tralac’s Daily News Selection
Mandela Day serves to remind and inspire us to strive for social justice. This is the complex and multi-faceted challenge to adopt policies and strategies for addressing poverty and inequality and to promote economic development; and to do so under the guidance of the right compass and within the broader regional and multilateral context. Good Governance will only be achieved through dedicated effort, inclusivity, transparent structures, and vigilance. This is true for national, regional and multilateral levels of governance.
The Mobile Economy Sub-Saharan Africa 2019: SSA’s mobile economy valued at over $150bn in 2018
Sub-Saharan Africa will remain the world’s fastest-growing mobile region over the coming years as millions of young African consumers become mobile users for the first time, according to a new GSMA study. It reveals that more than 160 million new unique mobile subscribers will be added across the region by 2025, bringing the total to 623 million, representing around half of the region’s population, up from 456 million (44%) in 2018. Subscriber additions will be concentrated in high-growth markets such as Nigeria and Ethiopia. The study calculates that the mobile ecosystem across Sub-Saharan Africa generated almost $150bn in economic value last year – equivalent to 8.6% of the region’s GDP. It is forecast to generate almost $185bn (9.1% of GDP) by 2023. Goodluck Akinwale, head of Sub-Saharan Africa, GSMA: “With mobile technology at the heart of Sub-Saharan Africa’s digital journey, it is essential for policymakers in the region to implement policies and best practices that ensure sustainable growth in the mobile industry, and enable the transition to next-generation mobile networks.”
Olu Fasan: Nigeria’s signing of AfCFTA must be meaningful, not perfunctory (Business Day)
However, the immediate action must be to ratify the AfCFTA agreement, because treaties are not self-enforcing in Nigeria. In its 2017 trade policy review, Nigerian officials cited “the difficulties in the domestication” of its WTO commitments for its failure to meet the commitments. Therefore the 9th National Assembly must speedily domesticate Nigeria’s AfCFTA commitments. What’s more, Nigeria must also create other relevant institutions and laws, including a robust trade remedies regime to deal with injurious trade practices, a key concern. Nigeria must seek international support, such as within the aid for trade framework, to build those institutions. But the biggest challenge is the policy mindset. AfCFTA is not compatible with Nigeria’s protectionist practices, such as import restrictions. However, free trade agreements often serve as external constraints on domestic protectionist measures and as a trigger for far-reaching domestic reforms. Thus, Nigeria must use AfCFTA to transform its domestic policies and institutions. That way, its signing of the agreement won’t be perfunctory, but meaningful.
Adu Owusu Sarkodie: Ghana hopes to benefit from hosting Africa’s free trade area secretariat (The Conversation)
Ghana’s hope is that hosting the secretariat will boost the hospitality sector – and more broadly the services sector – and generate increased international exposure. There should also be a boost for job creation as the secretariat hires staff; ranging from economists to translators, administrators and technicians. There is no clear deadline on when the secretariat is expected to be up and running. The AU itself still has to clear a number of hurdles,, including adopting a structure, staff rules and regulations, and the secretariat’s budget.
Representatives of the US government say plans are underway to establish the West African Trade Hub in Lagos and Abuja. Grace Adeyemo, director of the Nigeria-American Chamber of Commerce, said this at a conference for Prosper Africa, an initiative of the US government targeted at “creating an enabling environment for foreign and direct investment” in African countries. Adeyemo expressed optimism about the economic prospects of the President Donald Trump-backed trade initiative, which, according to her, prompted the decision to move the trade hub into Nigeria.
The Country Brief 2019-2020 is a short-term programming framework for the Bank’s operational activities in Zimbabwe. This is in accordance with the Bank’s Operational Guidelines of the Transition Support Facility. Its objectives are to update the Board of Directors on recent political and economic developments in the country, articulate challenges, opportunities and lessons to guide the Bank’s future operations. It builds on the achievements of the CB 2013-2016 (initially approved in 2013) to provide a programming framework for the period 2019-2020, and makes a case for the country’s eligibility to access resources under ADF-14 and 15. It should be noted that the country had no new strategy between end December 2016 and December 2018, pending finalization of discussions on arrears clearance. In 2016, an Interim Strategy Paper was prepared in anticipation of arrears clearance by the end of that year. However, following lengthy negotiations with the government and failed meeting of targets to clear the arrears, Management made a decision to prepare a new CB starting with a completion report for the previous CB, which was endorsed by CODE on 16th November 2018. Extract: Section 2.1.35 Regional Integration:
Being a landlocked country, regional integration is important for Zimbabwe’s growth and development. Its central geographic position in SADC region makes it a critical transit country and therefore key to regional trade. However the country’s infrastructure has deteriorated resulting in transporters having to take longer routes by-passing Zimbabwe to move goods mainly from South Africa into the sub-region. With regards to power transmission, Zimbabwe holds great opportunity for the evacuation of power from the Grand Inga as well as the Batoka Gorge Hydro Generation projects. Given the weakening external position, the GoZ has inconsistent import controls policy, often putting it on collision path with its trading partners, especially South Africa. From a fragility point of view, the poor economic performance of the Zimbabwean economy has had a negative impact on the sub-region, while weakening economic conditions in South Africa also present increasing risks to Zimbabwe. [Background: AfDB’s 2018 Zimbabwe Economic Report, pdf]
The Zambia Economic Brief, Wealth beyond mining – leveraging renewable natural capital, is posted
The external sector weakened in 2018. The current account balance weakened from a deficit of 1.7% of GDP in 2017 to 4.1% in 2018, reflecting increased deficits in income and services accounts amidst a narrowing trade surplus. Both exports and imports of goods and services increased in 2018 relative to 2017, but imports rose at a much faster pace of 17% (to $10.2bn from $8.7bn) than imports (10% from $9.1bn to $10.0bn). The growth of exports particularly moderated in H2 2018 where copper prices fell by an average of 11% below their H1 2018 level. As a result, the balance in goods and services deteriorated from a surplus of $351m to a deficit of $210m (Table 3, pdf). The deficit on primary incomes narrowed from $1.1bn to $407m, largely on account of a sharp decline in primary income outflows. The balances on secondary incomes declined from $359m to $276m, reflecting a decline in grants and remittances. Summing up these developments, the deficit on the current account widened to $1.1bn in 2018 from $428m in 2017.
