tralac’s first Daily News Selection for 2019
Profiled AU events, now underway:
The 32nd Ordinary Summit of the African Union started today in Addis on the theme Refugees, returnees and internally displaced persons: towards durable solutions to forced displacement in Africa. The summit has three segments: 37th Ordinary Session of the Permanent Representatives’ Committee (15-16 January); 34th Ordinary Session of the Executive Council (7-8 February); 32nd Ordinary Session of the Assembly of the Heads of State and Government (10-11 February).
The 1st AU Supply Chain Platform on the theme, Driving the AU’s strategic objectives through supply chain excellence, began yesterday in Addis. The workshop is intended to create a community of public procurement and supply chain practitioners who will engage through a web-based platform and convene an annual workshop.
The AfDB’s flagship report, the 2019 edition of the African Economic Outlook, will be released on Thursday. The theme: Regional integration for Africa’s economic prosperity
AfCFTA ratification barometer: 18 out of required 22 ratifications confirmed. Chad, Congo, Côte d’Ivoire, Djibouti, Eswatini, Ghana, Guinea, Kenya, Mali, Mauritania, Namibia, Niger, Rwanda, Senegal, Sierra Leone, South Africa,Togo, Uganda lead the way. Only 4 left. Make sure your country joins the pioneers! We have ratifications from all regions of the continent, except North Africa. We look forward to have a North African country among the historic 22 ratifications that will effectively bring the AfCFTA into force.
The 11th meeting of the AfCFTA TWG on Rules of Origin starts on 18 February in Addis Ababa. Upon request from delegates and the AUC Secretariat during previous meetings of the TWG, an advance technical paper, pdf The treatment of goods originating in Special Economic Arrangements/Zones in the African Continental Free Trade Area (551 KB) has been prepared by UNCTAD.
Extract: The basic requirements for implementing a FTA are rules of origin and a tariff phase-down schedule. Rules of origin should only be used to reduce trade deflection while, at the same time, creating a conducive environment for trade in originating goods to take place between FTA members. Best practice suggests that rules of origin should not be used as a protectionist measure. The concern of some African countries is how to address unfair competition that may emanate from goods produced in SEZs and trade under AfCFTA preferential treatment. The rationale is that, as goods produced in SEZs benefit from tax and other investment incentives, the cost of manufacture will be lowered so goods produced in SEZs will be able to be sold for less than goods not manufactured in SEZs. The challenge with this argument is: SEZs have evolved from firms in an enclave and many countries offer tax and investment incentives to companies / firms not in a specific enclave; Excluding goods produced in SEZs will reduce the effectiveness and efficiency of the AfCFTA; and, the tax incentives provided to firms in SEZs may not allow them to reduce costs of production.
The preliminary findings of this paper suggest that using rules of origin as a means to avoid unfair competition, a use that rules of origin are not designed for, will be ineffective and counterproductive. Instead AfCFTA State Parties should make use of WTO rules on subsidies and countervailing measure as referred to in Article 2 of Annex 9 to the AfCFTA Protocol on Trade in Goods. The WTO (which most AU Member States are either Members of or are in the process of acceding to) has an Agreement on Subsidies and Countervailing Measures containing the appropriate legal trade remedies to address any unfair advantage that may be conferred by subsidies in form of tax holidays, rebates and incentives to firms located in SEZs.
