tralac’s Daily News Selection
Africa’s partnerships with the EU, India: key updates
(i) AU Executive Council adopts the African Common Position for negotiations of a new cooperation agreement with the EU. In the same spirit, another highlight of the AfCFTA week was the Executive Council’s unanimous decision to adopt the African Common Position (pdf) for negotiations of a new agreement of cooperation with the European Union on the future of AU/EU post 2020. As the expiry date of the Cotonou Partnership Agreement approaches in February 2020, reflections between Africa and the EU have been under way to determine the nature, outline and configuration of a more appropriate framework for future post-2020 relations. As such, the adopted African Common position recommends that the new agreement with the European Union should be separated from the ACP context and based on a strong and sustainable continent-to-continent partnership that revolves around the AU and the EU.
The new agreement should also reaffirm the interdependence between Africa and Europe, as well as the development of modern political dialogue, based on equality, equity, mutual respect and the shared responsibility of both continents. It should be based on African priority development pillars and revolve around the following seven elements: structural transformation of economies and inclusive growth; people-centred development; migration and mobility; peace and security; science, technology and innovation; the environment and climate change; governance, human rights and natural resource management, while also not failing to consider the already existing bilateral agreements between the EU and Africa, including those of North Africa, South Africa and other African countries. [Downloads: Decisions of the 18th Extraordinary Session of the Executive Council]
(ii) Deepening Africa-India Trade and Investment Partnership: a joint African Trade Policy Centre, Confederation of Indian Industry report. In the present report (pdf), the effects of mega-regional trade agreements, particularly the Regional Comprehensive Economic Partnership – a proposed free trade agreement involving India – on Africa-India trade relations, are examined. There is a legitimate concern about market loss and trade diversion. RCEP, is expected to erode preferences and increase competition for African countries in the Indian market, which in turn, could undermine the benefits for them stemming from the Duty Free Tariff Preference Scheme. Meanwhile, our analysis clearly demonstrates that the establishment of the AfCFTA would be critical to mitigate the negative effects expected to be brought about by RCEP on African economies. Moreover, AfCFTA would provide a strong basis for the industrialization and structural transformation efforts in Africa as it would boost intra-African trade and the continent’s industrial content. The establishment of AfCFTA also offers important opportunities for Indian firms and investors, as it would provide a potentially larger, unified, simplified and more robust African market to tap into.
As a matter of fact, only after the establishment of AfCFTA would Africa and India be in a position to effectively enter into an economic integration partnership implying market access reciprocity. It is explicitly illustrated in the report that deepening integration between Africa and India would generate significant benefits for both partners. Such gains could even help to rebalance the composition of traded products by presenting opportunities to exploit value chains and enhance the structural transformation. Also, in the report, disablers and enablers to India’s trade and investment with Africa are further elaborated.
(iii) Connecting Africa: role of transport infrastructure. According to the ICA, India’s commitment to African infrastructure projects more than doubled to $1.2bn in 2016 from $524m in 2015. The largest portion of Indian commitments went to transport ($513m), followed by energy ($422m) and water ($262m) projects. The Export-Import Bank of India has been among the principal agents for supporting India’s development partnership with the African continent in the infrastructure sector. India’s transport network is among the largest and densest in the world. In order to support its rapidly growing economy, the Government of India has implemented a number of mechanisms in terms of new funds, institutions and agreements for upgrading its transport network. These mechanisms could be useful for transport infrastructure upgradation in Africa’s case, as both regions has similar features like a growing population, increasing economic growth, and huge land area, among others. [Note: The Working Paper, March 2018, can be downloaded from the Working Paper tab, here]
What investors want: perceptions and experiences of multinational corporations in developing countries (World Bank)
Through interviews with 754 executives, the survey finds that political stability and a business-friendly regulatory environment are the top two factors influencing multinational corporations’ investment decisions in developing countries. Investors seek predictable, transparent, and efficient conduct of public agencies. The survey results also show that investors are heterogeneous, and their perceptions vary with motivation and size. Multinational corporations that are involved in efficiency-seeking investment are more selective than investors motivated by other considerations, and that relatively smaller multinational corporations are more sensitive to host country characteristics and investment climate factors than large firms.
AfCFTA updates from Harare, Kampala:
(i) Confederation of Zimbabwe Industries: insights from a AfCFTA briefing. Speaking at a breakfast meeting hosted by the CZI yesterday, AU trade advisor, Brian Mureverwi said South Africa and Egypt wanted stricter rules of origin: “Rules of origin are a stumbling block. South Africa and Egypt want strict rules of origin.” Basically, if the threshold is increased, import-dependent countries like Zimbabwe would lose out as that would mean most of the products would have to be locally manufactured in order to be duty free if traded within Africa. While this would force the country to increase production, at the current state of local industry it is nowhere near having capacity to manufacture locally for a large part of the goods traded in the continent.
Industry, Commerce and Enterprise Development ministry permanent secretary, Abigail Shonhiwa said certain countries wanted to increase the 35% threshold. “The lower the threshold, the easier it is and the higher the threshold the harder it is. If you now set the threshold at 50% where 50%, of the product has to originate from the country that exports, then it sets a higher threshold and it is usually much more difficult to reach a higher threshold than a lower threshold if you see what I mean,” she said.
