Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: AfDB | Aurélien Gillier

The AfDB has appointed Moono Mupotola as Director, Regional Integration. Full details of this, and other senior management appointments, can be accessed here.

SADC Ministers for Employment and Labour and Social Partners: 2018 meeting outcomes

(i) Extract from Report of the Outgoing Chair (South Africa): Operational challenges. The biggest challenge we faced was the lack of capacity, support and visibility of the SADC Secretariat. It is noteworthy that it is the first time in this session that the sector is graced by the presence of a senior representative of the Executive Secretariat. The support of the Executive Secretariat is a matter that will require special attention from the Ministers in this sector. Without the consistent support of the SADC Secretariat in so far as providing effective support to member-states, our efforts may not yield the desired outcomes. The incoming Chairperson will have to pay urgent attention to this aspect, otherwise all the efforts will be in vain. The Executive Secretariat will have to play its role if the sector is to succeed in its efforts. Perhaps the first step for the incoming chair will be to organize a bilateral meeting with the SADC Executive Secretariat to thrash out better ways of working together going forward.

(ii) Extract from the Ministerial Declaration: Promoting decent work for sustainable global supply chains (pdf). In support of the 37th SADC summit’s theme: Partnering with the private sector in developing industry and value chains, which also covered labour migration issues, and a presentation of a compendium of SADC labour laws by the private sector; Recognize that value chains involve national and regional processes that facilitate investments with potential to increase manufacturing, diffusion of knowledge and technology, and local supplier linkages between Member States; Acknowledge that SADC’s international trade and investment flows have grown considerably over the last two decades, but integration into value chains remains low compared with other regions in the world;

Further acknowledge the need to address the different decent work deficits associated with Global Supply Chain through collaborative global and regional actions; Work in conjunction with the ILO in increasing policy coherence amongst our Member States as well as in maximizing opportunities and addressing challenges in the promotion of decent work in global supply chains; and Undertake to explore the ratification of international labour standards and their full implementation to complement national legislations and other international commitments such as the ILO Declaration on Fundamental Principles and Rights at Work, the UN Guiding Principles on Business and Human Rights, and ILO Tripartite Declaration of Principles concerning Multi-National Enterprises (MNEs) and Social Policy of 2017 in order to address decent work issues in all work circumstances, including cross-border supply chains;

Mozambique-IMF updates:

(i) 2018 Article IV Consultation report. Mozambique’s total public debt is on an unsustainable path. The updated debt sustainability analysis (see attached DSA) shows that Mozambique’s external debt rating is “in distress”, and total public debt is on an unsustainable path. All debt burden indicators, except the ratio of external debt service to exports, surpass prudent thresholds for several years. Under the baseline scenario, which does not assume any debt restructuring, the PV of external public and publicly guaranteed debt to GDP ratio largely exceeds the 40% prudent threshold for about eight years, while external debt service to government revenues remains on average at about 30% over the medium-term. Moreover, significant vulnerabilities related to domestic debt, which reached about 25% of GDP in 2017, are rapidly escalating. The PV of total public debt to GDP ratio is expected to peak at 126% by 2022, well above the 56% benchmark. [See Figure 3: Selected external sector developments]

(ii) Selected Issues report: Towards a new monetary policy regime in Mozambique. The central government wage bill in Mozambique is very high compared to peers. At 11.3% of GDP in 2016, the wage bill exceeds the median for a group of 42 low-income and Developing countries (6.6%; Figure 3). It is the fourth highest after Zimbabwe, Lesotho, and Liberia. Moreover, it is very high as a share of primary expenditures (40.3%) and as a share of domestic revenues (47.11%). The former indicator suggests that the control of government spending dynamics can be a very challenging task, while the latter indicator points to sustainability issues of wage outlays in Mozambique.

Nigeria-IMF updates:

(i) 2018 Article IV Consultation. A historic terms of trade shock - exacerbated by falling oil production and inadequate policy implementation - has taken a major toll on Nigeria’s economy. Output contracted for the first time in more than two decades in 2016, while external and fiscal buffers dwindled considerably. The initial policy response - including increases in electricity and fuel prices and a more depreciated exchange rate - did not yield the expected benefits, as sabotage of oil infrastructure, foreign exchange restrictions, and delayed implementation of structural reforms worsened investor confidence, increased borrowing costs, and crowded out private sector credit.

