tralac’s Daily News Selection
Women’s Digital Financial Inclusion in Africa: A Gates Foundation report prepared for the G7 French Presidency (pdf)
This report profiles five pillars for extending digital financial inclusion to African women - interoperability, digital identity, regulation, assessment of digital readiness, and gender-specific research - and highlights selected initiatives from the African Development Bank, the World Bank, J-PAL Africa, UNCDF, the Alliance for Financial Inclusion, and Oxford University’s Blavatnik School of Government. Together, these offer clear pathways for G7 governments to help reduce inequality and close the gender gap across the African continent. Extract:
For women in low- and middle-income countries, digital savings, credit, and payments services can provide them with a critical link to the formal economy and a gateway to greater economic security and personal empowerment. When women-headed households in Kenya adopted mobile money accounts, poverty dropped, savings rose, and 185,000 women left agricultural jobs for more reliable, higher paying positions in business or retail. In Niger, distributing government benefit payments through a mobile phone instead of cash helped give women who received the transfers more decision-making power in their households. Overall, strong progress has been made with financial inclusion in Africa. Between 2011 and 2017, the share of adults with financial accounts in the region grew from 23% to 43%, driven largely by growth in mobile money. Although East Africa has seen the most dramatic gains, West and Central Africa have also seen rapid uptake in recent years, bolstered by enabling regulatory policies.
Many of these countries also experienced a sharp uptick in financial inclusion rates among women. Between 2011 and 2017, the number of women with their own account doubled in Kenya and Ghana and increased seven-fold in Senegal. In some countries, mobile money has emerged as an equalizing force. For example, in Côte d’Ivoire, the gender gap in access to financial institutions grew by 90% between 2014 and 2017, yet the gender gap on mobile money decreased by 35 percent. Despite this progress, women remain disproportionately excluded from the formal financial sector. As shown in the table on page 6, complex social, cultural, economic, and legal barriers stand in their way. For example, Cameroon, Chad, Gabon, and Niger have regulations that prevent women from opening a bank account in the same way as men. [Melinda Gates pushes G7 to close digital gender gap in Africa; UNDP, AUC to implement African Young Women Leaders Fellowship]
The disruptive effects of big technology companies on digital and offline markets was the subject of intense discussion at last week’s UNCTAD meeting on competition law and policy. Governments gathered for a three-day meeting (10-13 July, Geneva) with three main issues in their crosshairs: Competition law and the digital economy, Competition in health care services and pharmaceuticals markets, and International cooperation in tackling cross-border anticompetitive practices and mergers. “At a global level competition policy goals don’t need to change – they are sufficiently flexible to accommodate changes in the digital economy,” the University of Melbourne’s Prof. Caron Beaton-Wells said in her keynote address to the meeting (pdf). “But the toolkit needs to be tweaked and enforcement needs to be bolder and quicker.” Prof. Beaton-Wells: “The United States’ and China’s technology giants generate 90% of digital revenues. The same companies are penetrating sectors in the non-digital economy, disrupting traditional business models, in areas such as retail trade and financial services.”
Philip Marsden, the deputy chair of the Bank of England’s enforcement decision making committee: “They’re wonderful and life changing, but at the same time exhausting and very demanding. We have to remember that they have a mommy and a daddy. Who’s that? That’s us, the regulators. We know what the tech giants want. They want our data and they want to make money off it. Enforcers have to run faster to face digital era challenges. We officials cannot wait for the glacial evolution of the judicial precedent, we have to lead it. It is up to us to ensure Big Tech run competitively in the market race,” Mr. Marsden said.
Profiled presentation: pdf Competition Commission of South Africa (336 KB) : These global giants pose a particular enforcement challenge for smaller developing country markets whose own economies are dwarfed by the valuations of these companies. There is a limited ability to effectively challenge global merger activity or pursue complex market conduct cases given the relative unimportance of our markets to these firms. This is particularly the case for those without a strong in-country physical presence, such as search and social media companies, as the regulatory reach is far more limited with most evidence located elsewhere. For this reason, the Commission is of the view that there is a greater need for coordinated enforcement action both regionally and globally. Regional or continental coordination in the case of Africa is also an imperative. This will provide more leverage in dealing with issues that may have a regional or continental dimension, such as development imperatives or digital firms with a stronger regional presence than their position globally.
