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China-Africa trade moves up
The nature of what Africa buys from China is slowly beginning to change
While most of China’s imports from Africa continue to be energy products and resources, its exports to the continent are shifting toward high-end products, a trend that will continue, experts say.
“China’s imports from Africa last year did not change much,” says Li Wentao, a researcher with the Institute of African Studies at the China Institutes of Contemporary International Relations.
“That’s because the country’s economic development needs the primary products of energy and resources that accounted for about 70 percent of the continent’s exports. On the other hand, China’s exports to Africa are shifting toward products with higher technology, such as mechanical and electrical products, motorcycles, televisions, cell phones and equipment.”
The trend is becoming clearer and is driven mainly by fast economic growth in the continent, he says.
“Africa’s consumption has improved significantly in recent years. At the same time, Chinese products have had the advantage of being cheap but of good quality. In recent years some Chinese businesses have moved to establish their brands and standards in Africa.”
China’s project contracting businesses in Africa have also increased exports of mechanical and electrical products to the continent, he says.
“The growth in trade between China and Africa will continue to be robust. In addition to increasing in size, the quality is also improving as mechanical and electrical products, rather than shoes and clothes, account for a bigger share of Chinese exports to Africa, a remarkable trend in recent years.”
Bilateral trade was probably worth more than $200 billion last year, he says.
Between January and October last year, bilateral trade between China and Africa was worth $172.83 billion, up 5.5 percent from a year earlier, says Chen Hao from the Department of West Asian and African Affairs of the Chinese Ministry of Commerce.
High value-added and high-tech products accounted for nearly half of China’s exports to Africa, Chen says. African industrial goods such as steel and copper products have also started to go to the Chinese market.
China became Africa’s largest trading partner in 2009. Africa is China’s important import source, second-largest market of overseas project contracting and fourth-largest outward investment destination, according to a Chinese government white paper on China-Africa economic cooperation published last year.
Trade between China and Africa was worth $198.5 billion in 2012, 19 percent more than in 2011, and accounted for about 5 percent of China’s total trade and about 16 percent of Africa’s overall trade. More than 2,000 Chinese businesses had invested more than $20 billion in African non-financial sectors by the end of 2012, the white paper says.
Li Jinzao, vice-minister of commerce, says Africa’s economic integration has provided new scope for bilateral cooperation in broader sectors and at a higher level. Economic cooperation between China and Africa is going through a period of rapid growth and change, he says.
Li Wentao says: “A highlight is that bilateral trade in services has grown rapidly in recent years. More Chinese tourists are visiting Africa, and African aviation and logistic services are going into China. Chinese telecom giants such as Huawei and ZTE are greatly expanding their businesses in Africa.”
However, China and Africa still have the challenge of a trade imbalance, a structural problem that cannot be resolved in the short term, Li says.
“Africa is also looking at China’s transfer of technology and industries into the continent. As China shifts some manufacturing businesses, that will ease overcapacity at home and upgrade African industries.
“In addition to expanding bilateral trade, China will next pay more attention to increasing Chinese investment in Africa, which will create more local employment and benefit the continent more.”
In March last year, Chinese President Xi Jinping chose Africa as a destination in his maiden foreign trip after assuming office. While in Tanzania, he said China would strengthen mutually beneficial cooperation with African countries in fields such as agriculture and manufacturing and help African countries translate their advantages in resources so they could achieve growth that is internally driven and sustainable.
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World needs policies for demand-led recovery from global financial crisis, argues UNCTAD study presented to G-20
Weaker global demand and not new trade barriers or supply-side difficulties are responsible for the slow growth in international trade, an UNCTAD study presented to a G-20 working group on January 21-22 contends. An expansion of trade would come with the recovery of demand and output, the study argues, and not the other way round.
More than five years after the onset of the global financial crisis, the world economy has not recovered a strong, sustainable or balanced growth path explains the UNCTAD study, called “Macroeconomic Strategies and Trade from a Global Perspective”.
The lack of dynamism is most visible in output, employment and investment figures, the study explains, but it is also apparent from the very sluggish growth of international trade.
However, trade facilitation and other supply-side measures cannot reignite trade and growth without a strong expansion of demand – including through income redistribution, particularly in major surplus economies.
Meanwhile, some policy measures, such as spending cuts and wage compression, are counterproductive, the study argues.
The trade facilitation agreement reached by the World Trade Organization in Bali in December 2013, while a welcome sign that multilateralism is still alive, did not address the main constraints on trade, contends the UNCTAD study, which was presented at a meeting in Quebec, Canada, of the G-20 Framework Working Group for Strong, Sustainable and Balanced Growth.
Policy choices aimed at spurring exports, such as “internal devaluations”, including wage reductions, would be self-defeating – especially if followed by several trading partners at the same time – the G-20 meeting heard.
The UNCTAD study also says that in order to be sustainable, demand growth must be based on household spending and supported by rising labour incomes (whose share in the GDP declined in most countries in the last two or three decades).
Rising private consumption, combined with public investment and expenditure in public services, would provide the basis for increased private investment, the study argues. This would be in contrast with the pre-crisis pattern of boosts in private spending based on consumer credit and asset bubbles, which contributed to internal and external imbalances and to the financial crisis.
In an interdependent global economy, the manner in which domestic demand spills across different countries is of paramount importance, according to the UNCTAD study.
One isolated country or group of countries can try to exit the crisis through net exports, even if other components of domestic demand remain anaemic; but if this strategy is followed by many trading partners, it creates a “fallacy of composition” whereby too many goods chase too few consumers.
A wider revival of economic growth and trade could conceivably follow from surging demand in a number of systemically important economies, the UNCTAD report contends.
However, demand must be geographically distributed in a way that is consistent with the reduction of global imbalances. This requires that surplus countries take the lead in expanding domestic demand and make possible an expansionary adjustment – in contrast with the recessionary bias of balance-of-payment adjustments that may put the entire burden on deficit countries.
Since 2010, UNCTAD has participated as an observer in several meetings of the G-20 Framework Working Group on Strong, Sustainable and Balanced Growth and has submitted several technical papers.
UNCTAD’s contributions to the G-20 aim to highlight the issues of interdependence and the need for systemic coherence in international monetary, financial and trade affairs, all of which are of vital interest to all member States of the United Nations.
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TTIP talks ready to accelerate
The U.S.-EU Transatlantic Trade and Investment Partnership (TTIP) talks are ready to resume after a quiet time since the last meeting in mid-December. U.S. Trade Representative (USTR) Michael Froman and EU Trade Commissioner Karel De Gucht will focus on the overall time frame and scope of the agreement at a February 17-18 ministerial level stocktaking session in Washington, DC. The fourth round of full negotiations for the TTIP will take place March 10-14 in Brussels.
The negotiating process received a jolt on January 21 when the EU Commission announced a three month pause on the investment portion of the TTIP talks after the March negotiating session while it conducts a public comment period. Commissioner De Gucht said the public consultation is in response to the wide public interest in the issue and the need to strike a balance between protecting EU investors and upholding governments’ right to regulate in the public interest. Some policy analysts said the action was meant to divert criticism on the investment issue ahead of EU parliamentary elections in May. USTR Froman is not bothered by the pause noting that investment issues are debated in the U.S. and he has ongoing consultations on the issue. Investor-state dispute settlement mechanisms have become an issue recently in other trade agreement negotiations and will be in future negotiations.
The EU Commission also created a special expert group on TTIP representing a wide range of interests to give the Commission ‘high quality,’ but nonbinding advice on TTIP issues. EU chief negotiator Ignacio Garcia Bercero will chair the group and work directly with the experts. The group’s members represent environmental, health, consumer and workers’ interests of various industries. The Commission is sensitive to criticism from interest groups that it does not listen to the general public and non-government organizations and is trying hard to overcome that criticism by increasing channels for input.
The announcement that the U.S. and EU will exchange their initial tariff rate offers for goods on February 10 does not substantially change the situation for U.S. agriculture. The EU’s agriculture tariffs are generally higher than those of the U.S., and the EU’s initial offer on agricultural market access is likely to be less aggressive than the U.S. plan and include some items where tariffs are not immediately free or phased out over 3-7 years. Lower tariffs on products that have regulations that restrict market access are not viewed as progress.
In trying to defend the EU Commission’s position in the talks, Commissioner De Gucht has made statements that raise red flags for U.S. agriculture. He said that the EU would not give up its policies on genetically modified food or restrictions on beef raised with artificial growth hormones. He did acknowledge they will be talking about the present and future barriers between Europe and U.S. related to regulation, but all regulations will not be eliminated. He did not indicate if there is a negotiator’s middle ground between those two statements.
