Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: IOL | Waldo Swiegers

A new tralac Trade Brief: Intra-African trade – focusing on trade within Regional Economic Communities

This paper gives an overview of the trade within the eight RECs recognised by the African Union: AMU, CEN-SAD, COMESA, EAC, ECCAS, ECOWAS, IGAD and SADC. In assessing intra-REC African trade, it is important to consider the impacts of multiple memberships where bilateral trade occurs between members in more than one REC, which leads to double counting. The authors find that such double counting has amounted to 7% of intra-REC exports and 9% of intra-REC imports since 2001. The analysis in this paper thus offers some insight into the amount of intra-African trade happening outside the RECs. [The authors: Talkmore Chidede, Ron Sandrey]

Between gatekeeper and gateway: Taking advantage of regional and global value chains by addressing barriers to South Africa’s trade competitiveness (MTI Global Practice, World Bank)

This paper (pdf) provides an overview of South Africa’s recent trade outcomes, as well as its trade policy framework, and assesses the causes of its disappointing performance. In turn, it suggests changes to trade-related policies as well as the governance and management of these policies. The paper focuses in depth on three specific trade-related constraints: transport costs, the institutional governance of trade tariffs and export promotion, and overall economic policy uncertainty. The paper proceeds to argue that the South African government would benefit from aligning its trade strategy, commercial and economic diplomacy and industrial policy with the dual objective of providing both the engine for a “Factory Southern Africa” that encompasses the rest of the SADC region, and of being the region’s gateway to the rest of the world. Since South African firms will not be able to drive this approach on their own, this necessarily means forging policies and institutions that encourage investments into South Africa and the SADC region, and working with neighbors to maximize the development of regional value chains that result from such investments. [The authors: Peter Draper, Jakob Engel, Heinrich Krogman, Anna Ngarachu, Lesley Wentworth]

South Africa Investment Conference: update from the Inter-Ministerial Committee (GCIS)

Over the past six months, the President’s investment envoys have engaged in over 150 dialogues with the both domestic and international investors. These engagements have achieved three broad aspects critical to achieving our objectives for the investment drive: (i) The Investment Envoys have contributed to an ‘issues log’, which is a collation of proposals on how government can re-orient policy to stimulate economic growth and increase investor confidence. Government has already established an inter-ministerial committee that is working around the clock to leverage this feedback to improve the ease of doing business; (ii) An investment pipeline has been collated, which is a collection of projects that either have a funding gap or have been delayed due to red tape or administrative delays. Some of these projects will be showcased at the Investment Conference for consideration by investors; (iii) The investment envoys, together with InvestSA, have facilitated the resolution of specific issues related to regulatory permits or licenses, delayed decision-making, work visas and guidance regarding B-BBEE equity equivalent requirements. Through this initiative a total of 45 bankable projects will be announced which are ready for implementation. These projects are in manufacturing, green economy, infrastructure, agro-processing, minerals beneficiation, mining, oil and gas, and property development. The projects are projected to be to the value of R150bn. [Download pdf The case for investing in South Africa: Executive summary (1.34 MB) ]

Does South Africa need its own export-import bank? (SAIIA)

The paper (pdf) shows the extent and depth of this market, demonstrating that there is sufficient trade finance for domestic and international trade currently. Its main finding is that there is a fully-fledged trade finance market in South Africa that compares well with international export and import markets. Two state institutions – the Industrial Development Corporation and the Export Credit Insurance Corporation – provide funding for trade and trade insurance facilities respectively. They compete with various private providers of trade finance solutions and distinguish themselves by having a higher risk appetite than their private counterparts thereby enabling access to these facilities by high risk trade participants. The trade finance market in South Africa is therefore considered to be sufficiently financed and well established. A new state-owned ECA is thus unnecessary and unfeasible, considering the country’s current fiscal constraints. However, a concerted effort is needed to improve the financing of small and medium-sized enterprises involved in cross-border trade activities since they are still finding it challenging to access this market. A final recommendation is for the IDC and ECIC to become drivers of growth in the SME space by providing streamlined trade finance solutions. [The authors: Cyril Prinsloo, Palesa Shipalana, Zinhle Ngidi]

