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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Rodger Bosch | MediaClub South Africa

25 Oct 2018

Our featured tweet, @AmbMuchanga: Great news. Got notification from Chief Negotiator. South Africa Parliament has approved ratification of the AfCFTA Agreement. Formal deposit to be done during side event at February 2019 @_AfricanUnion Summit. Momentum towards One African Market growing!

African integration, the AfDB and the upcoming African Economic Conference (3-5 December, Kigali): extracts from an interview with Ms Moono Mupotola

I must add that it is now AfDB policy that all regional projects allocate 10% of the total project budget to soft infrastructure interventions. We are now in the process of developing a trade and transport facilitation toolkit which should substantially assist our task managers in the transport sector to include the soft components in their project designs. The Regional Integration team will then develop similar tools for the power, water and ICT sectors...We now have Regional Integration Coordinators in each of our five regions working closing with our project managers to ensure that soft integration elements are included in most Bank projects. We shall launch at this conference the 2018 edition of our flagship Visa Index, an advocacy tool that has helped spur the debate on the movement of Africans to other African countries...Let me also say we have invited the head of Trade and Integration at the Inter-American Development Bank to provide the integration perspective from Latin America and the Caribbean.

Integrate regionally for stronger, sustainable growth in resource-rich sub-Saharan Africa (Brookings)

Given the smaller size of some sub-Saharan African countries, policies to improve the endowment of capital need to be supplemented by efforts to create larger markets that cross borders and make those countries more attractive to both foreign and domestic investors. A more integrated region will help overcome the burdens of low density, thick borders, and long distances that still negatively affect sub-Saharan Africa. My colleagues and I find in a recent report that spillovers from the three large, resource-rich, middle-income countries in sub-Saharan Africa (South Africa, Nigeria, Angola) to their neighbourhoods or the rest of the region are negligible. There is little evidence of statistically significant links between growth rates across sub-Saharan Africa as a whole. Modest integration limits the attractiveness of the region to both domestic and foreign investors. The parallels with the first round of East Asian tigers and the next generation of Asian countries is important: [The authors: Ivailo Izvorski, Djeneba Doumbia]

Nigeria and the AfCFTA: As Nigeria prepares to sign free trade pact (Daily Trust)

In preparation for joining the pact, the Minister of Industry, Trade and Investment, Okechukwu Okechukwu, said Nigeria’s trade team have been working on creating the enabling structures, including the design of the ‘Trade remedy mechanism for the rules-based safeguard of the Nigerian economy’ to serve as a trade remedy mechanism for safeguarding the Nigerian economy when the pact comes into force. The minister also said that a plan, ready for implementation on rules of origin, has been designed and an updated Market Access Goods Offer with a Draft Schedule of Tariff Concessions that provide a basis for re-negotiating the ECOWAS CET and AfCFTA negotiations have been prepared. “This exercise was carried out over a 4-month process with relevant stakeholders in a coordinated parallel process managed by the Tariff Technical Committee in the Federal Ministry of Finance and the Nigerian Office for Trade Negotiations of the Federal Ministry of Industry, Trade and Investment,” the minister said. He also said an updated Market Access Services Offer with a Draft Schedule of Specific Commitments for Trade in Services have been prepared, in an exercise carried out in a consultative process within the Nigerian Coalition of Services Industries.


REC trade and investment policy updates:

  1. ECOWAS develops regional automotive industry policy. Experts and representative of the Ministries of Industry from ECOWAS member states commenced a two-day meeting on 24 October in Abuja, with the aim of validating the ECOWAS automotive industry policy framework. The ECOWAS Commission’s Commissioner for Industry and Private Sector Promotion, Mamadou Traoré, cited the development of the automotive industry in Nigeria as an example of the impact the industry can have on the region by creating jobs for the youth, reducing poverty and improving its economy. “Apart from Nigeria that has developed a national automotive industry development plan as part of its industrial policy, other Member States of ECOWAS are still importing vehicles and only very few are assembling trucks,” he said. Commissioner Traoré recommended the creation of a regional motor vehicle production system characterized by a high degree of regional integration and interdependence.

  2. SADC, Russia sign five-year MoU on Basic Principles of Relations and Cooperation. SADC’s executive secretary, Dr Tax, expressed hope that the SADC Investment Forum and the signing of the MoU will go a long way in bringing the Russian investors to the SADC region in the areas of science and technology, infrastructure, particularly energy, pharmaceuticals and medicine. She highlighted that SADC was implementing the pooled procurement of pharmaceuticals and invited Russia pharmaceutical manufactures to partner with SADC in this initiative. She expressed commitment to support SADC Member States to develop and implement strategic programmes and projects with partners from the Russian Federation.

  3. 2nd EAC Development Partners Forum. Addressing the forum, EAC Secretary General Amb. Liberat Mfumukeko said over the last five years, development partners had committed about $500m direct and technical support to various aspects of EAC integration. He disclosed that the main contributors to the EAC Development Programmes include Germany, USAID East Africa, the EU, and the African Development Bank. The German contribution amounts to €286,541,354.42; USAID $237,823,555; and the EU Euro 65,000,000. The head of Delegation of the EU, Amb. Roeland van de Geer, said the forum is valuable for development partners to ensure an alignment of their respective cooperation programmes with those of the EAC. [Germany to tighten development aid conditions for Africa]

  4. Starting today, in Lusaka: Regional Forum on Climate Adaptation and Food Systems Resilience in Eastern and Southern Africa


pdf South Africa: Medium Term Budget Policy Statement 2018 (730 KB) (National Treasury)

Domestic outlook: The National Treasury forecasts that GDP growth will slow to 0.7% in 2018, down from 1.3% last year, before rising to 1.7% in 2019 and 2.1 in 2020. The economic outlook is weaker than projected in the February 2018 Budget, which forecast 1.5% and 1.8% GDP growth in 2018 and 2019 respectively. The revisions reflect lower production by agriculture and mining in the first half of the year, as well as a lack of new investment. Agriculture and mining are expected to return to moderate growth in the next 12 months, and business and consumer confidence are expected to improve gradually over the medium term. Despite lower commodity prices, the resolution of several longstanding policy issues over the past six months is expected to support investment in mining and energy. Higher agricultural output is expected as a result of improved rainfall in the Western Cape this year.

