Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Simon Dawson | Bloomberg

Trade recovery expected in 2017 and 2018, amid policy uncertainty (WTO)

The WTO’s more promising forecasts for 2017 and 2018 are predicated on certain assumptions and there is considerable downside risk that expansion will fall short of these estimates. Attaining these rates of growth depends to a large degree on global GDP expansion in line with forecasts of 2.7% this year and 2.8% next year. While there are reasonable expectations that such growth could be achieved, expansion along these lines would represent a significant improvement on the 2.3% GDP growth in 2016. Historically, the volume of world merchandise trade has tended to grow about 1.5 times faster than world output, although in the 1990s it grew more than twice as fast. However, since the financial crisis, the ratio of trade growth to GDP growth has fallen to around 1:1. Last year marked the first time since 2001 that this ratio has dropped below 1, to a ratio of 0.6:1 (Chart 1). The ratio is expected to partly recover in 2017, but it remains a cause for concern.

Extract (pdf): World commercial services exports were essentially unchanged in 2016 after having fallen 5.5% in value in 2015. This is illustrated by Chart 7, which shows growth in the dollar value of commercial services exports since 2013, broken down by major services categories. Total commercial services trade only grew 0.1% in 2016 and transport services fell 4.7%. Other types of services exports saw modest increases including other commercial services, a category that includes financial services. Detailed breakdowns of commercial services trade by region and country are shown in Appendix Tables 2, 5 and 6. Asia recorded the largest regional year-on-year increase in services in 2016 on both the export and import sides (0.9% and 2.6%, respectively). Meanwhile, Other regions (including Africa, Middle East and the Commonwealth of Independent States) had the largest declines (-0.6% and -7.4%). In general, trade in commercial services tends to be less volatile than merchandise trade.

Rwanda: From devastation to services-first transformation (UNU-WIDER)

Manufactured exports can be divided into two categories according to the markets they target: regional or international. The vast majority fall into the former group and, as already described, focus primarily on DRC, followed by Burundi. There are only 17 companies which export at least 2% of their output. Of the 14 for which market information is available, only one of them had its primary market outside of the region. For 11, the primary market was DRC or Burundi, and these two markets plus Uganda were the secondary market for 11 as well. Most companies have one principal export product, and these products are generally relatively low value and based on local or regional inputs. Maize flour, beer and other beverages, plastic shoes, cement rebar (reinforcing bars), and other construction materials are among the main exports. As explained above, Rwanda is well-positioned to access the DRC and Burundi markets. This has attracted investment from companies based in Kenya, Tanzania, and Uganda. Past growth in this trade has been impressive and there remains much untapped potential. That said, it is a very complex, indeed difficult, environment to work in and recent events are not encouraging. [The analysts: Kasim Ggombe, Richard Newfarmer]

Kenya Economic Update: Housing – unavailable and unaffordable (World Bank)

Is Kenya loosing competitiveness in the East African market? (Box B.1) Kenya’s merchandise trade performance has been dismal in recent years, in particular its exports to the East African Community. Kenya’s merchandise exports contracted by an estimated 23.3% in 2016. In part, this reflects weakness in global trade. In the aftermath of the global financial crisis, global trade has been subdued on account of weak demand and structural factors. Nonetheless, the contraction in Kenya’s exports is not only due to weakness among its high income trading partners. Worryingly, Kenya’s exports to the EAC saw a significant decline in 2016, a region where growth has remained relatively resilient. Of further concern is that longer term trends show that Kenya’s exports to the EAC have been on a decline for the past several years: export growth in value terms was some 29.5% in 2007 but has since contracted to a low of -8.9% in 2013. The decline in Kenya’s exports to the region in recent years has occurred despite overall growth in EAC intraregional trade, reflecting the stronger growth performance of its regional trading partners. This begs the question whether Kenya is becoming increasingly less competitive in the EAC region?

