW) of new, cleaner electricity generation capacity and increasing electricity access by at least 20 million household and business connections. Read more.
» Fact Sheet: U.S.-African Cooperation on Food Security
Since coming into office in the midst of a global financial and food crisis, President Obama has made food security a foreign policy priority. Building on commitments first made by African leaders at the African Union (AU) Summit in Maputo in 2003, the President led the G-8 in 2009 in launching a global food security initiative in L’Aquila, Italy and then shortly after launched Feed the Future which invests assistance in countries’ national food security plans, promotes agricultural research and innovation, and helps build the capacity of our partners. Read more.
» Fact Sheet: U.S. Engagement on Climate Change and Resilience in Africa
At the U.S.-Africa Leaders Summit, the United States and African countries reaffirmed their shared commitment to tackling together the challenges of climate change and poverty and to partnering to build resilience to these kinds of shocks. They also stressed their commitment to promoting low-carbon economic development and clean energy access on the African continent. Read more.
» Fact Sheet: Shared Investment in Youth
Africa has the youngest population in the world, with approximately 200 million people between the ages of 15 and 24 – a number expected to increase to 330 million by 2034. Africa also has the fastest growing population in the world. In fewer than three generations, 41 percent of the world’s youth will be African. By 2050, over a quarter of the world’s labor force will be African. Read more.
» Fact Sheet: U.S. Support for Peacekeeping in Africa
The United States strongly supports the work of more than 67,000 African peacekeepers serving with the African Union (AU) and United Nations (UN) in Africa. These men and women are working to protect civilians, prevent violence, and promote security and stability in many of Africa’s most complex conflicts. Read more.
» Fact Sheet: Security Governance Initiative
Today the President announced the Security Governance Initiative (SGI), a new joint endeavor between the United States and six African partners that offers a comprehensive approach to improving security sector governance and capacity to address threats. Africa is a dynamic and diverse region that is experiencing significant gains in economic growth and development, and African states are increasingly stepping up to confront security challenges. Read more.
» Fact Sheet: Partnering to Counter Terrorism in Africa
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» Fact Sheet: U.S. Support for Democratic Institutions, Good Governance, and Human Rights in Africa
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» Fact Sheet: U.S.-African Cooperation on Global Health
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» Fact Sheet: U.S.-African Cooperation in Advancing Gender Equality
In this fourth year of what the African Union (AU) has called the “African Women’s Decade,” the United States strongly supports the great strides and commitments many African countries and the African Union have made to increase women’s and girls’ empowerment through steps to promote good governance and rule of law, accelerate economic growth and enhance food security, advance respect for human rights, and improve access to services – from health care to education. Read more.
» Fact Sheet: U.S. Support for Combating Wildlife Trafficking
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» Obama’s U.S.-Africa Forum Will Catalyze $14 Billion In Business Deals
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» AGOA: Observations on Competitiveness and Diversification of U.S. Imports from Beneficiary Countries
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. Read more.
» Key recommendations from civil society for the U.S.-Africa Leaders Summit
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» On-the-Record Conference Call on the U.S.-Africa Leaders Summit
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» The African Growth and Opportunity Act at 14: The road ahead
Testimony of United States Trade Representative Michael Froman Before the Senate Finance Committee on the African Growth and Opportunity Act (AGOA)
» Growing the development dividend: U.S. trade policy and global development in the 21st century
Remarks by Ambassador Michael Froman at the Brookings Institution, 29 July 2014
» Hearing on Advancing the U.S. Trade Agenda: Trade with Africa and the African Growth and Opportunity Act
House Ways and Means Trade Subcommittee held a hearing on trade with Africa and the African Growth and Opportunity Act on July 29, 2014 in Washington, DC.
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» African Growth and Opportunity Act (AGOA): Background and Reauthorization by Brock R. Williams (Congressional Research Service, July 24, 2014)
Most observers agree that AGOA has successfully led to increased and more diversified exports to the United States from sub-Saharan African countries. Despite this, Congress may wish to address a number of issues and challenges as it considers possible reauthorization of AGOA. Among these challenges is how current and potential AGOA beneficiaries can better utilize the AGOA program and its duty-free benefits. Download the report here.
» U.S.-Africa Civil Society Forum: Recommendations for engagement on the U.S.-Africa Leaders’ Summit
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Measuring Progress on the Protocol on Trade
How to evaluate whether the SADC Free Trade Area is making solid progress? Which Member States are on track offering largely tariff-free access to the other SADC Member States? How far from achieving lower non-tariff barriers to trade within the region? In order to find answers to these questions and assist Member States in the implementation of commitments under the Protocol on Trade, SADC needs to take stock of the status quo and check progress on a regular basis.
Acknowledging this, SADC Ministers of Trade approved a comprehensive Monitoring, Reporting and Evaluation (MRE) System on July 17th 2014. The decision had been preceded by two years of intensive preparations at the SADC Secretariat. SADC is furthermore establishing an Enforcement Mechanism to ensure the implementation of all SADC MRE systems.
The Trade Protocol Monitoring System is critical to highlight major issues regarding the implementation of trade commitments – or lack thereof. Member States will submit annual progress reports on a holistic set of indicators directly derived from the Protocol on Trade. The SADC Secretariat and Member States will administer the MRE System jointly to ensure its sustainability, with both a validation mechanism and impact assessment being integral parts.
By strengthening the results-oriented monitoring function and capacity in Member States, SADC Structures and the SADC Secretariat, organisational learning and accountability policies can be improved, in line with SADC’s Policy for Strategy Development, Planning, Monitoring and Evaluation (download below). However, the MRE system’s success hinges on Member States’ buy-in and their commitment to devote resources to its institutionalisation. Ultimately, the impacts of the SADC Protocol on Trade MRE system not only depend on its implementation, but on how its results feed into decision making processes at national and regional level.
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SA offers chickens for Agoa renewal
The government is likely to allow some US chicken imports into the local market at lower tariffs in exchange for continued participation in the lucrative African Growth and Opportunity Act (Agoa) preferential trade scheme.
President Jacob Zuma is leading a major charge by the government and business at the US-Africa summit in Washington this week to win renewal of Agoa, which allows almost 95 percent of South African exports into the US market at zero or greatly reduced tariff rates.
Yesterday Zuma urged the influential US Chamber of Commerce to support the renewal of Agoa for 15 years with South Africa’s participation when it expires next year.
Although President Barack Obama’s administration supports Agoa’s renewal, the decision will be made by Congress and some US business interests and legislators want South Africa to be “graduated” because it is an upper-middle-income country and because they say it is discriminating against US imports.
Tom Donohue, the president and chief executive of the US Chamber of Commerce, told Zuma that the chamber was lobbying Congress hard for a renewal of Agoa with South Africa in it. But he said South Africa needed to protect US intellectual property rights and trademarks, strengthen investor protections, repeal anti-dumping measures “and settle ongoing issues over ownership of foreign-headquartered firms”.
Officials said South Africa was responding to these complaints by considering the introduction of a tariff rate quota agreement, which would allow a quota of US chicken imports into the local market at lower tariffs.
And Trade and Industry Minister Rob Davies disclosed last week that his department was investigating complaints by the US government that restrictions on US pork and beef imports on health grounds were “unfair and unscientific”.
Zuma told the chamber that renewing Agoa would benefit not only South Africa, but also the US and Africa as a whole.
“Our message to you today is simple. South Africa is open for business, open for tourism and open for partnerships in many sectors,” Zuma said.
“There are many opportunities to be explored in our country and beyond.”
One of the key instruments that would help to expand trade relations with the US was Agoa, Zuma added.
“Agoa has transformed the economic landscape for many African countries and South Africa. It is the cornerstone of trade relations between the US and sub-Saharan Africa.
“Agoa has also greatly enhanced trade between the US and South Africa. Almost 95 percent of South African exports receive preferential treatment under Agoa. We advocate the renewal of Agoa for another 15 years with the inclusion of South Africa.
“We strongly believe that by endorsing the extension of Agoa, the US will be promoting African integration, industrialisation and infrastructure development.
“South Africa’s economic growth is inextricably linked to that of Africa as a whole. That is why we put great emphasis in developing, not only our country’s infrastructure, but that of the African continent too,” Zuma said, describing his work as champion for the AU’s project to build a North-South transport and trade corridor to link Durban via Dar es Salaam to Cairo.
