tralac’s Daily News Selection
COMESA’s tribute to the late Ambassador Julius Onen, the PS of Uganda’s Ministry of Trade, Industry and Cooperatives
UNCTAD is undertaking an Investment Policy Review of Angola: further details of the 11-22 March mission
The SADC Council of Ministers will meet in Windhoek later this week: details of preparatory meetings now underway
The 2019 Africa Capacity Report (ACR2019) is the seventh in the series and like those preceding it, measures the capacity of African countries to pursue their development agenda, focusing on key determinants of capacity for development. The theme for 2019 is “Fostering transformative leadership for Africa’s development.” Extracts (pdf):
Country coverage in 2019. This report aims to include all African countries in its analysis. The inaugural edition in 2011 covered 34 countries. The current edition covers 46 countries. Somalia is included for the first time. South Sudan and the DRC are re-included since the technical obstacles preventing their inclusion in the 2017 African Capacity Report have been resolved. Cabo Verde could not be covered as data for that country were not available in time.
Results for the Africa Capacity Indicators. Results are generally satisfactory, driven largely by a strong policy environment. The ACI ranges from 70.8 for Mauritius to 24.0 for Guinea-Bissau (table 1.1), where scores of 0 to < 20 are very low, 20 to < 40 are low, 40 to < 60 are medium, 60 to < 80 are high, and 80 to 100 are very high. No countries are at the very low or very high extremes of capacity. Ten countries are in the high capacity bracket and five are in the low bracket, but no country is in the very low or very high bracket (figure 1.1). The bulk of countries have medium capacity. Two-thirds of countries (67.4%) fall within the medium capacity bracket, 21.7% are in the high bracket, and 10.9% are in the low bracket (see figure 1.1).
Table of contents. Chapter 1: Africa’s capacity development landscape in 2019; Chapter 2: Understanding transformative leadership; Chapter 3: The state and challenges of transformative leadership in Africa; Chapter 4: Lessons on capacity development for transformative leadership from country case studies; Chapter 5: Summary, key messages and capacity development policy recommendations.
Profiled Tables. Country results on the Africa Capacity Index 2019, by rank and index score (p3); Distribution of countries on the Africa Capacity Index 2019, by capacity bracket and indicator cluster (%) (p5); Country results on the Africa Capacity Index 2019, by rank and index score (p16); Distribution of countries on the Africa Capacity Index 2019, by capacity bracket and indicator cluster (%) (p18); Performance of countries on four thematic indices of the Africa Capacity Index 2019, by capacity bracket (%) (p20); Country performance on the Institutional Mechanism for Agenda 2063 and Sustainable Development Goals index 2019 (p24); African output growth, 2014–19 (p30).
Illicit financial flows and illicit trade in Africa in the context of the AfCFTA and the role of South-South Cooperation: BAPA+40 side event (21 March, Buenos Aires)
IFFs and illicit trade are a concern for Africa’s AfCFTA for various reasons. To benefit from regional preferential trade liberalization, African countries need to build and diversify their productive capacities through industrialization in order to boost intra-African trade, develop regional value-chains and ensure that their markets are not being flooded with counterfeited illicit foreign goods that can undermine their local industrial development. The AfCFTA can be a catalyst for industrialization, structural transformation and formalization of informal activities, including informal trade. Africa has to address IFFs and illicit trade in order to divert “lost” funds into the operationalization of the AfCFTA while the latter will also aid to create the conditions and incentives needed to reduce the “attractiveness” of illicit activities. Domestic resource mobilization should be an integral part of Africa’s agenda for deepening regional integration by operationalizing the AfCFTA and the complementary measures needed to make the AfCFTA impactful. Addressing IFFs and illicit trade should be at the heart of this domestic resource mobilization agenda.
Pioneering firms in fragile and conflict-affected states: why and how development finance institutions should support them (World Bank)
The role of ‘first movers’ in fragile states is critical: they grow and diversify markets in ways that no other firms do, generating disproportionate impact in terms of development and stability. But pioneer firms are rare in fragile states. This study documents their profile, their challenges, and the barriers that prevent them from realizing their potential. The study also explores the rationale for development finance institutions to support them, and proposes new ways to offset costs, risks, and the “unknown unknowns” that generate radical uncertainty. Extracts (pdf):
Once a fragile state faces an opportunity for transformation, the critical role of development agencies is to expand the formal private sector as rapidly as possible. Hence, the key areas for international support should shift from the humanitarian agencies to the DFIs. If DFIs are to rise to this responsibility, they will need to overcome a fundamental problem - there are not enough large, formal firms operating in fragile states for them to invest in. Therefore, we need a better understanding of why there are so few formal firms - what are the obstacles to entry by firms, and what can be done to support their entry, survival, and growth.