UNCTAD’s Commodities at a Glance: Special issue on coffee in East Africa

Current global supply does not match the projected demand. This poses challenges but also opportunities for East African and other coffee producing countries. For coffee-producing East African countries to capture greater value from coffee production, they will need to implement an agricultural transformation agenda comprising the following five elements: Reinforcing good agricultural practices; Fostering the establishment of coffee farmers’ associations; Strengthening producers’ bargaining power; Promoting regional bodies, such as the African Fine Coffees Association; and Making financing available (e.g. prefinancing, investment and early purchase contracts). This report is structured as follows [Download pdf Commodities at a glance: Special issue on coffee in East Africa (3.80 MB) ]:

Section II provides a brief history of coffee, from the remote tropical forests of Ethiopia where coffee was first “discovered” to the current globilized commodity, traded and consumed all over the world. Section III describes the coffee value chain, from tree to cup. Section IV introduces the East African coffee scene. Section V is devoted to two country case studies, focusing on the contrasting cases of Burundi and Ethiopia. Finally, the last section outlines the challenges and opportunities associated with the coffee sector in producing countries, with a focus on East Africa. Extract: Ethiopian coffee is exported to about 50 countries around the world. The EU is the most important destination (Figure 21). At country level, Germany is the destination for about one third of Ethiopia’s total coffee exports, followed by Saudi Arabia which accounts for 12%. [RelatedAfrican production and trade of coffee and tea in perspective: What are the implications for continental trade liberalisation? (tralac)]

World Bank’s biennial Poverty and Shared Prosperity Report: Piecing together the poverty puzzle

The report finds that the incomes of the poorest 40% grew in 70 of the 91 economies monitored. In more than half of the economies, their incomes grew faster than the average, meaning they were getting a bigger share of the economic pie. However, progress in sharing prosperity lagged in some regions of the world. The report also warns that data needed to assess shared prosperity is weakest in the very countries that most need it to improve. Only one in four low-income countries and four of the 35 recognized fragile and conflict-affected states have data on shared prosperity data over time. Extract [Download:  pdf Poverty and Shared Prosperity 2018 (5.77 MB) ]:

Sub-Saharan Africa now accounts for most of the world’s poor, and – unlike most of the rest of the world – the total number of poor there is increasing. The number of people living in poverty in the region has grown from an estimated 278 million in 1990 to 413 million in 2015. Whereas the average poverty rate for other regions was below 13% as of 2015, it stood at about 41% in Sub-Saharan Africa. Of the world’s 28 poorest countries, 27 are in Sub-Saharan Africa, all with poverty rates above 30%. In short, extreme poverty is increasingly becoming a Sub-Saharan African problem.

African countries have struggled partly because of their high reliance on extractive industries that have weaker ties to the incomes of the poor, the prevalence of conflict, and their vulnerability to natural disasters such as droughts. Despite faster growth in some African economies, such as Burkina Faso and Rwanda, the region has also struggled to improve shared prosperity. The bottom 40 in the dozen Sub-Saharan African countries covered by the indicator saw their incomes rise by an average of 1.8% per year in 2010-15 (slightly below the global average of 1.9% per year). More worrying, however, is that the incomes of the bottom 40 shrank in a third of those 12 countries. [Infographic: Completing the poverty puzzle]

Mobilization of tax revenues in Africa: state of play and policy options (Africa Growth Initiative, Brookings)