Regardless of the various political needs to adjust messages on more open trade, most of the economic analyses on TTIP show that most of the increase in trade value will come from achieving regulatory convergence. That does not mean more regulations or fewer regulations. The issue is how can two heavily regulated economies put their regulations on common terms so that products produced under one set of regulations can easily be sold under the other set of regulations. That is sometimes referred to as regulatory equivalence. There is no point in talking if that is not the goal.
That is where the issues get worrisome for U.S. agriculture. In a recent speech, Commissioner De Gucht said regulations in the U.S. and the EU often differ for “cultural reasons, beliefs, or societal differences.” That appears to be a reasonable assessment of the situation. With that as a starting point, how do the negotiators move toward regulatory convergence or equivalence?
The starting point for a trade agreement may be to ensure that the two regulatory systems dealing with food safety issues have the full range of information that is available on each side as they continue to set regulatory policies under their current systems. There is some concern now that not all scientific test data is being fully weighed as regulations are developed. Additional procedures that ensure full airing of views during the regulatory process of the other will allow each side to more clearly see where the disconnects exist and how they may be bridged.
Over time, the additional information will lead to more understanding of the issues and some convergence of thinking on how regulatory equivalence could be achieved. That process will take some time because deep-rooted concerns in industries and the general public will not be changed quickly. When the TTIP talks were in their pre-launch stage, some officials on both sides argued that some issues would not be resolved in the talks, but a process could be put in place to work through issues after an overall agreement was reached.
A solution to food safety issues based on science within the TTIP agreement is still the preferred outcome, but that does not appear any more likely now than when the pre-launch talks began a year ago. The stocktaking meeting in February and the full negotiations round in March will likely confirm that situation.
President Obama will be in Europe ten days after the end of the March round of talks. He will attend the U.S.-EU Summit in Brussels and is scheduled to meet one-on-one with European Council President Herman Van Rompuy and EU Commission President Jose Manuel Barroso. This will be an opportunity for the political leaders to discuss the outcome of the talks and the next steps forward.
Despite the increase in activity for the TTIP, the talks will likely continue on a slow track. Legislative authority from Congress for the President to negotiate trade agreements and have them considered by Congress on an expedited timetable, called Trade Promotion Authority or TPA, will likely be delayed until after the Congressional elections later in fall of this year. If approved then, the Trans-Pacific Partnership trade agreement which is almost completed is likely to be taken up first. That would push consideration of the TTIP well into 2015 at the earliest.
Ross Korves is a Trade and Economic Policy Analyst with Truth About Trade & Technology.
Source: http://www.truthabouttrade.org/2014/02/06/ttip-talks-ready-to-accelerate/
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Malawi: IMF Country Report No. 14/37
This paper focuses on Malawi’s Third and Fourth Reviews Under the Extended Credit Facility (ECF) Arrangement. Donors have suspended some aid disbursements to Malawi in response to a scandal involving the theft of public funds. Recovery is under way in many sectors of the economy, facilitated by increased availability of foreign exchange. Performance in relation to quantitative targets for the third ECF review was good, but weakened for the fourth review. There was significant fiscal slippage (excessive domestic borrowing) during July-September 2013. The IMF Staff supports the authorities’ requests for waivers based on corrective actions and policy commitments.
Executive summary
Donors have suspended some aid disbursements to Malawi in response to a scandal involving the theft of public funds. A group of public servants exploited weaknesses in the control environment of the government’s Integrated Financial Management Information System (IFMIS) to make fraudulent payments to several entities that had not provided any goods or services to the government. The authorities are implementing an Action Plan of remedial measures to prevent the recurrence of the fraud. Key elements of the action plan include strengthening security and management of IFMIS, a forensic audit, and identifying and prosecuting the perpetrators of the fraud.
Recovery is underway in many sectors of the economy, facilitated by increased availability of foreign exchange. This reflects the impact of policy reforms, including a strong response to exchange rate adjustment from the tobacco sector and re-established external credit lines. Inflation is falling, although more slowly than programmed.
Performance in relation to quantitative targets for the third ECF review (March test date) was good, but weakened for the fourth review (September test date). There was significant fiscal slippage (excessive domestic borrowing) during July-September 2013. This constrained the room for substituting domestic borrowing for the shortfall in aid flows. There has been progress in implementing structural benchmarks, but at a slower pace than programmed.
Discussions focused on managing the fall-out from the fiscal scandal and policies to reverse the fiscal slippage and lower inflation. A substantial decrease in aid receipts for the remainder of the fiscal year necessitated some reprioritization of spending plans as well as expenditure cuts. Fiscal and monetary policy need to be tightened to lower inflation pressures and safeguard international reserves.
Staff supports the authorities’ requests for waivers based on corrective actions and policy commitments. The authorities are implementing strong corrective actions to address the fraud and fiscal slippage, including several prior actions, and have also strengthened external debt management to ensure that they observe their commitment not to contract nonconcessional external debt. Staff further supports the requests for extension of the arrangement, rephasing of disbursements (including a halving of the disbursements originally associated with the third and fourth reviews and applying the balance to an additional review) and modifications of performance criteria.
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Tourism in Africa is an untapped goldmine: report
The future of tourism in Africa holds great potential, but its expansion and development depends on better transport infrastructure – including airline connections, roads and railways – in addition to open borders, and improved marketing to niche sectors such as adventure and eco-travellers.
The potential of Africa’s tourism is untapped, writes Mthuli Ncube, African Development Bank Group Vice-President and Chief Economist, in the foreword of the inaugural issue of the Africa Tourism Monitor, a joint initiative produced by the African Development Bank in partnership with the Africa Travel Association and Africa House at NYU.
“While Africa accounts for 15% of the world population, it receives only about 3% of world tourism,” writes Ncube. “To maximize Africa’s tourism potential, critical investments are needed in key infrastructure sectors (e.g. transport, energy, water and telecommunications).”
Africa is home to some of the fastest-growing economies, and revenues from tourism in Africa already represent more than double the amount of donor aid. Tremendous opportunities exist to further expand tourism across the African continent, yet challenges remain. The need for solid infrastructure, in the form of good roads and transportation corridors, for better airline connections, and fewer visas to cross African borders are just a few of the reasons Africa’s tourism sector has not taken off.
According to the United Nations World Tourism Association, 63.6 million international tourists arrived in Africa in 2012, compared to 17.4 million visitors in 1990. The top six countries for international tourist receipts in 2012 were, in descending order: Egypt ($9.94 billion), followed by South Africa ($9.994 billion), Morocco ($6.711 billion), Tunisia ($2.183 billion), Tanzania ($1.564 billion) and Mauritius ($1.477 billion).
The economic potential of tourism is remarkable, with direct and indirect impact on employment. In Africa alone, travel and tourism generated 8.2 million direct jobs in 2012. Africa is home to the world’s youngest population, with close to 70% of its population below the age of 25, and youth constituting about 37% of the labour force, but making up approximately 60% of unemployment. For this reason, the AfDB aims to promote tourism through the development of cross-border infrastructure and regional transport corridors, which will facilitated the movement of people and goods on the continent.
Africa’s future looks bright given the huge growth in adventure and eco-tourism, coupled with the continent’s rich cultural heritage and natural beauty. Already, several airlines from the United States, Africa, Europe and the Middle East have plans to expand their routes. Soon those untouched beaches and remote villages will become a thing of the past.
Download: Africa Tourism Monitor 2013 (5.6 MB)
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Azevêdo urges members to make 2014 the year to implement Bali and put Doha back on track
At the first meeting of WTO ambassadors after the 9th Ministerial Conference, Director-General Roberto Azevêdo told the Trade Negotiations Committee on 6 February that: “Bali represents not just a huge achievement for all of us – but also a huge opportunity. There is real political momentum and we must build on it.” He said he had asked the chairs of the negotiating groups to “start a dialogue with members on (Doha Round) issues that we may be able to take forward”. Below is an excerpt from his speech.
Good morning everybody.
As this is our first meeting of 2014, I would like to wish you all a happy and successful New Year – I very much hope it is a productive one.
I want to thank you all for the role you played, individually and jointly, in delivering that historic success in Bali.
After an 18 year drought, Bali proved that the WTO can deliver negotiated outcomes.
It delivered significant gains for the global economy and particularly for our developing and least-developed members. And it moved the spotlight back onto us here in Geneva.
But Bali has not finished the job.