But, much like everything else in fragile situations, pioneer firms are different from pioneers in other markets. They typically have additional experience, innovate at smaller sizes, and rely less on fixed assets, and on international standards, worker training, or corporate partnerships. The level of development and diversification in the markets suggests an intuitive explanation: the scope for innovation is much broader. Yet pioneers in fragile and conflict-affected states are unable to capitalize on their potential through formal banking. Contrary to other developing countries, pioneers in fragile states finance a higher share of investment through internal funds as they have less access to credit, and face a higher cost for capital. This suggests a clear role for DFIs in supporting their growth by financing them directly, and by supporting their access to finance from private equity and from local financial markets. The task facing DFIs is how to reset negative and self-fulfilling investor narratives such as the ‘basket case’ narrative. Three practical responses by DFIs can complement each other. One is to make a commitment. A second is to disrupt damaging narratives with evidence that is incompatible with them. A third is to replace a damaging narrative with a better one. We consider them in turn. [The authors: Paul Collier, Neil Gregory, Alexandros Ragoussis]
Issue Paper: pdf Financing railway rolling stock – a new solution for Africa (681 KB) (UNECA)
The present issue paper provides an exploration of a new global treaty for the recognition and prioritization of security interests held by creditors in railway rolling stock and includes responses to the following questions: Can the Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Aircraft Equipment be extended to apply to railways? What is the Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Railway Rolling Stock (Luxembourg Protocol)? What are the economic benefits of the Luxembourg Protocol? How can creditors who finance rolling stock through leases, secured credits and conditional sale contracts be protected?
Railways could transform the continent, but they currently play an insignificant role, which is not surprising, given the continent’s rail density of one km of rail track for every 357 km2 of land. In comparison, the rail density in the United States is one km of track for every 43 km2, and in Germany, it is greater than one km per 10 km2 (Rosen, 2015). The situation in Africa, however, is getting worse. Between 2005 and 2011, the volume of usable railway tracks in Africa diminished from 58,000 km to 50,000 km. It is nevertheless true that the position is gradually changing. Large rail projects are under way in countries such as Ethiopia, Kenya, Morocco, Mozambique, Nigeria, Senegal and Tanzania, and there are plans to bring railways to Burundi and Rwanda. The Addis Ababa Light Rail Transit network, which cost $475m and has a total route length of 34 km, is now operational. It is the first light rail service in sub-Saharan Africa. However, such projects stretch State financial resources to the limit. [An Issue Paper prepared for the forthcoming 52nd Session of the ECA Conference of African Ministers of Finance, Planning and Economic Development]
Electricity access in Sub-Saharan Africa: uptake, reliability, and complementary factors for economic impact (World Bank)
Electricity Access in Sub-Saharan Africa shows that the fundamental problem is poverty and lack of economic opportunities rather than power. The solution lies in understanding that the overarching reasons for the unrealized potential involve tightly intertwined technical, financial, political, and geographic factors. The ultimate goal is to enable households and businesses to gain access to electricity and afford its use, and utilities to recover their cost and make profits. The report makes the case that policy makers need to adopt a more comprehensive and long-term approach to electrification in the region - one centered on the productive use of electricity at affordable rates.
The Parliament of the Economic Community of West African States seeks to become more involved in the region’s single currency creation programme and appropriate recent decisions on the matter issued by meetings at ministerial and Heads of State levels. To do this, it convened a regional meeting (5-7 March, Dakar) on the theme Challenges and outlook regarding the creation of the ECOWAS single currency – mobilising parliamentarians for the actualisation of the project. The President of the Task Force on the ECOWAS Trade Liberalisation Scheme, Djibo Salou, declared that the non-existence of a common currency is an impediment to regional integration and encourages diverse tariff barriers. In turn, Jean-Claude Kassi Brou commended the initiative which, according to him, will enable an assessment of the status of implementation of the regional single currency. “This conference is holding at a time of widespread focus on the single currency implementation deadline, given the slow pace of macroeconomic convergence, harmonisation of financial and economic policies of the region. With the gradual approach of the 2020 target date for ECOWAS, the monetary integration programme has become a topic eliciting keen interest and lively debate within the Community, particularly among policy makers and practitioners.” [EBID holds 61st meeting of Board of Directors]
South Africa: Promoting private sector competitiveness and investment (dti)
South Africa’s Department of Trade and Industry and the World Bank Group yesterday announced an advisory services partnership aimed at improving the business environment for domestic entrepreneurs and undertaking policy and institutional reform to enhance foreign direct investment inflows. The partnership will focus on three key reform areas: business regulation, investment policy and promotion, and market regulation and competition policy. World Bank Group support will be delivered in partnership with the Swiss State Secretariat for Economic Affairs and the Prosperity Fund of the UK’s Foreign and Commonwealth Office. Early deliverables under the support program will be inputs into the Government of South Africa’s Investment strategy, which is expected to address not just horizontal barriers to private sector investment but also sector specific enablers for growth and employment creation.