pdf African Group declaration on WTO issues (116 KB) . Reaffirm that Special and Differential Treatment shall be an integral part of all WTO agreements and future multilateral outcomes and shall be embodied, as appropriate, in schedules of concessions and commitments and in the rules and disciplines, so as to be operationally effective and to enable developing countries, in particular LDCs in Africa, to effectively address their development needs in line with Africa’s industrial development priorities as encapsulated in the AU’s Agenda 2063 on structural transformation and industrialization; Invite all WTO Members to extend to African graduating countries the existing Special and Differential Treatment measures and exemptions available to LDCs for a period appropriate to the development situation of those countries; Pledge support to African countries in the process of WTO accession and urge Members to desist from making unreasonable requests on African acceding countries to extend any commitments made as a result of their membership to the AfCFTA or that are inconsistent with their levels of development; Underscore that Africa’s priority trade policy objective is the AfCFTA that will build a Single African Market for Trade in Goods and Services, and to ensure that WTO outcomes do not undermine those objectives. [Circulated at the WTO on 8 January 2019, adopted at the AMOT meeting, 12-13 December 2018]
Previews on the theme Africa and/in 2019:
tralac’s January 2019 newsletter: pdf In this first Newsletter of 2019 (4.77 MB) , we provide a brief overview of recent trade-related as well as domestic developments in select countries, which have, already in this new year, featured prominently in the media. We reflect on these developments and share our views as to why they merit further monitoring. There is a general theme in several of these developments – how (sometimes unexpectedly) national political developments impact on bigger regional and multilateral contexts. There is also a strong reminder that accountability, transparency and robust democratic institutions remain the harbingers of better governance.
Regional growth in SSA is expected to accelerate to 3.4% in 2019, predicated on diminished policy uncertainty and improved investment in large economies together with continued robust growth in non-resource intensive countries. Growth in Nigeria is expected to rise to 2.2% in 2019, assuming that oil production will recover and a slow improvement in private demand will constrain growth in the non-oil industrial sector. Angola is forecast to grow 2.9% in 2019 as the oil sector recovers as new oil fields come on stream and as reforms bolster the business environment. South Africa is projected to accelerate modestly to a 1.3% pace, amid constraints on domestic demand and limited government spending.
Box 2.6.1: Informality in Sub-Saharan Africa: High average informality. On average in 2010-16, the informal economy in SSA countries amounted to 36-40% of official GDP, informal employment made up 90% of employment and, more narrowly, self-employment accounted for 58% of total employment. Alternative measures of informality, such as the share of the labor force without pension coverage and perceptions of informal activity, were also high compared with other EMDE regions. Heterogeneity. There is wide cross-country heterogeneity. West and East Africa had much higher average shares of self-employed workers in total employment during 2010-16, at 80% and 68%, respectively. In contrast, the shares of self-employed workers in Central and Southern Africa were 48 and 43% respectively, only slightly above the EMDE average. Self-employment made up more than 85% of employment in Benin, Burundi, Madagascar, and Uganda whereas it was less than 20% in South Africa and Mauritius. Evolution of informality in SSA. Informality in SSA has declined gradually over the past three decades, broadly in line with the EMDE trend. Some countries, however, have made significant progress in lowering the shares of informal output and employment, such as Botswana, Ethiopia, Ghana, Malawi, Rwanda, and Tanzania. [Note: The IMF will release its World Economic Outlook Update (January 2019) on Friday, 21 January]
Will automation and AI fuel economic development and research as mobile technologies did in the past decade? Will they allow African nations to leap ahead, skipping traditional industrialization steps? The answers to these questions remain elusive, and in many respects it remains too early to tell. But for any chance at positive outcomes – that is, for African countries to fully leverage the power of automation and AI to change sectors like agriculture and manufacturing into globally-connected productivity powerhouses – governments and private sector alike must fully understand the advantages and consequences of this technology and deliberately respond to integrating it into national strategy.