We have two very significant tasks before us.
First and foremost, we need to implement the decisions and agreements reached in Bali.
Second, the Bali Declaration instructs us to prepare a clearly defined work program on the remaining Doha Development Agenda issues by the end of 2014.
And we should remember that the Bali Declaration instructs that those areas where decisions were non-binding in nature must be a priority in our post-Bali work. We must keep a relentless focus on these issues.
So the real work starts now.
These two tasks will form the bulk of our work over the course of this year – and so this is what I want to talk about today.
Implementing the Bali Package
First, let’s focus on implementation.
The true significance of the Bali results, and the tangible realization of their benefits, will only be achieved as a result of the actions that you, the members, take over the coming months.
This is an important test for the system – and one which we must pass if we want to move forward and see the benefits of Bali made real.
We must work together to keep up the momentum and the pressure that allowed us to reach a successful outcome in the first place.
The Bali Package consists of ten ministerial decisions, each of which requires different steps to take forward.
A lot of the implementation efforts will fall outside the TNC – but for clarity I think it would be helpful to take a few moments to set out some of the actions needed to implement each of those decisions.
Let’s start with Trade Facilitation, where the work has already started, and where there are important milestones for implementation over the coming months.
The first meeting of the Preparatory Committee was convened by the General Council Chairman on 31 January.
And we already have a chair, as you elected Ambassador Esteban Conejos by acclamation. Let me congratulate Ambassador Conejos, and wish him all the best in his new role.
The Preparatory Committee will swiftly commence the execution of the tasks Ministers gave it in Bali – specifically, to ensure the entry into force of the Trade Facilitation Agreement and prepare for its efficient operation.
The Bali decision on Trade Facilitation also calls on the Committee to carry out three immediate tasks:
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undertaking a legal review of the Agreement;
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drafting a protocol of amendment to include the Trade Facilitation Agreement in Annex IA of the WTO Agreement;
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and receiving notifications of Category A commitments.
Our ability to move the whole of the WTO agenda forward hinges on our ability to fulfil the promises to provide timely and effective technical assistance and capacity building wherever it is demanded by developing and least-developed countries.
To help those countries make full use of the flexibilities set out in Section II, and to facilitate preparations for the Agreement’s entry into force, the Secretariat will continue its needs assessment program. But in addition there is an imperative on developing members to identify what support they need as early as possible.
Donor members and various donor organizations are also getting ready to provide comprehensive support on Trade Facilitation.
I met with them yesterday for an initial conversation about the importance of coordination and transparency in the provision of support to developing countries.
Many donors were present at the meeting – over 25 countries and organisations were there.
In due course, the conversation needs to be broadened out to include beneficiary countries once there is greater clarity on their needs.
The WTO will of course help to facilitate the interaction between the donors and the beneficiaries.
So there is important – and urgent – work ahead.
I must also take this opportunity to thank Ambassador Sperisen-Yurt for his leadership and chairmanship of the Negotiating Group on Trade Facilitation.
Let’s turn now to Agriculture, where there were three decisions in Bali.
For each of these three decisions, Ministerial guidance specifically indicates that the Committee on Agriculture will undertake follow-up activities in terms of monitoring and review.
The Committee on Agriculture met on 29 January and discussed follow-up on these issues.
So let me briefly take each one in turn…
First, export competition. This decision calls for dedicated discussions based on notifications and a questionnaire to be circulated by the Secretariat.
The annex of the Declaration includes elements for enhanced transparency on export competition which will form the basis of the Secretariat’s questionnaire.
The Committee on Agriculture agreed to hold the annual discussion on export competition during its meeting in June this year. This timing could also be appropriate in 2015 as it would provide adequate time between that discussion and the review foreseen at MC10. That’s for you, the members, to follow through in the Committee on Agriculture.
The Secretariat will circulate the questionnaire soon with a view to circulating a summary of the questionnaire results in advance of the June meeting.
Second, with respect to the decision on TRQ administration, the Committee on Agriculture is expected to review and monitor the implementation of the Understanding.
The monitoring to be conducted in the context of the TRQ underfill mechanism will depend on the members’ submissions.
Some members have indicated that they planned to take advantage of this mechanism. Others noted that the Committee on Agriculture could begin applying the monitoring procedures laid out in the Annex of this Decision as soon as submissions were received by the Committee.
That leaves the decision on public stockholding for food security purposes. Here the monitoring activity of the Committee will again depend on how members decide to push this monitoring agenda.
As you will recall, Ministers agreed to establish a work program to be undertaken in the Committee on Agriculture with the aim of making recommendations for a permanent solution on this issue – that’s what the decision says. This work program will take into account members’ existing and future submissions.
Indeed, the conversation on the work program has already started with a discussion at last week’s meeting of the Committee on Agriculture.
I’d like now to turn to the decisions on Development and LDC issues.
The adoption of an LDC package was a key achievement of the Bali Ministerial – representing a very significant step forward towards the better integration of LDCs into the multilateral trading system.
But, here too, Bali represents a beginning, not an end.
A significant amount of effort is needed to convert these decisions into concrete gains for the LDCs.
On the operationalization of the services waiver the LDCs will need to table their collective request as soon as possible. This will kick-start the process, leading towards the high level meeting at which members will indicate if, and in what areas, they are prepared to give preferential access to LDCs.
In parallel, the Council for Trade in Services is convening an informal meeting to discuss the operationalization of the waiver. I encourage all members to actively participate in this process, so that we can bring fruition to this important instrument.
Next, the decision on Duty-Free Quota-Free market access.
Similarly here, members will need to notify their DFQF schemes and any other relevant changes that they may have adopted. In my view the LDCs should be pursuing this issue in the Committee on Trade and Development. Of course all members have a responsibility here, and the Secretariat will be on hand to support the process, but the demandeurs must keep up the pressure.
The same goes for the last decision in the LDC package – which is on preferential rules of origin.
Members have concrete guidelines before them to make further improvements to their LDC preference schemes. I encourage members, whenever possible, to draw on these multilateral guidelines and make a further contribution to help ease market access for LDC products. There will be an opportunity to annually review developments through the Committee on Rules of Origin.
The other important development decision taken at Bali – though not specific to LDCs – was to establish a Monitoring Mechanism on Special and Differential Treatment. Members will take this forward through a Dedicated Session of the Committee on Trade and Development.
I should also mention here those items which were held over from Bali – for example the Cancun 28 proposals and the 6 Agreement-specific proposals. These items are under active consideration in the Special Session of the Committee on Trade and Development and this work will need to be picked up as soon as possible.
The tenth decision of the Bali package relates to Cotton, which of course is sensitive for many members, particularly the Cotton-4.
I understand that informal consultations are underway to call a meeting of the Director-General’s Consultative Mechanism. That meeting would likely be held back-to-back with a dedicated discussion on cotton in a meeting of the Committee on Agriculture in order that we can move this issue forward.
You all worked incredibly hard last year to conclude the negotiations and deliver the Bali package.
So now let’s make it count, by delivering the benefits of the package.
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India-SACU free trade agreement needs ‘fine-tuning’
The increasing amount of trade between Namibia and India is expected to balloon even further once the India-Southern African Customs Union (SACU) Preferential Free Trade Agreement (PTA) is finalised. “It is important to reach an understanding that has a reasonable level of ambition,” said India’s Minister of Commerce and Industry, Anand Sharma, yesterday while paying a courtesy call on Prime Minister, Dr Hage Geingob.
Sharma added that the details of the agreement still have to be ‘fine tuned’ and emphasized that such an agreement should be beneficial for both India and Namibia. “This (PTA) will connect our people through both regional and global value chains, which would be hugely beneficial for both economies,” Sharma added. Also commenting on the agreement Minister of Trade and Industry, Calle Schlettwein, who accompanied Sharma to the PM’s office, said South-South cooperation is very important for Namibia. Schlettwein added that it is crucial that the agreement recognizes the different developmental stages of the all countries involved. Prime Minister Geingob also remarked that SACU is a building block for an eventual Southern African Development Community (SADC) agreement with India. Geingob reminded all parties that any SACU agreement will most likely be transferred over to SADC in due course.
The agreement is however still at the negotiation stage, but the PTA could see the light of day sooner than later with the official visit of the Indian minister. Namibia, as the chief negotiating party within SACU, has been working on the preferential trade agreement with India, and the final Memorandum of Understanding was initially set for conclusion in December 2013. Imports from India in 2012-2013 were valued at just over US$74 million, while during 2013-14 this figure stood at about US$64 million and it is estimated that Namibia exported close to US$10 million worth of goods to India during the same period. Last week members of the Indian business community remarked that bilateral cooperation in the energy and agricultural sectors has excellent prospects. Accordingly, business owners expressed the opinion that the volume of trade between Namibia and India could be much more than the reflected figures.
