Welcome to the first edition of tralac’s Daily News selection for 2018!

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The African Development Bank launched the 2018 edition of its yearly flagship report, the African Economic Outlook, at its headquarters in Abidjan. To facilitate advocacy and policy dialogue, the 2018 AEO has been shortened to a maximum of four chapters and about 180 pages, plus the 54 Country Notes, down from more than 300 pages.

Foresight Africa: top priorities for the continent in 2018 (Brookings)

In this year’s Foresight Africa, AGI scholars and invited experts delve deeply into six overarching themes that highlight areas in which African countries and their citizens are taking the lead to achieve inclusive growth. In a world where China and other emerging economies are ascendant, where cooperation on global governance is under challenge, and where free trade faces headwinds, Africa needs its own institutions to play a more assertive role in advancing the continent’s agenda. The potential for a more unified Africa to create never-before-seen opportunities for trade and economic prosperity is gaining traction. Through our exploration, we hope to emphasize that Africa’s future lies in its own hands and that it already has the power to reach its goals. Profiled chapter: Rethinking Africa’s structural transformation - the rise of new industries:

We have found a new pattern of structural change emerging in Africa, one different from the manufacturing-led transformation of East Asia. ICT-based services, tourism, and transport are outpacing the growth of manufacturing in many African countries. Between 1998 and 2015, services exports grew more than six times faster than merchandise exports. Kenya, Rwanda, Senegal, and South Africa have vibrant ICT-based services sectors. Tourism is Rwanda’s largest single export activity, accounting for about 30 percent of total exports. In 2014, 9.5 million tourists visited South Africa, contributing 3% to its GDP. Ethiopia, Ghana, Kenya, and Senegal all actively participate in global horticultural value chains. Ethiopia has achieved extraordinary success in flower exports, so much so that the country is now a global player in the sector. We also found that, because tradable services, agro-industry, and horticulture share many firm characteristics with manufacturing, it is possible to develop a strategy for structural transformation based on three factors that have largely shaped the global distribution of manufacturing. The first is the “investment climate” (the environment within which firms operate). The second is the capacity to export, and the third is agglomeration. The three are inter-related, and to boost the pace of structural change African governments need to address them concurrently. [The author: John Page)

Global economy to edge up to 3.1% in 2018 but future potential growth a concern (World Bank)

Regional outlook – Sub-Saharan Africa (pdf): A modest recovery is underway in Sub-Saharan Africa, supported by an improvement in commodity prices. Although growth rebounded in Angola, Nigeria, and South Africa - the region’s largest economies - it remained low. Metals exporters in the region experienced a moderate rebound, partly reflecting an uptick in mining output amid rising metals prices. Growth was stable in non-resource-intensive countries, supported by infrastructure investment. The region is projected to see a pickup in activity over the forecast horizon, on the back of firming commodity prices and gradually strengthening domestic demand. However, given demographic and investment trends, structural reforms would be needed to boost potential growth over the next decade. Downside risks continue to predominate, including the possibilities that commodity prices will remain weak, global financing conditions will tighten disorderly, and regional political uncertainty and security tensions will intensify. On the upside, a stronger-than-expected pickup in global activity could further boost exports, investment, and growth in the region.

Launching today: the WEF’s Global Risks Report 2018

This year’s report covers more risks than ever, but focuses in particular on four key areas: environmental degradation, cyber security breaches, economic strains and geopolitical tensions. And in a new series called “Future Shocks” the report cautions against complacency and highlights the need to prepare for sudden and dramatic disruptions. The 2018 report also presents the results of our latest Global Risks Perception Survey, in which nearly 1,000 experts and decision-makers assess the likelihood and impact of 30 global risks over a 10-year horizon.

Committee of Ten Ministers of Finance responsible for the Financing of the African Union: updates from the Kigali meeting, 11-13 January

(i) Mahamat calls for urgency in self-financing of African Union

Available information indicates that as of December 2017, the African Union Commission had on record 20 Member States that were at various stages of implementing the Kigali Decision. Out of these, 14 Member States had already started collecting from the levy and had deposited the funds at an account dedicated for the AU opened with the Central Banks. These Countries include Kenya, Ethiopia, Rwanda, Chad, Djibouti, Guinea, Sudan, Morocco, Congo Brazzaville, Gambia, Gabon, Cameroun, Sierra Leone and Cote d’Ivoire. On the other hand, Ghana, Benin, Malawi and Senegal have initiated internal legal and administrative processes to allow implementation of the Decision

(ii) CFTA to boost domestic tax collections: an interview with Prudence Sebahizi (Chief Technical Advisor and Head of the CFTA Unit at the AUC’s Department of Trade and Industry)

Rwanda Economic Update: rethinking urbanization (World Bank)

In a special section, the Update (pdf) analyses the trends and forms of the country’s rapid pace of urbanisation to examine its contribution to economic development. An increase in the urban population has been accompanied by the physical expansion of cities, notably the periphery of Kigali though around secondary cities as well. The report finds the urban share of Rwanda’s total population (now about 12 million) has increased far faster than official records suggest because the definitions of urban areas need streamlining. A 2012 census and 2014 household survey calculated the urban share of the population at 16.5 and 17.3% respectively. However, using another, simple definition of urban, the report’s researchers found that the level of urbanization had increased far more – from 15.8% to 26.5% between 2002 and 2015, an increase of 132% or almost 2 million people.