(ii) Uganda and the AfCFTA: Private sector fear for future as govt defends Africa trade area deal. Presenting the government position on AfCFTA in Kampala yesterday, the minister of Trade, Ms Amelia Kyambadde, said: “With the integration of the African continent, Uganda stands to benefit from expanded trade, increased production capacity and creation of employment. We are immediately targeting livestock products notably dairy and beef, coffee, tea, iron and steel, while in the services sector we shall target education, tourism, business services and infrastructure services.”
However, in an interview yesterday, Mr Gideon Badagawa, the Private Sector Foundation Uganda executive director, said the deal was not only ambitious, but its success and failure will demand more than just signing documents. The chairman of the Kampala City Traders Association, Mr Everest Kayondo, said Uganda and other EAC member countries risked becoming supermarket. Uganda Manufactures Association manager policy and advocacy, Mr Lawrence Michael Oketcho, said there was need for a strategy that will give clear guidelines on how to go about this ambitious agreement. [Global Trade Review : Lack of trade finance will limit benefits of Africa free trade deal]
South Africa: Tripartite Free Trade Agreement to be tabled before Parliament (SAnews.gov.za)
International Relations and Cooperation Deputy Minister Luwellyn Landers says government is in the process of submitting documentation and the Tripartite Free Trade Agreement to Parliament for ratification. Deputy Minister Landers said on Tuesday [with respect to rules of origin]: “The danger we face, which we have to guard carefully against, is when a product purportedly comes from Zambia but it comes from another country outside the African continent, let’s say from England, from Canada or France or Russia or China, then the rule of origin kicks in because that product does not come from an African country, the provisions of the agreement does not apply to that product. The danger to the labour movement is not only here in South Africa, but to countries in Africa – I have referred to the Zambian example. Zambian workers would lose because that product comes from another country outside the continent. They would not have participated in the manufacture of that product and therefore, you will find that job losses would occur and as a consequence, the Free Trade Area Agreement would fall apart. So I would strongly urge people in the labour movement to become involved in the discussion in Parliament when the agreement is tabled in that fashion.”
South Africa: Listeria takes a bite out of trade as countries ban SA’s processed meat (Fin24)
The Department of Trade and Industry told a joint sitting of Parliament’s portfolio committee on health and portfolio committee on agriculture, forestry and fisheries that more than six countries have banned products from South Africa in light of listeriosis concerns. Chief director of international trade and economic development Niki Kruger told Parliament WTO countries under the Sanitary and Phytosanitary measures were entitled to ban products from a country in light of concerns for infection. “We have been exporting $18m or R210m to countries like Lesotho, Mozambique, Namibia and Swaziland. There are R100m worth of exports in sausages alone that have been affected as a result of countries banning our products,” said Kruger. [Download the presentation, pdf]
Bitange Ndemo: Sour facts that blight local sugar industry (Business Daily)
The committee’s findings were startling. Their report revealed that “the average cost of producing one tonne of cane in Kenya is $22.5 while that of the region’s is as low as $13 per tonne. The average cost of producing a tonne of sugar in Kenya is $870 compared to $350 in Malawi and $400 in Zambia, Swaziland and Egypt and $450 in Sudan. The cost of production in Brazil is $300, up from $270 three years ago.” With the signing of the historic African Union free trade agreement, the odds of producing sugarcane in Kenya are simply against the country. There is a need to rethink a new path. Perhaps we could consolidate the factories and change the business model. As it stands, it is an exercise in futility to consider reforms within the current state of affairs. Certainly, Governor James Ongwae should abandon his dream of hiving off forestland to build a sugar factory.
Jordanian-Kenyan Business Forum: Jordan should exercise caution as it forges new trade partnerships (Jordan Times)
Establishing a Jordanian-Kenyan free zone in Aqaba would boost trade exchange with many African countries; however, the project has to be well studied to avoid unfavourable fallouts, Jordanian economists said. State Minister for Investment Affairs Muhannad Shehadeh said that the zone aims to create Kenyan and joint investments to boost trade exchange with Kenya and other African countries. Shehadeh said that the two countries were negotiating customs incentives agreements to increase the trade volume, which is still low at $14m a year. The agreement would help the Kingdom enter Kenya, which, in turn, would be a gateway to other African countries, the minister was quoted by Petra as saying. Reaching out to African trade partners has been part of a plan to open new markets after Jordan’s traditional markets and trade routes have become almost blocked due to regional political instability.
Today’s Quick Links:
South Africa’s merchandise trade statistics for February 2018: trade balance shifts to R0.43 billion surplus
Introducing the EU-SADC EPA: download the presentations from a recent workshop on Maseru
Singapore-based Olam: ”There’s a strong growth pipeline for the next 20-30 years that we can see in Africa, as it has happened in Vietnam or Indonesia, or China. We think that as the African population grows and the economics improves, we could really shift to higher protein.”
South Africa-based Massmart to open 20 stores in pan-African expansion: ”This year alone we will be opening eight new stores on the African continent. In the next three years we’ll be expanding our retail trading space by 35.6%...When we talk about growing our business across sub-Saharan Africa, that definitely includes Francophone Africa.”
French phone carrier Orange, which invests about 1 billion euros in Africa each year, will focus on markets where it already has a presence rather than expand to new countries. It will also concentrate on bedding down recent acquisitions, such as those in Sierra Leone, Burkina Faso and Liberia, which represent 8% of Orange’s revenue, account for about a third of its global growth.
The Brazil Africa Institute opens its first African office – in Ghana: It will draw up a strategic plan for the potential opportunities for Brazilian companies with the African continent, and vice versa, in different areas and facilitate socio, political and cultural rapprochement between Brazil and the African continent.