tralac’s Daily News Selection
Next month’s BRICS Summit: preview by Standard Bank’s Jeremy Stevens
South Africa will host the 10th annual summit of the Brazil, Russia, India, China and South Africa group. The BRICS Heads of State will meet at the Sandton Convention Centre in Johannesburg (25-27 July) at a time that the global economy is mired in uncertainty. Extracts:
It would be foolish to ignore the strong business cycle synchronization between emerging markets and the rest of the world. However, the BRICS must find ways to elevate their commercial relevance to one another. Unfortunately, the commercial relevance of the BRICS to one another is minimal. Intra-BRICS trade has actually fallen, from $342bn in 2013 to $312bn in 2017. Furthermore, taken as a share of their respective trade, the BRICS share has plateaued, after doubling from 6% 2003 to 12% 2011. In fact, it fell sharply in 2016.
The trade data is simple; for each of the BRICS, China is a large trade partner; just 20% of BRICS trade excludes China. The trade relation is therefore unbalanced. China is exporting manufactured goods to the other BRICS in proportions consistent with their relative GDP, whilst importing mineral products from Russia, Brazil and South Africa, and prepared foodstuff from Brazil. In fact, there isn’t anything particularly special about the commercial cords between BRICS. Even though the statement is true for India, too, it is specifically important for Brazil and South Africa to ensure that the bloc puts building manufacturing capacity at the centre to create much needed jobs and enhance skills.
In some respects, the timing for South Africa and the other BRICS couldn’t be better: China’s sense of encirclement is ratcheting higher with every passing week as China’s industrial policy exposes economic tensions with the US, tensions unlikely to be resolved any time soon. [CSO commentary: The BREAK the BRICS Coalition]
This weekend’s SACU Summit: preview by SACU’s ES, Paulina Elago
Talking about intra-SACU trade, SACU secretariat executive secretary, Ms Paulina Elago, said it had grown over the past five years.”Goods exported have increased by 10.2% reaching the value of R188bn in 2017,” she said. Ms Elago said the structure of intra-SACU exports had remained relatively the same over time with South Africa accounting for most of the goods traded within SACU. She said in 2017, South Africa accounted for 71.3% of intra-SACU exports followed by Namibia (11.6%), eSwatini (9.1%), Botswana (5.7%) and Lesotho (2.3%). On imports, she said intra-SACU imports had increased by 6.9% during the same period. “The intra-SACU import bill stood at R171bn in 2017. The structure of intra-SACU import has remained relatively the same during the past five years with Botswana, Namibia and South Africa being the dominant players.” She said in 2017, Namibia accounted for 29.3% of intra-SACU imports followed by Botswana at 29%, South Africa (21.7%), Lesotho (10.5%) and eSwatini (9.5%). “This is a positive trend in terms of trade creation effect of the Customs Union but the dependency on South Africa as the dominant player has at times put the BENL Botswana, eSwatini, Namibia and Lesotho at risk of high input cost to industrial inputs.”
Nigeria’s main manufacturing body said it will oppose plans for an African free trade area until the government has done more studies on its impact. “When they open our borders for all manner of products to come into this country, most of our industries will be out of business,” Frank Jacobs, president of the Manufacturers Association of Nigeria, told reporters in Lagos, the commercial capital, on Tuesday. “We will continue to oppose it until the right thing is done.” [Commentary byOlu Fasan: Nigeria is Janus-faced on trade, but can’t have it both ways]
The Tanzania Diagnostic Trade Integration Study 2017 identifies priority actions in support of the country’s strategy to deliver broad-based growth through trade integration. The study seeks to (i) take stock of the progress in implementing the action matrix adopted in the DTIS 2005; (ii) provide an in-depth focus on agribusiness, mining, and tourism; (iii) identify obstacles to the realization of the full development potential of agriculture and tourism in Zanzibar; and (iv) prepare an updated action matrix. While the report focuses on agribusiness, mining, and tourism, it more broadly addresses the issues of regional integration, trade facilitation, small-scale trade, and gender. Extracts:
The regional trade potential has not been fully exploited. Trade with the EAC has remained relatively low for an economic union. In 2015, Tanzania sourced only 4% of its imports from within the EAC and exports accounted for 10.5%, growing slower compared to other regions (from 3% to 8% to the rest of Africa, between 2010 and 2015). There is therefore considerable potential for increasing exports to neighbouring countries, but the relatively low degree of trade integration reflects the continued high trade costs.
Trade costs have been a major impediment. High costs divert trade to informal channels. A substantial portion of Tanzania’s trade goes unrecorded. Comparing mirror trade data (that is, the value of Tanzania’s exports to EAC partner countries’ import data for the same products) reveals substantial gaps, indicating that informal exports from Tanzania to partner EAC countries could account for as much as $262m. Other estimates show that approximately 500,000 tons of maize were informally exported to Kenya in 2014, amounting to more than $150m in value. This is in addition to the dozens of thousands of metric tons of other crops, such as rice, dry beans, coffee, and cloves that are regularly exported to neighbouring countries through informal channels. This ‘missing trade’ has a disproportionately negative impact on small farmers and traders, and women in particular.
