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tralac's Daily News Selection

tralac's Daily News Selection
Photo Credit: UN

30 May 2019

The AfCFTA Agreement is now in force: selected perspectives

@AmbMuchanga: Historic milestone! AfCFTA Agreement has today come into force. We celebrate the triumph of bold, pragmatic and continent-wide commitment to economic integration. We launch the market on 7 July; beginning the journey of transformation to secure inclusive prosperity.

@AUC_MoussaFaki:  I hail Amb Muchanga and his team for their relentless work to ensure the entry into force of the AfCFTA in a record 18 months, ushering in the world's largest trading market of 1,2 billion people with a combined GDP of $2,5 trillion. Today is a historical win for the #AfricaWeWant!

President Uhuru Kenyatta: “We must find a way where all of us come out as winners. We want Africa to come together for the mutual benefit of all countries”

tralac's Trudi Hartzenberg, Gerhard Erasmus: "If the AfCFTA is properly implemented, trade governance, customs administration and rules-based trade should benefit. All trade arrangements, including those with Africa’s most important trading partners (they are outside the African borders) should benefit. Africa should become a more attractive investment destination. The biggest challenge for the AfCFTA will be about rules-based governance and transparency at home."

Christoph Kannengiesser (head of the German-African Business Association) notes that the European single market didn't come about overnight either, adding that other trade agreements such as NAFTA or TTIP are still controversial as there tend to be winners and losers in the process. "That can trigger distributional conflicts and may prompt attempts to push and preserve your own national interests too much," he said.  Kannengiesser believes there's no big harm in Africa's most populous, oil-rich state, Nigeria, not wanting to join the AfCFTA. He thinks that while pursuing its own national interests and feeling stronger on its own, Niger won't be able to ignore Africa's economic dynamics in the long term.

Tshepidi Moremong (head of Africa coverage at Rand Merchant Bank): “In each of our countries, there are proper issues that one needs to deal with and where people need to see that the government is focused on their day-to-day issues. Opening up a market for the people from other parts of the continent to freely come and do commerce and trade in your country is going to take a lot.”

IATA's April data for African air cargo, passenger demand

Data from the International Air Transport Association shows that global air freight demand, measured in freight tonne kilometers (FTKs), fell 4.7% in April 2019, compared to the same period the year before. But: African carriers posted growth in April 2019 of 4.4% compared to the same period a year earlier. Global passenger demand (revenue passenger kilometers or RPKs) rose by 4.3% compared to April 2018. Regionally, Africa, Europe and Latin America posted record load factors.  African airlines had a 1.1% traffic increase in April, which was down from 1.6% growth in March and was the slowest regional growth since early 2015. Like Latin America, Africa is seeing some economic and political uncertainty in the largest markets. Capacity climbed 0.1%, and load factor edged up 0.7 percentage point to 72.6%.

Kenya: Foreign investment survey 2018 (KNBS)

 The Foreign Investment Survey (FIS) 2018 is the fifth in the series since the launch of the surveys in 2010 and captured data on foreign private capital flows and position for the period 2016 and 2017. Stock of FDI liabilities by region and country:  As shown in Table 2.5, the stock of FDI liabilities increased by 8.5% to KSh 683,839 million in 2017. Africa was the main driver of this growth with the stock of FDI liabilities from this region increasing by 11.5% to KSh 214,740 million in 2017. Europe was the major source of stock of FDI with a share of 45.3% and 43.6% to the total stock of FDI in 2016 and 2017, respectively, attributed to the EU. The stock of FDI attributed to France increased by 20.9% to KSh 51,163 million in 2017 from KSh 42,318 million in 2016.