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U.S.-Africa summit garners over $17 bln in investment pledges
African leaders on Tuesday called for a deeper economic relationship with the United States, hailing investment pledges totaling more than $17 billion at a Washington summit as a fresh step in the right direction.
U.S. and African companies and the World Bank pledged new investment in construction, energy and information technology projects in Africa at the U.S.-Africa Business Forum, including several joint ventures between U.S. and African partners.
“The United States is determined to be a partner in Africa’s success,” President Barack Obama said in a speech at the forum. “A good partner, an equal partner, and a partner for the long term.”
The U.S. president also urged African officials to create conditions to support foreign investment and growth.
“Capital is one thing, development programs and projects are one thing, but rule of law, regulatory reforms, good governance, those things matter even more,” he said.
African leaders said they were optimistic of becoming full partners in a relationship worth an estimated $85 billion a year in trade flows, as U.S. business leaders eyed opportunities in the region, home to six of the world’s 10 fastest-growing economies – even if they might be late to the party.
“We gave it to the Europeans first and to the Chinese later, but today it’s wide open for us,” said the chief executive of General Electric Co, Jeff Immelt, who on Monday announced $2 billion to boost infrastructure, worker skills and access to energy.
Tanzanian President Jakaya Kikwete said Africa wanted to move away from a relationship of “aid donor and aid recipient” to one of investment and trade.
Kikwete told the forum that with Obama and senior officials encouraging the business community “to take Africa seriously, I think this time we will make it.”
More than 90 U.S. companies participated in the forum, part of a three-day summit which has brought almost 50 African leaders to the U.S. capital, including Chevron Corp, Citigroup Inc, Ford Motor Co, Lockheed Martin Corp, Marriott International Inc and Morgan Stanley .
Many already have a foothold in the region, which is expected to have a larger work force than China or India by 2040 and boasts the world’s fastest-growing middle class, supporting demand for consumable goods.
The Coca-Cola Co said it would invest $5 billion with African bottling partners in new manufacturing lines and equipment, as well as safe water access programs, over six years, and the chief executive of IBM, Ginni Rometty, said the IT giant would plow more than $2 billion into the region over seven years.
Still, Aliko Dangote, the president of Nigeria’s Dangote Group, whose operations include cement making, flour milling and sugar refining, said nothing works without adequate power.
Dangote signed an agreement to jointly invest $5 billion in energy projects in sub-Saharan Africa with Blackstone Group funds, also calling for the U.S. Export-Import Bank to remain open to support African companies buying U.S. goods.
The World Bank, which committed $5 billion to support electricity generation, estimates that one in three Africans, or 600 million people, lack access to electricity despite rapid economic growth expected to top 5 percent in 2015 and 2016.
Obama took part in a discussion with corporate chief executives and government leaders at the event, also attended by U.S. Commerce Secretary Penny Pritzker as well as former President Bill Clinton and former New York Mayor Michael Bloomberg.
“These deals and investments demonstrate that the time is ripe to work together as partners, in a spirit of mutual understanding and respect – to raise living standards in all of our nations and to address the challenges that impede our ability to develop closer economic bonds,” Pritzker said.
African telecoms billionaire Mo Ibrahim encouraged U.S. businesses to invest in Africa and make money, but also said they should “pay their taxes.”
Remarks by the President at the U.S.-Africa Business Forum
Extracts from US President Barack Obama's speech at the U.S.-Africa Business Forum on 5 August 2014, Washington, D.C.
So we are here, of course, as part of the U.S.-Africa Leaders Summit – the largest gathering any American President has ever hosted with African heads of state and government. And this summit reflects a perspective that has guided my approach to Africa as President. Even as Africa continues to face enormous challenges, even as too many Africans still endure poverty and conflict, hunger and disease, even as we work together to meet those challenges, we cannot lose sight of the new Africa that’s emerging.
We all know what makes Africa such an extraordinary opportunity. Some of the fastest-growing economies in the world. A growing middle class. Expanding sectors like manufacturing and retail. One of the fastest-growing telecommunications markets in the world. More governments are reforming, attracting a record level of foreign investment. It is the youngest and fastest-growing continent, with young people that are full of dreams and ambition.
Last year in South Africa, in Soweto, I held a town hall with young men and women from across the continent, including some who joined us by video from Uganda. And one young Ugandan woman spoke for many Africans when she said to me, “We are looking to the world for equal business partners and commitments, and not necessarily aid. We want to do [business] at home and be the ones to own our own markets.” That’s a sentiment we hear over and over again. When I was traveling throughout Africa last year, what I heard was the desire of Africans not just for aid, but for trade and development that actually helps nations grow and empowers Africans for the long term.
As President, I’ve made it clear that the United States is determined to be a partner in Africa’s success – a good partner, an equal partner, and a partner for the long term. (Applause.) We don’t look to Africa simply for its natural resources; we recognize Africa for its greatest resource, which is its people and its talents and their potential. (Applause.) We don’t simply want to extract minerals from the ground for our growth; we want to build genuine partnerships that create jobs and opportunity for all our peoples and that unleash the next era of African growth. That’s the kind of partnership America offers.
And since I took office, we’ve stepped up our efforts across the board. More investments in Africa; more trade missions, like the one Penny led this year; and more support for U.S. exports. And I’m proud – I’m proud that American exports to Africa have grown to record levels, supporting jobs in Africa and the United States, including a quarter of a million good American jobs.
But here’s the thing: Our entire trade with all of Africa is still only about equal to our trade with Brazil – one country. Of all the goods we export to the world, only about one percent goes to Sub-Saharan Africa. So we’ve got a lot of work to do. We have to do better – much better. I want Africans buying more American products. I want Americans buying more African products. I know you do, too. And that’s what you’re doing today. (Applause.)
So I’m pleased that in conjunction with this forum, American companies are announcing major new deals in Africa. Blackstone will invest in African energy projects. Coca-Cola will partner with Africa to bring clean water to its communities. GE will help build African infrastructure. Marriott will build more hotels. All told, American companies – many with our trade assistance – are announcing new deals in clean energy, aviation, banking, and construction worth more than $14 billion, spurring development across Africa and selling more goods stamped with that proud label, “Made in America.”
And I don’t want to just sustain this momentum, I want to up it. I want to up our game. So today I’m announcing a series of steps to take our trade with Africa to the next level.
First, we’re going to keep working to renew the African Growth and Opportunity Act – and enhance it. (Applause.) We still do the vast majority of our trade with just three countries – South Africa, Nigeria and Angola. It’s still heavily weighted towards the energy sector. We need more Africans, including women and small- and medium-sized businesses, getting their goods to market. And leaders in Congress – Democrats and Republicans – have said they want to move forward. So I’m optimistic we can work with Congress to renew and modernize AGOA before it expires, renew it for the long term. We need to get that done. (Applause.)
Second, as part of our “Doing Business in Africa” campaign, we’re going to do even more to help American companies compete. We’ll put even more of our teams on the ground, advocating on behalf of your companies. We’re going to send even more trade missions. Today, we’re announcing $7 billion in new financing to promote American exports to Africa. Earlier today, I signed an executive order to create a new President’s advisory council of business leaders to help make sure we’re doing everything we can to help you do business in Africa. (Applause.)
And I would be remiss if I did not add that House Republicans can help by reauthorizing the Export-Import Bank. That is the right thing to do. (Applause.) I was trying to explain to somebody that if I’ve got a Ford dealership and the Toyota dealership is providing financing to anybody who walks in the dealership and I’m not, I’m going to lose business. It’s pretty straightforward. We need to get that reauthorized. (Applause.) And you business leaders can help make clear that it is critical to U.S. business.
Number three, we want to partner with Africa to build the infrastructure that economies need to flourish. And that starts with electricity, which most Africans still lack. That’s why last year while traveling throughout the continent, I announced a bold initiative, Power Africa, to double access to electricity in Sub-Saharan Africa and help bring electricity to more than 20 million African homes and businesses.
Now, we’ve joined with African governments, the African Development Bank, and the private sector – and I will tell you, the response has exceeded our projections. It has been overwhelming. Already, projects and negotiations are underway that, when completed, will put us nearly 80 percent of the way toward our goal. On top of the significant resources we’ve already committed, I’m announcing that the United States will increase our pledge to $300 million a year for this effort.