Cote d’Ivoire: IMF staff report for the 2018 Article IV Consultation
The medium-term outlook is robust. Growth is expected to average around 7% over 2018–23. On the supply side, this projection is supported by a pick-up of the industry (particularly mining and energy production) and services (including telecommunications and construction) over the medium term. Concerning demand, key drivers of growth are projected to be a rebound of private consumption and investment in the near term and rising net exports in 2020 and beyond. The current account deficit is expected to widen to around 3% of GDP in 2018-20 reflecting a decline in primary agriculture exports and an increase in imports of consumption and investment goods, and gradually narrow over the medium term, with industrial exports gathering strength and the services deficit stabilizing. Inflation is projected to remain below 2%, reflecting the projected low inflation in trading partners.
Gabon: IMF completes review mission
The mission expressed concern about weak program performance, substantial fiscal slippages, and disappointing progress on structural reforms. The overall fiscal deficit (cash basis) declined by about 3% of GDP, broadly in line with program projections. This helped contain public debt (including domestic arrears) at around 63% of GDP. But the composition of the adjustment was less than optimal as it relied on a large drop in public investment, which can have a negative impact on growth. There was also insufficient progress to contain current spending (wages and salaries, transfers, subsidies and special accounts) and weak non-oil revenue collections. Progress to clear domestic and external arrears was also slower than expected, and many important structural reforms have been delayed or not implemented as planned. [The Central African Backbone project: central pillar of the digital revolution in Gabon]
EU’s Trade and Investment Barriers report: EU removes record number in response to surge in protectionism
The annual pdf Report on Trade and Investment Barriers for 2017 (1.83 MB) released today, shows that the European Commission has eliminated the highest number ever of trade barriers faced by EU companies doing business abroad. European exporters reported a major increase in protectionism in 2017. The report also shows that 67 new barriers were recorded in 2017, taking the total tally of existing obstacles to a stark 396 between 57 different trading partners around the world. This confirms the worrying protectionist trend identified in previous years. China displayed the largest increase in new barriers in 2017, followed by Russia, South Africa, India and Turkey. The Mediterranean region also showed a notable rise in barriers for EU companies. The nine countries with the highest number of trade barriers still in place are all G20 economies. Examples of barriers eliminated in 2017: [Comments on South Africa, p17-18: Though South Africa has not been a focus of previous reports, an increasing number of protectionist barriers affecting trade and investment are being put in place. The country resorted to four new barriers in 2017, bringing the overall barrier count to eight.]
UK-Africa Strategy Post-Brexit: speech by Minister for Africa, Harriett Baldwin
We are really extending our reach across Africa. So far this year the UK has opened new posts in Lesotho and eSwatini, Mauritania and Chad, and there will be more to come. The vision is that at the end of this process we will have more offices across Africa than any other European country. Global Britain is open, inclusive and outward facing, committed to playing a leading role on the world stage. Leaving the European Union does not mean stepping away from our global responsibilities – quite the opposite. And this is why we are stepping up our partnerships across Africa, our commitment to the long-term success of African nations and our support to the future hopes of millions of young people.[Note: The speech was delivered at today’s British Foreign Policy Group event] [Douglas Gibson: Brexit presents an opportunity of a lifetime for SA]
Kenya on Monday hosted the China-Africa Infrastructure Cooperation Seminar amid calls for enhanced ties with Beijing to boost modernization of roads, ports, railways and telecommunication networks in Africa. The two-day meeting was organized by Chinese Embassy in Kenya, Kenyan Ministry of Transport and the African Economic Research Consortium. The forum focused on the Mombasa-Nairobi SGR project was the sixth one to be held in the continent ahead of FOCAC summit in Beijing in September. Zhou Yuxiao, China’s Ambassador for Affairs of the Forum on China-Africa Cooperation said: “In cooperation with Africa, China attaches great importance to the economic and social benefits of the projects. It advocates that large infrastructure construction and industrial development should be planned and carried out in parallel so as to make them mutually reinforcing and strengthen Africa’s capacity for sustainable and self reliant development.”
Nigeria: Customs to deploy drones to check rice smuggling (Punch)
The Nigeria Customs Service on Monday vowed to deal ruthlessly with those involved in the smuggling of prohibited items, particularly rice, saying that it was working with the Nigerian Air Force to deploy drones for border surveillance. The Deputy Comptroller-General, Enforcement, Investigation and Inspection, NCS, Aminu Dangalidima, said once the service was able to reduce the activities of smugglers, it would result into improved revenue for the government. “We will be able to boost revenue generation once we are able to block leakages,” he noted. The Federal Government had last week stated that it would shut Nigeria’s land border with a neighbouring country in few days’ time in order to halt the smuggling of rice into the nation.
Tuesday’s Quick Links:
ECOWAS, Israel agree on $1b renewable energy project
Zimbabwe, Zambia agree to speed up Batoka project
Angola’s state budget for 2019 will be different from every previous one: Minister of Finance
Gregory Krosten: Whither remittances in the Nigerian economy?
IMF on Euro 2.0: Past, present, and future of Euro area integration
IMF report on the globalization of farmland: theory and empirical evidence
The devil is in the details: growth, polarization, and poverty reduction in Africa in the past two decades