Africa was the second source of stock of FDI contributing one third of the total stock of FDI liabilities in the review period. The stock of FDI attributed to South Africa increased by 54.8% to KSh 121,161 million accounting for 56.4% of total stock of FDI attributed to Africa in 2017. Stock of FDI liabilities attributed to COMESA declined by 22.0% to KSh 73,487 million in 2017 accounting for 34.2% of the total stock of FDI liabilities from Africa. The decline was largely reflected in reduced stock of FDI attributed to Mauritius. Stock of FDI liabilities attributable to the EAC accounted for 15.1% and 14.0% of the total FDI stock attributed to Africa in 2016 and 2017, respectively. Stock of FDI liabilities attributable to Uganda increased by 4.7% to KSh 27,870 million in 2017 and contributed the highest proportion within the EAC.

In 2017, the stock of FDI liabilities attributed to Asia increased by 18.1% mainly as a result of FDI liabilities attributed to the Far East, which increased by 25.0% to KSh 68,107 million. India and Japan were the main sources of FDI stock collectively accounting for over 70% of the total stock of FDI from the Far East in the review period. United Arab Emirates was a significant source of stock of FDI liabilities contributing about a quarter of the total FDI stock attributed to Asia in the period under review. The stock of FDI liabilities attributed to North America, grew by 4.3% to KSh 63,843 million in 2017 and was mainly from the United States. [CBK Governor: Kenya needs to begin reorganising debt]

Egypt targets quadrupling of exports over five years (Egypt Today)

 Non-oil exports have been rising by 10% annually since launching the Trade and Industry Strategy 2016-2020. However, that increase does not match the manufacturing capabilities of Egypt so the state aims at boosting exports by $55bn over the next five years.  In FY2017/2018, Egypt achieved a 12.7% growth in non-oil exports to record $12.7bn from $15bn in the previous fiscal year. The prime minister held meetings with export council's representatives in the previous weeks, where each presented a vision on possible mechanisms to increase exports. In parallel, the state carries out economic reforms and takes measures that would boost the value chain by decreasing raw material exports, and increasing investments in the manufacturing sector.   Chairman of the Egyptian Commercial Service,  Ahmed Antar, told Egypt Today that the state targets 12 African states in the plan’s first phase. They are Ethiopia, Rwanda, Uganda, Zambia, Tanzania, and Kenya in the East; and, Nigeria, Senegal, Ivory Coast, Gabon, Ghana and Benin in the West.   [Egypt’s new Aswan free zone to serve development purposes]

Ethiopia's exchange rate: Why it matters for structural transformation and growth (World Bank)

Although Ethiopia has achieved rapid economic growth since 2004, addressing the major challenges facing the economy is critical to maintaining the growth momentum. Exports witnessed relatively weak performance since the early 2010s. Exports plunged from 16.7% of GDP in 2011 to 8.9% in 2018. This, combined with the surge in imports, resulted in considerable deterioration in the trade and current account balances. The lackluster export performance is generally reflected in, among others, the acute shortage of foreign exchange, currency rationing, and flourishing parallel market. Real currency appreciation accounts for a significant part of the widening external imbalance, particularly before the devaluation in October 2017. The slow pace of structural transformation poses another challenge to the Ethiopian economy. The country’s first Growth and Transformation Plan (GTP I) (2010-2015) was mainly targeted towards jump-starting structural change by promoting light manufacturing. Manufacturing-led industrialization also features prominently in the GTP II, which covers 2015-2020. Against this backdrop, the present paper attempts to address the following main questions:

Uganda Economic Update: Economic development and human capital in Uganda (World Bank)

The World Bank’s analysis of cross-country data on human capital indicates that Uganda is under-investing in the future productivity of its citizens. A child born in Uganda today will only be 38% as productive when she grows up as she could be if she enjoyed complete education and full health. Uganda is ranked among the countries in the lowest quartile of the Human Capital Index (HCI) distribution, with an index slightly lower than the average for the SSA region, and below what would be predicted by its income level. Uganda’s low ranking in the HCI is mainly due to the country’s low education outcomes. A child born today in Uganda is expected to complete only 7 years of education by age 18, compared to a regional average of 8.1. Because of the low levels of learning achievement in Uganda, this is only equivalent to 4.5 years of learning, with 2.5 years considered as “lost” due to poor quality of education (as shown by the quality-adjusted years of schooling component of the HCI). Uganda’s score on this component is the lowest amongst the comparator countries and below the SSA average.

