tralac’s Daily News Selection
Diarise: 4th EAC Heads of State Retreat on Infrastructure Financing and Development (21-22 February, Kampala)
Regional integration and informal trade in Africa: evidence from Benin’s borders (CEPII)
We use an original survey of informal transactions across Benin’s land borders, which provides the first direct and comprehensive account of trade volumes and product coverage for this type of trade. We combine this data with official trade records and exploit variation across products and countries to measure the impact of tariff and non-tariff barriers to trade on informality. Increasing tariffs on a given product by 10% makes it about 12% more likely that this product is imported informally rather than formally. Non-tariff measures also increase informality. Our results (pdf) also suggest that compliance costs, aside from tariffs and regulations, contribute to explain informality. [The authors: Cristina Mitaritonna, Sami Bensassi, Joachim Jarreau]
Southern Africa: Remittance factsheet (Finmark Trust)
The table below (pdf) summarises our country-by-country estimate of remittance market size. SADC migrants resident in South Africa are estimated to remit approximately R16.6bn home annually, with Zimbabwean migrants making up more than half of the total value of the market. The next highest sources of remittances are Mozambicans and Basotho, with these top three countries comprising roughly 89% of the regional market. In 2012, we had estimated total market size at R11.2bn (after accounting for inflation, approximately R13.9bn in 2016 terms). The difference reflects both the change in some of our assumptions of remitting behaviour, as well as the mix of migrants by nationality, given the greater accuracy allowed by availability of census data.
External adjustment has been more rapid than anticipated (Figure 4, Table 5). In the period of November 2016-October 2017, the trade deficit valued in US$ terms was 24% lower than compared to the pre-SCF period (July 2015–June 2016). Import volumes have increased only marginally by 1.5% when compared to the pre-SCF program period, reflecting exchange rate depreciation and adjustment policies. Export volumes are 43%higher, due to a more competitive exchange rate and policies to promote the growth of non-traditional exports such as horticulture and gold, and re-exports of petroleum products. Excluding re-exports, export volumes are still 30% percent higher than the pre-SCF program period. Box 2: Made in Rwanda (pdf):
The initiatives remain at their nascent stage, making overall assessment of their impact difficult. Some initial effects on domestic activity and external imbalances include: (i) Cement production has increased three-fold between 2014 and mid-2017, and could increase as much as nine-fold upon full use of planned upgrades. Increased domestic cement production has coincided with a sharp decline in import volumes, and slight increase in exports. (ii) Sugar and rice production has increased by around 40% since end-2014. Production should continue to increase under existing investment plans to increase processing capacity and agricultural efficiency. (iii) Investment in the textile industry has buoyed domestic production since 2014. Textile imports have fallen sharply since higher import tariffs on second-hand clothing and shoes were introduced in mid-2016 and production and job-creation has expanded rapidly. This has coincided with lower textile exports, consistent with some re-orientation of production to domestic markets. [Volkswagen to start Rwanda car assembly in May]
Why Kenya opted out of EAC project to link stock markets (The East African)
In a letter written to the EAC Secretariat in mid-November, Kenya said it would not join Burundi, Rwanda, Tanzania and Uganda to launch the platform in September, suggesting it had concerns on the infrastructure. It said it would monitor the performance of the regional platform vis-à-vis its ongoing modernisation of trading interfaces. Kenya pulled out of the CMI project in 2015, citing irregularities in the $3.3m tendering process of the software and requested for more time to consult on the matter. Burundi, Rwanda, Tanzania and Uganda are working on a schedule to have the project up and running by its September 2018 completion target. It is part of a wider World Bank-funded EAC Financial Sector Development and Regionalisation Project 1, which seeks to support the establishment of a single financial market among the EAC member states. [Kenya beats top rivals to rank fifth on stock markets index]
Mozambique: Increasing private sector participation in the Maputo Stock Exchange (SPEED+)
The Mozambique Stock Exchange (BVM) is very small with only five listed companies and very little trading. Market capitalization/GDP and turnover/GDP ratios are among the lowest in the world, and little capital has been raised through new issues in the past few years. The newly installed management team at BVM is determined to make the market larger and more active in order to make it an effective source of finance in the next phase of the country’s development. The draft SPEED+ report (pdf) observes that the number of listed companies may soon rise due to a planned wave of new issues by IGEPE the institution that is responsible for companies with state ownership and by listing of “megaprojects” in the natural resource sector. While welcoming the rise in listed companies, the report emphasizes the need to strengthen the corporate governance rather quickly, since experience shows that large-scale privatization without adequate safeguards for investors can have disastrous economic and social consequences.
Why Nigeria Stock Exchange is recording growth in 2018 (Premium Times)
On market performance in 2017, Oscar Onyeama (NSE CEO) said the market recovered from the macroeconomic overhang of the commodity down cycle to become the third best performing market in 2017 globally, with a 42% return in the NSE All-Share Index. Market capitalisation rose by 47% in 2017 to N13.62 trillion against N9.26 trillion posted in 2016, he said, adding that CBN policies increased liquidity in the foreign exchange market. Commenting further, he explained that the equity market activity rose from 2016 levels, as market turnover increased by 121% to N1.27 trillion from N0.58 trillion.
