tralac’s Daily News Selection
IMF’s Chart of the Week: Sub-Saharan Africa’s growth is a tale of different experiences
President Trump’s new Africa strategy was unveiled today in Washington:
Remarks by Ambassador John Bolton: “Under the President’s new Africa Strategy, we will expand economic ties on the basis of mutual respect, help African nations take control of their economic destinies and security needs, and ensure that US foreign assistance in the region gets results for the American people. Our goal is for the nations of the region to take ownership over peace and security in their own neighborhood. Under the Administration’s new approach, every decision we make, every policy we pursue, and every dollar of aid we spend will further US priorities in the region.” [Twitter thread by VOA’s Steve Herman; Twitter: #AfricaStrategy]
Related hearings, yesterday, on Capitol Hill:
The Brexit that refuses to arrive (tralac)
On Wednesday, 12 December (107 days before Brexit happens), a deeply divided Conservative Party voted, under a special procedure allowing a leadership challenge by secret ballot, to keep Prime Minister Theresa May as their leader (for now). As far as the EU is concerned, the UK should implement what they have negotiated. But the UK Government cannot ratify the withdrawal deal until Parliament has approved it, which will happen before 21 January 2019. If Parliament does approve the Withdrawal Agreement, it can be implemented. How will that happen and what are the implications? And what are the implications of these developments for the SACU Member States and for Mozambique, currently enjoying preferential access to the European Union market under the SADC-EU Economic Partnership Agreement? [The author: Gerhard Erasmus]
Strengthening public investment management and increasing domestic revenue in Africa were major topics on the agenda (pdf) of the Think20 Inception Conference attended by a senior leadership team of the AfDB. Director General of the Bank’s Southern Africa Bureau, Kapil Kapoor, presented policy briefs covering Fiscal and Debt Sustainability and the Compact with Africa at the conference (4-5 December, Tokyo). The conference is a precursor to the 2019 G20 meetings. In his draft paper on “Fiscal and debt sustainability,” Kapoor emphasized strengthening public investment management, increasing domestic revenue mobilization and domestic savings. A second paper on the Compact with Africa, summarized reforms implemented by Compact countries, investment they have received and the need for greater engagement with the private sector and African experts and institutions.
Members of the Africa Task Force agreed broadly with the papers presented and provided input which will be further incorporated towards finalization of the documents. Kapoor will serve as the co-chair of the Cooperation with Africa Task Force together with the JICA Research Institute. Cooperation with Africa is a broad agenda consisting of seven priority areas, namely: debt sustainability, Compact with Africa, industrial development and ICT, agricultural development, governance conditions and social effects, health, and tax challenges of digitization in Africa. Japan 2019 will present its final findings at the T20 Japan meeting in May 2019, prior to the G20 meeting scheduled for late June 2019 in Osaka, Japan.
Ms Shamika Sirimanne (Director, Division on Technology and Logistics, UNCTAD) presented the main highlights from the Forum. As all speakers highlighted, NTFCs are key for the success of trade facilitation and it is becoming evident that NTFCs are critical to the success of trade facilitation reform. It means that ineffective NTFCs may have the opposite effect. Trade facilitation is complex by nature as it spans across sectors and government ministries. Countries recognized the need for an effective coordinating mechanism to ensure a holistic implementation of the TFA agreement in a structured and coordinated way. NTFCs are not new – in many countries they existed already before the WTO TFA, but the TFA has added motivation and momentum to their creation and roles, and even more now with the launching of the African Continental Free Trade Agreement.
Many trade facilitation measures involve regional collaboration and collaboration with neighbouring countries. The WTO TFA helps regional integration in Africa, without adding to the spaghetti bowl of regional agreements. In practice, the AfCFTA and REC provisions on trade facilitation are WTO TFA plus. The requirements for NTFCs in the annex on trade facilitation to the AfCFTA Protocol on Trade in Goods are exactly the same as those in the WTO TFA. Yet, emerging conflict environments, particularly in West and Central Africa present serious challenges to the successful implementation of trade facilitation measures. There is need to pay closer attention to these conflicts. The AfCFTA implementation will require a great deal of coordination among different public and private stakeholders at the national and regional level, ensuring coherence with other relevant instruments.
The private sector can play the role of a technical expert, an end-user or a reform partner. To unlock maximum benefit from trade facilitation reform, there must be a mix of political will, trust building and capacity building emanating from both private sector and government. We must note that the private sector includes different players, including users and providers of services, large and small companies, importers and exporters, all with different interests. At national level, the private sector can struggle to find a coherent message and communicate constructive criticism for trade facilitation reforms. To achieve this, a good practice can be that the Chamber of Commerce set up working teams to focus exclusively on cross-industry trade facilitation issues. Same mechanism should be held at regional levels to reduce costs.
