tralac’s Daily News Selection
The Trade Development Forum began this morning in Kampala: twitter updates @TradeMarkEastA; hashtag #TDF2018
Call for abstracts: Corruption and the challenge of economic transformation in southern Africa
South Africa trade data: January deficit of R27.66 billion (SARS)
The South African Revenue Service has released trade statistics for January 2018 recording a trade balance deficit of R27.66bn. The R27.66bn trade balance deficit for January 2018 is attributable to exports of R80.51bn and imports of R108.17bn. Exports decreased from December 2017 to January 2018 by R23.52bn (22.6%) while imports increased by R19.45bn (21.9%). Profiled trade highlights by world zone: (i) Africa trade balance surplus of R9 303 million – this is a deterioration of R8 238 million in comparison to the R17 541 million surplus recorded in December 2017; (ii) Asia trade balance deficit of R24 710 million – this is a deterioration of R19 776 million in comparison to the R4 934 million deficit recorded in December 2017.
tralac’s John Stuart: Openness to trade makes South Africa vulnerable to global shifts (Business Day)
The sectors that are the targets of industrial policy are also lacking in their ability to create jobs at the rate required by the economy. On aggregate, the industrial sectors targeted by the Department of Trade and Industry’s industrial policy action plan are becoming more skills intensive, which means they will not be able to absorb unemployed low-and middle-skilled workers even if they grow. This tendency may be acceptable in Europe, where population growth is relatively static and education quality is high, but it is different in SA. It appears our industrial policy is misdirected if it is intended primarily to create the jobs that the economy so desperately needs.
One of the main highlights of the report is the statistics, which shall be used to monitor, assess and re-negotiate Nigeria’s trading relationship with counterparts. NATPOR statistics indicates that trade activities (import and export) employed over 14% of the Nigerian workforce, equivalent of 10.8 million people. It also notes that trade accounts for 18% of GDP, second only to agriculture (which accounts for 29.1% of the GDP). However, the overall value of Nigerian trade between 2014 and 2015 decreased by approximately 7.4 billion (from about 23.7 billion in 2014, to 16.3 billion in 2015). In terms of percentage, this is a decrease of about 18.5% in trade value between 2014 and 2015. The decrease in 2015 reflected the recession in economic activities due to the sharp decline in oil receipts. There was a slight increase in 2016. Stronger more positive performance is expected with Q4 figure in 2017.
NATPOR also showed that trade statistics for the three quarters of 2017, both in export and import, South Africa remained Nigeria’s major trading partner in Africa. Within ECOWAS, Côte d’Ivoire assumed the top position in terms of Nigeria’s imports from ECOWAS, while Togo maintained top position in terms of Nigeria’s exports to ECOWAS, in the reported three quarters of 2017. Outside Africa, Europe remains Nigeria’s major regional trading partner (both in Export and Import) through the three reported quarters of 2017, followed by Asia. Globally, India and the United States are Nigeria’s two top major trading partners in export through the 3 quarters of 2017, while China and Belgium are Nigeria’s two top trading partners in import through the 3 quarters of 2017. [Full text of FMITI press release (pdf)]
Vera Songwe’s meeting with African ambassadors: AfCFTA, migration, illicit financial flows (UNECA)
Ms Songwe opened the meeting with an overview of the work done by the ECA in the past three months in implementing its work programme for the biennium 2016-2017. She provided the Ambassadors with some important updates on the ongoing UN system-wide management reforms and other matters relevant to the work of the Secretariat. The ECA Chief and the Ambassadors discussed the forthcoming historic signing of the Continental Free Trade Area in Kigali in March and the work the ECA continues to do in supporting the AUC and member States in the AfCFTA negotiations. Member States, like Ghana, were concerned that it seemed like the private sector was not heavily involved as would be expected to make sure they benefited and entered trade deals that would be benefit the continent and its people once the AfCFTA was implemented. Ms Songwe urged the Ambassadors to encourage their countries to sign-up to global tax transparency and other relevant legislation to stop the bleeding and to ensure that money and assets siphoned out of the continent illicitly can be brought back once tracked successfully.
Standard Bank’s Vinod Madhavan: Digitisation will overcome African trade barriers (EA Business Week)
In a globally generalised growth environment Africa’s demand for trade finance is only likely to increase. This means that 2018 is likely to see Africa’s bank-intermediated trade finance deficit significantly exceed the AfDB’s estimation of a c. $100m shortfall. Given these numbers, using digitisation to increase the efficiency and reduce the cost of trade will be essential if Africa is to – quickly leverage the full potential of this historically unique instance of synchronised global growth. In particular, access to trade finance remains a challenge for Africa’s small and medium-sized enterprises. Developing effective SME financing able to support the rapid expansion of intra-African trade remains critical to both growth as well as social and political stability.
