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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Arne Hoel | World Bank

09 Oct 2018

Featured tweet, @RencapMan: Who’s got the biggest economy in Africa in 2018? If you use the NGN325 exchange rate, it is Nigeria. If you use the market rate, South Africa has returned to the top spot. Egypt is 3rd, Morocco 5th, Kenya 7th, Ethiopia 8th and Ghana is 10th. Zimbabwe is not really 20th…

Africa’s growing debt crisis: Who is the debt owed to? (Jubilee Debt Campaign)

The briefing, pdf Africa’s rising debt crisis: who is the debt owed to? (448 KB) shows that debt problems are increasing rapidly for many African countries, with average government external debt payments doubling in two years, from an average of 5.9% of government revenue in 2015 to 11.8% in 2017. The briefing also shows that of external debt owed by African governments, around 20% is owed to China, 35% is owed to multilateral lenders, 32% to private lenders and 13% to other governments. However, interest rates tend to be higher on private sector loans, which therefore account for 55% of interest payments, compared to China which accounts for 17% of interest payments. The briefing also investigates who debt is owed to by the countries that currently have the greatest debt problems. Of the 16 African countries rated by the IMF as in debt distress or at high risk of being so, on average 15% of their debt is owed to China. China is therefore on average a less significant lender in debt crisis countries, than across the whole continent. The data in the briefing comes from the IMF, World Bank and the China-Africa Research Initiative at John Hopkins University.

Cairo gives priority to Africa (Ahram)

Last week the Foreign Ministry hosted the first meeting of the Permanent Committee for Promoting Relations between Egypt and Other African Countries. The committee seeks to “coordinate efforts by various ministries and the private sector to boost Egypt’s African engagement,” Deputy Foreign Minister for African Affairs Hamdi Sanad Loza said after the meeting. The committee was formed by order of the prime minister and representatives from the Central Bank, the Ministry of Finance and Export Development Authority attended. A second committee meeting, scheduled later this month, is expected to include participants from the private sector, said Loza. The committee meeting was held ahead of the third Africa Investment Forum and the Intra-African Trade Fair, gatherings that seek to boost trade between Egypt and Africa, noted Khaled Omara, assistant foreign minister for African affairs. Egypt will also chair the African Union in 2019 and host the COMESA meeting in 2020. [Morocco, Russia willing to set up tripartite partnership with Africa]

SADC industrialisation: Where regional agendas meet domestic interests (ECDPM)

This paper looks at the political economy dynamics around regional industrialisation policy in SADC. It examines what drives regional industrialisation strategies in African RECs; the key actors and factors shaping regional industrialisation in SADC; and the resulting opportunities, different modalities and potential risks for donors who want to support such strategies. Despite the apparent logic for regional industrialisation strategies, it is not clear what the actual role and added value of regional organisations and policies are, or should be, in this domain. While SADC member states profess support for a regional industrialisation agenda, their domestic industrial development and other political objectives often lead them to adopt policies that protect national industries, often at the expense of their neighbours. Extract (pdf):

‘Meaningful participation’ by the private sector is seen as key for successful implementation of the SADC Industrialisation Strategy. So far this has been dominated by the South African private sector, especially large South African firms. This is unsurprising, however, as the ‘organised SADC private sector’ is largely comprised of South African firms.

‘Opportunities’ and entry points for external support exist in complex environments but the findings on political and economic dynamics emphasise the need for support to be flexible, iterative and adaptive - for example, many of the emerging dynamics on which regional collaboration on industrialisation could build are found beyond the formal agendas of regional organisations.

Nonetheless, regional organisations provide political legitimacy for regional cooperation on industrial development, which could bring about a more enabling environment for such dynamics, while there are crosscutting issues that are crucial to industrialisation, which are regional in nature (standards, trade barriers, regional infrastructure, etc), and hence which are central to SADC’s mandate.

Efforts to support the SADC industrialisation agenda should seek to: exploit the interest created by South Africa’s past Chairmanship of SADC; encourage South African collaboration with Namibia (current SADC Chair); explore and build on political traction and private sector agency in cross-country functional cooperation and problem-solving (such as infrastructure and corridor development). Opportunities for supporting domestically-led and sector-specific cross-country dynamics need to be explored to diversify the regional support portfolio beyond institutional strengthening of SADC institutions and also cover functional cross-country cooperation.

Different areas of engagement require different forms of engagement. A portfolio approach seems best suited to supporting regional industrialisation-related efforts at different levels and in adaptive ways, depending on the nature of the issues and the likely coalitions to emerge.

Going forward questions relate to the preparedness of the World Bank and others to continue to invest in regional problem solving in adaptive ways to contribute to economic transformation and industrial development. In order to do so it will have to invest in knowledge generation and in systems so as to embrace complexity and develop adaptive engagement strategies. [The authors: Bruce Byiers, Jan Vanheukelom, Sean Woolfrey]

East Africa: National interests delay Customs Union, even as technology kicks in (The East African)

Nicholas Nesbit, chairman the East African Business Council, says the increase in imports and policies whose net effect is keeping East Africans in poverty can be blamed on partner states ignoring the voices of manufacturers and innovators and choosing instead, to listen to importers whose business depends on failing locally produced goods and service. Mr Nesbit who is also the managing director of the Nairobi-based arm of tech firm IBM, blames the EAC partner states tendency to listen to traders and not manufacturers and innovators for the EAC’s failure on its mandate. “EABC has not been as strong as it should be,” he says. A strong EABC would force national business associations to bring trade disputes to their regional apex body. He says that national business associations take their trade issues to their ministers of trade and the EAC, which fuels protectionism, since discussions at that level are usually nationalistic and inward looking. But Alex Mugire, deputy commissioner at Rwanda Revenue Authority, says a fully functional EABC wouldn’t solve East Africa’s tendency to favour implementation of sections of the Customs Union that encourage imports.

