Trade policy newsletters:

From tralac: Recognition and protection of geographical indications in the EU–SADC Economic Partnership Agreement; Bridges: Lighthizer lays out US trade policy agenda, NAFTA hearings get underway

Afreximbank AGM: updates

1. Trade and economic transformation: meeting the test of relevance (pdf) - Dr Hippolyte Fofack (Chief Economist and Director of Research). The growth and economic fortunes of African countries are particularly tied to the dynamics of oil prices - in a region where oil-exporting countries account for about half of GDP and more than 55$ of exports; Over the years, the excessive dependency of the region to natural resources and primary commodity has exposed the region to recurrent adverse terms of trade shocks and acted as a major driver of growth volatility; In effect, the correlation between commodity prices and growth has made it extremely difficult to sustain growth episodes in the continent; In effect, a recent IMF review of stylized facts of growth turning points—(i) growth acceleration (up-breaks), (ii) growth deceleration (down-breaks), and (iii) sustained growth episodes (growth spells) is very instructive; It shows that Africa’s growth engine has been less robust — far less robust than in other regions, especially over the decades preceding the 2000s;

2. Mr Denys Denya (Executive Vice President, Finance Administration and Banking Services). On Friday, the Bank will hold the 23rd Session of its Advisory Group Meeting, under the theme “Expanding African trade in a world of rising protectionism” which will conclude the series of events that precede the 24th Annual General Meeting of Shareholders. The theme of the third day is motivated by the re-emergence of rising nationalistic sentiments and creeping protectionism across the world in recent years which are posing a growing threat to globalization and international trade. Trade restrictive rhetoric and protectionism measures have been on the rise recently, most notably in the United States and Europe – regions which had previously been the leaders of free markets, and promoting the free movement of capital, goods and labour. In this regard, discussion will explore how to promote African trade in the face of these unfavorable developments.

3. Obasanjo wants common currency for ECOWAS: Former President Olusegun Obasanjo on Thursday called on the leaders of the Economic Community of West African States (ECOWAS) to agree on a common currency to boost regional trade. Mr Obasanjo made the call at the ongoing 24th AGM of the African Export-Import Bank in Kigali. He spoke on: Can Regional Economic Communities work for Africa: lessons from a founding father. According to him, the currency is required to move the current level of the regional trade from 25% to more than 50%. He said the various currency zones like the Naira zone, the Cedi zone, among others should not be allowed to mitigate the flow of trade within the region. He blamed too many internal conflicts and changes in policies, among others, as some of the challenges facing the region.

4. Egypt borrows $200m from Afreximbank. Banque Misr, Egypt’s second largest state-run bank, signed yesterday a $200m loan agreement with Afreximbank, Anadolu Agency reported. The agreement aims at supporting and financing Egypt’s small and medium-sized enterprises as well as strengthening the bank’s foreign currency resources. The three-year term facility will also aim to fund the light manufacturing activities in the country. The transaction paving the way for Banque Misr’s robust presence in Africa, in addition to its current representation in Lebanon, UAE, France, Germany and China.

5. Rwanda’s private sector welcomes Afreximbank support. Private sector players say the $500m investment could help them expand their penetration into the regional market, as well as boost initiatives such as the Made-in-Rwanda campaign. During the ongoing Afreximbank Annual General Meeting in Kigali, the bank’s president said that they are currently in negotiations with the government on the disbursement of the funds. Stephen Ruzibiza, the Chief Executive Officer of the Private Sector Federation, told The New Times that such financing to Rwanda is timely.

6. $25bn to be mobilised for intra Africa trade. African Export and Import Bank is in the next five years expected to mobilise $25bn to support intra-Africa trade. Speaking on the sidelines of the on-going Afrexim bank annual general meeting, Afrexim Bank president Benedict Oramah said of the total funds to be mobilised, $10bn will be mobilised from within the African continent. “We have set an objective of mobilising $10bn from Africa because the continent has had more than half a trillion dollars in foreign exchange reserves sitting in banks outside Africa and most times earning nothing, on the other hand, pension funds hold more than $700bn,” he said. Last year alone, the bank mobilised $4.5bn from Africa.

