Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: UN | Abdul Fatai

Dr Donald Kaberuka: There is a time for everything – the African Continental Free Trade Area (pdf, Wilson Center)

That said, the AfCFTA is not just about physical merchandise. It is also about services, logistics, finance, data, IT. It is important to emphasise this point because some countries who are not signatories have not fully appreciated that there are not only enough safeguards against things like dumping, non-respect of rules of origin, etc. They may also wish to take note of the fact that the services sector is probably as important as physical goods. Our calculations show that around 50% of all the welfare gains in the AfCFTA are generated by the services. So, even countries without large manufacturing sectors have a lot to gain.

Studies conclusively show that the welfare gains are probably four or five times higher if non-tariffs restrictions are also removed. By non-tariff restrictions, I refer here to quotas, import bans, excessive documentation, roadblocks, health and sanitary measures which are not justified, etc. Yet, we know that dealing with such NTBs is a much more complex process, politically. Eliminating NTBs will require a higher level political threshold. It will require the mobilisation of the citizens, the businesses who provide the services, to the varying domestic constituency interests, to demonstrate that this is not a “zero sum game”.

Three additional issues in particular have been pointed out: (i) The implications for the RECs; will the RECs co-exist seamlessly with the AfCFTA? (ii) AU’s implementation track record of its decisions; will member countries implement? (iii) The challenge of adequate supportive infrastructure; how will the Free Trade Area function, without adequate highways, etc. Concerning the RECs, I believe Article 21 and two other Articles provide the necessary clarity: the AfCFTA will build on and strengthen rather than weaken the RECs. In relation to infrastructure, it is well known that the AfCFTA will be accompanied by an African Trade Development Plan of action. [Wilson Center event summary]

Conference of African Ministers of Finance, Planning and Economic Development: Ministerial statement, Committee of Experts

(i) Report of the Conference of Ministers on the work of its 51st session: Annex 1 – Ministerial statement (pdf). We acknowledge the importance of national plans and strategies to seize the opportunities presented by the African Continental Free Trade Area. These national plans and strategies should be designed to complement the broader trade policy of each State and identify the key trade opportunities, current constraints and steps required to take full advantage of the African market, including the empowerment of women and young people;

We are mindful that the current infrastructure bottlenecks in Africa remain a serious impediment to the continent’s integration, and commit ourselves to pursuing efforts to modernize and expand our infrastructure assets, in particular the railways, which remain the most efficient and environmentally sustainable way of moving people and goods. In this regard, we note the importance of international instruments on matters specific to railway rolling stock;

We note that the short-term impact of the African Continental Free Trade Area on tariff revenue is likely to be minimal and will be outweighed in the medium and long term by positive impacts of revenue from other sources of taxes as a result of expected increases in growth and economic diversification;

In this regard, we recognize the importance of enhancing fiscal space and sustainability in our countries and maintaining investment in the social sector, in particular in health and in education. In particular, we will strengthen efforts to increase our tax revenue by boosting our tax-to-gross domestic product ratios to achieve a minimum level of 20 per cent over the next three years in each of our economies. Efforts will also include action to pursue new sources of tax revenue, including levies on financial transactions, royalties, income taxes, land taxes and leases, and by encouraging private sector growth and moving informal businesses into the formal sector;

We also underscore the need to take steps to tackle harmful competition among African countries, including by using the second phase of the African Continental Free Trade Area negotiations on competition policy;

(ii) Report of the Committee of Experts: extracts (pdf). Experts noted that growth in some African countries was driven mostly by services and that the agreement on the African Continental Free Trade Area included a protocol on trade in services. At the same time, there were considerable gaps in statistics on trade in services in most African countries that needed to be addressed for effective evidence-based decision-making during the implementation of the African Continental Free Trade Area. In that regard, it was observed that building the capacities of African countries in the area of statistics on trade in services was critical.

Intellectual property rights would be the subject of the second phase of the African Continental Free Trade Area negotiations scheduled to commence in August 2018. Existing legal and regulatory frameworks on intellectual property rights were not necessarily adapted to the African context and everyday realities. Different policy regimes and sets of rules protecting intellectual property rights existed in various parts of the continent. In that context, experts recognized the critical need to harmonize intellectual property rights frameworks with a view to stimulating innovation and enabling member States to reap the full benefits of the African Continental Free Trade Area.

2018 African Sovereign Wealth Funds Summit: Accra meeting highlights (GBN)

According to the 2018 African Sovereign Wealth Funds Index, there is a total of $7 trillion dollars’ worth of sovereign wealth funds globally, with 12 African countries having a total of $90bn, representing 1.4% of the total global sovereign wealth funds. The Index is a multi-year project designed around seven main indicators namely; governance and public disclosure, size of fund, domestic investment mandate, source of funding (diversification sources), financial performance, economic impact, and sustainability.