And as of today – including an additional $12 billion in new commitments being announced this week by our private sector partners and the World Bank and the government of Sweden – we’ve now mobilized a total of more than $26 billion to Power Africa just since we announced it – $26 billion. (Applause.) So today we’re raising the bar. We decided we’re meeting our goal too easily, Zuma, so we’ve got to go up. So we’re tripling our goal, aiming to bring electricity to more than 60 million African homes and businesses that can spark growth for decades to come. (Applause.)
Fourth, we’ll do more to help Africans trade with each other, because the markets with the greatest potential are often the countries right next door. And it should not be harder to export your goods to your neighbor than it is to export those goods to Los Angeles or to Amsterdam. (Applause.) So through our Trade Africa initiative, we’ll increase our investments to help our African partners build their own capacity to trade, to strengthen regional markets, make borders more efficient, modernize the customs system. We want to get African goods moving faster within Africa, as well as outside of Africa.
And finally, we’re doing more to empower the next generation of African entrepreneurs and business leaders – it’s young men and women, like our extraordinary Mandela Washington Fellows that I met with last week. And I have to say to the heads of state and government, you would have been extraordinarily proud to meet these young people who exhibit so much talent and so much energy and so much drive.
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India says confident WTO will understand food security concerns
India refused to yield ground on Tuesday on its spat with the World Trade Organisation and said it believed it could convince other members that its need for more freedom on food subsidies was legitimate.
Trade Minister Nirmala Sitharaman did not give details in a statement she made in parliament, but her comments offered a robust and uncompromising defence of the Indian position, suggesting the government planned to dig its heels in on an issue that has isolated New Delhi.
Indian Prime Minister Narendra Modi’s new government vetoed the adoption of a treaty to simplify, standardise and streamline the rules for shipping goods across borders, having previously agreed to its terms at a ministerial conference on the Indonesian resort island of Bali last December.
Most diplomats had expected the pact to be rubber-stamped last week, marking a unique success in the WTO’s 19-year history which, according to some estimates, would add $1 trillion and 21 million jobs to the world economy. India calls these estimates highly exaggerated.
It blocked the text because it wanted more attention paid to its concerns over WTO limits on stockpiling of food which will ultimately hit its subsidised food distribution programme, the world’s largest, targeted at nearly 850 million people.
“I am confident that India will be able to persuade the WTO membership to appreciate the sensitivities of India and other developing countries and see their way to take this issue forward in a positive spirit,” Sitharaman said amid thumping of desks by lawmakers.
After drawing widespread condemnation as the deadline for the deal lapsed on July 31, India has said it is ready to sign the global trade deal as early as next month if other WTO members agree to its demand for concessions on food subsidies, estimated at $12 billion a year.
India fears that once it agrees to trade facilitation – largely seen to help advanced nations – it would have lost the bargaining chip on the subsidy issue.
“India is not standing in way of implementation of Trade Facilitation but seeking equal level of commitment and progress in working on the issue of public stockholding,” Sitharaman said.
“A permanent solution on food security is a must for us and we cannot wait endlessly in state of uncertainty while WTO engages in an academic debate on subject of food security,” she said.
FATAL BLOW
But in vetoing the first worldwide trade reform measure in nearly two decades, India may have dealt a potentially fatal blow to the WTO’s hopes of modernising the rules of global commerce and remaining the central forum for multilateral trade deals.
In the short term, this is a setback for freer commerce. In the longer run, it means trade liberalisation may advance - if at all - among narrower groups of countries, denying dissenters a chance to block progress, experts say.
While the unwieldy Geneva-based WTO will survive as a body for enforcing existing multilateral agreements, smaller clubs of like-minded nations are trying to move ahead faster to update the trade rules among themselves.
“Without a serious shakeup, the WTO’s future looks like that of the League of Nations,” said Simon Evenett, a professor at the Swiss Institute for International Economics. “Perhaps ultimately that’s what some governments want.”
But Sitharaman said India remained committed to the multilateral trading system. “We continue to believe that it (WTO) is in the best interest of developing countries, especially the poorest, most marginalised ones among them and we are determined to work to the strengthen the institution.”
Trade ministry officials say the breakthrough may come once the WTO agrees to revise the base year for calculating food subsidies in line with current prices which will then bring India’s subsidies within WTO’s limits.
India is also ready to give an assurance that the foodgrains it procures from farmers at prices that are higher than the market price will not be dumped in the global market.
Finance Minister Arun Jaitley, a key member of Modi’s team who had originally opposed the Bali accord, said India would not compromise on defending the interests of its farmers.
“Isolation doesn’t matter,” he told NDTV in an interview on Monday night. “Sometimes you can be the only one taking the right stand.”
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Lions go global: Deepening Africa’s ties to the United States
Africa is the world’s second-fastest growing economic region, yet US engagement with the continent is lagging. There’s an opportunity to change that.
The White House has invited some 50 African heads of state to Washington, DC, this week, presenting a historic opportunity to deepen US ties to the continent. But it would be a mistake to assume that the benefits of the US-Africa Leaders Summit will flow primarily to Africa. There is huge economic potential for the United States, too.
Africa is transforming from a continent in need of assistance to a continent of opportunity. Its economic growth is today second only to the East Asia region, which includes China,1 and Africa was home to 8 of the world’s 15 fastest-growing economies between 2000 and 2013. Indeed, the continent’s GDP of more than $2 trillion in 2013 is now larger than India’s (Exhibit 1).
Exhibit 1
Africa’s economic growth accelerated after 2000, making it the world’s second-fastest-growing region.
Investors around the world have taken notice. Private-capital flows to Africa totaled $545 billion from 2003 to 2012, surpassing remittances and official aid. Yet the United States lags well behind Europe, BRIC,2 and the Middle East in terms of the amount of foreign-direct investment (FDI) it sends to Africa. Moreover, the US share of African trade stands at only 4 percent.
This may be a missed opportunity. Africa offers a higher rate of return on FDI than most emerging economies – in sharp contrast to returns that foreign investors earned 20 years ago (Exhibit 2). But to date, economic engagement between the United States and Africa has been limited relative to its potential, and much smaller than Europe’s and Asia’s economic engagement with Africa.
Exhibit 2
The rate of return on foreign direct investment in Africa is higher than in most emerging markets.
Increasingly dynamic economies
After decades of disappointing growth, Africa’s economic performance has improved since the turn of the century.3 Real GDP grew at a compound annual rate of 4.9 percent between 2000 and 2013, more than twice its pace in the 1980s and 1990s. The continent weathered the Great Recession well, and a consensus of mainstream forecasts projects that annual growth will, on average, be 5.8 percent from 2014 to 2019.4 In addition, sub-Saharan economies are growing even faster than the continent as a whole. In 2013, their average GDP growth was 5.2 percent, and forecasters expect average annual GDP growth of 6.2 percent to 2019.
Africa has benefited from the surge in commodity prices since the turn of the century. The price of oil has increased from less than $20 a barrel in 1999 to around $100 a barrel today. Prices for minerals, grain, and other raw materials also soared on rising global demand. However, the continent’s growth has not solely been a function of booming commodity prices. We estimate that natural resources, and the related government spending they financed, generated only one-third of Africa’s GDP growth from 2000 to 2008. Since the global recession dampened commodity prices, they have contributed even less. The majority of Africa’s growth is being driven by other sectors of the economy, including wholesale and retail trade, transportation, telecommunications, and manufacturing. Evidence of the diversification of African countries is the fact that those with and without significant resource exports had similar GDP growth rates.
Africa’s accelerated growth over the past 14 years owes a great deal to improved macroeconomic and political stability and to structural economic reforms. Government action to end armed conflicts, lower inflation, and reduce public-sector debt has created a more stable environment for businesses. A range of microeconomic reforms has energized markets. Governments have privatized state-owned enterprises, increased the openness of trade, lowered corporate taxes, strengthened regulatory and legal systems, and provided critical physical and social infrastructure. Nigeria, for example, privatized more than 116 enterprises between 1999 and 2006, and by 2013 had privatized its entire electric-power sector. Morocco and Egypt struck free-trade agreements with major export partners. Although governments across Africa can do a great deal more to create a business-friendly environment, these important first steps have enabled a private-business sector to emerge.
The fruits of this structural reform have been an African productivity revolution. After declining through the 1980s and 1990s, the continent’s productivity started growing again in 2000, averaging 2.4 percent per annum between then and 2013.5 Productivity gains took place across countries and sectors.