How does Kenya regain its competitiveness in its backyard? Kenya has become less competitive in the EAC due mostly to cheaper products to EAC markets from elsewhere, in particular East Asia (including China). For instance, in both Tanzania and Uganda, the share of East Asia (including China) exports has increased from some 45% to 60% over the past decade. This has not only driven down market shares of Kenya’s exports but also that of other countries. However, for Kenya, the EAC market remains an important market, and provides a good platform to be able to compete globally. Reversing the decline in Kenya’s competitiveness is of paramount importance and will require both domestic policy actions to improve the competitiveness of Kenyan firms as well as efforts on a regional level to improve market access for Kenyan products and a much freer flow of goods within the EAC.

Tanzania Economic Update: Extending financial inclusion in Tanzania (World Bank)

Brexit is expected to have only a modest impact on the Tanzanian economy. The initial impact of the UK’s vote to leave the EU turned out to be short-lived and largely localized to the UK. However, the medium- to long-term repercussions are difficult to determine, with these repercussions partly depending on how trade relations and financial flows unfold between the UK and the EU in the years to come. For example, two UK-based banks, Standard Chartered and Barclays, collectively hold roughly 15% of banking assets in Tanzania. Brexit could reduce investment and financial flows from the UK and European firms. In recent years, the UK and Switzerland accounted for more than 50% of the total FDI inflows to Tanzania. Under the unlikely scenario of a sharp Brexit-induced turbulence in the UK and other European economies, the impact on the FDI channel may be significant. [Bella Bird: Growth and financial inclusion - where is Tanzania today?]

Ethiopia, China and UNIDO to strengthen cooperation on investment promotion, industrial park development (UNIDO)

The Joint Declaration was signed by Ethiopia’s Ministry of Industry and Ministry of Education, the Department of Commerce of Hunan Province, China, and UNIDO at an investment forum held in Addis Ababa, Ethiopia. The forum took place as part of the ongoing economic and trading cooperation between Ethiopia and the Hunan Province of China, which is also responsible for the establishment of the Ethiopia-Hunan Equipment Manufacturing Cooperation Park in Adama. The partnership will contribute to accelerating Ethiopia’s economic transformation through the establishment of industrial parks in various parts of the country and by leveraging the necessary investment for the parks themselves.

Tanzania: Standard gauge rail project set for formal launch today (IPPMedia)

The SGR is one of the current government’s flagship projects as Tanzania seeks to make optimal use of its long coastline by offering an upgraded transport network to boost trade with its landlocked neighbours. It is being built on a $7.6bn loan from China’s Export-Import Bank (Exim), with the Dar-Morogoro stretch to be constructed by a consortium of Turkish and Portuguese companies. The main project involves building a railway for an electric bullet train, along with related facilities including power infrastructure, interchange railways and station expansions. Once installed, the train is expected to travel at a speed of 160 kilometres per hour from Dar to Morogoro, making it the second fastest bullet train in Africa after one in Morocco. Officials say the stretch from Dar es Salaam to Morogoro will have a total of six passenger stations and six others for interchange railways. The government has set aside 1trn/- in the current financial year as initial cost of the project.The entire project is scheduled to be completed by September 2019. [Jaindi Kisero: Kenyan state on right track with plan to terminate rail concession]

Angola: Economist Intelligence Unit projections (MacauHub)

Angola’s budget deficit will remain high, although it is expected to decline from 5.9% of GDP this year to 4.4% in 2021, as spending pressures reduce following the 2017 general election, according to the Economist Intelligence Unit (EIU). Considering the weak results obtained so far in the process of economic diversification, GDP growth will remain dependent on the oil sector, with the EIU report predicting that it will average 2.8% in 2017/2021, a rate that compares with an average of 4.1% in the 2012-2016 period.