Songwe, UN heads of agencies discuss need for better coordination and delivery (UNECA)

ECA Executive Secretary, Vera Songwe, on Wednesday, met with key heads of UN agencies in Ethiopia to discuss how the UN in the region can coordinate better and deliver as one.  Continued collaboration for the implementation of the African Continental Free Trade Area and other related instruments, including the Free Movement Protocol and the Single African Air Transport Market, was also discussed, notably in view of their significant potential to boost regional integration, strengthen inclusive economic growth, generate jobs for young Africans, alleviate poverty and lead to more stable and peaceful societies. The Conference urged greater efforts to harness Africa’s youth dividend, notably with investments in health, education, data and in science and technology.

Digital trade issues: OECD's key issues paper prepared for the  Council at Ministerial Level (22-23 May)

 Digitalisation has cut the costs of international trade and more firms, including SMEs, are exporting to new markets as online tools are facilitating cross-border sales. Although difficult to measure and without internationally-comparable statistics, the available evidence suggests that digital trade is growing. Today, digitally deliverable services, for example, represent over 20% of services trade in OECD countries. Efforts are accelerating to provide internationally comparable statistics and evidence on digital trade and data flows. The OECD’s work on digital trade aims to help unpack some important policy and measurement issues raised by the digital transition. To start, the OECD and other international organisations including the WTO are developing a Handbook on Measuring Digital Trade. At the same time, the OECD is working on providing new frameworks for better trade policy making, identifying what matters for market openness in digital trade – including for services through the Digital Services Trade Restrictiveness Index – helping inform the debate on trade and cross-data flows, including in support of the work at the WTO. [Table of contents. Unlocking the potential of digital transition: the role of governments and importance of international cooperation;  Empowering different actors in society in the digital age: the role of jobs, skills, and education;  Realising the digital promise for sustainability and well-being;  Reaping and diversifying the benefits of trade in the digital era]

Mozambique: AfDB supports new tracking system to create growth-friendly labor market

The Ministry of Labour, Employment and Social Security of Mozambique has launched the Labour Market Information System (SIMT) Management Platform. The platform aims to establish a new dynamic in the analysis of the behavior of sector-based reliable statistics. More importantly, SIMT will enable the government to formulate skills development policies and programs, which will lead to the creation of decent employment opportunities, as well as growth and economic integration.

Migration and jobs: Issues for the 21st Century (World Bank)

With an estimated 724 million extreme poor people living in developing countries, and the world's demographics bifurcating into an older North and a younger South, there are substantial economic incentives and benefits for people to migrate. There are also important market and regulatory failures that constrain mobility and reduce the net benefits of migration. This paper reviews the recent literature and proposes a conceptual framework for better integration and coordination of policies that can address the different market and regulatory failures. The paper advances five types of interventions in need of particular attention in design, implementation, and evaluation:  [The authors: Luc Christiaensen, Alvaro Gonzalez, David Robalino]

Tackling the global profitarchy: Gender and the choice of business sector (World Bank)

 This paper investigates the horizonal dimension of sectoral segregation by studying global data on female and male enterprises operating in sectors that are typically dominated by the same and opposite sex. The analysis uses the novel Future of Business dataset, which spans 97 countries and was administered to enterprise owners, managers, and employees who use Facebook. [Note:  The geographic coverage of the Future of Business survey now includes 11 Sub-Saharan African countries. They are: Nigeria, Kenya, Uganda, South Africa, Côte d’Ivoire, Botswana, Benin, Mozambique, Tanzania, Ghana, Cameroon]

Today's Quick Links:

Japan grows stake in Africa with new deal

Japan and Austria support NDCs of African countries

Zimbabwe: Trade deficit narrows 22%

Mozambique exports power to Botswana

Nigeria: Trade ministry’s 13 reforms in Buhari’s 1st term