tralac’s Daily News Selection
Conference of African Ministers of Finance, Planning and Economic Development: 51st Session of the Commission (11-15 May, Addis Ababa)
(i) Assessment of progress on regional integration in Africa (pdf). The present paper aims to provide an assessment of regional integration in Africa, beginning with an overview of the state of regional integration in Africa, as evaluated by the African Regional Integration Index. Central dimensions of regional integration in Africa are also discussed herein. Finally, the paper sheds light on several key issues related to the African Continental Free Trade Area. Extracts:
Overall, it is expected that the tariff revenue losses will not be considerable. However, countries with high initial tariffs on intra-African trade and with larger volumes of intra-African imports will experience the highest revenue impact. Exclusion lists within the African Continental Free Trade Area can provide an avenue for decreasing tariff revenue losses. It has been estimated that, even with a 1 per cent exclusion list, the average African country could reduce tariff revenue losses under the Free Trade Area from 8 to 1 per cent of total tariff revenue. Overly liberal exclusion lists should be avoided, however, as they could erode the value and benefits of trade liberalization.
Within countries, in order to alleviate the impact of structural adjustment costs, a gradual and measured approach to implementation should be considered. Exclusion lists and safeguard measures can be used for that purpose, but can result in distorted consumption and are, therefore, not optimal. Another approach would be to apply adjustment assistance to vulnerable groups facing adverse effects from the African Continental Free Trade Area. For example, smallholder farmers are likely to need assistance to connect to value chains and to take advantage of new opportunities. Similarly, informal cross-border traders, many of whom are women, should be supported in joining the formal sector so as to benefit from the Free Trade Area.
Trade facilitation measures are of particular relevance to efforts to ensure that gains are inclusive. The chapter on trade facilitation under the Agreement and the global momentum around the topic as a consequence of the entry into force of the Trade Facilitation Agreement under the World Trade Organization both highlight the fact that trade facilitation can be an area of quick wins. At the continental level, landlocked countries, which have economies that are more sensitive to issues surrounding ease of access to ports and value chains, can gain from the effective implementation of the provisions on trade facilitation, transit and customs cooperation. At the national level, trade facilitation measures can be used to support small-scale businesses and female entrepreneurs, who face greater barriers to trade.
The effective implementation of the Agreement will further depend on a strong institutional structure. At the continental level, the responsibility for coordinating the implementation of the Agreement will rest with the secretariat of the African Continental Free Trade Area, which will form an autonomous institutional body within the African Union system and have an independent legal personality, akin to an agency of the African Union. It will work closely with the African Union Commission and its departments. The Commission will provide the necessary transitional support until the secretariat is fully operational. Funding for the secretariat will come from the overall budget of the African Union.
The regional economic communities will remain important implementing partners and be represented in a committee of senior trade officials of the African Continental Free Trade Area. Their role will include the coordination of implementation and of measures to address non-tariff barriers, harmonize standards and monitor implementation.
(ii) Overview of recent economic and social conditions in Africa (pdf). Relatively high fiscal deficits coupled with exchange rate depreciations have put pressure on rising public debt levels in some countries as Africa’s total debt share in gross domestic product hovers around 32% (see figure IV). It is elevated to levels above 40% in Southern Africa and among oil importing countries. Significant non-concessional borrowing for infrastructure development has led to high debt-servicing costs in several countries, such as Botswana and Mozambique. This aggregate picture, however, masks the significant debt levels in 13 countries, three of which, all small island developing States, have debt shares above 100% of their GDP (Cabo Verde: 111%; Mauritius: 117.5%; and Seychelles: 165%); four with debt shares between 76 and 100% (Djibouti: 80%; Mauritania: 75.4%; Sao Tome and Principe: 84%; and Tunisia: 79%); and the remaining six with debt shares between 50 and 75% (Gambia: 69%; Ghana: 52%; Liberia: 51%; Namibia: 60%; Senegal: 53%; and Zimbabwe: 69%) [Conference downloads]
African Consultative Group: joint statement by Chairman of the African Caucus, IMF’s Managing Director
“Against this backdrop, we agreed that reducing macroeconomic vulnerabilities and boosting private investment is necessary to lay the groundwork for transforming the current recovery into a sustainable growth spell and accelerating progress towards the SDGs. In particular, with public debt levels rising rapidly in many countries, containing debt vulnerabilities while creating room for much needed development spending requires continued efforts to boost revenue mobilization. In addition, sustainable growth and job creation requires reinvigorating private investment. We concurred that deepening financial systems and boosting FDI would help expand financing to the private sector. Advancing regional integration holds immense potential. Finally, other initiatives, such as public-private partnerships and special economic zones, can play a catalytic role in promoting structural transformation, but care is needed to contain contingent fiscal risks.”
IMF’s Africa Department: transcript of press briefing by Abebe Aemro Selassie
This recovery is fairly broad-based with two thirds of the countries in the region seeing growth accelerating in 2018. But this headline figures also mask diversity and growth outcomes and prospects across countries in the region. Several economies such as Cote d’Ivoire, Ethiopia, Senegal, Ghana, are growing robustly with growth of 6% or more. At the other end of the spectrum, countries that are home to one third of the region’s population have seen their per capita income fall in 2017 and most of these countries are expected to witness a further decline in per capita income this year.