Zimbabwe: Importers hard hit by cash crisis (NewsDay)

Fast moving consumer goods have called for longer import licences, as the ones they have are too short, and due to the foreign currency shortages, the permits expire long before payments to suppliers are made by banks and this, they fear, could lead to shortages of basics. Importers have to acquire permits from the Industry and Commerce ministry, which are valid for two to six months depending on products. A Zimbabwe Consumer Goods Importers Trust official told NewsDay the delays in processing the foreign payments were affecting importers. [RBZ eases foreign payments bottleneck]

Botswana nudges up in tourism rankings (Mmegi)

According to the recently released Travel and Tourism Competitiveness Report for 2017, Botswana continues to improve in both the ranking and quality score with the country ranked 85th out of 136 countries compared to 88th out of 141 countries in 2016. This was an improvement of three places up in the ranking. Although Botswana’s rankings improved, it is still below South Africa (53rd), Mauritius (55th), Kenya (80th) and Namibia, which slid 12 places down the ranking to position 82. The report says Botswana went up the ranking due to the success of its specific policies and strategic aspects that impact the industry more directly. [Services pull economy out of red]

South Africa: Retailers shift away from Africa expansion (Business Day)

Africa is falling off the immediate radar of local retailers after the region posted its slowest growth rate in two decades in 2016, and with the outlook for 2017 looking as unpromising, most companies are changing their focus from expansion to improving customer experience. Speaking at the EY retail sector overview on Tuesday, Derek Engelbrecht — EY lead consumer products and retail partner — said African expansion was just not something most retailers were speaking of.

Why Nigeria experienced N290bn trade deficit in 2016 – NESG (Vanguard)

The Nigerian Economic Summit Group, yesterday, gave an insight into why Nigeria experienced trade deficit of N290 billion in 2016, even as it projected that the economy will experience a Gross Domestic Product, GDP growth rate of 0.6%. Speaking during the 21st Annual General Meeting of the NESG, chairman of the Group, Mr. Kyari Bukar, said that the lower crude oil prices and inability of the country to finance its rising import bills in the face of plummeting non-oil export led Nigeria’s trade balance to a deficit of N290 billion while balance of payment deficit climbed to N1.8 trillion in the third quarter of 2016. Bukar hinted that aside from the foreign exchange crisis, the inability of government to respond swiftly and appropriately to economic challenges worsened the situation. [Download: NESG’s 2016 Annual Report]

Nigeria: Customs restricts exit of rice from free trade zones (The Eagle)

The Nigeria Customs Service said it has restricted the exit of rice from Free Trade Zones in the country to ensure total compliance to the ban on the importation of rice. Joseph Attah, the Public Relations Officer of the NSC, told the News Agency of Nigeria in Abuja that the Service has taken its war against rice smuggling to the FTZs. [FG prohibits importation of tomato through land borders]

Kenya defies EAC recommendation to allow imports of wheat flour from Tanzania (Business Daily)

A report from the EAC Council of Ministers meeting last week indicate that Kenya ignored the technical guidance issued by the secretariat on February 6 calling on Kenya to allow imports of wheat products from Tanzania. “In that guidance, among other things, they informed partner states that where wheat flour is milled from imported wheat grain in a partner state it qualifies under the EAC Rules of Origin to be accorded Community Tariff Treatment when traded between partner states,” reads a report from EAC. However, Kenyan wheat millers have long argued that Tanzania imports its wheat products and should therefore not enjoy tax incentives under the East African Community Customs Union rule of origin, which gives preferential treatment to goods produced within the region.

Regional ministers appoint staff to EAC organs (New Times)

The EAC Council of Ministers has appointed 31 East Africans – including six Rwandans – to various positions at the EAC Secretariat. This comes after conclusion of the 35th meeting of the Council at the EAC Headquarters in Arusha, Tanzania, which started end last month and concluded last week. [Bravo for envisioned EAC passport to unite us in the bloc (editorial comment, Tanzania Daily News)]

Today’s Quick Links:

West Africa economic bloc says rules out devaluation of CFA franc

ECOWAS Parliament Joint Committee on Health and Social Service, Trade, Customs and Free Movement: meeting update

Merkel’s ‘man in Africa’ downbeat on prospects for Africa-EU summit

Turkey-Africa 1st Agriculture Ministers Meeting and Agribusiness Forum: Side Event 4 - Agricultural trade and investment (pdf)

Mauritius: Agro-Industry workshop focuses on setting up of Regional Livestock Policy Hub

Morocco is ‘low risk’ country for free trade and business: Control Risks study

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