Africa’s growth has also been due to the rising number of households with discretionary spending. According to our research, consumer spending is projected to reach $1.4 trillion per year by 2020, from $1.15 trillion in 2012. Already, more than 100 million households have sufficient income to spend on discretionary goods and services, as well as the basics, and the continent has more middle-class households (defined as those with annual incomes of $20,000 or more) than India.
Africa remains overwhelmingly a rural continent, but its cities are a growing economic force. Today, 40 percent of the continent’s one billion people live in cities – a proportion roughly comparable to China’s population and higher than India’s. By 2030, that share is projected to rise to 50 percent, and Africa’s top 18 cities will have a combined GDP of $1.7 trillion.6 Urban expansion is spurring the construction of more roads, buildings, water systems, and similar projects. Of course, urbanization needs to be managed to avoid creating slums, gridlock, and a deteriorating quality of life as cities grow. And more infrastructure investment is needed across Africa.
In a world where many countries are aging, including China, Africa stands out for the relative youthfulness of its population – a potential demographic dividend. By 2035, the continent is set to have the largest working-age population of anywhere in the world – larger than in China or India. The task ahead will be for Africa’s leaders to bolster education and provide young people with the skills they need to secure employment, and to accelerate job creation. In 2012, only 29 percent of Africa’s labor force had stable, wage-paying jobs.7 The rest were employed in a variety of self-employment and household enterprises, scraping a living from subsistence agriculture or informal jobs in urban areas.
Africa’s global opportunity
Africa’s trade ties with the world are expanding. In 2012, the continent’s flows of goods, services, and finance were worth $1.6 trillion, or 82 percent of GDP, up from just $400 billion, or 60 percent of GDP, in 2000 (Exhibit 3). As in other countries, goods flows are Africa’s largest, with inflows and outflows worth $1 trillion in 2012. Flows of services and finance are smaller, totaling around $300 billion each.
Exhibit 3
Africa’s trade and capital flows grew to 82 percent of GDP in 2012.
Although commodities continue to be a large share of Africa’s exports, they account for less than half of goods exports. Capital-intensive goods, labor-intensive manufactured goods, and knowledge-intensive manufactured goods together comprise the majority of the continent’s exports (Exhibit 4). This is a clear sign of structural change in Africa’s economies, although the shift toward manufacturing and services needs to be accelerated. In many individual African countries, the share of manufacturing in the economy has been stagnant or even declining over the past decade.
Exhibit 4
Natural resources account for less than half of Africa’s exports, and exports of manufactured goods are growing.
Today may present a historic opportunity to boost Africa’s goods flows even further. As wages rise in China, production is shifting to lower-wage Asian economies – and to some African countries. Manufacturing already receives most of the FDI in some countries including Morocco, Algeria, South Africa, Mozambique, and Egypt (Exhibit 5). On current trends, manufacturing is set to create eight million jobs by 2020, a testament to wages and productivity levels that are competitive with other global low-cost manufacturing hubs.8 The evidence shows that the productivity of African workers in well-managed factories is comparable with that in other countries, although overall costs are higher because of poor logistics and infrastructure, as well as cumbersome bureaucratic procedures. Africa can build on this progress and develop industrial clusters in agro-processing industries, such as food and beverage manufacturing, textiles, leather goods, and wood products.
Exhibit 5
The destinations for announced foreign investment in Africa
Still, Africa is not as fully engaged in the global economy as its potential suggests it could be. The new McKinsey Global Institute Connectedness Index ranks countries based on goods, services, finance, people, and data and communication flows. It adjusts for the size of countries, and it reflects both inflows as well as outflows, both of which contribute to economic growth. The index shows that Africa ranks the lowest of any region in the world on its connections to the global economy.9Despite the continent’s low overall ranking, some African countries, particularly those with the most diversified economies, such as South Africa, Morocco, Egypt, and Nigeria, are rapidly becoming more connected to the rest of the world (Exhibit 6).10 South Africa is the African economy most connected to the world across all five flows, even though it ranks only 49th on the global index. Morocco ranks 53rd globally but is the second most connected economy in Africa, having risen 26 places since 1995. Morocco’s rise reflects a growing automotive industry that has attracted foreign investment and generated $2.7 billion of exports in 2013 and expanding tourism, offshore services, and agricultural exports. Along with Mauritius, which gained 28 places on the global index since 1995, it shows that large gains are possible with a concerted effort. Senegal has gained 14 places during this period.
Exhibit 6
The Africa global connectedness index
Underlying the expansion of global flows of goods, services, finance, and people is the soaring exchange of data and communication across borders through cross-border Internet traffic and international phone calls. Yet Africa risks being left behind in a growing “digital divide.” More than 720 million Africans have mobile phones, some 167 million people use the Internet, and 52 million are on Facebook. The numbers are rising rapidly, but more than three-quarters of the continent’s one billion people remain unconnected to what is supposed to be a “worldwide” web.11 In fact, the Internet contributes just 1.1 percent of Africa’s GDP overall, compared with 1.9 percent across developing economies. The situation may be changing. Africa’s cross-border Internet traffic grew 70-fold between 2005 and 2013, faster than in China or Latin America. The new undersea cables circling the continent should open up new opportunities, although laying the cables to bring that broadband access inland to cities and countries without easy access to the coast will be challenging. The potential in Africa’s growing cities is very large. A McKinsey survey in 2012 found that 51 percent of urbanites had accessed the Internet in the previous month and that 54 percent own Internet-capable devices.
Improving US engagement
The historic Washington summit is an opportunity to address challenges on both sides – the relatively low levels of economic engagement with Africa on the part of the United States and the unevenness of economic development in Africa despite its enormous potential. The US engagement with Africa lags the rest of the world. It accounts for just 4 percent of the continent’s trade, and that trade is growing more slowly than that with every other region of the world (Exhibit 7). US–African trade is just one-fifth the volume of Africa’s trade with Europe, and 60 percent smaller than Africa’s trade with China. On FDI, the United States ranks as only the fifth-largest source, behind Western Europe, the Middle East, the BRIC nations, and the rest of Asia (Exhibit 8).
Exhibit 7
The United States accounted for just 4 percent of Africa’s trade in 2012.
Exhibit 8
US FDI into Africa is small compared with that coming from other regions of the world.
Summits can too often be mere talking shops and photo opportunities. The importance of this gathering will materialize only with concrete action. The African Growth and Opportunity Act, signed into law in 2000, was aimed at increasing African exports to the United States and is now up for renewal. But to date, too much of the trade and investment between the United States and Africa has been related to oil and other commodities. The range of interactions needs to broaden if Africa is to fulfill its economic potential. If it does, more US businesses could benefit from the continent’s investment opportunities. We offer several priorities for accomplishing this:
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Raising US investment in Africa’s infrastructure from both public and private sources. Power Africa is a 2013 US initiative to double the number of people with access to power in sub-Saharan Africa. It aims to enable public and private capital to expand power generation and help electrify the continent. This initiative could be expanded given the size of the need in Africa. And energy is not the only infrastructure challenge that Africa faces. The McKinsey Global Institute estimates that Africa needs $2.6 trillion in infrastructure investment by 2030, including highway, water, and telecommunications infrastructure.
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Building the next generation of African leaders. Equally important will be measures to help the continent to develop a new generation of business and political leaders. The White House’s Young African Leaders Initiative is a step in the right direction. But more can be done. One useful step would be to dramatically expand the number of African students who can attend US universities for both undergraduate and graduate programs. Shorter-term exchanges, through the Fulbright Fellowship program and other opportunities, can also have impact.
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Improving Africa’s business climate. Greater trade with and investment in Africa from the United States will, to a large degree, depend on confidence about the macroeconomic and business environment. African countries must continue to strengthen the rule of law, ensure the sanctity of contracts, and make arbitration available in the event of disagreements. Foreign investors also want a level playing field with local firms. In practical terms, this requires limiting the preferential treatment of locally owned companies, as well as the removal of withholding tax on foreign remittances and ceilings on the repatriation of profits and capital by foreign firms. There is also more to be done in African countries on simplifying and standardizing business regulations, raising the efficiency of obtaining permits and approvals, and shortening the time it takes for companies to obtain approvals needed to set up operations.
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Facilitating US investment. Several African governments already have investment and trade promotion agencies to facilitate increased global engagement. For their part, African countries can do more to reach out to US investors and companies. Too many US executives are simply unaware of the opportunity. African countries can help them navigate regulations and local customs. Many developing economies have developed explicit strategies for attracting FDI and have created investment agencies that help foreign companies identify opportunities.