Trade finance in Africa is currently heavily paper-based and siloed both within and between nations. For a while now African governments have been encouraging digitisation as a way of boosting domestic and global trade in markets that lack traditional domestic and cross-border trade infrastructure. For example, the tea industry in Kenya has adopted a platform that brings buyers and sellers together. Other similar digital platforms in Kenya, Ghana and Tanzania provide services to businesses in the bulk oil importation space. What is immediately obvious is that Africa is being transformed by digitisation on three levels, namely; through the digitisation of the physical supply, the financial supply and also via the documents chain. [The author is Group Head of Trade for Standard Bank Group]
Economic relations have been diversified with a “win-win” approach. In this period, Turkey signed 45 commercial and economic cooperation agreements with the African countries, increasing the number of agreements for the reciprocal protection of investments from six to 26. While Turkish direct investments in Africa were $100m in 2003, they reached $6.5bn in 2017. Turkish entrepreneurs provided employment to 78,000 people throughout the continent and the volume of the projects carried out by the Turkish contracting companies exceeded $55bn. The number of continental embassies rose from 12 in 2003 to 41 in 2017, when the African Expansion Policy was initiated. Turkish Airlines’ flight traffic reached 52 destinations in 33 countries on the continent. Recep Tayyip Erdoğan has paid more than 30 visits to 28 African countries as both prime minister and president in the last 10 years. Foreign Economic Relations Board established business councils with 42 African countries. [Turkish-Algerian Business Forum: Erdogan says Turkish-Algerian trade exchange to hit $10bn]
High costs slow journey to export Uganda’s beef (Daily Monitor)
Exorbitant cost of electricity, poor quality of cows and lack of adequate places to seclude (quarantine) sick animals from the healthy ones have made it difficult for a factory commissioned about three years ago to export processed, packaged and branded beef to the rest of the world, Daily Monitor has learnt. Egypt-Uganda Food Security, a modern slaughterhouse commissioned in August 2015 by President Museveni is yet to export any value-added beef despite his remarks then that the country has come of age and as a result it is now in position to export processed and branded beef products. Ideally, commercial operations should have hit high gear by now, but as a result of challenges, most of which are down to the government failure to come clean on its promises, the management of the modern abattoir has found it hard to immediately hit the ground running as earlier anticipated.
I will now clarify the position of Cabinet and the Ministry on the restructuring of debt. This issue is unfortunately being misinterpreted that Government is anticipating challenges in servicing its debt. As announced in the 2018 budget address, the Government has commenced preparations to address the repayment of its Eurobonds through the operationalization of a sinking fund. Part of the process involves addressing liquidity risks at the time of paying/refinancing of the Eurobonds. As part of prudent risk management, the Government decided to reposition some flows falling due during the period of the Eurobonds, by engaging some creditors that may be open to pushing some flows this period forward. We are not contemplating any stock re-profiling but just the flows that fall due in the period of the repayments. China being a natural first creditor and accounting for 28% of our debt was a natural creditor to have a discussion with.
May I emphasize that Zambia does not intend to and will not default on its obligations. Only creditors that will be amenable to the proposal will be engaged and this will be on the basis of willingness. As part of the broader strategy, the Government has since put in place a team of officers from the Bank of Zambia, Ministry of Finance and Ministry of Justice to undertake work that will determine exactly what form of strategy will be adopted for the repayment/redemption of Eurobonds. The work will be completed by the end of the 1st quarter 2018. [Statement by Minister of Finance, Margaret Mwanakatwe] [S&P maintains Zambia’s stable outlook rating: MoF statement]
South Africa: Poultry producers vow to tackle immoral dumping, incorrect packaging (IOL)
The South African poultry industry on Tuesday met to find lasting solutions to the thorny issues of import tariffs, free trade agreements, immoral dumping and the mis-labelling of packaging. The South African poultry industry is faced with cheap imports from the United States, Brazil and the EU, and with the additional devastation wreaked by the avian flu epidemic. Advocacy group, Fair Play, said that this comprises immoral dumping, and made a recommendation that imports be reduced by as much as 50% while calling for the zero VAT rating of South African poultry products. Another appeal by producers was that the playing field be levelled for everyone including importers, and for the same rules of production and packaging to be applied across the board. The Department of Trade and Industry presented a report that was being tabled simultaneously to the Parliamentary Portfolio Committee giving an update from the poultry task team.
Climate resilience in Africa: the role of cooperation around transboundary waters (World Bank)
This report draws on a substantial body of empirical evidence from five major basins in Africa - including the Nile, Zambezi, Limpopo, Lake Chad, Niger basins - to support the critical role of transboundary cooperation on water resources management to building systemic resilience to climate change in Africa. The case studies underlying this report show that appropriately planned transboundary cooperation can improve the resilience of economies, livelihoods, and ecosystems in Africa. Specifically, the case studies show that...: Extract (pdf): Over 90% of Africa’s surface water is in transboundary basins and requires transboundary cooperation to manage optimally. In addition to its surface water, Africa has many transboundary aquifers, underlying over 40% of the continent. Some form of cooperation exists for most river basins (although much less for shared aquifers), but cooperation is inevitably complicated by a range of technical, economic, financial, political, and environmental challenges. Options for building resilience to climate change will be considerably smaller if limited to actions undertaken by individual countries only and run the risk of counter-productive investments when viewed at the regional scale.
Conference on Fiscal Management of Mining and Petroleum in West Africa: remarks by IMF Deputy Managing Director, Carla Grasso (IMF, GoG)
Too often, it seems that having natural resources makes very little difference to countries in terms of achieving better developmental outcomes. In some particularly extreme cases, natural resources might even make the situation worse if, for example, these resources lead to violent conflicts or foster corruption. We have also been reminded in recent years that commodity prices are highly cyclical and volatile. For countries in the region that are still dependent on revenue from the mining or petroleum sector, this has led to significant fiscal pressures. There are no simple answers on how to escape the so-called Resource Curse. [UNU-WIDER Blog by Alan R Roe: Information asymmetries in extractive industries – what can be done?]
Today’s Quick Links:
FairTrade and the Commonwealth: A five-point plan for prosperity, sustainability and fairness (pdf)
UNFPA posts its Demographic Dividend in West and Central Africa: 2017 Progress Report
GIEWS Southern Africa update: Erratic rains, intense dry January period lowers 2018 cereal production prospects
IMF Blog: China’s thrift, and what to do about it
World Bank Blog: Bank ownership – trends and implications