tralac’s Daily News Selection
Next week in Nairobi: “It’s all systems go as Kenya readies to host Africa’s leading premier SME gathering, the Kenya Trade Week and COMESA High Level Business Summit, 15-21 July”
Business impediments along trade and transport corridors in the COMESA region: terms of reference
EAC Heads of State Joint Retreat on Infrastructure and Health Financing and Development: status update on project implementation
Members of the Lower House yesterday approved the draft law for the ratification of the agreement establishing a Tripartite Free Trade Area among COMESA, the EAC and SADC. The Minister for Trade and Industry, Soraya Hakuziyaremye, told lawmakers that though the TFTA was officially launched by the heads of state in Egypt in June 2015, the ratification process had taken long, due to prolonged negotiations on rules of origin and tariff offers by the regional blocs. MP Frank Habineza tasked Hakuziyaremye to explain the value of joining the TFTA is when the nation is already a signatory of almost similar agreements binding wider blocs: “You have told us the benefits of joining TFTA but we are already part of the AfCTA, which in my opinion is not very different. What I see here is a duplication and I wonder if, in the end, we are going to reap or simply make losses.” Minister Hakuziyaremye explained that the two agreements complement each other and signing the TFTA would help the country to benefit faster since negotiations had been finalised as compared to AfCTA which is still work in progress.
Ethiopia to reinstate WTO negotiations: fourth round of negotiations to start soon (Addis Fortune)
Prime Minister Abiy Ahmed has formed a 10-member national committee to resume the process of WTO accession, which was paused for the past six years. Formed on 10 June, following the framework that was approved by the Council of Ministers to provide a legal framework for the accession, both the national and technical committees held their first meeting on 22 June. The committee, chaired by Mamo Mihretu, the chief trade negotiator and senior adviser to the Prime Minister, is composed of delegates from the Office of the Prime Minister, ministries of Foreign Affairs, Revenues, Finance and Trade and Industry; the National Bank of Ethiopia; the National Planning & Development Commission; the Attorney General’s Office and the Policy Study Institute. A long-standing 40-member technical committee composed of representatives from government offices, the private sector, non-governmental organisations and the academic community, will be submitting its findings and suggestions to the national committee. In the fourth round of negotiations, Ethiopia is expected to submit goods and service price offers to WTO members. The country will also answer 168 questions that have been forwarded from the previous negotiation round. “After analysing the recommendation of the technical committee, we’ll be holding the fourth round of negotiations in the next few months. But we can’t set a deadline for the entry of Ethiopia to the WTO,” said Mamo.
South Africa’s manufacturing sector has been significantly affected by trade liberalisation policies dating back to the nineties. At the time, these were widely adopted as a means of stimulating national economies in developed countries that were characterised as being hamstrung by high input costs and stagnant local markets. It was argued that open markets would help create jobs, raise levels of productivity and competitiveness, and ultimately increase economic output. Our study, has shown that, relative to our peer group and stage of industrial development, South Africa’s industrial policy is too focused on supply-side instruments. These include tax allowances for research and development, and direct financial support for human resource development or capital investment. The study began with two initial propositions: that the transition had been overdone; and that the country’s more traditional manufacturing sectors, such as leather goods and footwear, metal products and clothing, had been slow to respond to the new policy framework. The study confirms both. We conclude that the policy changes of the nineties were too extensive and South Africa’s industrial policy regime should be rebalanced as a means of growing employment and GDP. A combined approach of selective tariffs and better marketing to potential beneficiaries could rebuild the important contribution of manufacturing to the economy. [The author, David Richard Walwyn, is Professor of Technology Management, University of Pretoria]
Zimbabwe’s trade deficit has narrowed to $332m for the five months to May as it battles to pay for key imports such as electricity and fuel. According to the latest figures released by the Zimbabwe National Statistics Agency, Zimbabwe has significantly cut its electricity import bill amid foreign currency shortages and a heavy debt burden. ZIMSTAT said Zimbabwe’s trade deficit narrowed to $93.6m in May, bringing the cumulative year-to-date total deficit to $332m. The trade deficit was $1.3bn in the comparable 2018 period. Imports from South Africa dropped from an average $230.6m per month in 2018 to $136.6m in 2019. Exports also fell from an average $188m per month in 2018 to $141.7m in 2019. Zimbabwe further exported more than it imported from South Africa. Exports for the five months to May stood at $708.9m against imports of $683.2m for the same period.
Paulo Gomes: Why investors should go beyond African GDP (Project Syndicate)
Already, some multinationals are using city-based models to guide their African investment strategies. They know that dismal national GDP averages can obscure pockets of increasingly prosperous consumers who are eager to purchase high-quality goods and services from abroad. So, when determining a market’s viability, they often focus on cities, considering diverse indicators like mobile-phone penetration, electricity usage, and Internet bandwidth. One global packaged-food manufacturer, for example, has focused its Africa strategy on 15 cities that collectively represent about 25% of the total growth in packaged-food sales expected across Africa in the next five years. More broadly, foreign direct investment has been flowing primarily toward Africa’s four main megacities: Cairo, Johannesburg, Nairobi, and Lagos. Of course, whether at the city or country level, comprehensive and reliable data are needed to provide a strong foundation for investment strategies. Private companies – including African tech startups – can take advantage of new technologies to help deliver this. For example, Terragon, a Nigerian data analytics firm, pulls data on mobile-phone usage and matches it against data provided by its business clients to produce insights about African consumers. Investors who seize such opportunities to gain an accurate and nuanced picture of Africa’s economic performance and prospects could reap vast rewards. Those who write off the entire continent based on simplistic and incomplete GDP data will lose out.
