tralac’s Daily News Selection
Diarise: 4th Africa Fintech Summit (21 November, Addis Ababa)
Digging beneath the surface: an exploration of the net benefits of mining in Southern Africa (World Bank)
Many ex-miners suffer from vocational diseases to this day. While mining has helped build the economies of Southern Africa, it has come at social and environmental costs that cast a long shadow. Inequality is also high in many Southern African countries, suggesting that mining has not translated into inclusive growth. This report attempts to examine and weigh the various benefits and costs that mining has brought to the Southern Africa region. Data limitations are significant, restricting authoritative conclusions on whether the benefits from mining are positive or negative, on balance, for Southern African societies. The emphasis of this report is thus on taking stock of various benefits and costs associated with mining, while drawing on available information and thought experiments to highlight the potential trade-offs and how they affect stakeholder groups: workers, investors, governments, communities, and the rest of the economy. The countries this report focuses on are Botswana, Lesotho, Eswatini, Namibia, South Africa, Zambia, Zimbabwe. Extract (pdf):
Even though this study finds that the net benefits of mining are positive for Southern African societies overall - keeping in mind the data constraints in deriving this conclusion — there is still room for contestation. This contestation can link to the overall amount mining is expected to contribute to an economy, with governments developing requirements designed to foster greater linkages (referred to as “beneficiation”). Or it could be about the overall distribution of income from the proceeds of the production process, with governments trying to capture a higher share of the rent, workers and communities trying to obtain higher wages or benefits or demanding better compensation for the costs they incur. Such contestation can become particularly tense when external pressure increases, say due to falling commodity prices, or due to changes in the production process, such as mechanization, impacting jobs. Such conflict can be further fueled by incomplete transformation due to opaque reporting or accounting practices, which can undermine trust during negotiations. The study shows that these social dynamics at times result in policies (or actions such as strikes) that can reduce the commercial viability of mining, limiting investment and potentially causing the closure of mines. In other words, where the benefits and costs are considered to be inequitably distributed, the process of unlocking mineral wealth grinds to a halt altogether.
Zambia’s wealth beyond mining: leveraging renewable natural capital (World Bank)
Zambia’s path to economic recovery remains weak, reflecting both exogenous and policy uncertainties, says the latest World Bank’s Economic Brief on Zambia. Despite the Zambian economy growing by 3.7% in 2018 from 3.5% in 2017, a stronger recovery was undermined by lower crop harvest and fiscal slippages that led to the accumulation of new public expenditure arrears and high government borrowing that impacted private sector activity. Under the current policies, growth is forecast to weaken to 2.5% in 2019 and remain below 3% over the medium-term. While inflation remained within the authorities’ target range of 6-8% in 2018, averaging 7.5% for the year, pressures are now mounting, leading the central bank to tighten its monetary policy stance in May 2019 for the first time in over two years. The brief suggests some policy options including (i) front-loading fiscal consolidation to return to medium risk of debt distress and create fiscal space for inclusive growth; (ii) strengthening debt management to reduce the debt service burden and minimize debt related vulnerabilities; (iii) rebuilding foreign exchange reserves to buttress external stability, and (iv) implementing plans to improve the financial and operational sustainability of ZESCO and enhance the transparency of State-Owned Enterprises.
This Central Africa Regional Integration Strategy Paper explains how the African Development Bank Group will work towards making this vision a reality over the next seven years. The Bank’s investments in regional operations in Central Africa grew 15% between 2017 and 2018, reaching $1.1bn in August 2018. Over 2019 to 2025, investment will rise to $4.4bn – 88% in hard infrastructure and 12% in trade facilitation and capacity building. Implementing the RISP-CA will require investments of UA 3.185 billion, corresponding to 30 regional operations over a seven-year period (2019–2025). About 88% of the planned funding will be devoted to reinforcing regional infrastructure (energy, transport, and information and communication technology) while 12% has been earmarked for developing intra-regional trade and building institutional capacity in regional economic communities. The Regional Integration Agenda: status, challenges, opportunities, and lessons learned:
Central African intra-regional trade (trade within ECCAS) accounts for barely 2% of the region’s total trade. This situation is due to several factors, including the low production of tradable goods, an embryonic industrial fabric, a shortage of infrastructure, numerous tariff and non-tariff barriers, and countries’ reluctance to implement reforms for the free movement of goods and persons. The ECCAS zone has five tariff profiles: CEMAC’s common external tariff, the East African Community (Burundi and Rwanda), Angola, DRC, and Sao Tome and Principe.