Leaders from across Africa will meet in Washington, DC, between August 4 and 6, 2014, for the US-Africa Leaders Summit, the first such event of its kind.
About the authors
Acha Leke is a director in McKinsey’s Johannesburg office; Susan Lund is a partner with the McKinsey Global Institute (MGI) and is based in the Washington, DC, office; James Manyika is a director of MGI and is based in the San Francisco office; Sree Ramaswamy is a senior fellow with MGI and is based in the Washington, DC, office.
The authors wish to acknowledge the contribution of Lohini Moodley and Safroadu Yeboah-Amankwah. This article draws on their work in the McKinsey Global Institute report Lions go digital: The Internet’s transformative potential in Africa.
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Tanzania now allows free flow of capital for EAC
Tanzania will now allow East Africans to freely move capital in and out of the country – a move that is expected to increase cross-border investment and deepen economic integration.
The IMF in its latest disclosure on the Tanzanian economy said that the country had informed it that it had opened its capital account to East African nationals ahead of full liberalisation, which will allow the rest of the world to bring capital in and out of Tanzania with no restrictions.
The changes are part of a wider plan to loosen state control of the economy, which will also see the country allow its currency greater exchange rate flexibility and adopt new monetary tools.
“As a first step, the authorities have allowed for freer flows of capital among EAC residents since June, which they see facilitating trade, financial and investment flows within the region.
The next step would be to extend this with the rest of the world by end-June 2015, in line with Tanzania’s commitments under the EAC Common Market Protocol,” said the IMF.
Under the Common Market Protocol, countries are supposed to open up their economies to allow the free movement of people and capital.
Saada Mkuya Salum, Tanzania’s Finance Minister, in a June letter authored jointly with the Bank of Tanzania (BoT) and addressed to the IMF, notes that the decision to liberalise the country’s capital account to East African Community residents will allow freer movement of capital within the region, facilitate intra-EAC trade, and lead to increased financial flows and investments.
Normally, countries impose capital controls in order to reduce their exposure to external factors and limit capital outflows.
Allowing the Tanzania shilling greater flexibility has been previously cited by the IMF as one of the things that could help increase the country’s competitiveness: “Tanzania is becoming increasingly interconnected with the global economy and a greater focus on international competitiveness is warranted. Accordingly, the exchange rate should fully reflect market conditions,” said the IMF in May.
The BoT said it will now step in only when there is an urgent need for its intervention.
“The flexibility of the exchange rate will be further enhanced to help cushion against adverse external developments. The BoT will participate in the foreign exchange market only for liquidity management purposes and to smooth out short-term fluctuations in the exchange rate,” said BoT Governor Benno Ndulu.
Business leaders said the opening up will help make the country even more competitive.
“Tanzania is one of the leading FDI centres in East Africa. Opening the capital account will further boost the investment inflow into the country... It will now be easier to take advantage of low interest rates and one can better hedge against currency depreciation risk,” said Patrick Mwati, group finance director at Crown Paints, the NSE-listed paint manufacturer with operations in both Kenya and Tanzania.
General Motors East Africa general manager Rita Kavashe said the move will give businesses greater flexibility when sourcing for capital, adding “It’s a step in the right direction.”
Market watchers say the move will help deepen the country’s capital market and offer greater options for regional investors.
“We expect that with the opening up of the capital account, market turnover will go up and help pull up the bourse’s capitalisation,” said Joseph Uiso, manager of research, operations and trading at Tanzanian Securities Ltd.
Current limits
Currently, Tanzania does not place restrictions on East African participation in the equities market but limits ownership in government securities. Under current laws, East African citizens can only own 40 per cent of government securities, with investors from a single country allowed to own a maximum of 27 per cent.
“Depending on how the opening up of the capital account impacts on the shilling, we expect that the BoT will up the quota of government securities that East Africans can own,” said Mr Uiso.
The move is also expected to expand the array of investment options available to East Africans.
“This will enable East African investors from Kenya, Uganda, Rwanda, Burundi and Southern Sudan to diversify their investments by investing in securities listed on the Dar es Salaam Stock Exchange.
East African investors will be able to participate in the economic growth of Tanzania, particularly as the mining, energy and agricultural sectors in Tanzania pick up,” said Peter Mwangi, the Nairobi Securities Exchange chief executive.
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Border teams to boost trade in East Africa – official
The formation of border teams is seen as a key move in enhancing trade and cargo movement across East African, a Tanzanian government official has said.
Mr Kagyabukama Kiliba, Deputy Permanent Secretary in the Prime Minister’s Office, said the formation of Joint Border Committees will ease the operation time between border points in the region.
The teams will ensure quick and enhanced service delivery, a move that Mr Kiliba said will cut costs incurred.
He noted that the committees are streamlining operations at each border with multi agencies conversing on one online platform.
2000 PASSENGERS DAILY
The Tanzanian official was speaking on the sidelines of a meeting in Malaba where he led a delegation from Tanzania in a fact finding mission on smooth operations of the Malaba Joint Border Committee.
The JBCs are a co-operation between government agencies and the private sector involved in the border operations as well as cargo and passenger movement.
The formation of these committees comes after the launch of One Stop Border Posts in East Africa.
Malaba JBC Secretary, Deo Otia, reiterated the importance of creating a hub for exporters to other central African states.
According to Mr Otia, Malaba currently handles an average of 1,600 cargo trucks and 2,000 passengers on a daily basis and the introduction of the JBC system results in movement across the border.
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Presidential Memorandum – Establishing a Comprehensive Approach to Expanding Sub-Saharan Africa’s Capacity for Trade and Investment
In June 2012, I released the US Strategy Toward Sub-Saharan Africa, outlining a comprehensive US policy for the region.
The Strategy builds on many of the initiatives launched during my Administration, and in particular highlights an effort critical to the future of Sub-Saharan Africa: boosting broad-based economic growth, including through trade and investment.
The Strategy outlines a number of actions to help accelerate inclusive economic growth in Sub-Saharan Africa, including: promoting an environment that enables trade and investment; improving economic governance; promoting regional integration; expanding Sub-Saharan African capacity to effectively access and benefit from global markets; and encouraging U.S. companies to trade with and invest in Sub-Saharan Africa.
The African Growth and Opportunity Act (AGOA) is a cornerstone of the trade relationship between the United States and Sub-Saharan Africa. Since AGOA went into effect 14 years ago, exports from Sub-Saharan Africa to the United States have more than doubled and non-oil and non-mineral exports in particular have increased nearly fourfold. The growth of new export industries has supported the creation of hundreds of thousands of jobs in Sub-Saharan Africa.
However, my Administration’s recent review of AGOA has revealed that, while the tariff preferences provided under AGOA are important, they alone are not sufficient to promote transformational growth in trade and investment. For beneficiary countries to be able to utilize AGOA to its fullest, this program must be linked to a comprehensive, coordinated trade and investment capacitybuilding approach with clearly stated goals and benchmarks.
In July 2013, I announced the launch of Trade Africa, an initiative to encourage greater regional integration and to increase trade and investment between the United States and Sub-Saharan Africa by aligning U.S. assistance with governmental and private sector engagements. Trade Africa initially focused on the East African Community, with the intention of expanding over time within Sub-Saharan Africa.
Targeted and strategic trade and investment capacity building is critical to achieving not only the goals of AGOA and Trade Africa, but also other U.S. trade and investment initiatives, such as the Doing Business in Africa Campaign and the National Export Initiative/NEXT.
Executive departments and agencies (agencies) have made major strides in advancing the trade and investment related goals of the Strategy. In order to achieve maximum effectiveness, however, it is important to align agencies’ efforts and resources through a coordinated approach that is data-driven, goal-oriented, and strategic, and that builds on the experience of U.S. Government initiatives such as the President’s Emergency Plan for AIDS Relief, the Millennium Challenge Account, Feed the Future, Power Africa, and Partnership for Growth.
Section 1. Policy. It shall be the policy of the United States to spur trade and investment with and within Sub-Saharan Africa through a coordinated approach involving U.S. Government engagement, assistance programs, and partnerships with the private sector.
Sec. 2. Steering Group. There is established a Steering Group on Africa Trade and Investment Capacity Building (Steering Group), to be chaired by the Deputy National Security Advisor for International Economics or her designee from the National Security Council staff. The Steering Group shall meet regularly.
