Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: AP | Tsvangirayi Mukwazhi

AfCFTA ratification update, @AUC_MoussaFaki:

“Egypt’s parliament approves ratification of the AfCFTA, bringing total parliamentary approvals to 19, of which 15 have already deposited the formal instruments. Only 3 ratifications needed for the world’s largest free trade area to enter into force. #TheAfricaWeWant.”

tralac Infographic: Status of AfCFTA Ratification

Zimbabwe trade updates:

  1. “We can’t supply you with dollars anymore,” SA banks tell Zimbabwe. Zimbabwe is in a Catch-22 situation as South African banks are de-risking from supplying the troubled southern African country with US dollar notes, an official with the central bank told miners on Tuesday. Speaking at a post 2019 Monetary Policy Statement review meeting with small-scale miners, Reserve Bank of Zimbabwe deputy director for Financial Markets William Manhimanzi said the central bank was struggling to pay miners in hard cash as it was failing to import notes via South Africa. Zimbabwe pays its gold miners in cash, but has been failing to do so of late as the usual suppliers, South African banks, have been cutting ties amid fears of being fined by the United States’ Office of Foreign Assets Control. Zimbabwe is under US sanctions and unless otherwise authorised or exempt, transactions involving the greenback are penalised if they involve an entity or individual listed on the Specially Designated Nationals List (a list of individuals and entities under US sanctions). The nature of the regulations, however, makes it difficult for foreign banks to know whether they are dealing with Specially Designated Nationals or not, hence the decision by most South African banks to de-risk from dealing with Zimbabwean institutions. [Zimbabwe to manage volatility of new RTGS currency – finmin]

  2. Gold lost through informal channels: Minister. Zimbabwe is producing close to 100 tonnes of gold, but the bulk of that is being lost to the black market as small-scale miners, who are the main producers in the country, shun official channels, a government official has said. Mines deputy minister Polite Kambamura told leaders of the Zimbabwe Miners Federation at a meeting in Harare yesterday that a lot of gold was being lost through informal channels. Last year, deliveries to the sole buyer of gold, Fidelity Printers and Refinery, amounted to 33,4 tonnes. “The bad news is that for February, after the Reserve Bank of Zimbabwe announced the monetary policy, we have received only 20kg, which means there is a problem there. What we want is to mobilise and redirect gold to small-scale miners. We feel with the current challenges, we are losing gold to other markets. I am very convinced that we are already at 100 tonnes, but we are losing more gold to under-declaration and smuggling. We are losing gold to the other market due to some grievances,” Kambamura said.

  3. Zim sliding back to 2008: ZCBTA’s Zivhu. ZANU PF legislator and Zimbabwe Cross-Border Traders’ Association chairperson, Killer Zivhu has slammed the move by the Reserve Bank of Zimbabwe to introduce bureau de changes, saying this will encourage parallel market activities and take the country back to the 2008 era. According to the monetary policy, bureau de changes would change a maximum of $10 000 per day. Zivhu said the daily limit was not sufficient for cross-border traders, considering the high unemployment rate in the country, which has forced many into the informal market for survival. [The Herald: Call for packages for cross border traders]

  4. Botswana government denies offering $600m loan to Zimbabwe. In a statement to Business Day on Wednesday, Botswana’s permanent secretary Carter Morupisi denied that Botswana would provide the loan to Harare. “The office of the president wishes to inform members of the public that the government of Republic of Botswana and the government of the Republic of Zimbabwe are currently holding discussions under the framework of the binational commission which covers a wide range of issues which are mutually beneficial to the people’s of the two countries. As such, media reports that are currently circulating about the line of credit worth $600m that the government of Botswana has committed itself to extend to the Republic of Zimbabwe are unfounded,” Morupisi said. [See also: tweet by Botswana’s Minister of Investment, Trade & Industry, Ms Bogolo Kenewendo]

Profiled, new AfDB workings papers:

  1. Improving the poultry value chain in Mozambique. This paper examines the poultry industry in Mozambique and makes recommendations about how to improve the value chain in two provinces - Niassa and Zambézia. Understanding the structure and challenges of the poultry value chain is important for the revitalization of the sector and identifying issues that should be tackled through government actions and policy. Extract (pdf):

    Despite these potential opportunities, the industry faces two perennial challenges. The most important, as mentioned, is limited access to finance, which hinders access to key inputs such as feed for chicken producers, seeds and fertilizer for grain producers, and machinery for chicken processors, among others. By way of illustration, only about 20% of all adults on average, and 10% in rural areas, have access to banking and financial services. Second, the poor quality of infrastructure increases the costs of service producers, including for financial institutions, as well as the provision of extension services.

    In addition to these persistent obstacles to business, the sector faces more specific challenges in Mozambique. In particular, imports from neighboring countries such as South Africa, Zambia, and Zimbabwe, and as far away as Brazil, compete with local producers. Domestic production of poultry products falls well short of demand, so imports are inevitable. But the pressure created by imports on local producers is acute given how developed the industries are in these competing countries. Most Mozambican producers are small scale (falling under the micro classification in Table 1). They face high unit costs of production while more sophisticated operations in neighboring countries enjoy the benefits of economies of scale that outweigh shipping costs.

