tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: EPA-EFE | Nic Bothma

12 Jun 2018

Starting today, in Accra: Africa Trade Network’s multi-stakeholder AfCFTA consultation

The new head of the UNDP’s Regional Bureau for Africa: Ms Ahunna Eziakonwahead

Diarise: 31st Ordinary Session of the Assembly of the Union (1-2 July, Nouakchott, Mauritania). Major agenda items include reports by President Paul Kagame: Institutional reform of the AU - status of implementation; President Mahamadou Issoufou: African Continental Free Trade Area; AUC Chairperson, Mr Moussa Faki Mahamat: Western Sahara; African Common Position on ACP Post-2020

Brahima Coulibaly: Industries without smokestacks – Africa’s new path to structural transformation (Brookings)

To avoid the Yogi Berra syndrome, new research by the Africa Growth Initiative at Brookings and UNU-WIDER has looked in unfamiliar places and discovered evidence to suggest that Africa might be undergoing a more profound structural economic transformation than we think. It is occurring, not through the traditional industries, where we have been looking, but in tradable services and agro-industries that resemble traditional industries. These industries include horticulture, agri-business, tourism, and information and communication technology (ICT)-based services. For example, services exports from Africa grew more than six times faster than merchandise exports between 1998 and 2015. In Kenya, Rwanda, Senegal, and South Africa, the ICT sector is flourishing. In Rwanda, tourism is now the single largest export activity, accounting for about 30% of total exports. Ethiopia, Ghana, Kenya, and Senegal are all integrated into global horticultural value chains, and Ethiopia has become a leading player in global flower exports.

While economic development experts have been increasingly confident that Africa’s development model will be different, they have been less certain about what shape it will take. The industries-without-smokestacks model offers one possible answer. From a policy perspective, African leaders and Africa’s development partners should explore ways to support the growth of these industries through targeted reforms, and by incorporating them into national industrialization strategies and broader development agendas. From a private sector development perspective, this research suggests that interventions aimed at boosting job creation and economic transformation in Africa should prioritize these industries. [The author is the Director of the Africa Growth Initiative] [See the table of contents for the forthcoming OUP book: Industries without smokestacks – industrialization in Africa reconsidered]

Drones on the horizon: Transforming Africa’s agriculture (NEPAD)

Driven by increasing demand, drone technology is expanding at an exponential scale in the West and agriculture is one of the top economic sectors where they are being used. Africa should not lag behind. Therefore, through a consultative process, AU member states need to develop and enact national UAV regulatory frameworks, which ensure safety, encourage innovation and do not restrict the emergence of UAS agro-service providers or discourage private sector investment in the industry. With the current status of drone technology uptake and the opportunities it offers in crop scouting and monitoring, crop volume assessments, inventory, precision spraying, and crop damage assessment, Africa is set to increase its agricultural productivity in the next decade. In this regard, the African Union High-Level Panel on Emerging Technologies recommends the following for the national and continental levels: [Note: this is a report of the High-Level African Panel on Emerging Technologies, chaired by the late Prof Calestous Juma and Yaye Kène Gassama (Université Cheikh Anta Diop de Dakar, Senegal]

Agriculture in Africa: telling myths from facts (World Bank)

This report presents the insights obtained, organized around the confirmation (fact) or rebuttal (myth) of 16 frequently held perceptions. It is found that women do not contribute 60 to 80 percent of the work in Africa’s crop production, but rather less than half (40% in the six countries studied). And that farmers lose only 2 to 6 percent of their maize production after harvest, which stands in stark contrast to the much-touted 30% post-harvest loss widely quoted. Sound policy design requires establishing solid facts, as well as a clear understanding of the causal links.

New IMF analyses: Angola, Rwanda

(i) Angola 2018 Article IV Consultation: External Sector Balance Assessment (extract): Since the fall in oil prices in mid-2014, Angola’s current account (CA) position slipped into deficits. Prior, the CA recorded surpluses averaging 10 percent of GDP during 2010–2013 underpinned by large trade surpluses. Since 2014, the CA shifted into deficits, peaking at 10% of GDP in 2015 and narrowing to 5¼% of GDP in 2017. Between 2014-17, imports contracted by 40¼%, reflecting lower public investments and foreign exchange shortages, while exports declined sharply by 44½ % owing to lower oil prices. Trade surpluses have since declined significantly from an average of 40¼% of GDP during 2010–2013 to 13¾% in 2017.

(ii) Angola – Selected Issues report (pdf): Public ownership of banks exposes the sovereign to direct fiscal costs in Angola. Public sector entities have equity interests (minority stakes) in six banks and, as noted above, the government directly controls three banks that hold about 11% of banking system assets. State-owned banks operate against a backdrop of explicit and implicit government guarantees that generate bi-directional spillovers between the sovereign and banks. Since the oil price shock, the government has spent about 4% of GDP in recapitalizing such banks, and costs are expected to be above 1% in 2018 (Figure 8).

(ii) Rwanda: Ninth review under the Policy Support Instrument. The external sector continues to improve. The current account deficit narrowed sharply, from 15.8% of GDP in 2016 to 6.8% in 2017, supported, among other things, by exchange rate adjustment and other adjustment policies agreed under the recent Stand-by arrangement. Formal goods exports increased sharply by 58% (text table, Box 1), with the trend continuing in the first two months of 2018. Meanwhile import values declined slightly in 2017, but have risen in 2018 with increasing international fuel prices. The increase in import volumes in a stronger growth environment has been muted by declines in a few key sectors, including capital goods, construction materials and cement and clothing, partly reflecting efforts to raise domestic production in key sectors. The strength of trade adjustment has contributed to a faster build-up in gross foreign exchange reserves than had been anticipated—reaching 4.2 months of next year’s projected imports by end-2017.