For example, to support the expected increase in intra-Africa trade of $119.6bn by 2022, it will require nearly $40bn in trade financing alone. To achieve growth to the value of $27.9bn in industrial goods by 2022, an estimated $9.3bn in trade financing will be required. On the other hand, to support the projected growth in agricultural goods of $5.7bn by 2022, as much as $1.9bn in trade financing will be required. This is a big challenge for African banks in particular and will require flexibility in risk assessments and financing requirements as the African Development Bank already estimates that there is a trade-financing deficit of at least $90bn in Africa as of 2018. African banks, especially to regional banks like the Absa Group, Standard Bank and Ecobank, will need to adopt new ways of assessing risk in trade in order to support corporates as they take advantage of new growth and trade opportunities in Africa. This is important, as strong regional banks have proved to be key in regional economic and trade development in other regions such as Europe, North America and Asia.
The continent will also have to make sure that the benefits do not only accrue to bigger economies such as SA, Nigeria, Egypt, Angola and Kenya if it wants to avoid its own “Brexit” from some of the countries as the agreement matures. This will require careful balancing between opening the markets and protecting smaller players in the markets. [The author, Bohani Hlungwane, is Absa regional head of trade & working capital (ex-SA)]
Deputy Commissioner-Small Tax Payer, Ghana Revenue Authority, Daniel Edisi, indicated that about 40 tax administrators from seven countries (Rwanda, Malawi, Uganda, Tanzania, Lesotho, Sierra Leone, Ghana) would partake in this year’s event, organised by VAT Administrators in Africa. Welbeck Asare Asamoah, Executive Secretary of VADA: “It is essential that revenue authorities are abreast with how to track revenue in e-commerce and how to efficiently partner with the telecommunication industries to rake in revenue to help the economy.”
Contextualizing Ethiopia’s recent economic performance: Abebe Aemro Selassie’s keynote address
What has differentiated Ethiopia’s performance? Growth in Ethiopia, on average, has been 8.1% in 2000-10 and 9.5% in 2010-18 - this compares with 5.6% and 5.9% respectively in other fast-growing countries in sub-Saharan Africa. I will look at the composition of growth in a couple of different ways in the next two slides. Here, I focus on the last four decades and rely on a sample of sub-Saharan African and non-sub-Saharan African comparator countries with similar levels of income as Ethiopia and which have witnessed high growth in recent years. What Next? Second, there is a strong need to boost export growth by creating room for higher levels of domestic and foreign private investment. While the export mix has diversified in recent years and manufactured exports are growing at double-digit rates, the levels of most new export lines remain low and, as noted above, the overall export to GDP ratio is declining. Coupled with the higher debt level, this makes the country vulnerable to external shocks and potential difficulties in servicing its debt obligations. Policies need to continue to focus on reducing these external vulnerabilities and achieving the medium-term goal of improving competitiveness and the business climate. To the extent that export diversification can stimulate resource reallocation towards higher-productivity sectors, it will also contribute to higher long-term growth potential. [Note: Ethiopia’s SSA comparators are Senegal, Rwanda, Tanzania, Kenya, Uganda, Ghana. Non-SSA comparators are Egypt, Tunisia, Vietnam, Bangladesh, Cambodia. The author is Director, Africa Department, IMF. This speech was delivered at the International Conference on the Ethiopian Economy]
Tanzania Economic Update (World Bank)
Declining exports and surging imports are widening the current account deficit. The CAD has widened because of lower cashew exports and higher imports of capital goods. It reached 5.2% of GDP in the year ending January 2019, up from 3.2% a year earlier, as exports declined and imports surged (Figure 13 and Figure 14, pdf). The value of exports dropped 3.9%, largely because cashew exports shrank from $529.6m to $196.5m. Meanwhile, the value of imports went up by 7.8% as capital imports rose from $2.7bn to $3.2bn. Launch of major public investment projects, such as the standard gauge railway and expansion of the port of Dar es Salaam, has required imports of building and construction materials and transport equipment. Unlike goods exports, earnings from services exports have gone up. Though slight, the $189m increase in earnings from services more than offset the $56m rise in payments for services. The earnings from services were largely driven by travel activities, especially more tourist arrivals, and transportation of goods to and from neighboring countries. The small rise in payments for services was mainly for transport and related services. [World Bank contradicts Tanzania’s economic growth estimates]
Côte d’Ivoire Diaspora Forum: The untapped potential of remittances (UNECA)
