tralac’s Daily News Selection
Featured trade infographic, @ECA_OFFICIAL: Intra-Africa trade in agricultural products is underexploited. Trade liberalization under CFTA is expected to result in significant export volume growth across several food sectors.
Underway in Nairobi: 11th Annual Forum of Developing Country Investment Negotiators
An executive order signed by Nigeria’s president Buhari on Monday “prohibits the ministry of interior from giving visas to foreign workers whose skills are readily available in Nigeria.” It’s not a blanket ban though. The executive order states that foreigners will be considered for jobs “where it is certified by the appropriate authority that such expertise is not available in Nigeria.” The executive order also tells government agencies to “give preference to Nigerian companies and firms in the award of contracts.” But the restriction on hiring foreigners could be seen to conflict with the government’s recent move to more open visa policies.
Kenya now playing catch-up to Ethiopia on mega projects (The Standard)
Ethiopia is tipped to stretch its lead on Kenya in economic growth, spurred by increased investment in development projects. According to the Africa Construction Trends report 2017 released by audit firm Deloitte yesterday, for every Sh100 that Ethiopia budgeted for, Sh40 went to projects in key sectors of the economy compared to Kenya’s Sh20. This means that Ethiopia – which in 2016 overtook Kenya to become the largest economy in Eastern Africa – is in good stead to stretch its lead over Kenya. According to the report, although Kenya had the largest number of projects between 2016 and 2017, the total value of projects in Ethiopia was almost twice those in Kenya. [Ethiopia, Kenya need to exploit economic opportunities - Ambassador]
Kenya to start exporting oil in 2021/22, says Tullow (The Standard)
Kenya could start exporting oil on commercial scale in the next five years, Africa-focused oil and natural gas producer Tullow Oil said on Wednesday. “The exploration and appraisal campaign in Kenya has confirmed the presence of substantial oil resources in the South Lokichar Basin. After over six years of hard work, we can now move forward to commercialising these low cost resources through a phased development of the basin involving a central processing facility and an export pipeline to the Kenyan coast,” said Mark MacFarlane, Executive Vice President for East Africa. “In 2018, we will focus on taking the project towards Final Investment Decision in 2019 with a prudent and flexible plan of execution that can take advantage of low oil services costs and deliver first oil and cash flow as soon as possible. With good progress being made in Uganda towards FID, East Africa is on the verge of becoming a major oil exporting region.”
Kenya: Maize imports from Uganda rise sharply to top Sh1.47bn (Business Daily)
Maize imports from Uganda rose sharply between October and November last year compared with the same period in 2016, as high prices in Kenya following a shortage of the grain helped spur the trade. Data from the Eastern African Grain Council indicates that cross-border trade between the two countries increased from 1,408 tonnes in the fourth quarter of 2016 to 47,563 tonnes estimated at Sh1.47 billion in the same period last year. EAGC regional manager for marketing and communication Jacinta Mwau said the price differential and improved production in Uganda helped to raise volumes of grain traded between the two neighbouring states.
Kenya: Cheap Chinese, Indian, UAE imports threaten local firms (The Star)
In its fourth-quarter Barometer report, the business lobby said 63% of manufacturers complained cheap imports make local products uncompetitive. The Barometer represents a six-month forecast. The most-affected firms are Sameer Africa, which makes tyres, and Eveready East Africa, which manufactures batteries. Many other products, including textiles, are also hurt by imports. “It’s necessary to fast-track implementation of the Trade Remedies Act 2017 [that] seeks to deal with unfair trade practices such as dumping, subsidising and import surges,” KAM said. To ease the problem, the association wants full enforcement of existing laws to ensure fair trade practices and a level playing field. Last month, South Korean-based electronics giant Samsung announced it had abandoned plans to build an assembly plant in Kenya. It cited failure by the government to put in place mechanisms to protect manufacturers from cheap electronics imports.
Kenya: Govt to zero rate taxes on imported raw materials (KBC)
The government plans to zero rate both the Import Declaration Tax and the Railway Development Levy on all imported raw materials to be used in manufacturing processes locally. The revenue shortfall will then be recovered by increasing tax on imported finished products. This according to Industry and Trade Cabinet Secretary Adan Mohammed will cushion locally produced goods from unfair competition posed by cheap imported goods.
Uganda: Informal trade costs Shs900b in maize revenue (Daily Monitor)
Uganda’s failure to enforce regional standards aimed at eliminating cheap imports and informal trade is depriving the country of Shs900bn export revenue annually. Bank of Uganda statistics indicate that last year, the country formally exported maize worth $70m (Shs254bn) out of the 4 million metric tonnes. However, industrial players are saying the earnings were less than the country’s annual revenue potential of $320m (Shs1.1 trillion) if everybody played their part. In a bid to protect Uganda’s maize from cheap imports outside East Africa and informal traders who distort the market, sector players want government to enforce the regional standards. In an interview with Prosper Magazine, the chairman of the Grain Council of Uganda, Mr Chris Kaijuka, said: “We want government through the ministry of Trade, to enforce the EAC Maize standards so that traders start trading formally.” He said Uganda is being flooded with maize imports from Brazil and the Southern African countries.
Kenya: Smuggling of hides hurts did to grow leather trade (The East African)
While Kenya has identified the leather industry as among those to push its manufacturing sector, it is struggling to stem export and smuggling of raw hides and skins. According to the Tanners Association of Kenya, smuggling of hides and skins to China is costing governments in the EAC about $30m annually in lost tax. “Currently we don’t have a law banning raw exports of hides and skins but the government has increased export tax to 80% from 40% to encourage value addition,” said Kenya Leather Development Authority chief executive Dr Issack Noor. However, the high taxes feed into a smuggling racket, denying governments millions in tax revenue.