India’s principle commodities exported to Namibia include drugs and pharmaceuticals, inorganic/organic/agro chemicals, glass and glassware, plastics and linoleum products, manufactured metals, machine tools, machinery and instruments, transport equipment, manufactured rubber goods and electronics. The main products exported from Namibia to India include non-ferrous metals, ore and metal scraps, transport equipment and machinery. The Southern African Customs Union (SACU) currently consists of Namibia, South Africa, Botswana, Lesotho and Swaziland. A customs union is a type of trade bloc composed of a free trade area with a common external tariff. The member countries set up a common external trade policy, but in some cases they use different import quotas. Reasons for establishing a customs union normally include increasing economic efficiency and establishing closer political and cultural ties between member countries.
SACU is the oldest existing customs unions in the world and was established in 1910 pursuant to a Customs Union Agreement between the then Union of South Africa and the High Commission Territories of Bechuanaland, Basutoland and Swaziland. When these territories gained independence the agreement was updated on 11 December 1969. The customs union was relaunched as SACU with the signing of an agreement between the Republic of South Africa, Botswana, Lesotho and Swaziland. The updated union officially entered into force on 1 March 1970 and after Namibia’s independence from South Africa in 1990, it joined SACU as the fifth member. SACU meets annually to discuss matters related to the customs agreement. There are technical liaison committees such as the customs technical liaison committee, the trade and industry liaison committee and the ad hoc sub-committee on agriculture, which meet three times a year. SACU’s aim is to maintain the free interchange of goods between member countries and enforces the common external tariff, as well as a common excise tariff to this common customs area. All customs and excise duties collected in the common customs area are paid into South Africa’s National Revenue Fund. The revenue is then shared among members according to a revenue-sharing formula as described in the agreement. SACU revenue constitutes a substantial share of state revenue in Botswana, Lesotho, Namibia and South Africa.
Source: http://www.newera.com.na/2014/02/06/india-sacu-free-trade-agreement-fine-tuning/
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EU seals free trade deal with West Africa
Negotiators from West Africa and the EU have put pen to paper on a €42 billion-a-year free trade deal with the West African trade bloc after 10 years of haggling, but ongoing talks with East African states remain mired in fine print.
The deal, which covers trade and development cooperation, will guarantee full long-term duty and quota-free access to the EU market for West African nations. When it enters into force, it will eclipse bilateral interim agreements with Côte d’Ivoire and Ghana.
“We are very satisfied with the progress at expert level achieved during the negotiations in Dakar in January,” John Clancy, the EU’s trade spokesman told EurActiv. “The results of these negotiations are still subject to political endorsement,” he cautioned.
This is seen as a formality by sources close to the talks. Negotiators publicly stress that they have merely completed their task and “escalated” the deal to a higher level, but optimism is in the air.
“From the outset, heads of state said they would only be willing to negotiate if there was a strong development dimension [to the free trade deal] and I believe this is a statement of what is currently on the table, Kolawole Sofola, a trade officer for the Economic Community of West African States (Ecowas) told EurActiv from Nigeria.
Chief Ecowas negotiators may now meet on 7 February, with the block’s heads of state expected to officially endorse the first regional economic partnership since 2007 at the end of February or in early March.
All the Ecowas countries, apart from Nigeria, are classified as Least Developed Countries (LDCs) and so can already export anything except weapons to Europe, without exposure to costly tariffs or quotas.
The final stumbling block was overcome when the EU agreed that the African states could liberalise 75% of trade over 20 years, rather than the 80% over 15 years that Brussels originally wanted. Ecowas states had originally asked for a 60% figure.
An EU decision to halt all export subsidies to Africa last month was also seen as pivotal to the eventual compromise, as were a number of West African compromises.
‘Most Favoured Nation’ clause
The Ecowas negotiators accepted a ‘Most Favoured Nation’ clause in the text, with some exceptions, and agreed that EU development financing under an Economic Partnership Agreement Development Programme (PAPED), would remain at €6.5 billion, €8.5 billion short of their demands.
Observers say that this money may be counted as new or additional, despite having been pledged some time before.
Fears of regional disunity if the deal was not inked were rife, and the final deal was warmly welcomed by the European Center for Development Policy Management (ECDPM) think tank.
“Reaching an agreement is a very good deal for West Africa and a big victory for Europe,” said San Bilal, an ECDPM spokesman.
“But if there are no agreements with other regions then Europe will say ‘Why is it acceptable to sign a deal with West – but not East or Southern – Africa?’ And that will obviously create tensions,” he added.
East Africa Community
The East Africa Community (EAC) countries have been more hesitant to ink a trade deal guaranteeing Europe preferential market access in a region that other powers such as China are increasingly focused on.
“If we sign the EPA (Economic Partnership Agreement) and other sub-regions do so too, we would be giving up the better option we had before us, which allows for real industrialization,” the Tanzanian president Benjamin Mkapa reportedly said in a 2012 speech.
Mkapa queried whether a deal would help local economies, increase food security, or support regional transition from exporting raw materials to producing sophisticated products.
East Africa’s capacity to tax exports – including mined raw materials and associated products – will be a tough but to crack in any deal. Similar disagreements threaten any free trade agreement with Southern Africa.
“We liberalized without regulation and now we have nothing to plough back,” the Ugandan MP and trade committee chairman, Mukitale Birahwa complained, of a previous free trade deal.
Dutch flowers
The region’s economic powerhouse, Kenya, has asked to be allowed to maintain tariff-free access to Europe for its flower exports, even though it has a GDP of €25 billion, and is not considered an LDC.
“If ministers don’t find an agreement, the question for Kenya is: do they do deal with the EU on their own or stay with the region even though a lot of their flower businesses are suffering?” Bilal said.
“That might have negative consequences for the very many Dutch importers Kenyan flowers,” he went on. “There will be tensions among partners.”
For all East Africa’s economic potential though, West Africa accounts for 40% of trade between Europe and the Africa, Caribbean and Pacific (ACP) regions.
The EU buys West African products worth more than €42 billion a year from the ACP states.
NEXT STEPS:
7 February: Chief ECOWAS negotiators due to meet
End of February/Beginning of March: ECOWAS heads of state expected to officially endorse the Economic Partnership Agreement with the EU.
Source: http://www.euractiv.com/development-policy/eu-seals-free-trade-deal-west-af-news-533293
Related news story: “Commission on brink of major trade deal in Africa” (EuropeanVoice, 6 February 2014)
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Africans roast SA for lack of openness
Frustration over Africa’s disparate tax, travel, investment and trading regimes boiled over yesterday as Chris Kirubi, a leading Kenyan businessman and one of the wealthiest people on the continent, tore into South Africa’s failure to be a leading light in opening up the continent for business.
Kirubi was a participant in a panel discussion at the “Africa: The Outlook, the Opportunity” event hosted by former New York City mayor Michael Bloomberg in downtown Johannesburg.
To underscore his frustration, the outspoken Kirubi questioned why African travel businesses kept going to Europe and North America to sell African tourism, leaving behind Africans like him who needed no further convincing about visiting Africa.
“Open markets are not happening yet. We must open markets for people, goods and services,” Kirubi said. “South Africa needs to take leadership by opening up for smaller countries. How many of us have been allowed to invest here?”
His sentiments on the issue of openness were echoed by Reserve Bank governor Gill Marcus, who said the focus in Africa should be about co-operation and less about competition. Marcus, who seemed rather at ease five days after a slide in global emerging market currencies prompted her to hike interest rates, said the issue was “how do we use our different strength to benefit Africa as a whole”. She said co-operation would be particularly critical in dealing with three core challenges facing the continent: water, food and energy.
To illustrate what was possible if African governments worked together to create a more open investment environment, Aigboje Aig-Imoukhuede, the vice-president of the Nigerian Stock Exchange (NSE), said there was an emerging notion in west Africa, in terms of which Ghana was seen as the gateway and Nigeria as the destination.
Former New York City mayor Michael Bloomberg hosted a forum on African opportunities in Newtown, Johannesburg, on Monday. Photo: Simphiwe Mbokazi
He added that the NSE was planning to visit the JSE in the coming months to explore areas of possible co-operation.
In that regard, as an economic powerhouse, South Africa had an important role to play in reshaping how Africa did business, not only with the rest of the world but more importantly with itself.
