tralac’s Daily News Selection
AfCFTA ratification update, from @ch_nji: “It’s done, Cameroon has ratified the AfCFTA today, 19 July 2019. Instrument of ratification to be deposited with the depository in the coming weeks. Now, time for technical administrations, civil society and business community to start work on the national strategy.” Once completed, Cameroon will become the 28th country to deposit its instrument of ratification.
See tralac’s infographic on the Status of AfCFTA Ratification
Andrew Mold, Acting Director of ECA in Eastern Africa, said that the AfCFTA Agreement itself is not, as the name suggests, simply a Free Trade Agreement - it is about creating a unified continental market. The focus on trade liberalization is just the start. “The Agreement itself is 78 pages long, and the annexes 124 pages long. Its protocols have a lot of implications for business – whether that is on investment, on competition, on intellectual property, or free movement,” said Mold. He added that it is was important for COMESA member states to ratify and implement the Tripartite Agreement between COMESA, SADC and EAC, as a fundamental building block towards the completion of the AfCFTA. Mold was speaking at the panel discussing Africa’s competitive advantages during the 21st COMESA International Trade Fair and High-Level Business Summit in Nairobi on the theme Powering regional integration through trade.
Nigeria and the AfCFTA: two perspectives
Nonso Obikili: Finally, we’re in the AfCFTA. The flip side to that, however, is with regards to those firms who have historically survived by convincing government to ban or restrict their imported competitors. All those journalists who write those “Nigeria loses x billion naira to imported y” articles may have to rethink their marketing strategy. The firms involved will have to start thinking about productivity growth or they might run into trouble. Note: we don’t have electricity is not a valid excuse. Given our unfortunate history with protectionism, those firms are not insignificant in number. The big challenge for policy makers is to work towards enabling us to compete effectively. The lazy policy days of banning imports to boost local production are probably coming to an end. The AfCFTA means we are going to need firms that are as efficient as those in Ghana and as competent as those in Kenya. This is Nigeria though. We can outperform anybody if we really put our minds to it.
Franklin Ngwu: It will be interesting to see how we will benefit from AfCFTA when policies are formulated and executed from political, tribal and ethnic sentiments rather than from a nationalistic and patriotic disposition. Unless a miracle happens, it will be almost impossible to benefit from the agreement with only two main functional sea ports and about three or four international airports. How can we produce when electricity production is still below 5,000 MW for about 200 million people. While it is good to sign AfCFTA, we must appreciate that to effectively participate, lead and benefit from it requires more than talks and documentation. It starts with a determined and patriotic formulation and execution of a detailed and well integrated economic development plan through which we can appropriately participate, lead and benefit. Unfortunately, we don’t have such long awaited plan!
Craig Atkinson: Algorithms could give the world its first ‘born digital’ free trade agreement in Africa (LSE)
As the majority of businesses in Africa are small, the AfCFTA must target these enterprises to meet its objective to ‘promote and attain sustainable and inclusive socio-economic development’. Fortunately, legal technology can improve access to, and the functionality of, trade agreements for different user groups, including enterprises, customs agencies and policymakers. A ‘born digital’ AfCFTA would make the agreement easier to access, understand and apply. At the most basic level, this would imply the creation of an authorized ‘machine consumable’ translation of the text. Such a computer-friendly version of a trade agreement could, and should, equally represent any natural language counterpart. To add to usability, computational clauses, navigational aids and meta-data information could be integrated via digital formats.
Use of emerging standards such as Legal RuleML would enable users to easily search and jump between related sections. Metadata on specific sections could help users to identify particular provisions. This would be especially helpful for those unfamiliar with legal and trade terminology when searching for relevant parts of an agreement. A digital AfCFTA also provides an opportunity for home-grown innovation. Creating a machine consumable version of the agreement would provide developers with the means to layer other technological solutions over the digitally expressed clauses, making them even more user friendly and accessible. [The author is a visiting research fellow with the World Trade Institute and director of Lexmerca International Trade; EA business council in new digital push]
Regional integration and informal trade in Africa: evidence from Benin’s borders (Journal of African Economies)
This paper presents the first quantitative study of informal cross-border trade, based on comprehensive data for one country. We use an original survey covering cross-border transactions at non-authorised locations on each land border of Benin to document the size and composition of informal trade flows. We match this data to customs data on legal trade for the same trade directions and period, and identify some of the determinants of informality in trade. We relate tariff and non-tariff barriers to the probability that a given product be traded informally rather than formally. We also identify product characteristics, such as perishability, which associate positively with informality.
