Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Gilles Paire | Alamy

Starting tomorrow, in Lilongwe, Malawi: First Extraordinary Summit of the Committee of Ten Heads of State and Government championing education, science and technology

Our featured tweet: @ICA_Africa flagship annual report, Infrastructure Financing Trends in Africa, will be published on first day of Africa Investment Forum. Will it show a rise or fall in commitments to Africa’s infrastructure development? Find out on 7 November.

Revenue Statistics in Africa 2018 (OECD)

Africa has sustained gains in domestic resource mobilisation made since 2000, as tax revenues remained stable in 2016, according to Revenue Statistics in Africa 2018. Providing internationally comparable data for 21 participating countries, the report finds that the average tax-to-GDP ratio was 18.2% in 2016, the same level as in 2015, which represents a strong improvement from 13.1% in 2000. Revenue Statistics in Africa is a joint initiative between the African Tax Administration Forum, the AUC, and the OECD and its Development Centre, with the support of the EU. The publication, which now covers 21 countries, shows that revenue trends are mixed. Profiled key findings:

Tax revenues as a percentage of GDP: The Africa (21) average tax-to-GDP ratio was 18.2% in 2016, which is 5.0 percentage points higher than in 2000 but unchanged from 2015. In 2016, tax-to-GDP ratios ranged from 7.6% in the DRC to 29.4% in Tunisia. Six countries (Mauritius, Morocco, Senegal, South Africa, Togo, Tunisia) had tax-to-GDP ratios greater than or equal to 20% in 2016. The change in the tax-to-GDP ratio since 2000 is comparable with the increase in the LAC region (4.7 percentage points) and significantly stronger than growth amongst OECD countries over the same period (0.4 percentage points). Between 2015 and 2016, the tax-to-GDP ratios of 11 countries increased while those of 10 countries in the sample decreased. This contrasts with 2015, when the Africa (21) tax-to-GDP ratio increased by 0.5 percentage points from the previous year on average and in 15 of the 21 countries.

Tax structure: VAT revenue as a percentage of GDP in the Africa (21) increased by 2.0 percentage points from 2000, to 5.3% in 2016. VAT revenue accounted for the highest share of tax revenues in 2016 at 29.3%, an increase of 4.9 percentage points from 2000. The share of taxes on trade has fallen from 17.9% of total tax revenue to 11.6% over the same period. Revenue from income taxes contributed the most to growth in the average tax-to-GDP ratio of the Africa (21) between 2000 and 2016, increasing by 2.6% of GDP over this period to reach 6.2% of GDP in 2016. On average across the Africa (21), corporate income tax revenue increased by 1.4 percentage points – from 1.4% to 2.8% of GDP – between 2000 and 2016. [President Nana Addo Dankwa Akufo-Addo’s address at the OECD forum: summary]

Nigeria and the AfCFTA: three updates

  1. Repositioning Nigeria in the African Union The Chairperson of the AUC, Moussa Faki Mahamat, undertook a two-day official visit to Nigeria (25-27 October). On 25 October, the Chairperson attended a roundtable, chaired by Foreign Minster Geoffrey Onyeama and attended by the Ministers of Interior, Finance, Budget and National Planning, the National Security Advisor, the Controller Generals of Customs and Immigration, and the Acting Chairman of the Economic and Financial Crimes Commission. The theme of the meeting was “Repositioning Nigeria in the African Union”. The discussion focused on how best to expedite the integration process on the continent, in the light of the AfCFTA, the Protocol on Free Movement of Persons, the Right of Residence and the Right of Establishment, and the Single African Air Transport Market.

    The Chairperson of the Commission seized the opportunity to also brief on progress made on the African Union institutional reform, as well as the follow-up to the decision of the July 2018 Nouakchott Summit relating to the negotiations on the post-Cotonou arrangements with the European Union. The Chairperson also met with representatives of the Organized Private Sector, to exchange views on the AfCFTA and the Protocol on Free Movement of Persons. This interaction provided an opportunity for in-depth discussions on the concerns expressed by the private sector and the steps taken in the context of the negotiations on the AfCFTA to address them.

  2. African free trade not yet priority – Nigerian government. Nigeria has replied to the African Union Commission and lobbyists that it is not in a hurry to pen the African Free Trade Agreement. The special adviser to the President on economic matters, Dr Adeyemi Dipeolu, said on Wednesday at the 60th anniversary lecture of the Department of Economics, University of Ibadan: “Nigeria’s reluctance in signing the African Free Trade Agreement is based on the commitment to ensure that only what will benefit its economic interest is implemented as a policy.” Dipeolu however said there was the need for Nigeria to diversify into export and increase its revenue base: “We have to look at the current theory to influence our trade policy while our policy on transshipment must be addressed.”

    Also speaking, the African Trade Policy Center coordinator, Dr David Luke, said African countries must have a strategy to benefit from the agreement. He said it was important for African countries to open up their economies to encourage intra-regional trade in order to boost their GDP and employment. Luke noted that Nigeria would benefit from intra-African trade as it would become a game changer in stimulating growth and boosting industrialisation. The agreement may well offer better opportunities for African economies to industrialise than African relations with external partners, he said.

