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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Simon Davis

03 Aug 2018

Afreximbank has posted its Annual Report 2017 (pdf)

Regional spillovers in Sub-Saharan Africa: exploring different channels (IMF)

In addition to bringing together findings from a broad array of existing research, this note identifies countries that are the most likely sources of regional spillovers and those that are most likely to be impacted, and provides estimates for the size of these channels. It finds that intraregional trade and remittance flows are an important channel for growth spillovers, while banking channels are less important but will remain a risk going forward. Finally, the note documents other important spillover channels through financial markets contagion, revenue-sharing arrangements in fiscal unions, commodity-pricing policies, corporate investment, and forced migration. Extracts (pdf):

Foreign direct investment constitutes an important channel of regional integration in sub-Saharan Africa. For some countries, inward FDI from sub-Saharan Africa constitutes the largest share of total inward FDI. This is the case in Togo, Rwanda, Guinea-Bissau, and Botswana, where the share of regional inward FDI positions is more than 40% of their total stock of FDI (Figure 27). Firms from South Africa, Kenya, and Nigeria have the largest presence in other sub-Saharan markets. South African firms are the most visible, with more than 2,400 subsidiaries in other African countries (Box 6), but other hubs are growing fast, such as Kenya (with an important presence in East Africa) and Nigeria (in West Africa). Other sub-regions, such as central Africa, have limited cross-border corporate ownership.

Extract from Box 6: About 75% of investment from South Africa to the continent is in the services, trade, and financial sectors. Outward FDI from South Africa is increasing. The total stock of FDI from South Africa to sub-Saharan African countries was equivalent to 6.8% of South African GDP in 2015, up from 4.9% of GDP in 2010 (Figure 6.1). In receiving countries, South Africa’s investments represented as much as 3.2% of GDP (in Mauritius), with an average of 0.4% across all sub-Saharan African countries in which it invested in 2015.

Nigeria’s fuel subsidies are a quintessential example of negative fuel pricing spillovers, which had serious fiscal impacts on Benin and Togo. Benin and Togo set about reforming their fuel pricing policies from 2008 through 2012, while Nigeria continued to provide subsidies. Inevitably, a significant price differential arose between official fuel prices in these countries and those in Nigeria, leading to increased operating margins for smugglers and more fuel smuggling (Figure 29). The level of fuel sold on the formal (taxed) market declined precipitously in Benin to only 15% of total consumption and was much less than it should have been in Togo. This led to a smaller fuel tax base for legally consumed fuel in these two countries.

Table of contents: (i) Introduction and summary (ii) Regional trade links gaining strength (iii) Banking interdependence becoming more subregional (iv) The dominant role of South Africa sovereign spread spillovers (v) The changing pattern of remittance flows (vi) The foreign direct investment channel: South Africa rules the roost (vii) The fiscal channel: the role of unintended consequences (viii) The rising socio-economic impact of forced migration (ix) Concluding remarks. [Related IMF analysis: Trade and remittances within Africa]

African Leadership Forum 2018: Africa needs the right mindsets, rather than more funding – Kagame

The third way to reach a turning point, is to continue making it easier for African businesses to grow, and create jobs for young people. This is about improving the regulatory climate for enterprise and trade, on the one hand. It also means building deeper capital markets, and lowering the high cost of sending remittances. But it is also about changing the mindset of our youth from one of dependence and “poverty reduction”, to one of prosperity and wealth creation. In my view, the definition of “illicit flows” should be expanded to include the habit of importing things, that we already have right here in our countries, and our region. Certainly, even if the definition of illicit doesn’t include this, it is wrong, there is no doubt about it. Later on, I may have you time to tell the story that lies behind this point. We have to be mindful of the huge financial losses our continent incurs, as a result.

Dig deep, think local, go digital: UNCTAD head to African leaders (UNCTAD)

E-commerce will be in focus at a high-level event next week in South Africa, where Dr Kituyi will join President Cyril Ramaphosa and Jack Ma, the founder and head of China-based e-commerce giant Alibaba, who serves as a special adviser to UNCTAD on young entrepreneurs and small business. In December, UNCTAD will organize its first-ever Africa E-Commerce Week in December in the Kenyan capital, Nairobi, building on the success of its global editions in Geneva.

