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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: EAC

14 Mar 2019

The GTR AFRICA 2019 conference starts today in Cape Town. Twitter updates: #GTRAFRICA

The WTO’s 2019 Public Forum theme has been announced: Trading forward – adapting to a changing world. The dates: 8-11 October, Geneva.

Featured trade policy commentary, by PIIE’s Anabel González: Bridging the divide between developed and developing countries in WTO negotiations

5th EPRN Rwanda Annual Research Conference: The AfCFTA – challenges and opportunities. Extracts from the keynote presentation by Andrew Mold: pdf The case for implementing the AfCFTA in East Africa – some new estimates (579 KB)

How much is the East African Community currently under-trading? Based on a gravity model using a stochastic frontier approach, the bilateral export flows of the five EAC members States (Burundi, Kenya, Rwanda, Tanzania and Uganda) over the period 1995 to 2016 were examined. Intra-EAC trade is at around half of its potential: The ratio of actual/observed exports (US$ millions) to potential maximum exports (US$ millions) is 51% exports to the EAC and 56% to Africa.

A Computable General Equilibrium model. Global Trade Analysis Project was used to measure the static effects of the AfCFTA on East Africa, using 2014 baseline data with complete liberalisation (i.e. 100%) and standard closure, but fixing wages to reflect high unemployment rates prevalent on the continent. Results suggest large potential gains from the AfCFTA: Increase intra-African exports of Eastern Africa by almost $1bn; Chief beneficiary sectors are labour-intensive ones; Job creation of 0.5 to 1.9 million; Consumer welfare gain of $1.4bn.

A Partial Equilibrium Model. World Integrated Trade Solution SMART was also used to measure the impact of the AfCFTA on East African countries, with 2015 as the base year for most countries and using a complete liberalisation scenario. Results suggest a significant increase in intra-African exports – for Rwanda, a 22% increase over the base year, followed by Uganda (21%), Tanzania (17%) and Kenya (10%). Over one-third of the exports are in manufactured goods.

Speaking also at the ERPN conference, Leonard Rugwabiza, the Economic Advisor at the Rwanda Ministry of Finance and Economic Planning said that in the face of changing global context and economic uncertainties, Africa must also change the ways it does business. “It will be more difficult to govern if we cannot change the structure of our economies and create jobs for our youth. The AfCFTA and the African single market offer us more opportunities to do so than challenges.” [ pdf Concept note (819 KB) ]

Applications for the ECA/ATPC online economic modelling course applied to trade policy reforms, with a focus on the AfCFTA, close on 17 March.

Uganda accuses Rwanda of imposing trade embargo

Foreign Affairs Minister Sam Kutesa said on Wednesday that Rwanda has introduced an export permit system for those who intend to export goods to Uganda. “This is a technical and non-tariff barrier to trade, to which there has been no successful applicant. In effect, this is a trade embargo,” Mr Kutesa said. Ugandan Customs officials and traders at all border points say that goods from Uganda, especially foodstuffs, have been blocked from Rwanda. And Mr Kutesa on Wednesday said that exportation of Ugandan goods to Rwanda had been prohibited. Rwanda authorities, he said, were only allowing trucks carrying transit goods destined for the Democratic Republic of Congo and other countries. Update: “Claims that Rwanda has instituted trade embargo on Uganda are as untrue as they are diversionary,” responded Rwanda’s Foreign Affairs Ministry on Thursday. “It is not possible to have free trade including free movement of goods if traders are killed, tortured, extorted and their property is illegally seized. These are the fundamental issues that need to be addressed,” Kigali said.

Lesotho:  pdf Budget speech for the 2019/2020 fiscal year (1.12 MB)  (GoL)

Mr Speaker, the challenges facing the Lesotho fiscus have been well canvassed in the past and required actions are well known. But political will has lacked mainly because the actions require sacrifice by public servants and government as a whole. There are three options that government can consider implementing, namely:

(a) Government must contain the impact of the volatility of SACU revenues by designating a fraction of annual SACU inflow that is consistent with permanent revenue and set up a rainy day fund from which annual shortfalls in SACU revenue can be augmented. This would require that Government runs budget surpluses during years of SACU windfalls; and this is where past governments have lacked will. Past decisions of raising wages from temporary revenues have been dangerous and have created the current untenable situation. In FY2019/20 the Ministry of Finance will propose the adoption of a fiscal rule which shall then be passed as law to regulate the volatility in SACU revenues.

(b) The government must ensure that shared economic growth rises faster than the rise in wages. Practically, this means that private investment in sectors whose income is retained in Lesotho such as agri-business, tourism, and manufacturing, must rise much faster. This also means that annual growth rate of GDP must be on the order of 5-10 percent annually and consistently for many years. We know this has not been the case. Below I will outline specific actions in this direction.

(c) Finally, government must reduce its workforce. In an economy with double digit (24%) unemployment this has been extremely difficult to contemplate and it has simply been easier to kick the can down the road. But with little progress on growing the economy and government investments limited by tight fiscal budgets, at some point government will have to confront this monster.