“There are major issues we are not addressing and it is an issue of laws,” added Kirubi, who is also the east Africa chairman of a joint venture with Tiger Brands, South Africa’s biggest consumer goods company.
On tax, he asked why South Africa and Kenya did not have a tax agreement and why he needed to go via Mauritius each time he needed to open a holding company. “We have a problem. We’ve got to wake up.”
Finance Minister Pravin Gordhan was also among the panellists. He acknowledged that there were “huge challenges” in the mining sector, but reiterated the need for perspective on issues relating to labour strikes. “There is a lot of good work being done. In the next few years, skills development and training will be [enhanced] a lot more.”
On the issue of emerging market volatility and recent currency slides, Gordhan said: “We will survive this crisis as we have survived others”, referring to a sharp depreciation in the rand and investment outflows triggered in part by the US Federal Reserve’s bid to gradually reduce the availability of easy stimulus money.
Nonkululeko Nyembezi-Heita, the outgoing chief executive of steel group ArcelorMittal South Africa, and Sizwe Nxasana, the chief executive of FirstRand, spoke about local labour market conditions.
Nyembezi-Heita identified education as the biggest constraint to progress, and added that “people feel that there is an unnecessary level of rigidity in the South African labour market system”.
A rigid labour market has often been cited as one of the factors that make investing in South Africa unattractive.
However, Nxasana said he was not sure that such a view was based on facts because, as a chief executive of a telecoms company, he found rigidity in places like India and Ghana. The argument must be based on facts, he said.
He also raised the issue of a need for South Africa to have a real conversation about income inequality, especially in view of a clear misalignment between executive pay and pay for the average worker. Gordhan agreed, saying income inequality could be a social destabiliser.
Bloomberg, the founder of news and information provider Bloomberg, was the 108th mayor of New York City. He is in South Africa this week for the C40 Cities mayors’ summit on development and climate change.
Source: http://www.iol.co.za/business/budget/africans-roast-sa-for-lack-of-openness-1.1641343#.UvKCF_mSya8
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Greater competitiveness and regional integration critical for South Africa’s growth and opportunity
Greater export competitiveness and deeper regional integration could help propel South Africa towards faster-growing exports, allowing it to achieve higher, more inclusive, job-intensive growth as laid out in the country’s National Development Plan (NDP) 2030, according to the South Africa Economic Update released on 4 February 2014.
“Helping South Africa achieve its export potential is essential for rapid job creation, high growth, and more opportunity, especially for young people.” said Asad Alam, World Bank Country Director for South Africa. “We hope this report provides concrete evidence to help shape the country’s ongoing debate on its economic and development future.”
The South Africa Economic Update 5 assesses South Africa’s economic prospects in the context of the global economic environment and prospects. The Special Focus Section on Export Competitiveness examines the performance of South African exports over 2001-12 relative to peers in other emerging markets and analyzes the challenges.
Recent Economic Developments
The report forecasts real gross domestic product (GDP) growth in South Africa to recover to 2.7% in 2014, from the estimated 1.9% in 2013 and to reach 3.4% in 2015. However, it will remain well below the average 5.4% projected for Sub-Saharan Africa for 2014-2016.
“The medium-term outlook is that growth will improve gradually, but that this recovery will be more subdued than previously forecast,” said World Bank Lead Economist Catriona Purfield. “The under the baseline forecast the recovery in growth is expected to be led by strengthening exports, as the recovery in high income economies gains pace and export capacity expands. As such, the forecast is subject to potential downside risks from developments in international markets as well as regional and domestic issues.”
Special Focus on Export Competitiveness
South Africa has identified exports sector as an engine for higher, more inclusive and job intensive growth with the NDP, aiming for export volume growth of 6% a year in order to achieve an annual increase in real GDP growth of about 5.5%. This Economic Update shows that despite successes in some areas, South Africa will need to greatly improve its export performance to meet these targets.
The report examines the facts behind South Africa’s export performance by some 20,000 companies during the 2001-2012 period, stripping out the impact of the large minerals sector, looking at services and comparing performance with emerging market peers.
The report shows that South African exports are falling short of their potential as they are increasingly concentrated and losing dynamism. They also continue to be focused on capital intensive goods, which contribute less to job creation.
The report argues that while trading in products that are technologically sophisticated and highly capital-intensive has positive implications for competitiveness, it also means that the dominant export companies are failing to tap into South Africa’s large pool of low-skilled labor, thus failing to create enough jobs to make the export sector a major direct contributor to employment growth and poverty reduction.
“A key development in South Africa’s export pattern is the emergence of Sub-Saharan Africa as the main destination for South Africa’s non-mineral exports,” said Thomas Farole, World Bank Senior Economist. “While this has generated market opportunities for newer and smaller exporters, so far these exports have remained somewhat smaller and shorter-lived than exports to other markets.”
The report identifies three opportunities to help ignite export growth: greater competition among firms in South Africa, resolving infrastructure bottlenecks and cutting logistic costs, and deeper regional integration in goods and services.
By promoting competition in the domestic market South Africa would boost productivity and efficiency and enable entry to new more productive firms, which would place downward pressure on high markups, the report states. This would lower input costs and tip incentives in favor of exporting by reducing excess returns in domestic markets.
Resolving infrastructure bottlenecks and cutting logistic costs present a second opportunity to support export growth. Cutting the charges exporters incur for the use of ports, rail and telecommunications would promote competitiveness and benefit small and medium-size exporters and nontraditional export sectors.
Thirdly, promoting deeper regional integration in goods and services within Africa would generate the right conditions for the emergence of ‘Factory Southern Africa’, a regional value chain of production that could feed into global production networks. South Africa could play a central role in such a chain, leveraging the scale of the regional market, exploiting sources of comparative advantage across Africa to reduce its production costs, and providing other countries in the region a platform for reaching global markets.
Progress on all three fronts would help catapult South Africa toward faster-growing exports, allowing it to realize the higher, more inclusive, job-intensive growth articulated in the NDP.
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‘SA needs more open dialogue on mines’
The government needs to focus more on working together with the mining sector in a way that will benefit all people in the country, Randgold Resources CEO Mark Bristow said on Tuesday.
Speaking to 567 CapeTalk/Talk Radio 702’s Bruce Whitfield, he argued mining needs to benefit all who live in the country where it takes place.
“Mines and mineral rights are the nation’s assets and as miners and politicians, neither of us have ownership of them,” Bristow says.
“We are charged with ensuring that they are brought to account in a way that the whole nation benefits, including the investors that risk that capital to unlock it.”
But he says South Africa is merely managing, rather than excelling, in achieving this goal.
“It’s always trying to force people to do things rather than find solutions that are important and constructive.”
Bristow says finding an appropriate balance between the industry, government and labour is the first step that needs to be taken.
“There’s still a lot of work to be done. I think we’re all lecturing each other and in most cases, passing each other like ships in the night instead of engaging with the hard issues and collectively searching for solutions that deliver value to the economy and the wider group of stakeholders.”
At the same time, Bristow says the annual Mining Indaba currently underway in Cape Town should push the debate around the balance of roles between private capital and government.
“I would love to see politicians, particularly the South African government, embrace this and really make it something that would align Africa and attract investment into our continent.”
Listen to the full interview below, where Bristow also discusses the rest of Africa and gives his suggestions on where South Africa should be going with mining.
Click here for a feature on the Investing in African Mining Indaba by EWN
Source: http://ewn.co.za/2014/02/04/SA-needs-more-open-dialogue-on-mines
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Lagarde calls for a ‘new multilateralism for 21st century’
Responding to current and future economic trends requires a renewed commitment to international cooperation, IMF Managing Director Christine Lagarde said in delivering the 2014 Dimbleby Lecture in London.
She pointed to “two broad currents” that would dominate the coming decades – increasing tensions in global inter-connections; and increasing tensions in economic sustaina-bility.
To address these emerging global tensions, she proposed:
“A solution that builds on the past and is fit for the future: a strengthened framework for international cooperation. In short, a new multilateralism for the 21st century.”
Elements of the new multilateralism
The major elements of this reinvigorated multilateralism would include:
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A renewed commitment to economic openness and to the “mutual benefits of trade and foreign investment;”
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Managing an increasingly complex international monetary system that has traveled “light years” since the original Bretton Woods system; and
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Building a global financial sector for the post-crisis era that “serves the productive economy rather than its own purposes.”