Sec. 3. Membership. The Steering Group shall include designated representatives from:
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the Department of State;
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the Department of the Treasury;
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the Department of Agriculture;
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the Department of Commerce;
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the Department of Transportation;
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the Department of Energy;
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the Department of Homeland Security;
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the Overseas Private Investment Corporation;
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the Millennium Challenge Corporation;
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the United States Agency for International Development;
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the United States Trade and Development Agency;
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the Export-Import Bank of the United States;
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the Office of the United States Trade Representative;
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the Office of Management and Budget;
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the African Development Foundation;
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the Small Business Administration;
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the Council of Economic Advisers; and
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such agencies and offices as the Chair may, from time to time, designate.
Sec. 4. Functions. Consistent with the authorities and responsibilities of its member agencies and offices, the Steering Group shall perform the following functions:
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Not later than 180 days after the date of this memorandum, the Steering Group shall report to the President, through the National Security Advisor, recommendations on a comprehensive approach to expanding Sub-Saharan Africa’s capacity for trade and investment, consistent with U.S. trade and investment policy, development policy, and international agreements. The recommendations shall include:
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clearly defined goals and benchmarks for increasing trade and investment in Sub-Saharan Africa, and appropriate and transparent criteria for identifying priority countries, regions, and sectors that have the greatest potential to contribute toward meeting these goals and benchmarks;
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an indication of how the recommendations complement other major U.S. Government initiatives and partnerships focused on related issues;
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an outline of how to utilize programs across agencies to achieve these goals;
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an assessment of how the recommendations complement the activities of other major development partners, including Sub-Saharan African countries;
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an explanation of how the recommendations fit within existing budget constraints and resource requests, with identification of any significant funding gaps; and
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clearly articulated roles and responsibilities of relevant agencies.
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In undertaking these efforts, the Steering Group shall:
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consider a broad range of potential trade and investment capacity building, including: activities that support AGOA utilization; trade-related efforts to enhance regional integration; programs to develop supply chains; support for development of hard and soft infrastructure; and activities to foster a nondiscriminatory environment that enables trade and investment. Such activities include regulatory reform and transparency, trade facilitation and better border operations (including implementation of the World Trade Organization Trade Facilitation Agreement), and implementation of World Trade Organization commitments (including those that relate to science-based sanitary and phytosanitary measures and other technical standards);
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take into account the range of supply-side constraints to trade in Sub-Saharan Africa, growing private sector interest in trade with and investment in Sub-Saharan Africa, U.S. trade policies and interests (including in addressing barriers to U.S. trade and investment), international obligations, and the best means to promote regional integration and support value-added production;
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consult stakeholders, including Sub-Saharan African partner governments, regional economic communities, partner donor countries, the private sector, development banks, non-governmental organizations, and others as appropriate;
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coordinate its efforts with the interagency Trade Policy Committee, which was authorized by section 242 of the Trade Expansion Act of 1962, as amended, and established by Executive Order 11846 of March 27, 1975, and the Trade Promotion Coordinating Committee, which was authorized by statute in 1992 (15 U.S.C. 4727) and established by Executive Order 12870 of September 30, 1993; and
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coordinate its efforts with other U.S. Government initiatives focused on related issues, including Power Africa, Feed the Future, the Doing Business in Africa Campaign, Partnership for Growth, and the Young African Leaders Initiative, to ensure that U.S. assistance supports consistent policies across initiatives.
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Sec. 5. General Provisions.
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This memorandum shall be implemented consistent with applicable law, and subject to the availability of appropriations.
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Nothing in this memorandum shall be construed to impair or otherwise affect:
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the authority granted by law to an executive department, agency, or the head thereof; or
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the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
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This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
BARACK OBAMA
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U.S., Africa aim to boost trade
Leaders at Summit seek to renew program extending tariff, quota exemptions
U.S. and African leaders meeting in Washington on Monday kicked off a campaign to renew a program that gives exemptions on U.S. tariffs and quotas in an effort to boost trade and stimulate the economies of sub-Saharan African countries.
Leaders in the U.S. and Africa are looking to spur economic ties at a time when trade between the two is sinking and China’s hunger for commodities is boosting Beijing’s influence on the continent.
American officials and lawmakers say extending the 14-year-old African Growth and Opportunity Act, or Agoa, is crucial to preserving trade ties with fast-growing African countries, especially when U.S. trade negotiations at the World Trade Organization and with other major economies have stalled.
China passed the U.S. in imports in 2012 and imported $88 billion from sub-Saharan Africa in 2013, according to the International Monetary Fund. Partly because of increased oil production at home, U.S. imports from the region plunged to $34.5 billion last year, from a peak of $78.2 billion in 2008, with exports showing some gains in recent years.
Agoa is part of a strategy to increase economic ties with a growing Africa – including in trade and power generation – as China strengthens ties on the continent and the European Union negotiates free-trade agreements there. The goal, U.S. officials say, is to replace foreign aid with trade.
Building economic ties could also help contain conflicts that have convulsed Africa, said Erastus Mwencha, deputy chairman of the 54-nation African Union.
But critics point out that the bulk of African trade is oil shipments from West Africa, and U.S. agricultural and textile interests have opposed efforts to expand the list of products eligible for tariff and quota breaks.
President Barack Obama‘s trade policy has faced delays and dogged opposition in Congress, and a similar preferential tariffs program for the developing world was allowed to expire last year.
Still, trade with sub-Saharan Africa is so small that Mr. Obama and other officials say it shouldn’t be seen as a threat to the U.S. domestic industry. Non-oil Agoa trade was only about $5 billion in 2013, still up from just $1.4 billion in 2001, said U.S. Trade Representative Mike Froman.
That is because Africa’s factories and farms still face the same headaches as ever: ramshackle roads, debilitating blackouts, ports that need to be dredged and bureaucracies that process permits at a glacial pace.
Agoa “has not in fact been as powerful a stimulant in growing trade and investment as those who supported wanted,” said Johnnie Carson, former assistant secretary of state for African affairs, in an interview. “Progress is being made – it’s just being made at a much slower rate than many of us had anticipated.”
One way to boost trade with the U.S. further would be to loosen Agoa’s rules for sugar, tobacco and cotton.
“The issue of cotton, of course, remains a key concern of Africa.” Mr. Mwencha told Mr. Froman and representatives of 40 African countries gathered on Monday in Washington, the first day of the U.S.-Africa summit.
The U.S. is looking at make the criteria tougher for African countries to gain certain Agoa benefits, including in the areas of worker rights and rules that block agricultural trade, Mr. Froman said.He urged Congress to act soon to renew Agoa, since some factory owners and other investors need to make decisions a year or more in advance. The act needs to be reauthorized by September 2015.
“Things just take too long – it scares people,” said Cliff Schiffman, director of sales and marketing for Cherry Tree, a Turkish clothing-sourcing company that manufactures in Kenya. “I think deep down, the Congress does want to support Africa. … Unfortunately our legislative process is extremely slow.”
Lawmakers say opening U.S. markets won’t transform economic ties with Africa.
“Barriers to U.S. trade and investment in the region continue to inhibit the full potential of the U.S.-African trade relationship,” a group of Democratic and Republican lawmakers who write trade legislation said in a joint statement on Monday.
Read the FACT SHEET: Investing in African Trade for our Common Future, published by The White House on 4 August 2014.
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COMESA acts on food security
The Common Market for Eastern and Southern Africa (COMESA) has developed an initiative to eliminate intra-regional food import and export bans to improve food security and promote vibrant trade.
COMESA technical advisor Jackson Kiraka said food import and export bans have impacted negatively on access to affordable food in the region.
Mr Kiraka is concerned that countries with food surpluses are unable to export to member countries that may be facing deficits because of haphazard food import and export bans.
He said in a statement in Lusaka yesterday that the COMESA region has failed to leverage better food production in some member countries that can export to countries experiencing food deficits.
“Members of Parliament drawn from 19 member countries of COMESA will meet in Lusaka from August 11 to 13 to deliberate on the issue and come up with policy recommendations,” Mr Kiraka said.
He said there is a persistent concern that Africa’s place at the high table of food security remains unoccupied largely due to a very challenging and unpredictable agricultural trade policy environment.
“The inevitable consequences of this scenario include the frequent spate of food insecurity and poor economic performance in the agriculture sector and when big shocks like the 2008 food price crisis and financial meltdown occur, they only help to reveal the soft underbelly of the national economic systems, further destabilising the majority who depend on agriculture for their livelihoods,” Mr Kiraka said.