Egypt Economic Monitor: Taking Egypt’s exports to new levels (World Bank)
The severe foreign currency crunch that peaked in late 2016 motivated the GOE to introduce transformative economic reforms to alleviate the longstanding structural constraints to inclusive growth and macroeconomic stability. The flagship reforms of the economic program were (i) the liberalization of the exchange rate to eliminate the large currency overvaluation and foreign exchange shortages; (ii) a fiscal consolidation program that introduced a VAT and a gradual reduction in energy subsidies and the wage bill, and (iii) major energy sector terms to address power outages by public and private investment in generation and establish Egypt’s potential as an oil and gas producer by reducing pricing distortions and arrears. These reforms were complemented by efforts to improve the business climate and attract private investment, starting with legislative reforms and the introduction of new laws on industrial licensing, investment, and insolvency. Macroeconomic indicators have reacted positively to the stabilization reforms.
Extract from the accompanying research paper, From currency depreciation to trade reform: how to take Egyptian exports to new levels? (pdf): Table A.7 shows that Egypt is under‐trading with 63% of destinations, with African countries representing half of these destinations. The other half encompasses other small Asian and European countries and American and Pacific islands. At the same time, the country is over‐trading with around 20% of the markets, mainly with the USA, EU countries, China, Japan, Canada and some Asian countries, compared to the expected levels. The remainder 10% of Egypt’s trade partners has an index close to 1 (from 0.90 to 1.10), pointing out that the observed level of trade is in line with the expected level. At the product level, Egypt is under‐trading in 53% of the products, over‐trading in 13%, while 32% of its products are in line with the expected level of trade. Surprisingly, some of the under‐traded products are among those in which Egypt has a comparative advantage such as textiles, garments, fertilizers, chemicals and wooden products (Table A.10 in Appendix 2). This suggests that even in these promising sectors, Egypt is not exploiting its full trade potential, which raises questions around other factors that may hinder the development of these exports sectors.
The World Bank Board of Executive Directors approved a package worth $1.320bn from the International Bank for Reconstruction and Development to support the government of Angola in its efforts to promote more inclusive growth, improve water services, and strengthen the national social protection system. The approved package will finance the following three projects: Growth and Inclusion Development Policy Operation, Luanda Bita Water Supply Project, Strengthening the National Social Protection System Project.
China has retained its lead as the country best connected to others by sea, the index shows. The country’s LSCI has increased by 51% since 2006. “A country’s position in the global container shipping network – its connectivity – is an important determinant of its trade costs and competitiveness,” said UNCTAD’s chief of trade logistics, Jan Hoffmann. Five of the top 10 best connected economies in 2019 are in Asia, with Singapore, Korea, Hong Kong (China), and Malaysia rounding out the top-five list, each with a score of more than 100, according to the index’s metrics. At the other end of the table, small islands developing states (SIDS) have hardly seen any improvement, meaning trade in shipped goods remains problematic in those countries, with knock-on economic effects. “We observe a ‘connectivity divide’ – a growing difference – between the best and worst connected countries,” Mr. Hoffmann said.
Shape up or ship out: Africa’s ports threatened by cleaner fuel targets (The National)
In just six months the world’s cargo shipping fleet will have to switch to cleaner burning fuel, and ports globally are preparing for the change. In January the International Maritime Organization will implement a new benchmark for the bunker fuel that the vast majority of ships use to power themselves across the oceans. Sulphur found in ship emissions must be slashed from the 3.5% global limit currently in place to 0.5%. Ships are a major source of greenhouse gas emissions. For Africa-directed commerce, the question is how ready are the 172 ports that line the continent. Only a handful have adequate refining capacity, mostly in north Africa. For most, petroleum products including bunker fuel must be sourced from international markets and imported. South Africa, one of the few countries with domestic refining capacity, is preparing for the changes, according to the country’s Maritime Safety Authority (MSA). However, the country is still coming to grips with the details of the plan, such as the proper handling of ships coming into South African ports without the compliant fuel, the availability of facilities to test fuels in use by ships and the handling of vessels using non-compliant fuel but fitted with sulphur reducing equipment, among other issues.
2019 External Sector Report: the dynamics of external adjustment (IMF)
After narrowing sharply in the aftermath of the global financial crisis, overall current account surpluses and deficits reached 3% of world GDP in 2018, declining marginally while rotating toward advanced economies in recent years. The IMF’s multilateral approach suggests that about 35–45% of overall current account surpluses and deficits were deemed excessive in 2018. The 30 systemic economies analyzed in detail in this report (which includes South Africa) and included in the individual economy assessments are listed in Table 3.B. They were generally chosen on the basis of a set of criteria, including each economy’s global rank in terms of purchasing power GDP, as used in the IMF’s World Economic Outlook, and in terms of the level of nominal gross trade and degree of financial integration. [Transcript of the External Sector Report press conference]