In addition, Lagarde said that the “new multilateralism” would demand a stronger sense of global responsibility if major issues such as climate change and inequality are to be tackled effectively.
“The kind of 21st century cooperation that I am thinking of will not come easy,” she said. “It might even get harder as time passes, when the curtains fall on this crisis and when complacency sets in – even as the seeds of the next crisis perhaps are being planted.”
Lagarde noted that there are already specific, working, forms of cooperation at hand, citing the UN, the World Bank, the World Trade Organization, and the IMF. These institutions might be termed concrete – or “hard” – forms of global governance, Lagarde said.
There are also a number of “soft” instruments that include such groupings as the G20 as well as networks of nongovernmental organizations. Lagarde said that these “hard” and “soft” forms of cooperation can complement each other:
“The new multilateralism must be made more inclusive – encompassing not only the emerging powers across the globe, but also the expanding networks and coalitions that are now deeply embedded in the global economy. The new multilateralism must have the capacity to listen and respond to these new voices.”
Getting beyond the current crisis
The immediate priority for growth, Lagarde said, is to get beyond the financial crisis, which began six years ago and is not yet over.
“This requires a sustained and coordinated effort to deal with problems that still linger – a legacy of high private and public debt, weak banking systems, and structural impediments to competitive-ness and growth – which have left us with unacceptably high levels of unemployment.”
Lagarde also warned that financial integration can make crises more frequent and more damaging, and instant and wide communication can sow discord and confusion. “Because of this, the global economy can become even more prone to instability.”
Lagarde emphasized that strengthened international cooperation is key to managing these risks.
Longer-term impediments to global stability
Lagarde set the current crisis in the context of major long-term challenges facing the world in the coming decades:
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Demographics, both the challenge of aging populations in the advanced economies, and the “youth bulge” in many emerging and developing countries. Almost three billion people – half the global population – are under 25. A great deal depends on generating enough growth and jobs to satisfy the aspirations of this rising generation.
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Environmental degradation, as more people with more prosperity stretch natural resources to the limit. Phasing out energy subsidies that mostly benefit the relatively affluent and not the poor must be part of the solution. Reducing these subsidies and properly taxing energy use can be “a win-win prospect for people – and for the planet.”
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Income inequality, as skewed income distribution harms the pace and sustainability of growth over the longer term. Fiscal systems can help to reduce inequality through careful design of tax and spending policies.
Lagarde also renewed the call for greater equality and empowerment for women. “By not letting women contribute, we end up with lower living standards for everyone,” she said.
“‘Daring the difference,’ as I call it – enabling women to participate on an equal footing with men – can be a global economic game-changer. We must let women succeed: for ourselves and for all the little girls – and boys – of the future.”
Lagarde said the risk is of a world that is more integrated – economically, financially, and technologically – but more fragmented in terms of power, influence, and decision-making. “This can lead to more indecision, impasse, and insecurity – and it requires new solutions.”
Strengthened cooperation – a new multilateralism – is key to these solutions, she said.
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Swaziland knocked by falling tax revenues
The flight of foreign direct investment out of Swaziland is apparent in falling tax revenues and is one sign of expected challenges to the economy this year.
Gross domestic product (GDP) growth has been surpassed by population expansion for two decades. This has resulted in more Swazis falling into poverty in a country where already two-thirds of the population is ranked as chronically poor.
“The depreciation of the domestic currency (the lilangeni, which is linked to the rand on a one-to-one basis) has led to an increase in public external debt stock and by extension, total public debt, which has increased by 2.5 percent to reach R6.3 billion at end of December,” the central bank reported.
Total public debt now stands at 18 percent of GDP. Total public external debt stock, which includes public and publically-guaranteed debt, stands at R3.4bn, or 9.7 percent of GDP, and again is attributed to the rand’s decline against major overseas currencies.
The good news associated with the fall of the rand/lilangeni is that Swaziland’s exports improved last year, resulting in a trade account surplus during the final quarter of last year of R1.06bn. Merchandise exports rose an impressive 31.3 percent to R5.1bn during the third quarter of last year compared with the third quarter of 2012. Imports were up 14.5 percent, to R4.05bn, quarter to quarter.
King Mswati III of Swaziland. AFP
An International Monetary Fund (IMF) mission visiting Swaziland recently found that as long as it continues to be supported by receipts from the Southern Africa Customs Union (Sacu), the economy will not dip into recession. However, Sacu funds, which account for over 60 percent of government revenue, are not sufficient to push the country forward economically because the revenue is being used for consumption rather than investment.
“Swaziland’s economic performance has improved since the fiscal crisis of 2010/11, which followed a significant reduction in revenues from Sacu. For the first time since 2006/07, the country recorded a fiscal surplus in 2012/13, though a fiscal deficit of 2 percent of GDP is expected for 2013/14. International reserves exceeded four months of imports by the end of 2013,” Jiro Honda, the head of the IMF delegation, said.
Perhaps foreign business interests are wary of investing in a country kept from insolvency only by Sacu grants. During 2012/13, tax revenue earned from countries fell by half. The Central Bank of Swaziland reported a decline in taxes paid by companies from 14 percent of government revenues in 2011/12 to 7 percent last year.
“Swaziland’s challenges remain significant. In light of these challenges, there is a need to safeguard the exchange rate peg (with the rand),” Honda said.
“Not only is no new investment coming into the country, but businesses already operating here are not earning as much, trade surplus or not, and are paying less tax,” said Lester Dlamini, an accountant and investment adviser in Manzini.
“Businesses are worried that government has so mismanaged the economy that the lilangeni may have to be decoupled from the rand. That would lead to hyperinflation, economic collapse and any investments becoming worthless. The only good economic news is the result of things completely out of government’s hands, like Sacu receipts and the boost in export profits from the rand’s drop,” he said.
Swaziland’s corporate tax rate of 27.5 percent may be lower than that of Mozambique and South Africa, but it can not offer sea port access or the large local markets enjoyed by its neighbours. Botswana, Lesotho and Namibia, which like Swaziland are smaller and less developed countries, offer the inducement of corporate tax rates lower than Swaziland, at 22 percent, 25 percent and 18 percent, respectively.
Swaziland also has underdeveloped, but expensive telecoms systems and internet access. High electricity prices have been cited by businesses as a disincentive for more local investment.
Food prices are also high.
As for the country’s political system, foreign business interests find it problematic that despite King Mswati’s suppression of political dissent and public demonstrations, an absolute monarchy form of government can remain viable in Africa’s age of emerging democracies.
“Why take the risk of the unknown?” Dlamini said.
“The threat posed by a Renamo-led civil war now seems minimal in Mozambique, and against the country’s wealth of natural resources what risk there is can be overlooked. South Africa has political scuffles but they are non-lethal and the country is still where the action is. Swaziland needs to be imaginative to attract investors and not be lazy about relying on Sacu receipts,” Dlamini said.
Source: http://www.iol.co.za/business/news/swaziland-knocked-by-falling-tax-revenues-1.1640528#.UvFP3_mSya8
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Africa mineral resources ‘grossly under-explored’: Shabangu
Africa’s unmined metals and minerals lie waiting for investors, Mineral Resources Minister Susan Shabangu said on Monday.
Speaking at the start of the African Mining Indaba in Cape Town, she called for greater investment in exploration by both local and international partners.
“Africa remains grossly under-explored for its mineral potential. For instance, the exploration expenditure per square metre averages US65 dollars in Canada, Australia and Latin America, whereas the African equivalence remains below US5 dollars per square kilometre.
“The mineral exploration prospect in Africa remains extremely high, requiring both local and international partners and investment to unearth.”
Shabangu said tapping into this needed “responsible” investment, not investment based on exploitative principles centred solely on expectations for unrealistic rates of returns, disguised by the principle of high-risk, high-return.
“As you know, mining is a long-term investment, and not about quick wins. Those who balance Africa’s mineral development with growth will ultimately receive the greatest reward in the long-term.”
Such development should be coupled with community development, nurturing human capacity growth and development, as well as institutional collaboration on joint technology development and deployment.
It was also important that mining development in Africa be integrated and interlinked with its infrastructure development initiatives, such as the Programme for Infrastructure Development in Africa, adopted by the African Union.
Shabangu said Africa needed a “gigantic” shift and transformation in its traditional mining jurisdictions.
“This should entail a shift from [the] exporting of largely raw material to ensuring that minerals serve as a catalyst for accelerated industrialisation through mineral value-addition.”
The fundamentals for investing in mineral development, both globally and in Africa specifically, were sound.