Africa50 General Shareholders Meeting: Rwanda, Africa50 infrastructure financing talks take shape (New Times)
The government of Rwanda and Africa50, a pan-African infrastructure investment firm, are exploring avenues of infrastructure financing and investments that could see Rwanda become a beneficiary as well as an investor. Rwanda is a shareholder in Africa50 Infrastructure Fund having joined and committed $10m to the fund, and then released 25% of the amount as of June 2018. Africa 50 has already committed to invest in the Kigali Innovation City’s Digital Innovation Precinct, an emerging tech hub which features 11 components with investment opportunities valued at about $420m. The Africa50 general shareholders’ meeting brought together ministers of finance from the 27 shareholder countries and representatives of the AfDB, the Central Bank of West African States, and Bank Al-Maghrib.
Africa Investment Forum 2019: Nigeria expected to be major player (AfDB)
Effects of trade liberalization on textile and apparel exports from Sub-Sahara Africa. This paper estimates the impact of market access liberalization in high-income countries on sub-Saharan African exports. The methodology exploits the large reduction in trade barriers that was induced by three unilateral trade liberalization initiatives: (1) the dismantling of the Multi-Fiber Arrangement, (2) the African Growth and Opportunity Act in the United States, and (3) the extension of EU trade preferences for developed countries through its Everything-but-Arms program and the General System of Preferences. Using detailed product-level information at the 6-digit level of the Harmonized System and a triple-difference empirical specification, the usual endogeneity-of-policy critique is flexibly controlled for. The results indicate strongly positive export effects, which are especially large for textile, apparel, and leather products, and tend to be realized fully within five years. Each percentage point reduction in import tariffs raises exports to the EU by 0.73% and to the US by 0.30%; effects are two to three times as large for textiles. The presence of strong Chinese imports has ambiguous effects on countries’ ability to take advantage of trade liberalization as the impact on the export effects to the EU and the United States show an opposite sign. [The authors: Johannes Van Biesebroeck, Elena Zaurino]
The extent of GVC engagement in Sub-Saharan Africa. This paper exploits information from two different datasets to provide a novel and multi-dimensional picture of the engagement of all sub-Saharan African countries in global value chains. It documents in detail the nature of the underlying data and the way it is used to construct several indicators of GVC engagement. As a companion to the paper, the data files are made available to interested researchers. While it is impossible to summarize the broad range of experiences that we document, two patterns stand out. First, the level of GVC engagement of most countries in sub-Saharan Africa is rather low, especially for their manufacturing sectors. Second, while there is increased GVC engagement over time in some countries, this pattern is by no means universal. The average engagement for the region over the time period studied (1995-2018) is not even positive on average across countries for several indicators.
- Women at Work: How can investment incentives be used to enhance economic opportunities for women? In a context of growing global competition for private investment, policymakers face the timely challenge of ensuring that women are not left behind in the development agenda. This working paper identifies and analyzes investment incentives that governments can provide to businesses with the aim of promoting gender equality. Barriers to gender equality in the workplace include supply-side barriers that make it difficult for women to find jobs or investment financing, and demand-side barriers that make it more costly for firms or investors to hire or fund women. The paper discusses three main types of investment incentives that governments may use to address these barriers: (i) subsidies and grants, (ii) tax incentives, and (iii) public procurement incentives.
Gender and Trade: selected updates
tralac’s Women in Trade Governance (WiTG) Development Programme: tralac’s inaugural Women in Trade Governance development programme residential took place in Cape Town during the week of 8 July 2019. Twelve future leaders in trade governance gathered to network, learn and reflect. Over the course of the week, participants acquired new technical knowledge, shared experiences on trade, worked on honing their communication skills and connected with like-minded women from their own and other countries. The 12 women from across the Continent will form the core of tralac’s Women in Trade Governance (WiTG) network.
The International Finance Corporation and Goldman Sachs Foundation launch first-of-its-kind gender-focused trade finance program. Called the Banking on Women-Global Trade Finance Program (pdf) the initiative will incentivize IFC’s Global Trade Finance Program participating banks to increase trade finance for women importers and exporters and encourage those financial institutions to track their business with female entrepreneurs. “Just one in five exporting companies is owned by a woman, and research suggests that they have less access to finance than their male counterparts,” said Philippe Le Houérou, Chief Executive Officer of the International Finance Corporation. “The BOW-GTFP will help us to understand the finance gaps faced by women entrepreneurs and to better tailor our financial programs and tools to fill those gaps.”
Global Trade Review interview with Jessica Schnabel, global head of IFC’s banking on women business: “We are working with these 285 banks and any more that may subscribe to the programme to first identify trade with women-owned SMEs, and then provide information to IFC about that trade, such as company names, and the specifics of the trade. We are asking those banks to begin to seek out and then to track and monitor business with those women-owned companies. IFC will begin to collect data from those participating banks which will then help IFC establish a baseline. We are also providing advisory services through the GTFP to the participating banks on how to identify, measure, and track business with women-owned companies. And that is a really important component, because as each of those banks begins to seek out and monitor business with women-owned companies, they then begin to understand their own flows and transactions with women-owned companies.”
WCO’s session on gender and trade during the 2019 Global Review of Aid for Trade. The WCO presented its various tools and initiatives to promote gender equality and diversity in Customs, including the recent updates of the Gender Equality Organizational Assessment Tool (GEOAT), the WCO Virtual Working Group on Gender Equality and Diversity as well as a Blended Training Package composed of a one-week workshop and an e-learning module. The WCO also informed the participants about the recently launched WCO survey on Gender Equality and Diversity which received 95 replies.
Today’s Quick Links:
2020 CHOGM: Rwf20 billion for Commonwealth summit
Cross-border smuggling: What drives illicit trade in North Africa?
Joburg-Musina high-speed train ‘on the cards’ to reduce road deaths
Seven new countries can now visit South Africa visa-free