Government leaders should focus on three key activities: Increase financing of internet and communications technology infrastructure development; Integrate technology education into curricula of primary and secondary schools; Implement reforms to data collection and data privacy policies. There is an urgent need to accelerate improvements to the agriculture and manufacturing sectors to increase their value alongside other efforts to diversify African economies, strengthen growth, and build resilience. Given the leapfrogging lessons of mobile technology on the continent over the last two decades, many African countries are positioned well to leverage automation and AI with agility and innovation. Automation and AI in agriculture and manufacturing would unlock tremendous value, connecting these markets to new regional and global marketplaces and allowing them to compete more efficiently and effectively. The challenge lies not in maneuvering these technologies as a vehicle but in ensuring that government, industry, and civil society contribute to creating an enabling environment. Other chapters: A letter from the conveners, African governance: challenges and their implications (Chester A. Crocker), Climate change and Africa’s future (Mark Giordano, Elisabeth Bassini), Africa 2050: demographic truth and consequences (Jack A. Goldstone), Unlocking the potential of mobile tech in Africa: tracking the trends and guiding effective strategy on maximising the benefit of mobile tech (Andre Pienaar, Zach Beecher). Companion analysis: Latin America in an emerging world
Foresight Africa: top priorities for the continent in 2019 (Brookings Institution)
In this year’s Foresight Africa, AGI scholars and invited experts illuminate the priorities of the continent in 2019, delving into six overarching themes with recommendations for tackling the challenges that lie ahead. This unprecedented dynamism of the continent is creating opportunities for trade and investment and is drawing interest from an increasingly diverse group of external partners. Democracy is consolidating, although the prevalence of tensions and, in some countries, violence during elections point to areas for improvement. The demographic tidal wave looms closer, and job creation has not yet been able to catch up. Despite continued progress on governance, more efforts are needed to eradicate corruption and to elevate the voice of women and young people in decision making. Africa is brimming with promise and, in some places, peril. With its array of contributions, this year’s edition reflects both the diversity of the continent and the common threads that bind it together. With that aim, we hope to promote and inform a dialogue that will generate sound practical strategies for achieving shared prosperity across the continent. Table of contents: Governance lags behind youth expectations and needs (Mo Ibrahim), Reconciling financing needs and rising debt levels (Brahima Sangafowa Coulibaly), How industries without smokestacks can address Africa’s youth unemployment crisis (John Page), A new approach to state fragility (Paul Collier), Spotlighting opportunities for business in Africa and strategies to succeed in the world’s next big growth market (Acha Leke, Landry Signé), Intra-African trade: A path to economic diversification and inclusion (Vera L. Songwe)
Economic transformation in Africa: key trends in 2019 (ODI)
A commentary by Dirk Willem te Velde: Forthcoming elections in Nigeria have put the spotlight on a faltering economy. While foreign direct investment into the country increased in 2018, foreign reserves, oil prices and growth have all been weaker than expected. With a quarter of the labour force unemployed, jobs and transformation should be central to the election campaign in Nigeria. Elsewhere on the continent, Mozambique hopes to put its debt irregularities behind it following recent action and a renewed focus on jobs and the economy ahead of planned elections in October 2019. South Africa, one of the weakest economic performers on the African continent and with the world’s highest youth unemployment rate, is also facing elections, probably in May this year. At the global level, then, the clouds are darkening. Which countries will seize the opportunities to transform and create jobs in the year ahead?
Moody’s on Sub-Saharan Africa sovereigns: 2019 outlook negative as fiscal, external challenges persist despite easing pressures. Going into 2019, 15 of the 21 sovereigns that Moody’s rates in the Sub-Saharan Africa region have a stable outlook, while six hold a negative outlook. “Our negative outlook for sovereigns in Sub-Saharan Africa is driven by persistent credit challenges related to their ongoing fiscal and external vulnerabilities,” said Daniela Re Fraschini, Assistant Vice President – Analyst and author of the report. “That said, we expect credit pressures to ease relative to previous years, despite a more challenging external environment, as credit profiles display some resilience at their lower rating levels.”
Célestin Monga (AfDB): Africa’s historic pivot
Anzetse Were: Key focus points for Africa in 2019
Nicholas Norbrook (The Africa Report): Africa in 2019 – how to make a continental deal
John Campbell (CFR): David Pilling’s African Year in Review
Alex Vines (Chatham House): Continental drifts towards Africa