New policies and recovering oil prices are supporting Nigeria’s slow exit from recession. The doubling of oil prices from their early 2016 levels, new foreign exchange measures - including the introduction of a new investor and exporter FX window - and a tighter monetary policy have contributed to better FX availability, a significant narrowing of the parallel market exchange rate premium, contained inflationary pressures, a soaring financial market, and reserve buffers that reached a four-year high. This performance was accompanied by positive economic growth for two consecutive quarters in 2017, propped up by recovering oil production. Reforms under the government’s Economic Recovery and Growth Plan have resulted in significant strides in Nigeria’s latest Doing Business Ranking and steps to improve governance. However, important vulnerabilities persist.

(ii) Selected Issues report: Mobilising tax revenues in Nigeria. Relative to peers, Nigeria has one of the lowest revenue-to-GDP ratios. Between 2011 and 2017, a sharp decline in oil revenues led to consolidated government revenues falling from 17.7% to 5.1% of GDP (Figure 1). During this period, non-oil revenue stayed relatively stable at about 3 and 4% of GDP, although with an accelerating decline in 2016-17. In particular, the corporate income tax (CIT) decelerated by 0.1% of GDP and value added tax by 0.2% of GDP relative to 2011. Comparing Nigeria’s tax structure with those of a selected sample of advanced, emerging, and developing economies, none of its domestic tax collection showed a promising performance. Nigeria raised the least revenue of all comparators and at 5.3% of GDP in revenue in 2016 was significantly below the sample’s 22% of GDP average (Figure 2). In most countries, excises alone raise 3.6% of GDP.

US-Africa Relations: a new framework (State Department)

Africa still has vast, undeveloped natural resources. Private sector expertise in the United States can facilitate the responsible development of those resources, helping bring more Africans out of poverty to share in the economic values of those resources. But significant transcontinental infrastructure is necessary to support the development, spur economic growth, and boost intraregional trade on the continent. Today only about 12% of total African exports are delivered to their neighbouring countries on the continent. Compare that to 25% among ASEAN countries and more than 60% in Europe, and the potential for more economic prosperity through trade on the continent itself is quite evident. As African nations achieve greater regional integration through lowering tariff barriers and improving transport, energy, and infrastructure links, that will create more opportunities for U.S. businesses, investment, and transatlantic trade.

And importing American business practices and expertise provides the best combination for Africa’s future by contributing to economic prosperity, equipping African nations with new capabilities, and doing so in an open, transparent framework. That is why we want to create the new development finance institution. DFIs are specialized government banks designed to support private sector development to improve development effectiveness. We’re working with Congress to give the United States the ability to compete with countries that already utilize finance to achieve their goals in the developing world. [Remarks by Rex W. Tillerson, Secretary of State, George Mason University]

Bloomberg View: Tillerson faces a tall order in Africa

Post-MC11: Charting a way forward for LDCs, SVEs and SSA countries (The Commonwealth)

This issue of the Commonwealth Trade Hot Topics examines the outcome of MC11 and assesses the technical and strategic way forward for least developed countries, small, vulnerable economies and sub-Saharan African countries, especially from the perspective of a changing global, political, economic and trading landscape and the evolution of interests and negotiating terrain at the WTO.

China Systematic Country Diagnostic: towards a more inclusive and sustainable development (World Bank)

The 19th National Congress of the Communist Party of China reaffirmed the country’s commitment to eliminating poverty and promoting shared prosperity and inclusive growth. In this regard, the China systematic country diagnostic is supportive of the priorities of the Party Congress. China’s historic rapid growth resulted in a poverty decline unprecedented in its speed and scale. Rapid growth was made possible by a wide range of reforms, which transformed a state-dominated, planned, rural, and closed economy to a more market-based, urbanized, and open economy. China is on its way to eliminating extreme poverty, but the population vulnerable to poverty will remain relatively large. China is expected to continue to make strong progress toward eliminating extreme poverty despite the slowdown of economic growth. The World Bank projects extreme poverty, based on the international public private partnership United States $1.90 per day poverty line, to decline to 0.5% by 2018. According to this higher poverty line, China is projected to have a poverty rate of 3.9% or 54.6 million people below this higher poverty line by 2018.

Today’s Quick Links:

COMESA-Egypt Business Dialogue: Egypt is the strongest industrial country in Africa - Sherif Al-Gabaly

Egypt: Government approves agreement to establish Russian Industrial Zone

AfDB approves $100m trade finance facility in Angola

India decries new tariff barriers signalled by US

Hunger rates remain high amid conflict, climate shocks, warns UN food security report


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