IATF 2018: Intra-African trade the engine for developing Africa (UNECA)
In a speech read on her behalf at a gala dinner for delegates attending the inaugural Intra-African Trade Fair in Cairo, Ms Songwe said the AfCFTA will help to address Africa’s economic challenges and allow for the greater, prosperous flow of trade within the continent. She said gaps currently remain in the modalities for trade in goods in the AfCFTA. “What is needed is for our able technocrats and negotiators to see through the vision of our Heads of State, and bring the Agreement to an operative conclusion. Yet in doing so, let us not cut corners; we must hold fast to the grand ambition behind this project. As we build on the momentum of the negotiations, and the landmark Heads of State Summit in Kigali in March this year, we must ensure that the final touches to the Agreement truly deliver upon the liberalization of our intra-African trade.” In particular, she said, member States have agreed to liberalize 90% of their intra-African trade, but still need to decide how to deal with the remaining 10%. “Getting the AfCFTA right will entail ensuring that the approach to this remaining 10% is appropriate for boosting trade. Our research at ECA implies that we should be ambitious in these matters, and that not only will a more ambitious outcome boost African welfare the most, but will also see the gains from the AfCFTA spread strongly to many of Africa’s smaller and less developed nations.”
South Africa has deposited the Instrument of Ratification of the EAC-COMESA-SADC TFTA Agreement, bringing the number of countries that have done so to four. The other countries that have ratified and deposited the instrument are Kenya, Egypt and Uganda. The handover ceremony of the instrument of ratification took place in Cairo, on the margins of the African Ministers of Trade Meeting. South Africa’s Minister of Trade and Industry Hon. Rob Davies handed over the ratification to the current Chairperson of the EAC-COMESA-SADC Tripartite Taskforce, Ms Chileshe Kapwepwe, who is the Secretary General of COMESA. Ms Chileshe Kapwepwe commended the government of South Africa for being the first SADC country to ratify and deposit the TFTA Agreement. She revealed that six more countries will soon ratify the Agreements paving the way for the region to have ease movement of goods, services and people.
On the SADC Tribunal: SALC’s response to the judgment by South Africa’s Constitutional Court
SALC welcomes the judgment for upholding the rights of individual South African citizens to access the Tribunal for legal redress. The importance of this decision (pdf) cannot be overstated; it is precedent setting, not only for South Africa but also as a reference point for governments in the Southern African region. “We call upon the Presidency to not only comply and take steps to implement the judgment but to also use this judgment to lobby his SADC counterparts to consider the principles laid down by the Constitutional Court in calling for the reinstatement of the SADC Tribunal.” [Law Society of South Africa statement]
Heirs Holdings, which has significant investments across Africa in the financial services, resources, real estate and hospitality and power sectors, plans to deploy the facilities to further support its power, oil and gas strategy, as it positions itself as an African leader in integrated natural resources.
Africa eCommerce Week: Mobile money holds key to financial inclusion in Africa (UNCTAD)
Njuguna Ndung’u, head of the Africa Economic Research Consortium and former governor of the Central Bank of Kenya, said that financial inclusion was a public policy objective but it relied on the private sector to take it forward. Governments must adapt to what the private sector provides in the payment solutions market, and consolidation of the two sides was vital. “The moment you have an easy, effective and safe payment solution, financial inclusion follows,” he said. Once the central banks realized that commercial banks were providing a platform to manage mini-accounts, they understood that the public policy goal of financial inclusion was being reached, Mr. Ndung’u said.
Elizabeth Rossiello, founder and chief executive officer of BitPesa, a digital foreign exchange and payment platform that leverages blockchain settlement for fast, cost-effective payments to and from Africa, said that her company was growing by leaps and bounds but still faced regulatory and infrastructure barriers across the continent. “I think the problem is that innovation is happening so quickly that it comes at governments like a firehose.” In some countries she had been able to work with governments on licencing to enter the market, in others she could not enter until the government developed the licence. Ms Rossiello also said third party entities would always fill the gaps between different financial services operators like payment solution providers, banks and post offices. The future of financial inclusion in Africa relied on connecting and updating the moving parts and newly introduced functions of the system.
Africa’s consumer market potential: trends, drivers, opportunities, and strategies (Brookings)
In fact, consumer expenditure on the continent has grown at a compound annual rate of 3.9% since 2010 and reached $1.4 trillion in 2015. This figure is expected to reach $2.1 trillion by 2025, and $2.5 trillion by 2030. Also, in 2030, if the AfCFTA is properly implemented, a single continental market for goods and services will be operational, offering corporations different points of entry to the continent and a potential market of 1.7 billion people. Extract (pdf): The current state of Africa’s consumer market and the demographic changes that are already underway mean that certain markets are poised for investment over the next few decades. In just five countries – Algeria, Egypt, Morocco, Nigeria, and South Africa – an estimated 56 million households will reach the status of middle class by 2020, with disposable incomes of more than $680bn. In sub-Saharan Africa, nine countries will account for nearly 75% of all consumer spending by 2020 - Nigeria, Senegal and Ghana in West Africa; Kenya, Uganda and Ethiopia in the East; and the southern states of Angola, Zambia, and South Africa. [The author: Landry Signé]
Cautious optimism extends into 2019: airlines heading for a decade in the black (IATA)
The International Air Transport Association forecasts the global airline industry net profit to be $35.5bn in 2019, slightly ahead of the $32.3bn expected net profit in 2018 (revised down from $33.8 billion forecast in June). African carriers are expected to report a $300m net loss in 2019 (slightly improved from the $400m net loss in 2018). The expected net loss per passenger is $3.51 (-2.1% net margin). This makes Africa the weakest region, as it has been over the past four years. Performance is improving, but only slowly. Losses are expected to be cut in 2019 as fuel prices decrease. The region benefits from higher-than-average yields and lower operating costs in some categories. However, few airlines in the region are able to achieve adequate load factors to generate profits. [Single African Air Transport Market handbook launched in Livingstone]
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