    The government has tried to help the sector through a number of steps, some more dramatic than others. In 2017, the government banned poultry imports. While the ban covered many countries (including South Africa and Zimbabwe), the main target was Brazil, which was believed to be flooding the market and inhibiting the growth of the local industry. The ban was later relaxed for chicken imported from South Africa. It seems to have driven up local poultry prices, not only because of lower imports but also due to higher costs since the ban forced domestic suppliers to import eggs from Europe instead of neighboring countries. The unintended effects of the ban suggest that less dramatic and more long-term policy interventions such as facilitating access to credit, increasing formalization, and extending veterinary services are needed to help boost local production in a sustainable way. [The authors: El-hadj Bah, Ousman Gajigo]

  2. The diaspora and economic development in Africa. Our results have two major implications. The first is related to the political sense given to the interpretation of these results. Indeed, they should not be interpreted as an incentive for brain drain. By helping to significantly improve the level of income in Africa, the Diaspora reduces the incentive to emigrate because the latter increases when income levels are low in the country of origin. The second area relates to policy measures that could further enhance the impact of the Diaspora on economic development in Africa. Two main virtuous measures could be considered (pdf). The first is the institution of the annual African Diaspora Summer School as a vector for the transmission of development drivers (knowledge, technology, experiences in all fields, etc.). The second is the establishment of a Diaspora savings account in banks in developed countries with the aim of alleviating the constraints of financing for development in Africa. Furthermore, our findings lead to additional implications: [The authors: Blaise Gnimassoun, John C. Anyanwu. The full set of new working papers can be accessed here]

Profiled new AfDB EOIs: For a trade and regional integration expert to work on, inter alia, the Visa Openness Index 2019 and other flagship publications; For an industrial policy support programme that will focus on Morocco, Ethiopia, Senegal

EIF strategic plan 2019-2022 seeks to help least developed countries gain more from trade (WTO)

Officially presented for the first time on 19 February in Kampala, Uganda, the new 2019-2022 Strategic Plan is designed to better position LDCs in the global economy at a time of growing concerns about trade. Drawing from past e-commerce research in a handful of countries, new targets will involve supporting the use and uptake of technology in LDCs that draws from evidence-based trade studies. Extracts (pdf):

Foreign Direct Investment and AfT flows to the LDCs. While investments to boost LDC trade are more pressing than ever, FDI flows directed to the LDCs dropped by 17.1% in 2017. Nearly two-thirds of FDI flows to the LDCs have been going to just five countries, namely Bangladesh, Cambodia, Ethiopia, Mozambique and Myanmar. In addition, despite some fluctuations in the AfT flows to the LDCs over the recent past, the relative share of the LDCs in AfT flows has remained stable overall. In light of the above, supporting the LDCs to revisit investment promotion regulations and to leverage more domestic resources is even more important. This can be achieved by supporting the private sector and particularly MSMEs to thrive, and empowering economic actors, particularly women and youth, to more effectively participate in economic activities.

As of 2017, 37 countries have integrated trade into their NPDs, thereby recognizing trade as an important pillar of development. This paves the way for further integration of trade into sector strategies. For example, in Cambodia and Malawi, trade sector-wide approaches have been adopted, providing a platform to channel resources to national trade priorities. By 2017, trade ministries in more than 15 countries demonstrated a capacity to develop and drive trade development agendas. Thirty-seven countries have established quality, functioning public-private coordination mechanisms, which has improved government engagement with the private sector and led to fruitful partnerships. For example, a Memorandum of Understanding was signed between the Government of Guinea and a Malian private company to export mangoes to Europe using Guinea’s airport.

Somalia and the IMF: First review under the staff-monitored programme (IMF)

Somalia’s economy is recovering but further efforts are needed to secure economic resilience and reduce poverty. Since 2017, growth has rebounded, inflation has slowed, and the trade deficit has narrowed. For 2018, real GDP growth is projected at 3.1% and end-year inflation at 3.5%. The exchange rate has remained stable. The authorities’ efforts to improve domestic revenue mobilization has strengthened revenue performance. This reflects efforts to broaden the tax base, and to develop the tax policy framework and administrative capacity to collect taxes. Data through November 2018 show that domestic revenue reached $161m (31% higher than the same period in 2017), and the overall cash fiscal position was in surplus by $8m.

IGAD Council of Ministers: communiqué (MFA Ethiopia)

The meeting underlined the importance of expediting the endorsement of the proposed treaty and structure to reform IGAD; and decided that there is need for enriched and continued discussion on the organizational structure and treaty of IGAD until the next ordinary sessions of the policy organs. It also underscored the need for a collective approach to challenges in the Red Sea and the Gulf of Aden by strengthening regional cooperation, and establishing a regional platform for #IGAD Member States with a view to promote dialogue with other stakeholders including the AU and other international partners. [EU-Arab Summit declaration]


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