South African updates

South Africa: Country Strategy Paper 2018-2022 (AfDB)

In the longer-term retrospective, South Africa’s imports and exports increased from 17% and 21% of GDP respectively in the early 1990s to about 30% in 2016 for both imports and exports, which demonstrates that the country’s trade linkages have steadily increased over the past decades. Today, South Africa is the 36th largest export economy in the world. Key destinations in 2016 were Asia (30% of total exports); Africa (29%); Europe (24.6%); and America (9%). The Southern Africa Development Community (SADC) alone accounts for about 27% of South Africa’s export market. In contrast, imports from SADC (and actually Africa as a whole) accounted for less than 10% of South Africa’s total imports, translating into a strong trade surplus with the other countries of the southern African region. About 30% of total imports are from Europe, followed by Asia with about 25%.

South Africa’s ranking in the Doing Business Index has deteriorated in recent years, from 39th, 41st, 43rd and 73rd, to 74th (out of 190 countries) during 2013 to 2017. The main reasons for the deterioration are counterproductive reforms that created more obstacles to doing business, such as the introduction of regulations making access to credit information more difficult, an increase in property transfer taxes making the registration of property more expensive, and higher vehicle taxes. In 2017, South Africa’s least favourable Doing Business indicators are “Trading across Borders” (139th), “Starting a Business” (131st), “Enforcing Contracts” (113th), and “Getting Electricity” (111th). On the positive side, the country performed well in “Protecting Minority Investors (22nd) and “Resolving Insolvency” (50th).

South Africa has a high potential to reindustrialize if the right policy decisions are made. Re-industrialization in South Africa faces several key shortcomings including weak policy, planning and program coordination in government; legislative and regulatory delays and burdens; and concentration of manufacturing firms, among others (Annex 6). Promoting reindustrialization requires a well-tailored policy mix, consisting of measures to further improve the general business environment, notably through infrastructure development, but also spatially balanced, targeted support at micro-economic level to specific industries with the potential for competitive advantage and higher-value added job creation. This needs to be accompanied by skills development: [Download: pdf South Africa Country Strategy Paper 2018-2022 (2.41 MB) ]

Cape Town’s tech SMEs outshine their African peers in job creation (Business Day)

The report by global research firm Endeavor Insight, entitled Evaluation and Network Analysis of the Cape Town-Stellenbosch Tech Sector (pdf), found that the Cape Town entrepreneurial tech sector now employs between 40,000 and 50,000 people, which is more than double the people employed in the sector in Lagos and Nairobi combined. Lagos and Nairobi are two of the leading tech hubs on the continent. The report was commissioned by the tech incubator Cape Innovation and Technology Initiative, Wesgro, and the Allan Gray Orbis Foundation, with the support of the Western Cape government. Cape Town authorities have been pushing to establish the city as an innovation hub and the Silicon Valley of Africa.

AfDB EOI: Consultancy services for mapping existing incubators and accelerators across Africa. The mapping exercise has to cover all African countries but with a particular focus in Kenya, Ghana, Nigeria, South Africa and Côte d’Ivoire.

“Trade liberalisation bureaucracy frustrating Nigeria’s export to ECOWAS” (The Guardian)

Bureaucratic bottlenecks in the registration of products under the ECOWAS Trade Liberation Scheme, currently being managed by the Foreign Affairs Ministry are impede export goods from Nigeria to other West African countries, the Lagos Chamber of Commerce and Industry says. According to the Chamber, the fusion of the Ministry of Integration and Economic Cooperation, which had responsibility for facilitating trade with other African countries, into the Ministry of Foreign Affairs, has further increased the officialdom in the region. LCCI President, Babatunde Ruwase, said the administration of ETLS should be moved from Ministry of Foreign Affairs to the Ministry of Industry, Trade and Investment, specifically, the Nigeria Investment Promotion Commission, to improve the administration of trade protocol and serve exporters better. The Chamber has also aligned with the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture on the ratification of the AfCFTA, saying the country should sign the agreement, since signing is the first step in the negotiation process.