  3. Nigeria’s Technical Work Group of the Presidential Committee on the Impact and Readiness Assessment for the Agreement establishing the AfCFTA meets. In his introductory remarks, Dr. Okechukwu E. Enelamah, Minister for Industry, Trade and Investment, explained: “The objectives of this Committee are to: (a) conduct a full assessment of the costs and risks inherent in the AfCFTA; (b) identify short, medium and long-term measures to resolve the issues and risks, including but not limited to policy, laws and regulations update, reform programs, infrastructure upgrades and compliance enforcement; (c) define roadmap to prepare Nigeria for the take-off of AfCFTA trading bloc; and (d) finalize and launch plan to enforce the provisions of the ECOWAS treaty as part of the process to validate the practicality of some of the provisions of AfCFTA.”

Mathew Kindinger (Frontier Strategy Group): Continental free trade agreement bodes well for future of trade policy across Africa. “In addition, the creation of a common foreign trade policy – another aim of AFCFTA – will be difficult to establish. Therefore, while the agreement bodes well for the future of trade policy across Africa, companies should not expect a significant reduction in barriers to cross-border trade for the next several years.”

Tying trade and gender together in southern Africa (UNCTAD)

Over 70 policymakers, academics and equality advocates from SADC are taking a new UNCTAD course on trade and gender. The course participants began their eight-week training programme on 15 October. At its core is a new teaching module, Trade and Gender Linkages: an analysis of the Southern African Development Community (pdf), which complements and enriches the existing teaching material with data, case-studies and in-depth analysis of the connections between trade performance and gender equality in the 16-nation region. “The course contributes to bridging the knowledge gap on the links between trade and gender. Without an in-depth understanding of these linkages, there can be no targeted gender-responsive trade policies,” said Ms. Pamela Coke-Hamilton, who heads UNCTAD’s international trade and commodities division. The SADC course is the final activity under UNCTAD’s 2017-2018 cooperation agreement with Finland.

Women-supporting trade policies need better data, experts say (UNCTAD)

Analysis of global value chains – the complex international supply and manufacturing chains along which modern goods pass – can show the important part played by women in global trade but which is missed by trade statistics alone. “A way to solve this would be to establish a link between exporting firms and their employees to enable better analysis of gender roles across the whole value chain over time,” Nadim Ahmad, chief of the Trade and Competitiveness Statistics Division at the OECD said. “In the absence of this, collaboration with the private sector presents opportunities for filling data gaps.” Mr Ahmad said the OECD and the World Bank Group had recently collaborated with Facebook to survey several firms each month to find out what was stopping women business owners from trading internationally and integrating into global value chains. Barriers included restricted access to finance and inequality in information networks. While the need for better data is clear, the challenges are complex, the gender concerns vary depending on the country, and the different statistical capacities of advanced and developing economies need to be taken into account.

Senegal: IMF completes 2018 Article IV Consultation discussions

Most of the structural reforms for the seventh review have been implemented. But there have been delays in the operationalization of the payment of taxes via mobile phones, and limited progress has been made in implementing the action plan for reducing tax expenditures. The 2019 draft budget is consistent with the WAEMU fiscal deficit target of 3% of GDP. However, achieving this target will prove challenging given the recent weakness of revenue collection and the adverse fiscal impact of persistently high global oil prices. In the medium term, the authorities need to develop a tax policy and revenue administration strategy to reach the WAEMU tax revenue to GDP target of 20% over the medium term. They also need to set up a fiscal framework to manage the oil and gas wealth in line with international best practices that should aim at limiting the procyclicality of fiscal policy.

Lauren Johnstone: The Belt and Road Initiative – what is in it for China? (ANU, Wiley)

Given the scale of the ambition of the BRI, and potential scale of the related spill‐overs, it is increasingly important for the development research and policy community add studies that elucidate how China’s BRI aid‐supported and private‐sector investment patterns and practices fall within the more established growth and development literature – or not – and to understand the consequences. Comparative studies Chinese investment against “traditional” aid and investment projects in developing countries might similarly shed light on the BRI, alongside provide ideas as to how to maximise its offerings toward enhanced opportunity for sustainable global development.

Anecdotally, it is suggested that projects associated with the BRI more readily receive funding from Chinese agencies. If this owes to the greater array of financing pots available for the BRI‐related projects, or to the fact that BRI projects are being explicitly prioritised and different investment criteria, is not known. Greater transparency of BRI‐related data, including the terms and range of funding available, would help toward those goals. Meantime, because the successful advance of the BRI is imperative to China’s own ongoing economic transformation, it is opportune and timely for BRI‐engaged countries to be strategic and proactive in utilising the BRI’s resources for the realisation of their own concurrent sustainable development path.

Knowledge of China’s own use of aid and development finance, as well as the dynamics of China’s own econ omic development, an introduction to which was presented herein, may support the targeting of and negotiations with respective Chinese funding agencies and investors. Implicit to rise of a giant developing country as China is, is also that China’s needs may overshadow, directly and indirectly, the needs of smaller developing countries. Awareness of this risk, and timely and up‐dated knowledge of China’s own economy and how this can strategically complement development elsewhere, may help to alleviate these risks.

International Forum on China’s Reform and Opening Up and Poverty Reduction: speech by WBG’s President Jim Yong Kim

China is now within striking distance of eliminating extreme poverty, and the 40th anniversary is a good time to reflect on the country’s reforms, opening up, and record poverty reduction: First, we must understand China’s journey and get the historical record right. Second, we need to understand China’s past reforms, because they are important for future reforms. Third, more countries see China as a model of development, so understanding China’s reforms is increasingly important for the rest of the world.

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