“The huge impact of the increased demand on earth’s shrinking resource-base, as a result of unprecedented population explosion of recent years, will be even more important for Africa’s mineral development.”
Related articles:
“African mining: ‘prepare for a rebound’” (SouthAfrica.info, 3 February 2014)
“Urgent action needed to link mining with region’s development objectives” (UNECA, 3 February 2014)
“Local communities must prosper from Africa’s natural resources” (Africa Progress Panel, 3 February 2014)
“Forum underlines private sector role in the Africa Mining Vision” (UNECA, 4 February 2014)
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Zuma: AU committed to tackling intra-Africa trade bottlenecks
President Jacob Zuma says the African heads of state have prioritised tackling infrastructure bottlenecks to enable intra-Africa investment to happen in a bid to boost the continent’s growth.
Speaking at the Bloomberg “Africa: Economic Outlook and Opportunities” Conference at the Turbine Hall in Newtown on Monday, Zuma said this commitment was made at the African Union Summit that took place in Ethiopia at the weekend.
The conference, founded by the 108th Mayor of the City of New York, met to discuss the economic outlook of the African continent, with Finance Minister Pravin Gordhan and Reserve Bank Governor Gill Marcus also in attendance.
Zuma said while intra-African investment has been growing since 2007, at more than 32%, a lack of access to trade-enabling infrastructure on the continent remained a fundamental challenge.
“We discussed this matter at length again at the African Union summit in Ethiopia this past weekend. We recommitted ourselves as African heads of state to continue building cross-border infrastructure, to unlock growth and development in our continent.
“In addition to a focus on trade-enabling infrastructure, we are intensifying our continental integration efforts through the negotiation of the Tripartite Free Trade Agreement.
“We have made considerable progress in the negotiations, which aim to integrate 26 countries of Eastern and Southern Africa. This involves a population of nearly 600 million people and a combined GDP of US $1 trillion,” he said.
On the home front, Zuma said South Africa had introduced the National Development Plan (NDP) – the country’s policy framework to eradicate poverty, reduce inequality and create employment by 2030.
He said the plan outlined the country’s intentions of transforming the economy and creating jobs through promoting sectors in which the country has competitive advantage.
This includes the minerals sector, agro-processing, mining, manufacturing, construction, general infrastructure and the green economy.
Zuma said the plan also committed the country to invest in a strong network of economic infrastructure designed to support the country’s medium and long-term economic and social objectives.
“We are building roads, bridges, dams, schools, hospitals, universities, colleges and a lot of other infrastructure.
“We believe we are making progress. Very few nations have gone through the repression, subjugation and divisions that we went through and emerged to build a new society and a stable democracy in such a short space of time.
“It is through the support of development partners like Bloomberg and many of you in this room, that we have been able to achieve our goals,” he said.
The NDP also envisions South Africa to invest into Africa, and Zuma said government has already been contributing to that goal.
Since 2007, there has been a compound growth of 57% in South Africa-originated foreign direct investment projects into the rest of Africa.
“South Africa was the single largest FDI investor in the rest of Africa in 2012, with cumulative FDI jobs created, standing at more than 45 000 to date,” he said.
He also said the conference took place at a time that the African economy was growing and has tripled since 2000.
“This growth is predicted to continue in the foreseeable future, giving rise to a new African paradigm: Africa as the new growth frontier. The South African government and private sector have a critical role to play in this continued growth.
“There is a need to redefine and to strengthen our partnerships on the continent towards realising the vision of an integrated Africa, underpinned by greater levels of intra-Africa trade and even greater levels of intra-Africa investments.”
Related: “Zuma Says Eastern, Southern Africa Moving Toward Free Trade Area” (Bloomberg, 3 February 2014)
Source: http://www.sanews.gov.za/south-africa/zuma-au-committed-tackling-intra-africa-trade-bottlenecks
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Free trade area: Looking beyond the EAC
Experts believe that the creation of a bigger free trade zone beyond the East African Community through opening borders and addressing policies that impede trade is the gateway to boosting regional economies.
This involves elimination of non- tariff barriers, harmonization of tax regimes, implementation of a single customs union and creation of one-stop border posts along regional blocs to expedite trade.
“A bigger free trade area will attract more investment and make the blocs competitive,” said Mark Priestley, the Trade Mark East Africa country director for Rwanda.
In essence, the linking of the EAC to other regional blocs on the continent will create a more expanded market for products within the regions, thus enhancing business opportunities.
“Harmonizing trade policies across the three blocs would enhance business and investment and create jobs,” noted Peter Kiguta, EAC director general for customs and trade.
Indeed, experts believe that for a bloc such as the EAC to achieve free movement of goods as well as persons, other blocs must harmonize their trade policies.
Angelo Musinguzi, a consultant on the single customs territory tax issues at the Private Sector Federation, says that similar trade regimes facilitate ease of doing business and cut down costs within the blocs, thus boosting competitiveness.
Indeed, the recent efforts to strengthen both the customs union and common market protocols have yielded success, with a call to extend these efforts to other blocs.
“I believe that removal of barriers to business and also instituting dispute resolution mechanisms are crucial in improving the business environment across the regional blocs,” Musinguzi noted.
Trade barriers
But traders still believe that policy makers miss the issues, mainly the elimination of both non-tariff and technical barriers within the blocs.
“What we would wish to see is the total elimination non-tariff barriers within all corridors in the regional blocs, and this will come when governments are willing implement policies at the same time,” Theodore Murenzi, executive secretary of Rwanda Long Distance Truckers Association said.
Moreover, experts believe that harmonization of these policies, such as rules of origin, tax regimes, and single customs territory, would help attract more investment in the economic blocs.
“It is very encouraging to see the tripartite free trade area negotiations that started in 2011 are finally getting to something,” said Léon Gashumba from Burundi.
There is optimism that the recent meeting of experts from the three regional blocs of East African Community (EAC), Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (Comesa) in Mauritius will pave the way for a bigger trade zone.
“For as long as the borders are open and taxes and duties are removed along the borders in these regional blocs, then you expect business to grow faster,” Davis Mukiza, a business consultant, said.
Seizing opportunities
Despite these efforts, there is still the challenge of the regions’ private sectors’ ability to seize the opportunities arising from bigger free trade zone.
“The opportunities are created, but the question is, are we able to put to use with our products originating within the region?” Mukiza asked.
Gerald Mukubu, chief advocacy officer at Private Sector Federation of Rwanda says that private sector will be able to tap into the opportunities because it is profit driven. “As long as there is favorable business environment, the private sector is always ready,” he said.
Moreover, there have been recent efforts by governments within the blocs to attract more investments in manufacturing, services, infrastructure, and tourism to help produce for the expected larger market.
Under these agreements, goods originating from one country going to another within the blocs will have free access to market, a waiver on duties, and will be shielded from competition from goods originating outside the blocs.
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EACJ jurisdiction ‘should cover investment litigation’
Regional lawyers have added their voice to the push to have the jurisdiction of the East African Court of Justice (EACJ) extended in a bid to effectively arbitrate in litigation relating to foreign investments.
A delegation of East African Law Society led by its chairman, James Mwamu on Friday paid a courtesy call on the EALA Speaker, Margaret Nantongo Zziwa to seek out possible initiatives on the matter.
The EALS President noted that it was vital to have the Treaty for the Establishment of the EAC amended to pave way for the court to adjudicate on other issues, outside its strict human rights sphere of competence.
“Litigation is key and we feel the EACJ is currently limited in terms of its scope and operations,” he said.
“In addition to the human rights issues which interests EALS, the EAC has recently discovered quite some resources including oil and gas and naturally litigation is expected at some point as regional integration moves ahead,” he explained.
The EALA Speaker concurred with that view, remarking that the EACJ deserved more mandate as the integration process deepens. In attendance were Stephen Musisi, Vice President of EALS, Ruth Sebatindira, President of the Uganda Law Society and top officials of the EALS and ULS Secretariats.
On matters of human rights and democracy, the EALA Speaker lauded the EALS for their commitment to the ideals of the rule of law.
Speaker Zziwa maintained that the partner states were committed to the integration process, explaining that the bitterness on the Coalition of the Willing that sparked tensions over the past year was a ‘creation of the media.’
The integration process allows for bilateral engagements between partner states and this is normal. “We as an assembly are in support of a unified region,” she declared.
At the moment, the EACJ has initial jurisdiction over the application and interpretation of the Treaty as prescribed under Article 27.
In April 2012, the EALA passed a resolution seeking the council of ministers to implore the International Criminal Court (ICC) to transfer the cases of the Kenyans facing trial in respect of the aftermath of the 2007 General Elections to the Arusha based court.
