Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Bloomberg

Egypt’s fourth Trade Policy Review is underway at the WTO: access the documentation prepared by the WTO Secretariat and the Government of Egypt.

Extract from the executive summary report by the WTO Secretariat: Egypt is a relatively active user of trade remedy measures: between January 2005 and 30 June 2017, it initiated 31 anti-dumping investigations, 16 of which resulted in the imposition of definitive anti-dumping duties. Three anti-dumping measures were extended. During the same period, Egypt initiated 14 safeguard investigations, imposed provisional measures in all and final safeguard measures on three products: blankets, steel rebar, and cotton and mixed yarns. Although few final measures were adopted, the application of provisional measures could have acted as a deterrent to trade. There are currently no countervailing measures in place.

Contemporary issues in African trade and trade finance: November 2017 edition (pdf, Afreximbank)

Stringent regulatory regimes, especially in major money centres have substantially raised compliance costs for internationally active banks. In developing economies with small fragmented markets and where the marginal costs of compliance are seen as disproportionately higher than marginal revenues, most global financial institutions, with weakened absorption capacity in the post-crisis environment, have opted for de-risking - essentially exiting relationships and closing the accounts of clients based in countries considered “high risk”. In this global environment of decreasing risk appetite, which has characterized the transition from the old rule-based towards risk-based systems, Africa has become a victim. In addition to increasing costs of financial services to African entities, a large number of multinational banks have withdrawn from correspondent banking relationships with wide-ranging consequences for trade finance and economic growth in the region. For the continent as a whole, the inherent costs associated with the adoption and rollout of de-risking strategies were magnified by a number of factors.

First, the rather unexpected timing of large-scale withdrawals of international banks from the African financial landscape made it difficult for countries to adjust and evolve towards new mechanisms and solutions. Second, the costs associated with the unexpected withdrawal were further exacerbated by the structure of the African financial system which is still largely dominated by foreign banks and financial institutions. Volume 3 Issue 1 of Contemporary Issues in African Trade and Trade Finance (pdf), looks at the challenges of promoting African trade and investment in a difficult global and financial environment where an increasingly stringent regulatory environment has decreased the willingness and capacity of global financial institutions to absorb risk. It brings together articles assessing the potential implications of rising costs of compliance and globalization of corporate governance for African economies and financial institutions, papers exploring alternative sources of financing available to corporate entities within the region, and those examining the legal requirements for regional trade agreements as African governments pursue the Continental Free Trade Area (CFTA).

Table of contents: (i) Changing regulatory frameworks, rising costs of compliance and implications for financial institutions in Africa (Benedict O. Oramah) (ii) The globalisation of corporate governance in a world of institutional inertia (Hippolyte Fofack); (iii) The emergence of supply chain finance and implications for Africa (Anthony Kyereboah-Coleman, Abdelaziz Elmarzougui); (iv) Factoring - a financing alternative for African small and medium-scale enterprises (Robert L. Tomusange); (v) Regional trade agreements and the World Trade Organization (Yusuf Daya).

African Trade Report 2017: Bridging Africa’s trade finance gap through domestic resource mobilization (pdf, Afreximbank)

Intra-African trade champions (extract from Section 8.1, pdf): Of the top 10 contributors to intra-African trade, 3 accounted for 40% of the total US dollar value: South Africa (23.3%), Nigeria (8.5%) and Namibia (8.1%) in 2016 (Figure 8.3). Seven - Botswana, Zambia, Côte d’Ivoire, Ghana, Mozambique, Democratic Republic of Congo, Zimbabwe - account for around 30% of the total. The remaining 44 African countries account for around 30%. South Africa dominated intra-African trade in 2016, accounting for just over 23% of the total, down from 26.4% in 2014 and 24.4% in 2015. The moderation was steeper in 2015, with exports falling more than 14% and imports falling more than 15%. While exports to the rest of the region have recovered, South Africa’s imports from other African countries remained sluggish, trending downward from $13.7bn in 2014 to $11.64bn in 2015 to $9.9bn in 2016. South Africa therefore widened its trade surplus with the rest of Africa from $13.8bn in 2014 to $11.9bn in 2015 to around $17bn in 2016.

Indian investments in Africa: scale, trends, and policy recommendations (Observer Research Foundation)

Indian investments in Africa, from both public and private sector entities, have increased considerably in the last decade. Yet despite the growing importance of Indian investments in Africa, only a few empirical studies have been carried out on the subject. This paper undertakes a disaggregated analysis of Indian foreign direct investment outflows to Africa from 2008 to 2016, and presents three main findings. Extract (pdf): To determine the relationship between India’s development cooperation and its commercial interests, Figure 7 ranks African countries according to the total value of lines of credit, a major instrument of India’s development cooperation, and the total FDI outflows from India between 2008 to 2016. The figure suggests that there is a weak positive association between the total concessional credit received by a country and the FDI in that country. The spearman rank correlation between Indian lines of credit and FDI flows is only 0.44.

Countries in the first quadrant – Mozambique, Kenya, Ethiopia, Tanzania, Ghana, Mali, Rwanda, Gambia, and Sudan – are those that have been favoured destinations for both Indian investments as well as credit lines. Of these, five countries (Mozambique, Kenya, Ethiopia, Tanzania, and Rwanda) are in East Africa, a region with which India has historically enjoyed close economic and cultural relations. The presence of a large diaspora in those countries also helps Indian businesses, besides fewer regulatory hurdles, and the fact that English is widely spoken in the region. This region also occupies a special place in India’s foreign policy due to its strategic location in the Indian Ocean. Countries in the third quadrant such as Djibouti, Swaziland, and Benin have not been major beneficiaries of either lines of credit or investments from India.