Mozambique Economic Update: making the most of demographic change (World Bank)

The World Bank’s new Mozambique Economic Update (pdf) notes that small and medium enterprises are crowded out, and that not even the sizable growth of commodity exports is sufficient to counteract the effects this is having on the economy. The level of concentration has also increased in 2017: Just a few commodities dominate exports, representing a larger share of foreign currency inflows, which heightens the country’s exposure to external shocks. The concentration of output in the extractive and minerals sector keeps Mozambique on the path of a two-speed economy, one less capable of generating enough jobs to absorb a net inflow of the almost 500,000 people entering the labor force each year. Trends observed in 2017 make it clear that Mozambique needs to double its efforts to support small and medium enterprises and look beyond the extractive sector for more balanced growth.

Tanzania: Seventh Review under the Policy Support Instrument (IMF)

Significant public investment is planned over the coming years. Major projects include the standard gauge railway linking Dar es Salaam with Mwanza, the 2100 MW Stiegler’s Gorge hydro power project, the Bagamoyo port development, and the Hoima-Tanga pipeline linking Uganda’s Lake Albert oil fields to the Tanzanian port of Tanga. Timelines and financing modalities are not yet fully decided, and it was agreed that the medium-term scenario presented in the previous staff report continues to be relevant and will guide the authorities’ public investment plans. Thus, the baseline scenario assumes that the overall fiscal deficit would increase to about 4½ percent of GDP for a few years, before converging back to below 3 percent of GDP as major public investment projects are completed and in line with regional commitments toward the planned East African Monetary Union. That scenario allows Tanzania to maintain its low risk of debt distress rating as indicated in the accompanied debt sustainability analysis update.

The Pan-African Investment Code: a good first step, but more is needed (pdf, Columbia Center on Sustainable Investment)

It is clear, under these circumstances, that the Code will not keep its original promises. Nevertheless, it certainly remains a useful instrument for African investment policy-making. As many binding regional instruments are currently under negotiation, including the SADC-COMESA-EAC Tripartite Free Trade Agreement and the Continental Free Trade Agreement, which both contain investment chapters, the Code can serve as a useful capacity-building instrument. It can, indeed, provide guidance to the negotiators of these agreements, in support of the continent’s structural transformation objectives. Having said that, to put the Code into context and clarify its purpose, it will probably be necessary to rename it as “Pan-African Guiding Principles on Investor-State Relations.” [The author: Mouhamadou Madana Kane]

The role of trade policies in building regional value chains: some preliminary evidence from Africa (UNCTAD)

This study (pdf) uses newly published international input-output tables, obtained from the UNCTAD Eora GVC database, to quantify trade in value added between African countries and to evaluate each country’s position in the RVC. The empirical analysis concentrates on the backward integration perspective, defined as imported foreign value added from the region embedded in a country’s exports to the region. On average, 6.0% (in 2012) of the value added exports to African countries are also sourced from within the region. Southern African countries such as Namibia, Botswana and Swaziland are considered to be the most integrated countries, mainly attributed to their proximity to the regional hub, South Africa. Moreover, all African countries, except South Africa, presently import more inputs from within region than they did in 2006. Between 2006 to 2012, real imported FVA increased by 114% while total value added trade increased by 53%. The stronger increase in FVA indicates a strengthening of regional production networks.

China’s impacts on SSA through the lens of growth and exports (IMF)

If China’s impacts on SSA are well quantified, a following question would be what the potential transmission channels are? how China influences SSA? In this context, the paper (pdf) seeks to assess the traditional channels of trade and FDI by examining whether China-related variables are among the determinates of SSA’s total exports and exports to China. In summary, the paper seeks to answer the following questions: Is China’s economic growth significant for SSA growth? Does it evolve over time? Does country heterogeneity play a role? Which component of China’s GDP is more important: consumption or investment? What role does Chinese economy play in SSA’s exports?

SADC-EU Economic Partnership Agreement Civil Society Forum: conference report (pdf)

Profiled recommendation: It was agreed that the experience of the European Economic and Social Committee provided useful lessons for the establishment of a civil society platform under the SADC-EU EPA. For example, the EESC participated in a joint consultative committee with civil society from the Caribbean to discuss issues of common interest on an annual basis. It was recommended that a similar structure be established under the SADC-EU EPA with participation from existing umbrella groupings in SADC that are mandated to represent civil society, such as the SADC Council of NGOs, Southern African Trade Union Coordinating Council and the Southern African Business Forum. The platform would define its terms of reference and participate in the monitoring of the implementation of the EPA and identify initiatives to tackle bottlenecks related to the agreement. It would also serve as a space to network and exchange best practices between civil society in the EU and the SADC EPA countries.

Maritime piracy and armed robbery reaches 22-year low (ICC)

A total of 180 incidents of piracy and armed robbery against ships were reported to the International Chamber of Commerce’s International Maritime Bureau in 2017, according to the latest IMB report. It is the lowest annual number of incidents since 1995, when 188 reports were received. Beyond the global figures, the report underlined several takeaways from the past year: