tralac’s Daily News Selection
Underway, in Arusha: EAC Sectoral Council on Trade, Industry, Finance and Investment. High on the agenda of the meeting are progress reports on; Status of the implementation of previous decisions; update on the EAC-EU-EPA; AGOA out-of-cycle review; Sectoral Committee on Investment and the Committee on Customs.
Diarise: SAIIA, in collaboration with Institute for International Trade, Australia workshop – The challenges of regional integration, trade facilitation and gender equity for Africa (1 December, Johannesburg)
EAC Industrial Competitiveness Report 2017: harnessing the EAC market to drive industrial competitiveness and growth (EAC/UNIDO)
The most encouraging finding of this report comes from the detailed analysis of the market opportunities offered by the EAC to its Partner States for expanding their manufacturing sectors. First of all, the EAC acts as a fundamental market for most of its Partner States, with high shares of manufactured exports remaining within the region, in particular for Rwanda, Uganda and Kenya. Exports to the rest of the world did not play the same role. In addition, it also provided the opportunity for all countries to expand their exports further to the regional market between 2000 and 2014, leading to a significant increase in their intra-regional manufactured trade ranging between 9% and 31% on average per annum. Secondly, throughout the years, the EAC market provided Partner States with the opportunity to export a larger share of higher value-added products. All countries, apart from Rwanda, exported a larger percentage of manufactured goods, as well as medium and high-tech products to the EAC, than to the rest of the world. Thirdly, and following from above, the EAC market allowed a more pronounced level of diversification of manufactured products traded within the region, with no domination of a particular sector. The largest exports came from the chemicals and plastic sector, as well as metals, followed by food and beverages. Whereas the top three products traded within the EAC contributed to 58% of total manufactured exports in 2014 in the EAC, the same figure at global level stands much higher at 71%.
Nonetheless, since 2010 we observed a slight contraction from the two biggest actors, Kenya and Tanzania, that diversified their markets more to Sub-Saharan African countries other than the EAC (in the case of Tanzania – mainly Congo, DRC, Zambia), and outside of Sub-Saharan Africa (for Kenya – mainly US, Serbia, India and China). Jointly, therefore, intra-regional manufactured trade has slowed down significantly, from an annual growth rate of 16% per annum between 2000 and 2010, to only 2% between 2010 and 2014. EAC manufacturing firms have therefore lost market share in one of the most dynamic regions, where demand for processed goods has been increasing at almost 17% per annum since 2010.
Findings concretely show several missed opportunities for EAC firms to tap into their own dynamic regional market. This was measured by trends in market shares across the period 2000-2014. A close examination of top 25 most demanded manufactured products showed that in most cases (22/25) EAC firms lost market share in the period, including cement, pharmaceuticals, iron/steel products, and fertilisers. In most cases, EAC manufacturing firms managed to increase their capacities, experiencing positive growth rates in the period (except for heavy petrol/bitum oils) but not at the pace and extent needed to keep up with the growth of EAC demand, therefore allowing other international firms to gain larger market share.
Protection of cars, dairy blocks EAC trade deal with southern Africa (Business Daily)
Protection of East Africa’s dairy and motor vehicle industries from competition is one of the stumbling blocks facing a trade agreement with southern African states. The EAC is negotiating a deal with SACU to scrap import duty on at least 60% of products traded between the blocs. However, a report released last week by the Council of Ministers on EAC Affairs and Planning shows that the two bodies failed to agree on several key tariff lines in a September meeting in Johannesburg. SACU requested that the EAC scrap duty on dairy products and motor vehicles within five years of signing the deal. The EAC did not respond positively. “On motor vehicles and dairy products, (the) EAC has responded that the products are sensitive due to their strategic importance for economic development in the EAC,” says the report. The EAC did agree to carry out an analysis on the implications of scrapping duty on motor vehicles. SACU also asked for immediate the liberalisation of trade in refrigerators, plastic tubes, beef, salt and wines once the deal is signed. EAC “agreed to offer only refrigerators for immediate liberalisation,” pleading time to consult on the rest. The southern African countries were similarly unreceptive of EAC’s request to liberalise trade in textiles, cut flowers, edible oils, fruit juices, coffee and vegetables.
(i) Full FTA in sight as remaining states make steady progress to join. Fifteen of the 19 COMESA Member States as now fully in the regional Free Trade Area, with only four countries remaining. The Council of Ministers’ meeting in Lusaka last week noted the steady progress that the remaining countries are making towards full participation. Except for Swaziland which is exempted owing to its membership of SACU, the DRC, Congo, Ethiopia and Eritrea are all at various stages of eventually becoming full members of the FTA. The DRC is expected to achieve full participation by 2018 after reducing tariffs for COMESA originating products by 40%, 30% and 30% each year since it issued a gazette notice in December 2015. Eritrea is already offering 80% tariff preference to COMESA originating products. A study on the implications for joining COMESA FTA on the Eritrean economy was carried out and validated on 16 June 2017. This study will assist Eritrea in arriving at a decision regarding participation in the COMESA FTA. As a first step toward joining the FTA, Ethiopia reduced tariffs for COMESA originating products by 10% in 1989. In 2014, a study on the competitiveness of Ethiopian firms in participating the COMESA FTA was undertaken. The study recommended a phase down of products on which tariffs could be reduced to zero by 2019. The country is consulting on effecting further reductions. [COMESA mulls a shipping line to address high transport costs]
(ii) Digital Free Trade Area instruments ready for trials in member states. COMESA Secretariat has completed the design of the Digital Free Trade Area and its action plan and the Electronic Certificate of Origin (eCO) and its draft regulations. The two instruments are now ready for piloting in 15 Member States that are willing and ready to participate. They include: Burundi, Democratic Republic of Congo, Egypt, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Sudan, Seychelles, Uganda, Swaziland, Zambia and Zimbabwe. Ministers attending the recent Ministerial Council meeting in Lusaka (3-4 November) welcomed the progress made on the development of electronic trade facilitation tools noting that they have the potential to transform regional trade. The Council recommended for a phased approach for rolling out the instruments for the Digital FTA. This will begin with the instruments that are ready and Member States that are ready to participate during the year 2017. Other segments will be finalized concurrently while addressing constraints Member States may have.