Wilbur Ross, Chris Coons: China is “pouring money into Africa.” Here’s how the US can level the playing field (CNBC)

As a Cabinet Secretary and a Democratic Member of the Senate Foreign Relations Committee, respectively, we agree that the United States must do more to present our African partners with better alternatives to state-led economic models, promoted by countries like China, so Africa can assume its rightful place in the global economy. We oppose opaque investment and development initiatives that impose undue costs and burdens on recipients, limiting their options for determining their own future. Passage of the Better Utilization of Investments Leading to Development Act of 2018, better known as the BUILD Act, would change this unsustainable situation. This bipartisan legislation would reform and modernize government development finance by establishing the US International Development Finance Corporation.

Trinidad and Tobago strengthening links with Africa (The Guardian)

Between 2014 and 2017, T&T’s average exports and imports with the African continent were $1.4bn and $7.5bn respectively, resulting in a trade deficit of $6.1bn. The top export markets in 2017 were Morocco, Senegal, Liberia, Ghana and South Africa, while the top import partners were Gabon, the DRC, Congo, South Africa and Morocco. The figures were revealed by Trade Minister Paula Gopee-Scoon when she spoke at the Emancipation Support Committee’s 18th Annual Trans-Atlantic Trade and Investment Symposium.

Solving Africa’s currency illiquidity problem (World Bank)

Some 41 currencies serve the African continent. Many of these are characterised by their illiquid and rarely traded status on the global financial market, as well as their volatility. So for those wishing to do business with Africa, these currencies - as difficult and expensive to source - can pose a real problem. From the Namibian dollar to the Seychellois rupee, it is vital that organisations are able to source emerging market currencies reliably, on time, and at competitive prices. Yet such necessities often elude those trading with Africa, who view currency concerns as one of the biggest barriers to the development of Africa as an emerging - and therefore high growth - opportunity for international investors. So what are the potential solutions? [The author, David Bee, is Head of Global Markets at Crown Agents Bank] [IMF: 2018 Review of Facilities for Low-Income Countries]

As African economies gain momentum, air travel is booming (The National)

The emergence of new airlines, as well as a diversifying of intra-African routes, is beginning to make itself felt. Uganda Airways is the latest, having agreed to acquire four Canadian Bombardier CRJ900 aircraft and two Airbus A330-800neo last month, which will form the basis of its fleet. Uganda is also the first African customer to acquire the Airbus Neo. The DRC has also just re-invigorated itself after being dormant for years. It, too, has two Bombardiers and two Airbuses, and began flights in June. Congo Air has two A320 aircraft it uses to service internal destinations. Its only international stop as yet is a regular flight between the capital Kinshasa and Johannesburg, South Africa.

What happens where: A new integrated geospatial information framework (UN)

The Overarching Strategic Framework (pdf) is a forward-looking blueprint built on national circumstances, and priorities. The Framework aims to assist countries to move towards e-economies, e-service and e-commerce to improve services to citizens, build capacity for using geospatial technology, enhance informed government decision-making processes, facilitate private sector development, take practical actions to achieve a digital transformation, and to bridge the geospatial digital divide in the implementation of national strategic priorities and the 2030 Agenda for Sustainable Development. [Downloads: UN-GGIM 8th session]

Friday’s Quick Links:

The World Bank has posted a series of country opinion survey reports: Tanzania, Mali, Senegal, Gabon, Togo, Zimbabwe, DRC, Algeria, Morocco, Sierra Leone, Ghana,Liberia, Madagascar, Central African Republic, Equatorial Guinea, Burundi

Rwanda: Energy access diagnostic report

Ethiopia: Energy access diagnostic report

World Bank approves $100m IDA credit to support Ethiopia’s efforts to build a green economy

Shoreline, Mota-Engil agreement sees emergence of new entity to drive trade-enabling infrastructure

International trade community preps for packed autumn agenda, eyeing 2018/2019 deliverables

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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to recipients across Africa and internationally, serving in the AU, RECs, national government trade departments and research and development agencies.

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