Half of this already high spending bill, is accounted for by wages and salaries. The bill for only 47,000 employees – and Lesotho has a population of 2 million people – is larger than the individual contributions of many important sectors of the economy including the mining, agricultural and construction sectors. The Lesotho wage bill has grown faster than national output and this increase was funded by windfall SACU revenues or hollowing out the share of the budget that used to fund goods and services – which has fallen to below half of the wage bill since 2002. There is therefore an urgent need to adopt measures to reduce public spending as a percentage of GDP, including those aimed at curbing the growing wage bill. [Delivered by Mr Moeketsi Majoro, Minister of Finance; Mauritius 2019/2020 pre-budget consultations]

SACU, Mozambique make progress on impending Brexit (dti)

The Minister of Trade and Industry, Dr Rob Davies says progress has been made to finalise a roll-over Economic Partnership Agreement between the SACU Member States, Mozambique and the UK. Davies, briefing the media in Parliament yesterday, said SACU, Mozambique and the UK have agreed on Terms of Reference for the dialogue on the roll-over of the EPA: “The MoU will carry over the effects of the SADC-EU EPA to ensure that there is no disruption of trade on 30 March 2019 if the UK exits the EU without a deal. The MoU will roll-over the effects of the SADC-EU EPA for a period of 6 months, while the roll-over of EPA is either being concluded or the necessary domestic legislative processes for ratification of the SACU, Mozambique and UK EPA are being concluded.” According to the list, a total of 469 tariff lines will remain dutiable with varying levels and types of duties, including ad valorem, specific, mixed duties; tariff-rate quota based duties. These will affect the following sectors: [Related: Peter Fabricius: Southern Africa scrambles to avoid trade fallout from Brexit; What a no-deal Brexit would mean for Western Cape exports]

Tanzania Jobs Diagnostic

The Jobs Diagnostic covers three main areas: macro and demographic trends, labor supply, and labor demand. The first section looks at the relationships between employment growth, labor productivity, and economic growth to set the macro context to later examine labor supply and demand. The second section cover labor supply. It aims to identify trends in labor supply to understand the population’s needs for employment, the unemployment challenges, underemployment, and waged and informal employment. These trends include working-age population , labor force, and inactivity. Once identified, international comparisons are based on a global harmonized household database (International Income Distribution Dataset – ‘I2D2’). The labor supply section in JDs employs a set of harmonized variables that are comparable across countries and time. The third section covers labor demand. It aims to identify the links between sectoral productivity, size, age, and other characteristics to assess the constraints for employment growth, productivity, and wages. Firm-level datasets such as Enterprise Surveys, (which allow for some international benchmarking), or censuses of enterprises are used to do this.

The MUVA+ project: Helping women market traders in Mozambique unlock their sales potential (World Bank)

Providing training for subsistence female entrepreneurs aiming to increase their revenue is nothing new, but MUVA does it a bit differently. We focus on fostering the individual aspiration by valorizing their experience and unleashing their potential, rather than focusing directly on their business and teaching the financial skills they don’t have. We also work on the social norms barriers that hinders dreams of personal achievement. After a four-month training, one of our participants told us that she never thought of her as having a work that was worth something. Now she pays herself a monthly salary and calls herself an entrepreneur. When MUVA+ started, only 13% of participants confirmed that they did something in the previous three months to increase their sales. By the end of the project, that number had increased to 76%. Two more cycles will be implemented this year, and more results in terms of change in profits and personnel empowerment of the participants will be coming soon. Stay tuned. [The author: Luize Guimaraes]

Drivers of gross capital inflows: which factors are more important for Sub-Saharan Africa? (World Bank)

This paper discusses recent trends and investigates the drivers of capital flows across regions in the world, with emphasis on Sub-Saharan Africa. The post-global financial crisis behavior of capital flows into Sub-Saharan Africa is unique and differs from that of global capital flows. The structure of financial flows into Sub-Saharan Africa has shifted toward new sources, such as international bond issuances and debt inflows from non-Paris Club governments. The main message is that the behavior of capital flows into Sub-Saharan Africa differs from that of capital flows into global, industrial, and non–Sub-Saharan African developing countries. The main findings suggest that pull and push factors are the driving forces of capital inflows for industrial countries and non–Sub-Saharan African developing countries – especially better economic performance, sound fiscal outcomes, a greater degree of financial openness, and stronger institutions. The impact of these drivers has become stronger in the 2000s. [The authors: Cesar Calderon, Punam Chuhan-Pole, Megumi Kubota]

Ensuring quality to gain access to global markets: a reform toolkit (World Bank)

Jointly developed by the WBG and the National Metrology Institute of Germany,the toolkit is designed to help development partners and governments analyze a country’s QI ecosystem, provide recommendations to design and implement reforms, and enhance the capacity of QI institutions. The toolkit’s 12 modules provide a systematic, holistic knowledge resource – supported by practical case studies and examples – for QI diagnostics, reform interventions and approaches, and monitoring and evaluation. Related diagnostic tools are also available online, here and here.

One Planet Summit: World Bank update

Recognizing that a number of countries in Africa are among the most vulnerable to global climate shocks and stresses, and in line with these new climate financing commitments and future direction of our Africa Climate Business Plan, more than half of the $22.5bn financing will be devoted to supporting adaptation and resilience in Africa. This will amount to about $12-$12.5bn over five years from 2021-2025. This year, for example, the World Bank will provide the government of Ethiopia with a results-based support program for adaptation and resilience, the largest done by the World Bank ever in Africa. The new operation, which is currently under preparation, will provide $500m for results in improved watershed management and land administration systems.
 

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