He said several studies by the Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA) show that the implications of food import and export bans include market gluts at production level, resort to informal trade channels including smuggling, cases of corruption and ultimately higher transaction costs and consumer prices.
Mr Kiraka said food trade experts are of the view that while governments resort to these options with the good intention of securing food security at the national level, the unintended results are always counterproductive and only help to worsen the very situation that was to be addressed.
He said the initiative will be bolstered by the launch of the Pan African Food Exchange which will be held in October in Kenya.
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US companies missing out on African investments – says ECA’s Lopes
On the eve of the Africa-US Summit to be held in Washington DC this week, Mr. Carlos Lopes, Executive Secretary of the Economic Commission for Africa (ECA) has underscored that with Africa attracting major investments from the BRICS (Brazil, Russia, India, China and South Africa) and other developing economies, it is time for American companies to wake up and participate in the already vibrant and promising African investment terrain.
The Summit is taking place against widespread agreement that Africa has evolved into a dynamic market with a growing middle class. In addition, there is a growing understanding among African leaders and people on economic transformation as an imperative for the continent to sustain growth and foster inclusive development.
Yet, according to Lopes, who will be in attendance, traditional donors, trade partners and investors of Africa such as USA, Japan and those in European economies are “taking a bit of a back seat.”
“In terms of capital stock on investment with Africa, the US has the prized spot,” he says, but cautions that the type of investment it is involved with and the trends moving forward are not very favorable.
He notes that the Summit in Washington should play a critical role in discussing what needs to be done in order for American companies to be convinced that “we are entering a very different stage in Africa's economic situation and that they should be part of it.”
As part of Africa’s engagement with the Summit, the ECA has prepared a poignant Briefing Note on the theme: “Frontier Markets in Africa - Misperceptions in a Sea of Opportunities” in collaboration with the African Union Commission (AUC) and the African Development Bank (AfDB), which identifies the opportunities for investment in Africa, corrects misperceptions about the business environment on the continent and suggests general areas of focus for future partnership between Africa and the United States of America.
“The positive recent characterization of Africa as a rising continent is derived in part from the rapid socioeconomic changes and improvements in governance that have transpired. However, more importantly, it reflects the fact that limited information and long-held misperceptions about Africa don’t match reality,” states the Briefing Note. It outlines several key shifts, and deliberate policies and reforms, aimed at institutional strengthening and improvements in the business environment.
The Briefing note underscores an underlining message: that trade and investment in Africa will continue to grow and that the U.S. can seize the opportunity, and proposes that a mutually beneficial future is possible, “if Africa-US partnerships are focused on areas with high pay offs including: investments; education; and science and technology and innovation.”
And, there are benefits to the existing relationship. For instance, according to an additional White Paper, themed: How AGOA 2:0 Could be Different: Outlining Africa’s Position on the AGOA Review Process prepared by the ECA and the AUC for the Summit, more than 300,000 jobs have been created in the context of the Africa Growth and Opportunity Act (AGOA); this has increased women’s access to the workforce.
Furthermore, transformation examples are not in short supply according to Lopes. Mauritius has the best financial market in terms of performance, Ethiopia has made massive strides in terms of industrialization, Nigeria has increased agricultural productivity and Morocco has mastered the value chain and is integrating its services and its industrial capability. “Countries have different appeals depending on which entry point we are talking about,” he says.
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Africa activists urge Obama to act on extractive industries law
As the three-day U.S.-Africa Leaders Summit got underway here Monday, anti-corruption activists urged President Barack Obama to prod a key U.S. agency to issue long-awaited regulations requiring oil, gas, and mining companies to publish all payments they make in countries where they operate.
“The companies need to be held accountable, and we would ask President Obama to also support us in this message,” said Ali Idrissa, the national co-ordinator of Publiez Ce Que Vous Payez (Publish What You Pay, or PWYP), in Niger, a country rich in uranium and iron deposits.
“We need to look at the entire production chain of these extractive industries; we need to continue putting pressure on this industry …so we can fight poverty and corruption and ensure we have a better development,” he added.
Idrissa, one of scores of African activists who have descended on Washington for this week’s unprecedented gathering, was speaking at a forum sponsored by the Open Society Foundations (OSF), Global Witness, Human Rights Watch, and Oxfam America, among other groups, on civil society efforts to promote government and corporate transparency and accountability on the continent.
The activists, whose numbers are dwarfed by the size of official government delegations, most of which are led by heads of state, as well as U.S. and African corporate chiefs eager to explore business prospects, nonetheless claimed at least part of the spotlight Monday.
At what was billed as a “Civil Society Forum Global Town Hall” meeting at the National Academy of Sciences, both Vice President Joe Biden and Secretary of State John Kerry echoed Idrissa’s concerns in general remarks.
“Widespread corruption is an affront to the dignity of your people and direct threat to each of your nations,” Biden declared. “It stifles economic growth and scares away investment and siphons off resources that should be used to lift people out of poverty.”
Kerry also stressed the importance of “transparency and accountability” not only in attracting more investment but also in “creat(ing) a more competitive marketplace, one where ideas and products are judged by the market and their merits, and not by a backroom deal or a bribe.”
While their words gained applause, it was clear from the OSF forum that anti-corruption activists are losing patience with what they see as pressure by the extractive industries to prevent the emergence of tough new disclosure requirements from the Securities and Exchange Commission (SEC), the federal agency that regulates U.S. stock and related markets.
At issue is section 1504 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, an anti-corruption provision that requires all extractive companies listed on U.S. stock exchanges to publish each year all payments they make to the U.S. and foreign governments in the countries where they operate.
According to the legislation, which is designed to counter the so-called “resource curse” that afflict many developing countries, particularly in sub-Saharan Africa, taxes, royalties, fees, production entitlements and bonuses should all be reported down to the project level.
Eight of the world’s 10 largest mining companies and 29 of the 32 largest active international oil companies would be covered by the Act, which requires the SEC to develop specific regulations to implement its intent.
After nearly two years of consultations with businesses, activists, and other interested parties, the SEC issued draft regulations, but they were immediately challenged in a lawsuit filed by the American Petroleum Institute (API), a lobby group that represents the powerful oil and gas industry here.
The SEC has since reported that it does not plan to resume the rule-making process until March, 2015, a source of considerable frustration for the anti-corruption activists.
In the meantime, the European Union (EU), whose member countries have historically shown much less willingness than Washington to enact legislation to deter bribery and corruption by its companies operating abroad, has adopted and begun to enforce its own tough disclosure measures that go beyond the energy and mining industries to include timber companies as well.
“Until 2000, corruption and bribery by European [companies] was not only legal; it was tax-deductible,” Mo Ibrahim, a Sudanese-British telecommunications entrepreneur and prominent philanthropist for good governance in Africa, told the OSF Forum. “The United States, which has been a leading light on corruption, is now dragging its feet. Do you have a backbone, or what?”
He echoed the concerns of an open letter sent to Obama and signed by the heads of the national chapters of PWYP, an OSF-backed international anti-corruption group, in Guinea, Niger, Tanzania, the Democratic Republic of the Congo (DRC), Chad, Ghana, and Nigeria, on the eve of this week’s Summit.
“It has been more than four years since you signed the Dodd-Frank Act, section 1504 of which obliges all U.S. listed extractive companies to publish the payments they make,” the letter, which was also signed by the African representatives on the PWYP global steering committee. “The law will yield crucial data that can help us hold our governments to account, but it has yet to come into effect.
“We ask you to urge the SEC for a swift publication of the rules governing section 1504 to ensure that they are in line with recent EU legislation and the emerging global standard for extractive transparency,” it said, adding that more also needs to be done to strengthen multilateral rules on taxation and creating a public registry of corporate beneficial ownership information as other critical parts of the anti-corruption struggle in Africa.
Harmonising the SEC regulations with those of the EU is particularly critical, according to Simon Taylor, co-founder and director of London-based Global Witness. “If the SEC gets it wrong, we will then have a double standard,” he noted, suggesting that some European companies could move to the U.S. if the latter’s requirements are less stringent.
API and other critics of the section 1504 have argued that strict rules will put U.S. companies at a disadvantage in bidding for mining or drilling rights, especially vis-à-vis China whose trade investment in Africa, particularly in the continent’s extractive resources, have exploded over the past decade and now far exceeds the U.S.