Remittances from the diaspora are an important source of income for African economies, which could be making a huge impact on the ground if exorbitant charges were slashed, says ECA’s Acting Director for the Sub-Regional Office for West Africa, Bakary Dosso. Speaking at the 3rd edition of the Ivory Coast’s diaspora forum he said remittances from the Africa diaspora were growing every year but continued to be eroded by high charges. He also spoke about diaspora investments in West Africa, which, he said, were on the rise. According to Mr Dosso, migrant remittances in 2017 were estimated at over $77bn for the whole of Africa and $31bn for West Africa. Five countries in West Africa were among the top 10 countries that received the largest amounts in remittances in 2017. These are Nigeria ($22bn), Ghana ($3.5bn), Senegal ($1.9bn) and Mali and Togo with $827m and $$403m. Côte d’Ivoire received $342m during the same year. “It is important to note that remittances as a percentage of GDP account for 12% of GDP in Liberia, 9% and 8.5% of GDP in Senegal and Togo; and 7.3% and 6% of GDP in Ghana and Nigeria. This indicator is estimated at 0.8% for Côte d’Ivoire.” Prime Minister Coulibaly said Côte d’Ivoire ranked 18 among African nations receiving remittances – in 2008 it received $199m which rose to nearly $380m in 2017, an increase of 91%. “Our country must meet the challenges of supporting the diaspora in its socio-professional integration.”
Structured Discussions on Investment Facilitation for Development: speech by WTO DG Roberto Azevêdo (WTO)
With this in mind, a look at the current trends gives some cause for concern. Last year, global flows of foreign direct investment fell by 13%, to $1.3 trillion. This represents the lowest level since the global financial crisis and confirms the stagnation of international investment this decade. This is very concerning. Therefore, in order to harness the development benefits of trade and investment, including meeting the Sustainable Development Goals, it is vital to create a regulatory environment that is conducive to attracting and expanding investments. Key elements here are the transparency and predictability of policies and regulations, and more efficient administrative procedures to deal with investments. These are precisely the core elements that you have been discussing all along.
The Standards and Trade Development Facility: Independent evaluation outcomes (WTO)
The Standards and Trade Development Facility is responding to the needs of developing countries by improving their capacity to meet sanitary and phytosanitary (SPS) standards and to unlock trade opportunities, according to an independent evaluation published on 17 July 2019. The report covers the performance of the STDF over the last five years. A new STDF strategy, drawing upon the recommendations, is due to be launched at the end of 2019. Profiled case study: Uganda. Major constraints to SPS and trade for agricultural sector. Uganda faces many challenges in the control of SPS. These are prevalent at the policy level, institutional level and the private sector operators’ level. With such widespread difficulties, systematic change is required to unlock trade opportunities in agriculture. Currently Uganda faces multiple crises in export due to SPS/food safety issues with frequent interceptions (both alerts and rejections) in both of its main markets of Kenya and the EU. At a policy level, Uganda’s SPS framework suffers from out-dated legislation and political interference, which results in a loose system of control. Firstly, the legislation in Uganda for SPS measures is contained within the Food and Drugs Act, which is now 50 years old. Moreover, the “food” part was never enacted, meaning that subsidiary legislation was never developed in Uganda and so in many cases, there is just not any provision for SPS controls, and given the age of legislation, there are no provisions that relate to border control and other trade aspects (such as no legal requirement for health certification for exports). While it has been recognised that new legislation is required, there is no consensus among key players, namely the Ministries of Health, Agriculture and Trade, who are not in agreement regarding either scope or responsibilities, with much of the focus on territorial concerns. Moreover, SPS agencies are often headed by non-technical persons who are politically motivated and driven, and not necessarily best placed to drive through SPS or food safety controls and measures. This all results in a disjointed framework that cannot develop to meet the modern requirements of trade in agriculture and agri-processed products (or national disease, pest and/or food safety control), and in action by public authorities that maintain the status quo. [Available downloads: The full report, Executive summary, Methodology and findings (chapter 2, 3), Conclusions and recommendations (chapter 4)]
Today’s Quick Links:
SADC Harmonised Consumer Price Indices: May 2019
African Regional Conference on efforts to “localise” international humanitarian aid
New book highlights key outcomes from WTO Ministerial Conferences