West Africa: Benin buys cement from China, we’re just 35km away – Dangote (National Wire)

Chairman of Dangote Group, Aliko Dangote, has called for conscious efforts that will deepen African regional market by African investors and governments for rapid growth and development of the continent’s economy. Speaking in London on Monday during “One to One Conversation” at the on-going 5th annual Financial Times African Summit, Dangote said the key to Africa’s economic growth and strength is in the development of the regional market, saying “Regional markets in Africa must work.” Citing an instance of his own experience, the Africa’s richest man referred to the case of neighbouring Benin Republic where the country continues to import cement from China while his Nigerian factory is only 35 miles away from the border. “We need to trade with ourselves”, Dangote stated as he spoke glowingly about the prospect of African economy, the free trade agreement and the availability of huge raw materials to attract investors.

Prompted by the Editor of the Newspaper, Lionel Barber to speak about difficult markets like Tanzania and Ethiopia, Dangote dismissed the issue difficulty and re-affirmed “our aim is to always provide jobs and worth. As an African investor I don’t want any investor anywhere in Africa to have a bad experience.” Dangote repeated his central mantra for African growth urging the reduction of exports of raw materials to other continent but create greater wealth within African economies: “We need to continue to transform the structure of African economies”. He alluded to his company’s entry into the Ghana Sugar market, pointing that he is further expanding his sugar business to Ghana for the main reason of helping to revitalize its economy. “We are going to help Ghana grow its own sugar for the first time.” [Zambia: Moroccan firm in talks to revamp Nitrogen Chemicals]

Lessons from foregone mineral opportunities: The imperative for diversification in Ghana (Goxi)

In the case of Ghana, despite relatively strong performances, worrying trends abound. While Ghana ranks 8th in Africa as per the Ibrahim Index, its score has been slightly declining in recent years. Similar to Zambia, debt-to-GNI was brought down markedly but has begun to steadily rise from an average around 30% per year to over 50% by 2016. Ghana’s mineral rents have played an outsized role in some areas, accounting for 22% of government revenue and 45.5% of exports as of 2016. Yet it has not been similarly significant for income and job creation (see Figure 2), while manufacturing value added, in comparison, stagnates below 5%. In light of these developments, there are a number of takeaway messages of the crisis we see unfolding for other mineral producers, many of which are echoed in ongoing work of the African Minerals Development Centre as it assists countries in implementing the Africa Mining Vision. [The author: John Sloan]

ECOWAS to sanction members disobeying court judgments (ThisDay)

The Economic Community of West African States has disclosed that plans have been concluded to punish member states that are in the habit of disregarding and disobeying judgments of the ECOWAS Court of Justice. The President of the ECOWAS Court of Justice, Justice Edward Asante, made the disclosure Monday while declaring open a Regional Capacity Building Workshop for Law Enforcement Agencies.

Ghana: There will be massive infrastructural development next year – Bawumia (GhanaWeb)

The Vice President Dr Mahamudu Bawumia has announced plans by the government to embark on a massive infrastructural development across the country in 2019. “We are going to be tackling major roads, bridges, interchanges and so on across the country. There is a major infrastructure project on the way and the whole of Ghana, by the grace of God, will feel it when it starts in 2019”, he said, while addressing the closing session of a five-day capacity building conference for Metropolitan, Municipal and District Chief Executives in Accra. Dr Bawumia said the Sinohydro project would be implemented on a full scale next year, and indicated that the government would be spending almost $1.5bn out of the $2bn Sinohydro facility on the road sector. He mentioned the Eastern Corridor Road as one of the projects that would be benefiting from the road project. [China Affair: Our eyes are wide open – Akufo-Addo]

Trump reaches for checkbook diplomacy to counter China (Foreign Policy)

Trump came into office planning to shut down OPIC, which uses government funds to encourage private sector investment in developing countries, especially in Africa. Less than two years later, the administration is driving a massive expansion of the program, doubling its financing authority to $60 billion and freeing it to make more kinds of investments in more types of projects. The reason for the turnaround? China and its aggressive use of finance in the developing world. The US overhaul, said Ray Washburne, the current head of OPIC, “offers a financially-sound alternative to the state-directed initiatives pursued by China that have left many developing countries deep in debt.” Some of the changes to US development finance will likely take years to fully implement, including the ability to make sovereign loans, conduct financing in local currencies, and purchase equity stakes in new projects. [The author: Keith Johnson; Quartz Africa: The reason American presidents keep visiting the same few African countries]

Today’s Quick Link:

IMF’s October 2018 World Economic Outlook: the report, press conference transcript, Maurice Obstfeld blog

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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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