(iii) Ministers pledge support to innovation to raise product quality. Their decision was informed by a report presented to them showing that, on average, the level of technological sophistication of exported products from the COMESA region was not only low, but has also declined. The report noted that a narrow range of product sophistication across the member States has persisted. This notwithstanding that primary and resource based products in the COMESA region have continued to account for the largest share in the export basket. Except for Mauritius (43%), primary and resource based products together accounted for more than 60% of the export basket in all Member States, up from 50% in 2014. For Rwanda, Malawi and Zimbabwe these two categories accounted for more than 80% of the exports while for Burundi, DRC, Zambia, Comoros, Seychelles, Ethiopia and Djibouti they accounted for more than 90% of total exports. “Put together, the products accounted for more than 60% of the export basket in all Member States, up from 50% in 2014,” the report said. “Rwanda, Malawi and Zimbabwe accounted for more than 80% of the exports while Burundi, DRC, Comoros, Zambia, Seychelles, Ethiopia and Djibouti they accounted for more than 90% of total exports.”
Lack of multiple grain handlers, rains and inefficiencies at the Port of Mombasa are costing importers an arm and a leg. Delays in off-loading cargo has compelled importers to pay demurrage of up to Sh1.5 million a day. Grain importers have been the hardest hit by the delays, with huge volumes of maize and wheat being held at the facility awaiting discharge, a situation that could affect consumers in future as they will have to absorb the extra charges. Logistics firms and millers have raised concerns over the delays that have now cut supply of goods in the market, signalling a looming shortage. According to millers, the total expected grain arrivals at the port through 20 November is 720,000 tonnes. With no further delay caused by the rains, it might take 72 days to discharge the entire consignment.
Doing Business in Rwanda: Govt to introduce 15 new reforms (New Times)
For instance, under access to electricity, Rwanda ranked 119th globally and under this indicator, government plans to introduce five reforms by May next year, to ensure adequate and constant energy supply to investors. Rwanda Energy Group is working on a system that will monitor outages and record frequency and durations of power outages so that it is predictable for people running factories. The Government also seeks to reduce the time for connection from the current 34 days to 20 days as well as revising tariffs to introduce preferential rates for productive users. Other reforms under the indicator include introducing electricity quality service codes and reducing the cost of connection. The starting a business indicator, which ranked at 78th position in the last report, is scheduled to have three reforms which could influence a change in position. Under the indicator, three reforms are set to be introduced, including free application of online electronic billing machines, exemption of payment of trading license ‘patente’ for startups that are small and medium enterprises as well as simplified process of employee benefits registration. [Botswana committed to ease of doing business – Masisi; Uganda Investment Authority: Low publicity dipped ease of doing business ranking]
With a target to become Africa's third largest economy by 2020 and Africa's model mega city in 2025, the Lagos State government has reiterated its commitment to sustain the existing partnership with the private sector. This it aims to do by creating more business-support infrastructure and developing sound policies, which will build a solid framework and enable businesses thrive.
African economic growth rides on wireless rails (Bloomberg)
From the Atlantic to the Indian Ocean, hand-held phones are letting people become their own ATMs, increasing economic activity by enabling payments for food, travel, school and business. Wireless communication is driving economic growth in sub-Saharan Africa much as the railroad did in the 19th-century US, accounting for almost a tenth of global mobile subscribers and a growth rate that's beating the world. The transformation is reflected in the more than 1,300 publicly-traded companies that make up corporate Africa. The value of communications firms increased during the past five years to 25% of the total market capitalization of African companies, up from 16%, according to data compiled by Bloomberg. Materials and energy, the natural-resources benchmarks that defined the region since its colonial days, diminished to a combined 18% from 27% during the same period.
The inaugural meeting of the Intergovernmental Group of Experts on Financing for Development happened to coincide with the publication of the Paradise Papers by a consortium of journalists exposing the vast scale of tax avoidance by transnational corporations and superrich individuals. Topics covered by the experts included the problem of “illicit financial flows”, a catch-all term for tax evasion, capital flight, trade mispricing, foreign exchange manipulations, money laundering and other maneuvers – including tax avoidance. The three-day meeting also looked at ways of strengthening domestic tax frameworks, the role of development banks, modernizing the Official Development Assistance system, and how private finance could be exploited through “blended” financing instruments. [Background papers available for download], [Tax base protection workshop ends with call for more support to strengthen Africa’s capacity]
Today’s Quick Links:
On ECOWAS common currency (editorial opinion, The Guardian)