Private sector infrastructure investment commitments in developing countries fell in 2016 (World Bank)

Investment commitments (investments) in infrastructure with private participation in Emerging Markets and Developing Economies fell sharply in 2016. The $71.5bn committed across 242 projects in 2016 represents a 37% decline in investment compared to 2015 and a 41% decline compared to the annual average of $121.4bn over 2011 to 2015. The year-on-year drop in 2016 can be explained by a precipitous decline in investment in Turkey, which had a banner year in 2015, as well as steep declines in South Africa and Peru. Similarly, the lower investment relative to the five-year average is largely driven by declining private investment in infrastructure in three key markets, which together accounted for a majority of investment from 2011–2015: Turkey, India, and Brazil. All are countries where large programs over the last decade boosted the total number of investments in EMDEs. The Sub-Saharan Africa region (pdf) saw 11 infrastructure deals totaling US$3.3bn, or five percent of global PPI investment for 2016. This amount falls 48% below the 2015 and the five-year average investment, both at $6.4bn. Nine deals were in the energy sector, and two were in the transport sector. Uganda was the most active country with four projects, followed by Ghana and Senegal with two projects each. In 2015, the region saw considerably more projects: 22 projects in the energy sector (mostly in South Africa), and one project each in the transport and water sectors.

WTO records moderate rise in G20 trade restrictions (WTO)

A total of 42 new trade-restrictive measures were applied by G20 economies during the review period (mid-October 2016 to mid-May 2017), including new or increased tariffs, customs regulations and rules of origin restrictions. This is an average of six measures per month – slightly higher than in 2016 but below the longer-term trend observed in 2009-2015 of seven per month. G20 economies also implemented 42 measures aimed at facilitating trade during the review period, including the elimination or reduction of tariffs and the simplification of customs procedures. At an average of six new trade-facilitating measures per month, this represents a similar level compared to the previous reporting period (mid-May to mid-October 2016) and is in line with the declining trend observed in 2016.

South Africa: May trade balance figures (SARS)

SARS has released trade statistics for May 2017 recording a trade balance surplus of R9.50bn. The year-to-date trade balance surplus of R19.52bn is an improvement on the deficit for the comparable period in 2016 of R13.29bn. Top 5 countries SA exported to: China (7.8%), United States (7.8%), Germany (7.5%), India (4.8%), Japan (4.4%). Top 5 countries SA imported from:​ China (18.7%), Germany (12.4%), United States (6.8%), Saudi Arabia (6.0%), India (4.4%).

Zambia Economic Brief: Reaping richer returns from public expenditures in agriculture (World Bank)

International trade is rebounding, but reserves remain low (pdf): Copper provides 77% of Zambia’s exports, and as global prices of the metal fell, so did the US$ value of exports in 2015 (by 28%), and further in 2016 (by 11.6%). This opened up a trade deficit. As the economy slowed down and the price of imported goods rose (following a rapid weakening of the kwacha in the second half of 2015), the US$ value of imports also decreased steadily in 2016, reducing the size of the trade deficit (figure 9). Both exports and imports have increased in Q4 2016 (as the economy recovered, copper prices firmed and the kwacha appreciated). In Q1 2017, exports rose (the volume of copper exports rose 24% in Q1 2017, while copper prices firmed) and imports fell, thus narrowing the trade deficit. This resulted in a narrowing of the current account balance to $257.1m in Q1 2017 from $574.7m the previous quarter. This, coupled with increased portfolio debt inflows (there was keen foreign interest in government bonds), has pushed the balance of payments into a surplus of $26.3m in Q1 2017, from a deficit of $161.4m in Q4 2016.

Nigeria: In new executive order, Osinbajo gives tax defaulters nine months to pay up (ThisDay)

In a bid to boost non-oil revenue and ensure that every taxable individual and corporate citizen is captured in the tax net, Acting President Yemi Osinbajo Thursday signed an Executive Order to give bite to the Voluntary Asset and Income Declaration Scheme (VAIDS). “All of these 214 Nigerians who pay N20 million or more in taxes annually are to be found in Lagos State. I’m sure in this room (and I’m not looking at anyone), there are another 214 people who earn more than N80 million annually,” he said. Osinbajo’s comment, which drew applause from the audience who felt he was referring to the cross section of governors, ministers and other top government officials, added that “tax evasion is not limited only to wealthy Nigerians and also not limited to individuals. Many companies maintain three sets of books”.