Tanzania’s rice exports to Kenya, Rwanda to increase (The East African)
Tanzania hopes to increase its rice exports to Kenya and Rwanda by one-third this year, according to forecast by a trade tracker. According to the East Africa Cross-border Trade, the trade volume will be boosted by supplies from the August harvest and high carry-over stocks, which are likely to lower prices. The low rice prices are due to lower maize flour cost which is a substitute staple food to rice. Amid trade disputes, Kenya is still Tanzania’s main market for rice followed closely by Rwanda. Tanzania projects to export 84,000 tonnes of the locally produced rice to Kenya and 60,000 tonnes to Rwanda.
Speaking at a business luncheon he hosted in Dar es Salaam in honour of the visiting Chinese Minister of the State Administration for Industry and Commerce, Zhang Mao, Dr Reginald Mengi TPSF chairman, added: “Tanzania has regulatory framework for protecting investments and therefore we in the private sector are comfortable with the measures, the government has undertaken to raise investor confidence. Tanzania has huge potential to attract Chinese investors who intend to relocate industries outside China,” he said, encouraging Chinese investors to come to Tanzania to form partnerships or joint ventures with the private sector to accelerate cooperation between the two countries. The TPSF chairman said the government was also addressing bureaucratic procedures that raise the costs of investments and doing business in key sectors.
Why flying within East Africa is cumbersome (The East African)
According to a report (pdf) by the East African Business Council and the global management consulting firm InterVISTAS, the vast majority of Basas signed between the EAC countries and other African countries are restrictive, with partial or full restrictions on aspects of the Basa. Thanks to these restrictions coupled with higher taxes, only one in 10 passengers flies within the region. “From our research, only 9% of the travellers go to destinations within the region, while 16% travel to other African destinations. More than 46% are always flying to/from international destinations outside of Africa while 29% fly domestically,” the report notes. The open skies treaty signed in Addis last weekend would have offered a glimmer of hope for the region, but it failed to do so, as two of the region’s biggest aviation destinations – Tanzania and Uganda – failed to assent to the SAATM. “They raised issues to do with competition within their markets and how this would curtail their dreams of a national airline. The two countries have in recent times been propping up their national airlines and changing policies to allow for the entry of bigger players to support their national airlines. They are still discussing these issues, which is why they haven’t signed up,” The EastAfrican was told. [Single African Air Transport Market: Domestic flights still protected – Mozambique]
Commentaries: George Omondi: Endless Kenya, TZ trade pacts reveal worrying inertia, George Wachira: Restrict competing imports in quest for food security
Port access in the Lake Tanganyika: key challenges and recommendations (World Bank)
In 2016, the DRC and Tanzania requested World Bank support for the implementation of the Lukuga project, a dam on the sole outlet of Lake Tanganyika, whose purpose was to stabilize the lake’s water level in order to secure ships access to its main ports. Its main objective is to determine the relevance of the Lukuga project by assessing the ships difficulties in accessing the main ports on the Lake, characterizing impact on transport and trade, identifying the main factors hindering access to ports, and presenting a combination of measures to mitigate those factors.
Democratic Republic of Congo: Jobs diagnostic (World Bank)
Extract from Section 3: Firms and jobs (pdf). Most firms are in the commercial sector. Over three-quarters of firms are enterprises operating in the commercial sector (figure 3.1). The second largest sector in terms of number of firms is services, with over 12%. Over 8% of firms are in manufacturing and just over 1% are in the mining, utilities, and construction sector. The typical firm is relatively young. In this sample, 70% of firms have been in the market for fewer than nine years. Those firms constitute almost 60% of non-farming employment. Firms with fewer than five years make up 45% of all firms in the country, and a similar share (41.6%) of non-farming employment (figure 3.2). This is a strikingly young population of firms when compared with those of Afghanistan, Burkina Faso, Kenya, Tanzania, Uganda, and Zambia. The highest share of young firms is no more than 27%, in Afghanistan.
The typical firm is small. In terms of employment, 95% work in micro to small firms of fewer than nine employees. In terms of annual turnover, 95% of firms have sales that are less than the second quartile in the distribution (table 3.2). Only 5% of firms benefit from higher turnover. Firms that enter the market small, stay small (or even shrink) while big firms grow (some). Using cross-sectional data, it may be possible to decipher the possible life cycle of firms, from birth to about year 10, with respect to the number of employees these firms hire and let go. The average micro firm at birth employs, on average, 3 employees. When young, the average firm adds another worker to reach 3.7 workers by age of 10 (figure 3.3). If the firm at birth hired between 6 and 9 employees, that firm shrinks 10 years later. Only firms that start relatively larger - with at least 10 workers - grow substantially over the 10 years.
DP World, the international ports and logistics business based in the UAE, handled more containers last year than at any time in its history, as the growing world economy boosted global trade. In its annual assessment (pdf) of container traffic through its ports, the company reported that more than 70 million TEUs – 20 foot equivalent units – passed through ports it either owned or had a significant presence in. That outcome was a 10% rise over 2016, beating forecasts of 6% by industry experts Drewry Maritime.
Today’s Quick Links:
The Kenya Association of Manufacturers launched its 2018 Manufacturing Priority Agenda this morning in Nairobi
Egypt looks forward to an investment base for Oman in Africa: trade minister
EALA appoints six Standing Committees: the members
Is acceleration the panacea for scaling growth entrepreneurs? Reflections from XL Africa.
UK ready to build on new opportunities to grow SA trade ties: commentary by UK trade envoy, Andrew Selous