Central to the goal of addressing debt vulnerabilities is stronger tax revenue mobilization. Stepping up revenue collections would allow sub-Saharan African countries to make progress towards sustainable development goals while preserving fiscal sustainability. Most countries in the region are seen as having considerable potential to collect higher revenue despite substantial progress of revenue mobilization over the last couple of decades. Sub-Saharan African continues to have the lowest revenue to GDP ratio. According to some work we have done, countries in the region could mobilize between there to five percentage points of GDP and additional tax revenues in the next four or five years. Achieving this ambition would require strengthening VAT systems, streamlining exemptions and broadening tax base.
Just to step back a little bit, you know, in recent years, we have seen a significant improvement in inter Africa trade. It has gone up from below 10% to now almost 20% of the region’s trade. And what is interesting about the trade is that much of what Africa trades with each other tends to be more processed, more manufacturing type goods. Exactly the kind of more diversified exports that our countries are seeking. So, we think that the CFTA when fully implemented and if coupled with reforms through non-tariff barriers, facilitating infrastructure to allow goods to move with each other should facilitate and allow connecting markets and, you know, deepen and expand the markets in which African firms can trade. So we strongly welcome it. [International Monetary and Financial Committee: communiqué, statements; Development Committee: communiqué]
Migration and Development Brief: record high remittances to low- and middle-income countries in 2017 (World Bank)
The World Bank’s latest Migration and Development Brief (pdf) shows that officially recorded remittances to developing countries touched a new record – $466bn in 2017, up 8.5% over 2016. The countries that saw the highest inflow in remittances were India with $69bn, followed by China ($64bn), the Philippines ($33bn), Mexico ($31bn), Nigeria ($22bn), and Egypt ($20bn). Remittance flows to developing countries are expected to grow 4.1% to reach $485bn in 2018. The global average cost of sending $200 was 7.1% in the first quarter of 2018. The cost ranges from the most expensive average cost of 9.4% in Sub-Saharan Africa, to the lowest average cost of 5.2% in South Asia. [Global Knowledge Partnership on Migration and Development]
Tanzania, Uganda restrict Kenya’s sweets, ice cream (Business Daily)
A fresh round of trade wars is simmering in East Africa after Tanzania and Uganda imposed taxes on Kenya made confectionery products like chocolate, ice cream, biscuits and sweets citing use of imported industrial sugar in the goods. The two states have rejected certificates of origin issued by the Kenya Revenue Authority (KRA) and opted to levy 25 per cent import duty on Kenyan confectioneries. “This is an EAC-wide remission scheme that is available to all manufacturers in the region,” said Kenya Association of Manufacturers chief executive Phyllis Wakiaga. “We are not supposed to pay duty when we sell in the region because our competitors in the region also rely on industrial sugar imported under the same remission scheme.”
South Africa: SARS introduces electronic system to track cargo (SANews)
The South African Revenue Service at the weekend introduced a new electronic cargo system that tracks the movement of cargo coming into and leaving the country. The paperless cargo reporting system brings to an end one of the last remaining paper-based processes in the revenue service. Chief Officer of Customs and Excise, Teboho Mokoena, said the electronic reporting system will expedite the processing of legitimate trade and improve the management of risk for goods coming in and leaving the country. “The implementation of the electronic reporting requirements falls under Customs’ Reporting of Conveyances and Goods project, which is one of three main pillars of SARS’s New Customs Acts Programme,” SARS said. The first phase of NCAP to go live is RCG, albeit under the current 1964 Act.
Structural transformation in South Africa: moving towards a smart, open economy for all (pdf, IDTT)
Trade minister Rob Davies, in his introduction to the report: “The findings make for hard reading. The industrial structure of South Africa has changed remarkably little, especially in the context of major global change. Indeed, there has been a hollowing out of industrial capabilities, which can be characterised as premature deindustrialisation.” UJ’s Simon Roberts: “We are saying the policy choices of the 2000s were wrong in many ways; problematic in many ways. There was a hollowing out of capabilities. The ownership of companies has changed, but the companies have not changed. You have a financial sector growing, but not investing.”
Extract from the report: The fragmentation of government is problematic for realising a coherent industrial policy. Industrial development requires co-ordination between policies on mining, energy, trade, development finance, competition, technology, sector industrial development and procurement. In fact, the fragmentation of the state, with its accompanying proliferation of departments, opened-up more space for successful lobbying by large international businesses and aided rent-seeking. Inconsistent stances have been taken across government. The impact on industrial policy has been profound as it has made effective interventions across departments and the combination of policy instruments near impossible.
Global Commodities Forum: Building skills for sustainable development (23-24 April, Geneva)
Participants will examine and discuss the roles that skill development plays in the commodities sector in moving up the value chain, contributing to industrial development (Sustainable Development Goal 9) and providing decent work (Goal 8) and professional education (Goal 4). Particular emphasis will be placed on how human capital development strategies should adapt to the increasing automation of the mining sector, and how these strategies help prepare for the transition to a lower-carbon energy mix in pursuit of universal access to affordable, clean energy (Goal 7) and contribute to increasing the participation of women in skilled vocations in value added activities (Goal 5).
Today’s Quick Links:
The Great Lakes Trade Facilitation Project has launched its website
Meeting of the EAC Sectoral Committee on Customs and SCT Monitoring and Evaluation Committee (23-27 April, Arusha)
Meeting of the East African Standards Committee and Subcommittees (23-27 April, Arusha)
ILO’s Con Gregg: Why anticipating the need for skills helps spread benefits of trade and growth
IGF’s Isabelle Ramdoo: Skills development in the mining sector – making more strategic use of local content