Balance of payments: The current account deficit widened to 4% of GDP during the first half of 2018 from 2.4% over the same period in 2017. This was largely due to a smaller trade surplus, higher net income payments and deteriorating terms of trade. The value of total exports of goods and services rose by 1.3% in the first half of 2018, while that of imports of goods and services rose by 4.4%. The current account deficit is expected to average 3.2% of GDP in 2018, rising to 3.9% over the medium term, as a result of import growth and weaker terms of trade. [Note: Read the speech by Finance Minister Tito Mboweni here. The complete set of MTBPS documentation can be accessed here]

pdf The case for investing in South Africa: accelerating growth by building partnerships (4.90 MB) . See chapter 6, Opportunities for investors, for sectoral investment opportunities in agriculture and agro-processing, mining and minerals beneficiation, manufacturing, services, and infrastructure.

Trade logistics: Trading across borders in South Africa (World Bank)

This topic measures the time and cost (excluding tariffs) associated with the logistical process of exporting and importing goods. It assesses three sets of procedures – documentary compliance, border compliance and domestic transport – within the overall process of exporting or importing a shipment of goods. The information appearing was collected as part of the Doing Business subnational project in South Africa, which measures and compares regulations relevant to the life cycle of a small to medium-sized domestic business in cities and regions. Explore data for Cape Town, Durban, Ngqura, Port Elizabeth ports:

South Africa-US trade update: Rob Davies welcomes some steel and aluminium product exclusions from Section 232 duties (dti)

The US Department of Commerce has granted product exemptions for imports of 161 aluminium and 36 steel products from the Section 232 duties that the US imposed against foreign imports. Minister Davies welcomes these positive developments as a step towards normalising trade relations between South Africa and the US. Over 800 US companies are represented in South Africa and the trade between the Parties is relatively balanced with total trade reaching R161.4bn in 2017. The exemption of some of the aluminium and steel lines confirms that South Africa remains a source of strategic primary and secondary products used in further value added manufacturing in the US, does not threaten US national security and contributes to jobs in both countries. The products that have been exempted for aluminium include aluminium foil and aluminium plates, sheets and strip. In relation to steel, the products include the hot rolled bars, hot rolled sheets, cold rolled sheets, plates cut and plates in coils. Minister Davies thanks the South African and US companies, as well as Members of Congress that have lobbied for the exemption of South Africa from all Section 232 duties. South Africa continues to encourage its domestic exporters to engage US buyers to consider requesting product exemption from Section 232 duties of all imports from South Africa. While South Africa welcomes this important relief to our exports, Government remains engaged with the US Government and continues to request a country exemption.

Namibia:  pdf FY2018/19 Mid-Year Budget Review (445 KB)  (GoN)

Closer to home, the South African economy which is the destination of about 14% of Namibia’s merchandize exports has entered a technical recession by the Second Quarter of this year, reflecting continued contractions in such key sectors as agriculture, transport, retail trade and manufacturing. Under these subdued conditions, the South African economy is projected to grow by a lower output rate of about 0.8% this year and rise to 1.4% by 2019. For Angola, the sub-region’s third largest economy and an equally key trading partner for Namibia, an annualized contraction of about 0.1% is projected for this year, after a decline by 2.5% in 2017, with a rebound to positive territory of 3.1% next year.

The decline in investment over the past years calls for a comprehensive set of coordinated actions and policy reforms to enhance competitiveness, strengthen partnerships to foster business confidence and continue entrenching policy certainty. Exports of goods and services are estimated to grow by 2.3% this year, following a contraction in 2017 as import flows continue to lag due to weak consumption demand. This results in positive spin-offs for the current account balance, the trade balance and the stock of international reserves. The current account deficit has narrowed from 14.0% of GDP in 2016 to 4.9% of GDP in 2017 and 1.3% during the second quarter of 2018; International reserves have increased to 5.2 months of import cover in September 2018, which is 7.7 times higher than the currency in circulation and more than sufficient to support the currency peg.

The cost and benefits of tax treaties with investment hubs: findings from Sub-Saharan Africa (IMF)

Our paper is focused on tax treaty policy in Sub-Saharan Africa. Building on a panel data set of 41 African economies from 1985 to 2015, we examine the effects of concluding DTTs with investment hubs empirically. In Africa, Mauritius has positioned itself as a conduit country for investment into the continent. As part of its strategy, Mauritius taxes corporate income at 15%, which can be reduced to an effective rate of 3%, and negotiated favorable tax treaties with many African economies. We take advantage of the fact that 11 countries in the region have concluded treaties with Mauritius, but others have not. Using a Difference-in-Difference framework, we do not find that these treaties increase FDI in treaty partner countries. Our work, however, does provide a indication of non-negligible revenue losses in source countries following the enactment of a treaty with Mauritius and investment hubs more generally. [The authors: Sebastian Beer, Jan Loeprick]

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