The Central African region’s business climate does not attract sufficient investment or stimulate the private sector. Per capita foreign direct investment flows in the ECCAS zone fell by 55% between 2011 and 2015, dropping from $337.6 to $153.20. Most local investments come from supplier credits, forcing companies to mobilize their cash flow, profits, and depreciation provisions. The region’s financial system, which is mainly dominated by the banking sector, is not dynamic enough. This hampers the region’s ability to finance economies as a means to develop regional markets. For example, in the CEMAC zone, total assets are estimated at 25% of regional GDP and the sector’s activity is dominated by banks whose business model is mainly based on a restrictive credit policy whose high fees are a barrier to all but large companies. Access to finance for small and medium-sized enterprises is limited and constitutes a major challenge in the region. As at 31 December 2016, CEMAC’s banking system counted 52 banks that provide very little medium-term financing (3 to 7 years) and impose rigid access conditions. Long-term financing (over 7 years) is scarce and accounts for 3% of loans. Finally, the proportion of companies with a credit line is 9% in Central Africa versus 23% in sub-Saharan Africa, and the self-financed investment rate of Central Africa companies is 93% compared to 79% in sub-Saharan Africa.
Ensure 3-years of economic stability before adopting Eco: Professor Quartey (GhanaWeb)
Morocco and the IMF:
Executive board concludes 2019 Article IV Consultation. Morocco’s medium-term prospects remain favorable, with growth expected to reach 4.5% by 2024. However, this outlook remains subject to significant domestic and external risks, including delays in reform implementation, lower growth in key partner countries (particularly the euro area), higher oil prices, geopolitical risks, and volatile financial conditions. On the upside, lower international oil prices could help further strengthen the economy’s resilience and increased regional integration in the Maghreb region could become an added source of medium-term growth for Morocco.
pdf 2019 Article IV Consultation Staff Report (2.35 MB) . Morocco’s current account is characterized by large trade deficits, a tourism-driven surplus in services, and strong remittances. The trade deficit is highly sensitive to external demand, particularly from the Eurozone (2/3 of export market), and the price of oil, of which Morocco is one of the largest net importers. Since 2012, the sharp decline in oil prices has helped shrink the share of oil imports as percent of GDP from 12.6% in 2012 to 5.4% in 2016. However, with higher oil prices, the share of oil imports recovered to 7.4% of GDP in 2018. At the same time, the composition of exports has gradually shifted toward higher value-added sectors, with automobile exports overtaking the traditional export engines: phosphate and textiles. Tourism receipts, at about 6,5% of GDP, have remained robust despite the low euro. [See Figure 4: External Developments, 2009–19]
pdf Selected Issues (865 KB) . This paper assesses the potential reaction of output and employment to different reform scenarios in Morocco. We focus on two broad reform categories emphasized in the literature as having significant potential for promoting growth and employment in emerging markets: reduction of firm’s barriers to entry, and improvement in labor market policies and human capital.