The Minister of Finance, Mrs. Adeosun, said the government has resolved to change the narrative through vigorous pursuit of the VAIDS. She said: “During the last eight years, Nigeria has failed to reduce its debt levels despite high oil prices and nominal GDP growth. We have inherited a situation where our debt and underdevelopment are getting worse not better. This cannot continue. Neither can the behaviour of some of our richest citizens and multinationals operating in Nigeria – who seem to consider paying tax to be optional. From 2018, international law will make it easier than ever to track these evaders down and punish them. This scheme is in line with similar initiatives launched in 2016 in India, Indonesia and South Africa. We know they work, we know it’s the right thing to do and the treasury desperately needs the money. Finally, the proceeds of this scheme will not disappear. We will provide regular updates on the funds collected to date, and how those funds are being put to very transparent use.” [Kenyans filing tax returns double to 2.082 million]

Nigeria: Export Council seeks ECOWAS trade corridor (Tribune)

Towards this end, Executive Director/CEO of NEPC, Mr Olusegun Awolowo advocated the collaboration of both agencies and Manufacturers Association of Nigeria in securing a platform for trade and investment along the ECOWAS trade corridor through NEXPORTRADE and a proposed offshore warehouse in Togo, noting that it would ease the challenges encountered by exporters in terms of cost of transportation of goods, warehousing, lack of constant supply among other logistics. In his remarks, Managing Director of NEXIM Bank, Mr Abba Bello, reinstated the need to urgently kick-start the Sealink Project, saying it would promote intra and inter-African trade, thereby fostering regional integration, economic growth and development in the West and Central African sub-regions.

Nigeria to supply Walmart with $7bn worth of cashew nuts (Premium Times)

This was revealed by the Minister of Agriculture, Audu Ogbe, on Wednesday while briefing State House correspondents after the meeting of the Federal Executive Council at the State House Presidential Villa Abuja. “Their demand is a 130,000 tonnes of cashew nuts per annum, the total value is $7bn,” he said. Mr Ogbe said what Nigeria currently does is ship the nuts to Vietnam, who in turn roast and sell to the US. “This year we are going to create six cashew processing factories in Nigeria, one each to be cited in Enugu, Imo, Benue, Kogi, Kwara and Oyo states. These are the cashew belt for now,” he said.

Unpacking the economics of DRC’s proposed Inga 3 dam (International Rivers)

In debt and in the dark (pdf) is the first in-depth assessment of the economics of the proposed 4,800 MW Inga 3 Dam in the DRC. Authored by noted economist Tim Jones, the report scrutinizes the claims that project proponents have made to justify the project, namely that Inga 3 will generate revenues to fill government coffers through the sale of power to South Africa and mines in eastern DRC and will provide needed power to the country. Using empirical evidence from similar hydropower projects in Africa and globally, Jones tested the stated assumptions of the project’s performance by examining factors such as the amount of power to be generated, the risk of cost overruns, the extent of transmission losses, likely electricity tariffs, and borrowing costs. Jones then forecasted the dam’s potential performance across a range of scenarios.

ECA develops toolkit to help member states integrate Agendas 2030 and 2063 (UNECA)

Speaking in Abuja at the on-going high level policy dialogue on development planning in Africa, Bartholomew Armah, Chief of the Renewal Planning Section in the Macroeconomic Policy Division, said the integrated nature of Agenda 2063 and the SDGs calls for an integrated approach to their implementation and reporting hence the development of the new toolkit. The toolkit has already been tested in Ethiopia and is being fine-tuned ready for deployment end of June.

Overall East African container trade expands over first quarter, despite contrary corridor performance (FEAFFA)

Looking forward, the development along the Northern Corridor will very much depend on the Kenyan elections and the extent to which they are peaceful. A.P. Moller – Maersk expects, nevertheless, a short-term reduction in the import market, followed by a very quick recovery after the August elections. Furthermore, if the interest rate cap decision is reviewed, liquidity could increase, boosting trade and increasing buying power. For the Central Corridor, A.P. Moller-Maersk does not expect to see much fundamental change for the rest of the year. On the long term, “we hope to see developments in mineral exports and we are also excited about the Rwandan market which is a buoyant economy and certainly seems to be taking a strong position in terms of becoming a key trading hub over time,” asserts Felder.

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