The 2018 SWFs Index ranked Nigeria, Rwanda and Ghana as countries on the continent with the best managed sovereign wealth funds in Africa in first, second and third order. The Index mentioned other African countries that had established sovereign wealth funds as; Algeria, Libya, Senegal, Botswana, Gabon, Mauritania and Equatorial Guinea. It is observed that majority of the SWFs were established by countries after they had discovered and started producing crude oil in commercial quantities except Rwanda, Morocco and Senegal that had set up SWFs although they do not produce oil or major mineral resource exports. [Ghana to establish a Ghana Asset Management Corporation to manage the state’s asset portfolio]

pdf ACP negotiating mandate for a post-Cotonou Partnership Agreement with the European Union (1.00 MB) . Pillar 1: Trade, Investment, Industrialisation and Services

The objectives under this Pillar in the Post-Cotonou Agreement will include the following: Strengthening institutional arrangements necessary to build and scale up the capacity of the private sector and governments to take advantage of trade arrangements, including the Economic Partnership Agreements, as well as other ACP regional and continental trade arrangements such as the CARICOM Single Market and Economy and the African Continental Free Trade Agreement; Providing support to further tap into the potential of trade in services among ACP countries, between ACP regions and with the EU by, inter alia, promoting sustainable development initiatives such as the digitalization of the public sector in order to enhance service delivery, productivity and Private Sector Development; Supporting measures aimed at addressing vulnerabilities and building economic resilience; Promoting policy measures that will encourage ACP financial institutions (including development banks) to develop instruments to expand access to finance and improve payment systems for trade and investment including for micro, small and medium enterprises (MSMEs); and Improving the leveraging of industrial opportunities associated with natural resources and the green and blue economies. [Adopted, 30 May, by the 107th Session of the ACP Council of Ministers, held in Lomé; ACP-EU Council of Ministers: Future EU-ACP Partnership after 2020]

The 65th session of UNCTAD’s Trade and Development Board began today in Geneva. High-level segment themes: New ways in which the UN could address the crisis of multilateralism and trade and its development machinery and what the contribution of UNCTAD would be; Industrial policies and productive capacity policies for a digital economy; Plugging financial leakages and mobilizing domestic and international resources to deliver on the Sustainable Development Goals; Building resilience to multiple shocks affecting people and sustainable development. [UNCTAD’s Civil Society Hearing: Civil society calls for more honest narrative about benefits of trade]

The AfDB’s Civil Society Forum: recommendations

The African Development Bank organized the Civil Society Forum 2018, as a three-day event at HQ in Abidjan, on the topic: “Engaging civil society to accelerate Africa’s industrialization”. For the first time in the Bank’s history, the Forum took place separately from the Annual Meetings. This new format provided an enhanced platform for the continent’s CSOs to engage in dialogue and exchange views with the Bank – upholding the Bank’s commitment to engage with CSOs, and view them as key partners to successfully implement and achieve the High 5 priorities. The Forum brought together over 300 participants from across the continent. During the Forum’s closing ceremony, the CSO representatives presented the conclusions of the three working group sessions, with three respective recommendations to the Bank: Create a multi-stakeholder platform with representatives from the public sector, private sector, the Bank and Civil Society – to guarantee the involvement of all actors in the development of industrial policies and projects; Promote equal access to digital tools for networking, capacity building, skills improvement, and data production purposes – to inclusively accelerate Africa’s industrialization; Establish capacity building programs that integrate gender lens training in the design of Bank policies and strategies – to improve the business environment in regional member countries so all entrepreneurs can grow and flourish.

Ghana’s impending GDP rebasing decision: insights from Databank Research (GhanaWeb)

Ghana’s GDP could now be valued as high as GH¢300billion after the expected rebasing this month, which is the second in less than 10 years according to an in-depth analysis of Ghana’s Public Debt Management in 2017 by Databank Research. The economic and policy analysis, which is predicting a 30-45% increase in nominal GDP, points out that the economy’s size should move from the GH¢205.91billion recorded in December 2017, to GH¢300billion or 63.4bn after the rebasing or revision of the methods and base data used to calculate GDP. Government is expected to announce the rebasing in the last week of the month. The higher nominal GDP is expected to suppress the debt-to-GDP ratio to between 50–60% in 2018 from the high of 68% recorded in 2017, according to the latest data from the Bank of Ghana – which could catalyse the potential for positive reviews of Ghana’s credit ratings. With a lower debt to GDP ratio, government might be tempted to increase its rate of borrowing, while the tax revenue-to-GDP ratio could drift further below government’s medium-term target of between 20–25%.

Mali: IMF reports

(i) 2018 Article IV Consultation: Mali is a fragile state, facing severe security challenges and social tensions. The authorities struggle with the implementation of the 2015 peace agreement, and persistent insecurity in northern and central Mali associated with limited State presence, highlights the lack of a peace dividend and explains limited societal buy-in. The economic recovery has entered its fifth year, and growth is projected to remain robust in the near term. However, poverty remains high and social discontent is growing. The economic outlook is also subject to downside risks from the volatile security conditions and potential pressures on policy implementation ahead of the 2018 elections.

With exception of some improvement since the mid-2000s, export diversification has stagnated, and export quality has been generally stable (Figure 4). In 2016, cotton and gold represented 80% of exports. Mali’s export diversification indices have remained relatively low throughout the past five decades and are still lower than many other LICs, primary commodity producers, the SSA or the WAEMU averages. The export complexity (Text Figure 11), an index that measure the sophistication of a country’s exported products, shows that Mali exports few products and that the exported products are not very sophisticated.

(ii) Selected Issues Report: Tax revenue mobilisation in Mali (extract). Mobilizing more revenue to keep up with raising spending will be critical to implement the new government’s priorities while preserving fiscal sustainability in the context of declining external support. This paper shows that the tax-to-GDP ratio, at about 12.6% is low relative to West African Economic and Monetary Union and SSA averages. Using the peer (SSA) analysis and stochastic frontier approach, the tax revenue gap in Mali is estimated at about 0.7% of GDP in 2010-15, implying a significant potential to raise revenue. The estimated gap is even larger for trade taxes at about 2 ½-3 percentage points of GDP below their tax capacity during the same period. The analysis suggests that closing the tax policy and tax gap will require sustained reforms, both in tax policy and tax administration.


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