Four AfCFTA updates: South Africa, Ghana, Nigeria, NTB online tool
AfCFTA offers SA the chance to become a more industrialised manufacturer. As countries begin to implement AfCFTA, regional and continental trade, their markets will become more integrated and it will be easier for companies to integrate into regional and global supply chains. Original equipment manufacturers across Africa are increasingly interested in the opportunities these developments are creating for increased trade and investment, at a time when the US government is increasing its efforts to support more trade and investment in and with African countries. It’s thus important that Africa harnesses and observes these evolving opportunities across the continent. AfCTA will allow goods and services for 1.2-billion people to truly utilise an intra-African trade model. The biggest challenge in terms of creating a single market in Africa has to do with the relative imbalances that exist. In order to ensure its sustainability, a single market in Africa would have to be fair to all and one from which everyone can benefit. Such a market would depend on two-way flow and mutual benefit, so there could not be one dominant ‘player’. Going forward, we perhaps need to look at trading blocs in north, south, east and west Africa; and at creating component movement within these trading blocs as well as between them. [The author, Mike Whitfield, is the Chair of Nissan Group of Africa]
Ghana’s export-oriented SMEs and the AfCFTA: roadmap for Africa Free Trade Area to be drawn. Following the official launch of the five operational instruments to govern the working phase of the AfCFTA agreement last week, key stakeholders in Ghana’s export and trade sectors have initiated moves to draw a roadmap to maximize the potential benefits of the trade policy by local producers of goods and services. This is under the auspices of the Ghana Export Promotion Authority, in collaboration with the Africa Centre for Economic Transformation, bringing together representatives from the Ministry of Trade and Industry, International Chamber of Commerce, the Institute of Statistical, Social and Economic Research as well as some trade technocrats. The roadmap is aimed at setting modalities for export-oriented indigenous SMEs to harmonize trade strategy for exploiting the benefits and opportunities as well as ameliorating key challenges of the policy. In Ghana, it is estimated that SMEs contribute more than 70% of Ghana’s GDP and account for 92 out of every 100 businesses. [GUTA: Importers, consumers reaping from Akufo-Addo’s import duties cuts]
AFCTA agreement will benefit workers, open Africa trade relations. The president of the Nigeria Labour Congress, Mr Ayuba Wabba, on Tuesday commended President Muhammadu Buhari for signing the AfCFTA. He said the agreement would benefit the lives of Nigerian workers and open trade relations in the region. “Critically, we said that our jobs must be protected, Otherwise, our jobs will be taken away and the unemployment situation will continue. What we, organised labour, are impressed with is actually the consultation process that went into the process. If policies are about the people, then they should be consulted and that is the hallmark of it. It was because we shouted that people started asking questions about the content of the agreement. So, how do we sign what we are not aware of? We don’t just join the bandwagon. Africa is about Nigeria. Some of those countries that signed earlier are less than local government in Nigeria. If Nigeria has not signed the agreement, it means Africa has not signed it because we are the largest economy in Africa and also the key market in Africa. What we are impressed with and have canvassed that all other policies should be tailored along is the consultations. We have also insisted that it should be made in Africa goods and it should be strictly trade among African countries and that you import goods from other parts of the world, dump them in one African country and begin to flood our market with the goods. That is not part of the agreement because it is going to affect our economy and we will be at the receiving end.”
An innovative online tool by UNCTAD and the AU is set to help African countries navigate non-tariff barriers. Buy-in and ownership by the AfCFTA member states is the main reason this mechanism will work, UNCTAD economist Christian Knebel said. “Over several negotiating rounds, the online tool was reviewed and approved by technical experts, chief negotiators, senior trade officials, ministers of trade and finally launched by heads of state. There was a strong commitment to implementing the mechanism and achieving inclusiveness for small traders.” The tool will be managed by the African Union through the AfCFTA Secretariat, to be based in Ghana. An NTB coordination unit in the secretariat will manage the system and facilitate the resolution of reported barriers between countries. Governments have committed to appointing national focal points to help resolve NTBs. These officials are mandated to receive NTB complaints in real-time and resolve them within given deadlines to enhance and facilitate intra-Africa trade.
International trade in services: 2019 Quarter 1 (pdf, Unctad)
World services exports remained at the level of the previous year in the first quarter of 2019 (measured in current United States dollars, year-on-year). The most recent estimates point to a slight downturn in transport and travel exports since the beginning of the year, offset by an increase in international trade of other services. In general, the growth observed over 2018 has receded. On the regional level, Europe registered a decline in services exports (-2.1%). Asia and Oceania - the growth leaders - recorded an increase (+3%), mainly owing to exports of other services (+4.8%). The figures from Latin America and the Caribbean revealed a considerable weakening (-4.3%) of other* services trade. While the trade in transport dropped overall in the first quarter of 2019, Latin America and the Caribbean witnessed a rise of exports in that category (+2%).