Countries in the second and fourth quadrants represent a disassociation between development cooperation and FDI flows. Countries in the second quadrant – Burkina Faso, Sierra Leone, Niger, Malawi, and Senegal – have been major beneficiaries of Indian lines of credit but these countries have received scant FDI flows. This signifies the failure of Indian credit lines in stimulating private sector investments in these countries. For their part, countries in the fourth quadrant (Zambia, Mauritania, Liberia, Nigeria, and Gabon) have received high volumes of FDI but have not been major beneficiaries of Indian lines of credit. In this case, it is clear that India’s credit lines are not aligned with the priorities of the private sector. Here, investments have not followed development cooperation. Private-sector companies have found it profitable to invest in these countries anyway. Zambia’s case is particularly interesting because as observed earlier, not only has it been the fifth largest recipient of Indian investments, these investments are also spread across various sectors of the economy. This is largely due to the Zambian government’s efforts in attracting Indian investments.

Tea and potatoes show potential of intra-Africa agricultural trade (UNCTAD)

Basic crops grown in Africa can be made into higher-value products, whether it’s by bagging tea or turning potatoes into frozen French fries, creating jobs and fueling growth in the continent, according to a recent UNCTAD assessment of the continent’s food trade. The potential of basic crops to form such agricultural “value chains” remains untapped in several sectors, the assessment said. The assessment, part of the report From Regional Economic Communities to a Continental Free Trade Area, also looked at highly-traded commodities in Africa such as avocados, cashews, onions, pineapples, beef and poultry. The findings provide useful insight for trade negotiators ironing out agricultural policies for Africa’s Continental Free Trade Area ahead of a March 2018 summit of African leaders in Kigali, Rwanda, where the deal is due to be signed. [Deloitte’s report on agricultural opportunities in Africa: crop farming in Ethiopia, Nigeria, Tanzania]

Public-private partnerships key for gas infrastructure development in SADC region (Club of Mozambique)

Public-private partnerships are key to developing gas supply projects in SADC, Nepad Business Foundation Africa infrastructure programme manager Peter Varndell said on Monday. Speaking at the Africa Gas Forum, in Johannesburg, he said there was strong gas supply potential in the SADC region, but a weak market to deliver to within SADC’s borders. He noted that a multi-stakeholder platform for public-private sector dialogue would enable and support the monetisation of natural gas resources in the region. He pointed out that if SADC were to develop a natural gas master plan, it would assist in shifting market dynamics to attract investment and develop natural gas resources. “There is an estimated 600-trillion cubic feet of natural gas reserves in Southern Africa and the SADC region. A master plan would be a useful blueprint to enhance economies of scale, help transform the regional economy and leverage regional value chains,” he said.

Rwanda: Tax body, civil society join hands to fight illicit financial flows (New Times)

According to Pascal, Bizimana Ruganintwali, the Rwanda Revenue Authority (RRA) deputy commissioner general and commissioner for corporate services, the tax body supports all efforts geared at crackdown on those involved in illegal movements of money to protect Rwanda from fraudsters. “RRA will never relent it its efforts to apprehend multinationals or individuals involved in illegal financial activities designed to deplete Rwanda of its resources,” Ruganintwali said. He was speaking at the launch of the drive last week in Kigali. Spearheaded by Action Aid Rwanda, Governance for Africa and Tax Justice Network Africa and the taxman, the campaign is being conducted under the theme, “Tackling illicit financial flows; the Rwandan perspective.”

The economic impact of local content requirements: a case study of heavy vehicles (ECIPE)

The use of local content requirements (LCRs) has been growing for a long time. Used by developed as well as developing countries, they aim to promote the use of local inputs and serve the purpose of fostering domestic industries. Argentina, Brazil, China, India, Indonesia, Russia, Saudi Arabia and the USA are very frequent users of LCRs. India is by far the most prominent user, followed by Brazil. While LCRs might have perceived benefits related to specific policy goals in the short term, the damaging impacts of LCRs evolve over time and outweigh short term benefits. This study estimates the economic impact of LCRs in a selected sub-sector of motor vehicles, where they are frequently used, i.e. the heavy duty vehicles subsector. ECIPE collected LCRs which affect the selected subsector in a database, classifying them by three different dimensions: their different types, their scope, and their level of impact. This database is used as a basis for the assessment of the economic costs of these LCRs for BRICS countries.

The OECD-WTO Balanced Trade in Services Database (pdf, OECD)

The first edition of the Balanced Trade in Services (BaTIS) dataset provides annual data from 1995-2012, covering 191 economies, broken down for the 11 main EBOPS 2002 service categories. This paper accompanies the dataset and describes its compilation methodology in detail, including the collection and cleaning of the reported data, the different methodologies used to estimate missing information, and the final balancing of the exports and imports flows.

Comprehensive and Progressive Agreement for Trans-Pacific Partnership: selected updates

(i) What is the CPTPP? Full text, FAQs (Government of Canada)

(ii) Eonomic impact of Canada’s participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (Office of the Chief Economist, Global Affairs Canada)

(iii) CPTPP vs TPP (Government of New Zealand)

Today’s Quick Links:

Rwanda to issue mining licenses to attract $2bn of investment in 2018

The African countries implementing the African Medicines Regulatory Harmonization Initiative

SA government remains committed to intra-African investment

Kenya: Statement by the IMF Resident Representative in Nairobi

Jean-Claude Maswana: Revisiting the growth effects of Sino–African bilateral trade on African economies (pdf)

European Commission: 2017 another record year for EU agri-food exports


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