The regional aggregate masks significant heterogeneity in performance. As shown in Figure 2 (pdf) , for several economies, revenues are below 10% of GDP. Non-resource tax revenues are particularly low in resource intensive economies, pointing to great scope for more revenue mobilization in the non-resource sectors of these economies. For example, in Chad, Equatorial Guinea, and Nigeria, revenues from non-resource sectors are only about 5% of GDP or less. The excess reliance on resource revenues exacerbates the effect of declines in commodity prices on these economies. In contrast, Lesotho, Namibia, South Africa, and Swaziland have all been more successful, with revenue collection comparable to or even exceeding the OECD average. Figure 4, Estimated tax revenue gaps for sub-Saharan African countries as a percent of GDP, displays the gaps between tax capacity and tax revenue collection by country. Significant heterogeneity in tax gaps exist across the region. At the country level, the gaps are largest for Equatorial Guinea, Nigeria, Chad (9 percentage points or higher) and smallest for Liberia, Mozambique, and Togo – two percentage points or less. [The authors: Brahima Sangafowa Coulibaly, Dhruv Gandhi]

Let’s be real: The informal sector and the gig economy are the future, and the present, of work in Africa (CGD)

Is this a disaster for Africa? Will the informal sector lose its ability to generate livelihoods as both goods and services become automated? It’s not clear which way the market will swing, but we already see digital platforms starting to change the very nature of what it means to be informal or formal. Until now, enterprises were (more or less) either in the informal sector or in the formal sector. Yet the digital world allows a business to take on formality in small, accessible, low-cost steps that match company needs – more of a ladder to climb than a cliff to scale, as illustrated in Figure 2.

African workers are in gig employment already. Following dozens of households every two weeks for a year, BFA has conducted financial diaries studies in Kenya, Tanzania, Mozambique, South Africa, India, and Mexico. These financial diaries illuminate the lives of people on low incomes, one transaction at a time. What we’ve learned is that they have a lot of income sources in the course of a year, ranging from two in India to eight in rural Tanzania and Pakistan (see Figure 3). [The authors: Amolo Ng’weno, David Porteous]

Vera Songwe tells African ambassadors: ECA aiming to become Africa’s premier think tank (UNECA)

As part of the proposed reform agenda, the Executive Secretary plans to create a private sector division, focusing on the business environment with respect to energy, infrastructure services, financial sector and capital market development. In addition, the issues of poverty and inequality, as well as governance, will receive added attention in dedicated sections. Ms Songwe said the retreat was an opportunity for the ECA’s senior team to listen to the permanent representatives, build a stronger relationship between Addis and the member states and ensure that country and continental priorities were aligned and consistent with those of the African Union. “This retreat is the first of its kind, but we hope to build on it to ensure ECA delivers value to its member states and the AU.”

SADC, Tanzania sign MoU on pooled procurement services of pharmaceuticals (SADC)

SADC’s Executive Secretary, Dr Stergomena Lawrence Tax, described the signing of the MoU as a significant step in the implementation of the SADC Pooled Procurement Services (SPPS), which is anticipated to reduce the prices of pharmaceuticals and medical supplies by 40% by allowing SADC Member States to share pricing and supplier information to enable them negotiate for better prices for high quality medicines from suppliers. Dr Tax called on Tanzania’s MSD to fast-track all the necessary procedures to facilitate the operationalisation of the SPPS, as agreed by the SADC Ministers of Health and Ministers Responsible for HIV and AIDS at their meeting in November 2017.

Today’s Quick Links:

Mauritius: Government is determined to revitalise the tea sector, states Prime Minister

Statement of the Chairperson of the AUC on the appointment of a parity Government in Ethiopia

Ministers endorse continental report on population and development issues in Africa

The 7 Dakar Principles: Multi-sectoral coordination for effective delivery on nutrition

Europe, Asia leaders prep for high-level summit, with trade and cooperation to headline agenda

SWIFT gpi White Paper: Towards frictionless cross-border payments

WCO’s advanced customs valuation workshop for Rwanda

WCO News N°87: October 2018

SAIIA: Ties between African countries and China are complex: understanding this matters


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