A distinction must be made between two forms of informal trade. Some trade goes unrecorded because of evasion at customs, using practices such as underinvoicing, misclassification or misdeclarations. In parallel, some trade occurs outside of official border crossing points, avoiding customs entirely. We focus on the second form. Case studies have suggested the importance in magnitude of this form of trade; we confirm this with our data. Despite the difficulties inherent to collecting data on informal activities, our data offers a remarkably rich view of informal trade at Benin’s borders. The ECENE survey (Enquête sur le commerce extérieur non enregistré) was conducted by the National Institute of Statistics of Benin in 2011: 171 border crossing points were identified and surveyed; a total of 8,883 traders were interviewed, 10,415 single-product flows recorded. These crossing points are all distinct from official border points. The case of Benin is particularly relevant for this issue. [The authors: Sami Bensassi, Joachim Jarreau, Cristina Mitaritonna]
Related analysis, by Niti Bhan: The African Continental Free Trade Agreement and the Age of Interoperability
Namibia favours SACU status quo (Namibian Observer)
Finance minister Calle Schlettwein said the argument by South Africa that SACU member states were benefiting through the existing revenue sharing formula at its expense, were far from the truth. “That is the argument from South Africa. We don’t believe that the argument is necessarily true because the gains that South Africa get by having us as their captive and secure market is huge. So, we have to find out who is gaining and who is not. We do not accept upfront the argument that they are bankrolling us and we are not contributing, it’s not the case.” Quizzed if SACU had a set timeline to conclude the review of the sharing formula, the finance minister said: “It is a work in progress.”
Mozambique: Politics, economy, and US relations (Congressional Research Service)
Investment climate and sectoral trends: Despite some improvements in the ease of doing business, the economy remains constrained by high transaction costs and taxes, cumbersome regulations and laws, poor transport and other infrastructure, and corruption. Mozambique scored 16th out of 48 sub-Saharan African countries assessed in the World Bank Doing Business 2019 survey score, but it scored 135th out of 190 countries globally. Its indicators for starting a business, access to credit, certain investor protections, and tax payment complexity were notably poor. Recent FDI activity has centered on the growing coal sector and natural gas development (see below). FDI peaked at $6.2 billion in 2013 but has since declined steadily, to $2.3 billion in 2017 (latest data), though levels remain far higher than prior to the discovery of gas. Mozambique is a top regional FDI destination; it received the sixth-largest FDI inflows in Africa in 2017. Its total FDI stock is also large; at $37.5bn in 2017, it was the fourth-largest in Africa. Annual US FDI into Mozambique from 2013 to 2017 averaged $824m a year (18% of such FDI).
Corruption and crime: Given the weakness of fiscal and anticorruption institutions, some observers have questioned whether the state has the political will and ability to effectively govern the large expected influx of gas revenue. The government has taken some steps to address such challenges. For instance, in 2009, Mozambique joined the Extractive Industries Transparency Initiative, a voluntary international effort to make extractive industry revenue contracts and revenue payment and receipt data publicly accessible, and to increase related fiscal accountability. The government plans to require beneficial ownership and business interest transparency, to establish a sovereign wealth fund to preserve and manage gas income, and to allocate a fixed share of gas revenue to fund infrastructure development, poverty reduction and economic diversification.
“The ongoing impasse in filling vacancies of the Appellate Body remains, with no response from the objecting member (the US), in spite of dozen proposals to address to concerns related to its functioning,” India said at an informal trade negotiations committee meeting on Friday. “The (WTO) membership needs to act before the Appellate Body moves from the ICU to the mortuary,” J.S. Deepak, India’s trade envoy warned at the meeting. An end to the Appellate Body frees the most powerful countries from adhering to multilateral trade rules, said a Geneva-based trade law expert, who asked not to be named. “Without resolution of this issue, existing rules will become unenforceable and the adoption of new rules becomes futile,” cautioned ambassador Xolelwa Mlumbi-Peters of South Africa. China has urged the US to engage in exhausting all possibilities and options so to avoid “the real crisis by the end of this year.” However, at the meetings convened by a facilitator — Ambassador David Walker of New Zealand - the US stayed silent. “The US wants to see the closure of the AB because it had repeatedly ruled against several illegal measures adopted by the US,” the expert cited above said. [India, South Africa (and others) urges WTO to ask members to amend laws that allow unilateral curbs]
China’s outward foreign direct investment in Sub-Saharan Africa (pdf, USITC Executive Briefings on Trade)
According to the latest Chinese official statistics, China’s stock of OFDI in SSA amounted to $36.0bn in 2016, an increase of more than two-fold from $11.7bn in 2010. China’s stock of OFDI in SSA was relatively concentrated among a few destination markets – in 2016, the top recipient markets were South Africa, the DRC, Zambia, and Nigeria, jointly accounting for 42% of total Chinese OFDI stock in SSA (Table 1). Although a significant share of China’s stock of OFDI has been concentrated in these markets, investments have become more geographically diversified since 2010. Comparison of the composition of Chinese OFDI at the project level: Among the top recipients of Chinese OFDI in SSA, the patterns of investments differ considerably in terms of targeted industry sectors. Figure 1 compares the sectoral composition of Chinese OFDI in these recipient countries using transaction-level data from the American Enterprise Institute. As can be seen, in the more economically developed South Africa (Fig 1c), Chinese OFDI have been more diversified across sectors, while its investments in Zambia and the DRC were concentrated in mining sectors (Fig 1a and 1b). Continued investments in SSA’s natural resources sector indicates China’s continued interests in the region as an important import source of key minerals and metals (including copper and cobalt) for domestic consumption purposes. Meanwhile, as China’s investment composition in Nigeria demonstrates, China has begun to channel investment into SSA’s renewable energy sector, which helps to expand SSA countries’ electricity system. [The authors: Arona Butcher, Wen Jin “Jean” Yuan, Ujjwall Uppuluri]