Beijing has failed so far to join the 12-year-old Extractive Industries Transparency Initiative (EITI), an Oslo-based international organisation that promotes transparency and currently includes 44 governments, as well as extractive companies, civil-society groups, international development banks, and institutional investors.
But Ibrahim said it was “not acceptable for Europeans or Americans to say, ‘We want to be moral and ethical, but we can’t until this guy’” joins. “China is learning; it can understand and can change. They’re trying to find their feet [in Africa].”
George Soros, the billionaire philanthropist who created OSF, as well as a number of other foundations, said it was important to get China on board because “otherwise they are the spoilers. It is so important that I think we have to be willing to reconsider the whole structure of the [EITI which] they consider [to be] a post-colonial invention.
“They have to be involved in the creation of the system that they will abide by. That’s where civil society in Africa can be influential,” he added.
Jim Lobe is the IPS News Agency Washington DC Bureau Chief. His blog on U.S. foreign policy can be read at Lobelog.com.
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It’s time to update our thinking on trade
Our institutions for governing world trade and our thinking about world trade date back to a simpler era. Without a radical rethink, we risk the gradual decay of our most valuable international institutions, loss of extraordinary opportunities to improve global living standards and possibly the sidelining of the West in developing modern institutions.
The GATT and the WTO were devised for a simpler era, when it was possible to think about world trade in the way Ricardo taught – namely that a good is produced in one country and consumed also in a single country. If Portugal was adeptat making wine and England at cloth, it would benefit both to reduce barriers and enhance trade. That two-country model worked relatively well until about 1978, when China started opening its economy by establishing special economic zones across the border from Hong Kong.
By the last decade of the twentieth century, production had become a complex global process. The logic of increasing efficiency by reducing trade barriers remained completely valid, but policy adaptation of that logic to a new era has faltered.
A laptop or a smart phone now is typically made in 15 to 20 countries. When old-style trade thinking is applied to this situation, confusion causes bad policy and gratuitous conflicts. A laptop made in 17 countries might be assembled in China for $2 worth of local wages then exported to the United States, but old two-country thinking leads members of Congress to react as if China had exported $1500 of value to the US. This bolsters protectionism, reduces support for multilateral trade liberalisation and contributes to the fragmentation of the global trade regime.
Because it is difficult to continue the process of trade liberalisation, countries feeling a need for deeper integration form their own regional blocs, inducing further fragmentation.
Regional and bilateral trade negotiations today are focused on ‘country of origin’, by definition a single country or preferential grouping, with the result that it is considered normal to have 500 pages of country of origin rules in a single trade agreement. Since each country has many trade agreements, companies may find the rules so complex that they simply pay high tariffs rather than trying to manage the complex paperwork to prove countries of origin. The complexity of the system discriminates against small, open economies like Singapore, and it discriminates against smaller companies without huge accounting departments. Because it cannot adapt to the globalisation of production, the system is beginning to defeat itself.
Moreover, the addition of over one billion new workers to the globalised workforce entailed very low wages in Eastern countries such as China, flat wages in the West and huge trade imbalances between East and West. This discouraged Western countries from vigorously pursuing the kinds of global agreements that would have eliminated those dozens of separate, conflicting 500-page rule books about countries of origin.
Feeling overwhelmed by Chinese manufactured exports, Western countries have also moved to exclude China from the most important efforts to modernise the global trading system. The proposed Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership agreements (TTIP) both seek to exclude the world’s second-largest economy from potential membership, an arrangement that is both economically untenable and a potential geopolitical disaster.
The geopolitical consequences were magnified by the inclusion of Japan in the TPP agreements, even though Japan’s economy is much less open than China’s and historically has been much less willing to reform in the face of domestic interest group pressure than China has. Given Sino-Japanese tensions, this has come across in Asia as part of a strategy to isolate China.
Magnifying Sino-American differences could make a more inclusive, truly multilateral future trade system much harder to negotiate.
While we still flounder over attempts to come to terms with globalised production, we are heading into globalised consumption. Instead of an era with one billion new globalised workers, we are heading into a world that will contain two billion or more new middle class consumers, mainly in Asia and heavily in China. Chinese wages are rising 13 to 20 per cent a year and total compensation is rising even more. This phenomenon should gradually resolve the most serious trade imbalances and begin to allow Western wages to rise.
But Western media, interest groups and politicians remain obsessed with the problems of yesterday. This could lead the West to squander one of the greatest economic opportunities in world history, namely the extraordinary consumer boom in China, India and other emerging markets. It could also disastrously delay responses to the jobs challenge of the new era: a technology-driven transformation of the workplace driven by robots, other automation, the internet of things and 3D printing that will eventually force billions of workers out of old jobs.
We must begin addressing the world as it is and will be, not the world of generations past. Ironically, in the process the WTO remains crucial to a vibrant world economy. Without the WTO’s dispute settlement mechanism, trade wars will ignite everywhere. By allowing the WTO system to decay, and by blaming globalised trade for problems that are unique to the past generation, we risk going back to pre-World War II trade wars. We need a modern, multilateral structure that updates the WTO, not a degeneration of the global trade and investment system based on a failure to recognise the shape of the new world we are entering.
We are now at one of those great historical turning points. Disillusionment, often misplaced, with existing institutions and obsession with obsolescent problems have allowed the process of trade negotiations to decay so far that TPP and TTIP negotiations could fail or, if they succeed, the exclusion of China could make them Pyrrhic victories. Continued Western failure to address the real issues of our emerging world of globalised production and consumption, and the reality of China’s central role, could lead to trade regimes with the most dynamic markets governed by structures like the Regional Comprehensive Economic Partnership promoted by Asian emerging economies.
William H. Overholt is President of Fung Global Institute and Senior Fellow at Harvard’s Asia Center. The views expressed here are personal and not endorsed by his employers.
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Extraordinary Summit of the African Union on Employment, Poverty Eradication and Inclusive Development: Ouagadougou, Burkina Faso
In 2004, the African Union (AU) Extraordinary Summit on Employment and Poverty Alleviation in Africa held in Ouagadougou in September 2004 adopted a Declaration, Plan of Action and Follow up Mechanism that committed Member states to place employment at the center of their economic and social policies.
The Summit was a culmination of efforts by member states, RECs, tripartite social partners, as well as international partners to address the challenge of employment creation and providing conditions for decent work. It was also a point of departure for more concerted efforts at national, regional and international levels to step up employment creation for poverty alleviation. The Summit adopted three policy documents:
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Plan of Action for the Promotion of Employment and Poverty Alleviation and
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Follow up Mechanism for Implementation, Monitoring and Evaluation
While Member States and RECs are the principally responsible for implementation, UN agencies and other international development partners are expected to adopt greater policy coherence and to increase support for the implementation of the above three policy documents.
In 2011, the 19th Ordinary Session of the AU Executive Council decided to hold a Special Session of the Labour and Social Affairs Commission (LSAC) to evaluate the implementation of the 2004 Ouagadougou Declaration and Plan of Action on Employment Promotion and Poverty Alleviation. The 9th Ordinary Session of the AU LSAC (Addis Ababa, April 2013) decided to convene the Special Session in Windhoek, Namibia, from 23 to 25 April 2014 as prelude to an Extraordinary Session of the Assembly in Ouagadougou (Ouaga+10) in September 2014.
The Assembly of the AU accepted the offer of the Government of Burkina Faso to host the Extraordinary Session of the Assembly from 3 to 7 September 2014 to assess the progress in implementation of the 2004 Ouagadougou Declaration and Plan of Action on Employment and Poverty alleviation, under the theme “Employment, Poverty Eradication and Inclusive Development”.
The Extraordinary Assembly is taking place at the end of the year-long celebration of the 50th Anniversary of the OAU/AU that commenced in 2013 and during which an African Agenda for the next 50 years is being developed (African Agenda 2063). The Assembly also convenes at a time when the international community is engaged in defining the Post 2015 Development Agenda. For example Goal 8 and Targets of the proposed Sustainable Development for the Post 2015 Development Agenda states: “Promote strong, inclusive and sustainable economic growth and decent work for all” and has clear targets to “halve the number of youth not in employment, education or training by 2020”; and to “achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities by 2030”. Hence, the Special Session could draw from a wealth of contemporary thoughts and information to enrich its outcomes, particularly from the Common African Position on Post 2015, as it relates to human capital development, job creation, social protection and inclusive development.