Nigeria: Compendium of investment incentives
This Compendium of Investment Incentives in Nigeria is the product of a collaboration between Nigerian Investment Promotion Commission and Federal Inland Revenue Service. It is published pursuant to the provisions of Section 4(i) of the NIPC Act, which requires NIPC to “provide and disseminate up-to-date information on incentives available to investors” in Nigeria. The Compendium is a compilation of fiscal incentives in Nigerian tax laws and sector-wide fiscal concessions duly approved by the Federal Government and supported by legal instruments. This first edition is based on the 2016 Fiscal Policy and covers 5 sectors. [Nigeria moves closer to energy overhaul with new oil Bill]
Namibian trucking firms making use of the Sesheke-Livingstone road in Zambia, which forms part of the Walvis Bay Corridor and stretches all the way to the DRC, are bemoaning its deplorable state. Namibian and other truckers lose valuable time and money which impacts on their efficiency and ultimately their competitiveness within the logistics sector. The heavily-potholed Sesheke-Livingstone road covers a stretch of only 97km, which makes up a portion of the Walvis Bay-Ndola-Lubumbashi Development Corridor as part of the overall Walvis Bay Corridor. It should take about an hour and a half to drive, but due to gaping potholes that stretch across almost its entire length truck drivers, bus drivers and other motorists take between three to five hours to travel this important road. “This road is a critical piece of infrastructure for the corridor. Our Zambia office is working tirelessly to ensure the Zambian government prioritises infrastructure development on that road,” said Johny Smith, CEO of the Walvis Bay Corridor Group.
Transport minister Jean de Dieu Uwihanganye said: “It is big in so many ways; in terms of the budget of the project, impact on cost of imports and exports to and from Rwanda and Made-in-Rwanda competitiveness on the global market, to say the least.” High transport costs in East Africa have often been cited as a serious challenge to Rwanda’s ability to compete effectively with its neighbours. Importers say it costs the country, on average, $4,990, to import a 20ft container while the sub-Saharan average is $2,504, which significantly affects Rwanda’s competitiveness in terms of cross-border trade. Deus Kayitakirwa, the Director of Advocacy at Private Sector Federation, says the cost of transporting a container between Kigali and Dar-es-Salaam currently stands at a staggering $3912. PSF’s Kayitakirwa said it will cut transport costs by over $1500 a container. [East Africa ports in fresh push to attract shipping lines]
Notably, the railway is set to be the first of the two-prong SGR – one prong from Dar es Salaam along the Central Corridor, and the other from Mombasa via Kampala on the Northern Corridor. This will uniquely place Kigali at the centre of economic activity, bridging the gap between the Central African region and the EAC, especially in the mining, agriculture and industrial development sectors. This necessarily anticipates an intermodal passenger and freight cargo enterprise that will seamlessly combine rail, air and road modes of transport opening up the hinterland, if one takes the example of the Eurasian Resources Group’s broad mining interests in the wider region, including of cobalt through its Metalkol Roan Tailings Reclamation project in the DRC. [Commentary by Gitura Mwaura]
Jean de Dieu Uwihanganye, the State Minister in charge of Transport, said that national carrier will launch its flights to Guangzhou in May. “There are currently a lot of business transactions going on between China and the continent and we think that Guangzhou route will help ease connectivity between Africa and China,” he said. The minister added: “As an airline, we are also trying to spread our wings to different parts of Africa.” The flight to Guangzhou Baiyun International Airport in Guangdong Province, China will be tagged on the Mumbai, India route, he noted. He, however, said they were looking at possibilities of having direct flights in the long-run.
Total trade represents 60% of the world’s GDP, and yet global supply chains are clogged with inefficiencies and heavily reliant on complex paper-based systems. A single shipment of goods from East Africa to Europe can require over 200 unique interactions with 30 individuals and organizations, generating a four-inch stack of paper records. In some instances, it can cost as much in paper and administrative flow as it does to pay for the shipping itself. Over 18 months, through initial pilots, we’ve shown that blockchain can work on many of the most common barriers in supply chains. We’ve used the technology to securely digitize, automate, and store critical paperwork. Early testing demonstrated that we can significantly reduce administrative costs, which at the time of testing could be as high as 15% of the value of the goods shipped. Now, through this new company, IBM and Maersk will commercialize and scale blockchain solutions to a much broader group of global corporations, many of whom have already expressed interest in these solutions: General Motors, Procter and Gamble, Agility Logistics, Singapore Customs, Peruvian Customs, APM Terminals, PSA International, and Guangdong Inspection and Quarantine Bureau for trade corridors in and out of China.
Status report on the SADC, COMESA and EAC harmonised seed trade regulations: where does this leave the regions’ smallholder farmers? (ACBIO)
This paper offers a critique of these frameworks which firmly embed green revolution approaches in Africa, favoring large scale agribusiness as the solution to seed insecurity in Africa. This approach will have drastic implications for smallholder farmers and their seed systems, who provide the most sustainable supply of seed in the region. Long-term solutions require comprehensive and appropriate national and regional seed policies that guarantee the rights of farmers, and particularly women farmers, supporting smallholder seed production and supply, and protect agricultural biodiversity.
Uganda was the first Member State to host a workshop on the country-specific consultations on CPPI forecasted drivers for 2018. Policy makers, technical officials drawn from the Office of the President, Office of the Prime Minister, Ministry of Foreign Affairs, Ministry of Internal Affairs and Ministry of Defence, Civil Society Organisations as well as the private sector met in Kampala from 11 – 16 December 2017 to review the key forecasted structural drivers for Uganda that were forecasted by the COMESA Early Warning System Sructural Vulnerability Assessment model. The multi-stakeholders’ consultative forum was convened in response to a Decision of the 15th Meeting of the COMESA Ministers of Foreign Affairs, that was held in Antananarivo in October 2016.
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