Ghana: AGI against Africa free trade pact (Graphic)

The Association of Ghana Industries says the ratification of the AfCTA by Ghana will expose the country to a flood of foreign goods from African countries. It, therefore, questioned why Parliament was swift to approve the agreement which could dwindle revenues from import duties, because imports from Africa would not be liable to pay duties. “Every revenue Ghana is getting from imports from Africa is going to be eroded, because importers could bring in anything to Ghana. Even if they are made in Europe, you just take them to any African country and bring them to Ghana to avoid the payment of duties,” it stated. [Ghana-South Africa Business Chamber: Ghanaian trade delegation to visit SA]

South Africa’s ABSA Group targets Nigerian banking license (BusinessDay)

South African financial services group ABSA, formerly the whole owned subsidiary of Barclays Africa Plc, is considering getting a banking license in Nigeria after it begins trading on the Nigerian stock exchange by the end of July, as part of its plans to provide financial services to its international clients who are willing to get exposure to the Nigerian market and vice versa. Garth Klintworth, head of markets for Barclays Africa Group, said is was important that ABSA had a presence in Nigeria for the bank to be seen as an African bank in Africa. He disclosed that all is set for the securities subsidiary to open in July on the Nigerian Stock Exchange.

Kenya: Remittances up 50% to remain top forex earner (Business Daily)

Remittances by Kenyans living abroad rose 50% in the first four months of the year compared to a similar period in 2017, cementing the inflows’ position as the leading source of foreign exchange in the country. Latest Central Bank of Kenya data show the cumulative inflows in the four months to April stood at Sh86.7 billion ($858.6m), compared to Sh57.7 billion ($571.2m) in a similar period in 2017, with the increase mainly backed by huge growth in the dominant North American remittances.

Kenya’s food import costs jump to Sh68bn (Business Daily)

Kenya’s food imports in the first four months of the year grew by a third to Sh68.63 billion compared to a year earlier, reflecting the country’s reliance on foreign markets despite improved weather. Official statistics collated by the Central Bank of Kenya shows food import bill rose by 30.10% in the January-April period compared with Sh52.75 billion in the same period of 2017.

Anatomy and impact of export promotion agencies (World Bank)

This paper describes the characteristics of export promotion agencies (EPAs) around the world, using a novel database from the World Bank, in collaboration with the International Trade Center in Geneva, covering 2005-2010. In addition, it presents a short summary of the literature on the impacts of export promotion agencies. Extract (pdf):

The survey asked the EPAs to rank their strategic objectives from 1 to 8 in order of their importance (1 being the most important strategy and 8 the least important). The following options were considered as possible strategies: i) increase exports across all sectors and destinations (All); ii) diversify exports by encouraging new products (Products); iii) diversify exports by encouraging new destinations (Destination); iv) encourage the development of industry clusters (Clusters); v) help firms enter global supply chains (Supply chain); vi) support exports and competitiveness of small and medium enterprises (SMEs); vii) attract investments by export-oriented multinationals (EOM); and viii) other strategies.

The large majority (86%) of the agencies reported that the promotion of exports across all sectors and destinations is one of their strategies, with an average ranking of 1.6. Moreover, almost the same share of EPAs (85%) reported diversification of export destinations as one of their strategies, with an average ranking of 2.8. Diversification of markets is a more common strategy than product diversification according to 73%of EPAs, with an average ranking of 3. Also, several agencies ranked the attraction of export-oriented multinationals, the development of clusters and inclusion in global supply chains as part of their strategies, but with a lower average ranking. As such, we can infer that, for the majority of EPAs, increase in overall exports and diversification are more often their top priorities, not necessarily through inclusion in global supply chains, clusters or attraction of multinationals.

Miracle or Mirage: What role can trade policies play in tackling global trade imbalances? (pdf, OECD)

Simulations of the OECD’s METRO model show liberalisation of existing trade distortions would modestly narrow aggregate trade imbalances in the medium term for some countries. Reducing tariffs, non-tariff measures and the combined market access and productivity-enhancing effects of pro-competitive measures in services all have some rebalancing potential. Liberalisation would also offer economically significant income gains for all countries. By contrast, narrowing trade imbalances using trade restrictions would come at disproportionately high economic costs for all countries.

Today’s Quick Links:

African Cotton, Textiles & Apparel Monitor: Issue #13 is posted

Namibia Trade Forum: Namibia’s trade analysis for 2017

SA eyes region’s building and mining sectors for exports of steel products

UNDP’s Ayodele Odusola: Addressing the foreign direct investment paradox in Africa

Zimbabwe-China Business Forum: President Mnangagwa charms Chinese investors

Third China-Uganda Business Forum: Yes, China can deliver African continent’s growth miracle

COMESA, IOM, sign co-delegation agreement on cross border trade

The Gambia: Social safety nets diagnostic

Privacy law and services trade: resolving the conflict

Toxic and untaxed: perils of global trade in bootleg liquor exposed


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