The Resolution (then) moved by Dan Wandera Ogalo further appealed to the Summit of EAC Heads of State to make amendments to Article 27 of the Treaty and to give retrospective effect to the jurisdiction.
The EALS is an apex regional body of lawyers in the EAC with a membership of over 15,000. EALS is the largest professional organization in East Africa, with a focus on the professional development of its members as well as promotion of constitutionalism, democracy and good governance, the rule of law and the advancement, promotion and protection of human rights in East Africa and beyond.
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EAC states fail to strike trade deal with Europe
The just concluded negotiations on the Economic Partnership Agreements (EPAs) between East Africa Community (EAC) member states and the European Union (EU) markets have once again failed to strike a deal.
In a three-day meeting held in Brussels, Belgium, the two parties failed to agree on contentious issues of duties and taxes on exports and on Most Favoured Nations (MFN).
However the meeting managed to conclude on the issues of the institutional arrangements and dispute settlement.
“Consensus was not reached by both Parties on Article 15 (Duties and Taxes on Exports) and on Article 16 (Most Favoured Nation) of the Framework of Economic Partnership Agreements,” a statement from EAC said.
Another ministerial meeting is now expected to be held within the region by March this year to see the way forward on how solve the outstanding issues and hasten the process.
Kenya is aiming to conclude an agreement that will help her continue favourable trade deals with EU and at the same time with EAC without restrictions.
Kenya stands to lose compared to other EAC member states especially if the issue of taxes and duty on export is not solved by the end of October this year, as it is likely to hit hard on the flower sector.
Unlike the other four EAC sister states (Uganda, Tanzania, Rwanda and Burundi), Kenya is not listed as a Least Developed Country and as such will have its products attract a tax rate of up 16 percent on her exports to the EU.
Currently, Kenya is the leading supplier of fresh cut flowers to the EU with an approximate market share of 38 percent.
It is estimated that nearly one million stems are cut, graded, chilled and delivered from Kenya to key EU destinations every day.
Source: http://www.capitalfm.co.ke/business/2014/01/eac-states-fail-to-strike-trade-deal-with-europe/
Download: Joint Communiqué: Interim ESA-EU EPA Committee, Third meeting, Brussels (28 January 2014)
Red tape, bribes strangle growth
When John Endres, CEO of Good Governance Africa, presents his views on the state of Africa to international audiences, he illustrates his talk with three maps.
The first covers the initial wave of liberation from colonial rule.
“You can see the green colour spreading out from the north.”
The second wave occurred when people liberated themselves from the liberators. A map of the continent from 1989 shows mostly the red of one-party state rule and the yellow of military rule. “Green? There weren’t that many examples,” he says.
Today, all but two of Africa’s countries are multiparty democracies in name, if not in practice. The two exceptions are Eritrea and Swaziland.
What has since occurred is Africa’s “third liberation”, he says borrowing the title of the book by Jeff Herbst and Greg Mills. “The third wave is liberation from bad governance. There we see the least progress,” he says.
Mr Endres has just released Good Governance Africa’s mammoth 421-page Africa Survey, which contains just about any statistical measurement of society, business and economics on the continent.
Instead of looking for African countries that tick all the boxes – there are precious few – Mr Endres says it is more useful to look at those who are improving their governance scores.
Or not. As in the case of South Africa, which has a deteriorating score. South Africa is viewed as a “young, but pretty much stable democracy”, though Mr Endres says: “I’m not so sure.”
It is being hurt by perceptions of corruption and of decreasing economic freedom, which includes the freedom of citizens to engage in trade, the availability of money, the ability to trade internationally and the enforceability of contracts.
South Africa is starting to fall short on indices that measure “how easy it is to do business”.
South Africa’s herd of state-owned enterprises, the propensity of its ministers to want to meddle in business transactions or labour disputes, the many official compliance requirements from BEE to tax and labour laws, are all starting to take the fizz out of the global perceptions of South Africa.
“The complexity of regulations reduces the flexibility of the labour market,” says Mr Endres.
To illustrate his point, he contrasts two web pages. The first is from the British government’s website. It lists six simple things that must be done to employ someone.
The second is a web page from South Africa’s department of labour.
It lists no fewer than 162 “basic guides” covering everything from employment equity to sectoral rules on annual leave, child labour, closed-shop agreements, employment contacts and minimum wage determinations.
The World Bank also calculated the time needed to obtain a business operating licence.
South Africa’s most recent measurement from 2007 is an astounding 36.2 days. Competitors for investment, such as Nigeria (12.1 days) and Ghana (6.4 days), beat South Africa hands down.
What South Africa appears to lack is “a single-minded focus on economic growth”.
Nigeria has that sense of urgency, as if it has set itself the goal of overtaking South Africa as the continents number one economy, as soon as possible.
South Africa’s stagnation is illustrated by the World Bank’s calculation of GDP per person employed.
In the 23 years from 1990 to 2013, South Africa’s figure declined 8% while Nigeria’s grew 61%.
The South African total is still higher than Nigeria’s, but the gap is closing rapidly.
Nigeria is often stereotyped as corrupt, but no fewer than 17% of firms identify corruption in South Africa as a “major constraint”.
Nigeria is not that much worse at 25%. About 15% of companies say they are “expected to give gifts to public officials to get things done” in South Africa, a percentage more than twice that in Zimbabwe and Rwanda.
Source: http://www.bdlive.co.za/africa/africanbusiness/2014/02/02/red-tape-bribes-strangle-growth
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Global value chains should benefit the people – Schlettwein
Investment in value addition activities that multinational companies make around the world should be extended to benefit developing countries Minister of Trade and Industry Calle Schlettwein, said during panel discussion at the Partnership Summit underway here.
“Services should also improve the lives of people living in these countries,” said Schlettwein weighing in on the topic of global value chains. Schlettwein was speaking at the last plenary session during day two of the annual summit, which took place under the theme, “Services as a Critical Component of the Global Value Chain: Challenges for Developing Countries.” In efforts to enhance business efficiency and optimise profits multinational companies set up what is called ‘global value chains’, which are enterprises for component design, research and development, specific services or component design in various countries across the world, all of which contribute to the final product the company sells to the world. Governments all over the world try to attract such investments with various incentives on offer. The panelists, who included Cesar Fragozo of the Mexican Trade Commission and Pramod Bhasin, vice chairman of private company Genpack, agreed that while traditionally global value chains were limited to manufacturing, the phenomenon has since evolved to include services since the dawn of the information technology revolution.
It is estimated that services currently make up about 60 percent of India’s Gross Domestic Product (GDP), compared to about 25 percent in Namibia, according to Schlettwein. The panelists also agreed that services continue to make up more and more of global value chains, a trend that they said continues to increase. “Global value chains are here to stay and it is a development aspect we as developing countries have to strive towards,” said Schlettwein. “We want to partake in a higher position on both ends of the global value chains. One way to do this is to consider the development of regional value chains, which makes sense especially for smaller economies like Namibia,” Schlettwein said. He added that emerging economies like Namibia should focus on facets such as logistics and transportation to take advantage of global value chains.
Meanwhile, Mexico’s Fragozo said global value chains have become a part of daily life in Mexico, which he says has become a manufacturing hub in Central and North America. “Mexico still needs to work hard to provide services to multinationals operating in our country,” noted Fragozo. As the only panelist representing the private sector and representing a company actively involved in the services sector, Genpact’s Bhasin reminded summit participants that companies will still ultimately purchase services from the places that offer the best value for money. “Developing countries need to learn from each other. The developed world doesn’t have a choice, but to come to the developing world for services along the global value chains,” explained Bhasin. “The world will go wherever they find the talent that they need. Talent is the most valuable commodity in the world,” he said. Responding to questions from the audience during a lively debate, Schlettwein said services and manufacturing in the global value chains should be more closely linked. “Products and services are becoming more cost effective when sold as a package deal,” concluded Schlettwein. Interestingly the concept of global value chains is not new, and has been practiced by large multinational companies for years, but what is new is their recognition.
With the gradual liberalization of world trade and the reduction of trade costs, coupled with technological advancement, emerging economies have learned to utilize GVCs to become the largest trading powers in the world in just over a decade’s time. Experts at the summit, which ended yesterday, have advised that the developing world can emulate China’s example by participating in GVCs and building newer ones and in the process become major contributors to global economic growth.
Source: http://www.newera.com.na/2014/01/30/global-chains-benefit-people-schlettwein/