tralac’s Daily News Selection
Is the AfCFTA practical?: a CNBC interview with Rudi Steinbach (World Bank Africa specialist)
This paper attempts to shed light on this question and fill a gap in the literature that has largely overlooked integration and its implications within sub-Saharan Africa. Namely, we ask how has intraregional integration evolved in sub-Saharan Africa in recent decades and how has this affected growth spillovers on the continent? We focus on trade linkages, which are the strongest in the region. We first present a novel set of stylized facts that document that intraregional integration in sub-Saharan Africa is significantly greater than is widely believed and is indeed inline or greater than in developing and emerging economies in other regions. With this, we identify the countries in sub-Saharan Africa that are more likely to generate regional growth spillovers through trade, as well as the countries that are more likely to suffer from growth spillovers from their regional trading partners. We then estimate and quantify growth spillovers between trading partners in sub-Saharan Africa, in both the short run and in the long run. [IMF Working Paper: pdf Regional Growth Spillovers in Sub-Saharan Africa (567 KB) ]
Extract: The value of the regional imports purchased by the top 10 regional importers (those listed in Figure 6) represents significant shares of the economies of the exporting countries, setting the stage for potentially large spillovers. For instance, South African imports from Swaziland, Lesotho, Zimbabwe and Mozambique represent between 4 and 11% of these economies’ GDP. Zimbabwe’s total demand for goods from Zambia, Malawi and Botswana constitutes between 1 and 4% of these countries’ GDP. Other countries also import in amounts that are non-negligible shares of their neighbors’ GDP, even though they do not constitute substantial shares of total sub-Saharan African intra-regional imports. This is the case of Nigeria, Mali, Ghana, and Burkina Faso, who’s imports amount to more than 1% of GDP of their sub-regional trading partners (see Figure 7). In these cases, any reduction in import demand, caused by an economic downturn in the importing country, could have significant consequences for GDP growth in their trading partners.
From the conclusion: Motivating our econometric analysis is the increasing trend towards regional integration in sub-Saharan Africa that we have documented, a novel result that is contrary to the common perception of countries in the continent as silos who are integrated with the rest of the world but not with each other. Indeed, trade integration in sub-Saharan Africa is now at comparable levels with developing and emerging market economies in other regions. In this vein, we have identified the countries that are potentially the main sources and destinations for growth spillovers via trade linkages, based on their intraregional trade networks. The rate at which these countries will continue to growth will therefore have implications for their major trading partners, as our econometric analysis implies. Supported by appropriate policies, the steady increase in trade integration experienced in sub-Saharan Africa has the potential to be further deepened. [The authors: Francisco Arizala, Matthieu Bellon, Margaux MacDonald; The IMF’s new report, Internal trade in Canada: case for liberalization]
Policy and regulatory issues with digital businesses (World Bank)
This policy paper lays out the key policy and regulatory issues around digital businesses. Competition laws need to be revisited to address the winner-take-all tendency of digital platform businesses. Tax systems should also be updated to close the loopholes available to digital platform businesses so that they pay their fair share to society. This paper also provides the first analysis of the World Bank’s Digital Business Indicators initiative, which collects information on the existence and quality of regulations in broadband connectivity, digital payment, data privacy and security, as well as logistics, in 21 pilot countries. Extracts (pdf): Concerns about anticompetition arise when digital platforms exhibit monopolistic tendencies. Alibaba’s Taobao.com Marketplace and Tmall now account for almost two-thirds of online shopping in China. Flipkart is the Indian e-commerce fortress with a domestic market share of 60%. Grab in Malaysia merged with Uber’s Southeast Asia business, aiming for a dominant position in the regional ride-hailing business. Although dominance alone may not warrant regulatory sanctions, emerging monopolistic behaviors are calling for government intervention. For example, JD.com, China’s second-largest online retailer, is accused of forcing online merchants to slash product prices in preparation for platform-wide promotions. Passengers in Singapore started complaining about higher fares after the Uber-Grab merger deal. The most common way of regulating cross-border transfers of personal data among the countries studied by the Digital Business Indicators project is the adequacy approach. Ten of the 21 countries studied allow cross-border data transfers subject to conditions that vary by country. The Personal Data Protection Agency in Armenia has approved a list of countries to which data transfers are allowed. In Tunisia, the existence of security measures to ensure data protection in the destination country is a key condition for approval of the data protection agency granting the transfer. [Note: The Sub-Saharan Africa countries covered in the Digital Business Indicators initiative are Burkina Faso, Kenya, Senegal, Tanzania]
Communications Authority of Kenya: The Digital Economy Blueprint. “The Blueprint is a framework to improve Kenya’s and Africa’s ability to leapfrog economic growth. The document is hinged on five pillars: Digital Government; Digital Business; Infrastructure; Innovation-Driven Entrepreneurship and Digital Skills and Values. The Blueprint also highlights the cross cutting issues that need to be considered for the success of a digital economy.”
Foreign private investment in Low-Income Countries: more important than you think (CGD)
In a world of stagnating public aid, limited fiscal space, and rising public debt in low-income countries, can they realistically expect to rely more on private finance from foreigners? What does the evidence suggest? Our new paper looks at recent cross-border private capital inflows to LICs. You might be surprised at what has happened since the global financial crisis. For individual LICs, external private capital is an important and growing source of finance (Figure 1). The global financial crisis has not had a lasting, dampening effect on private inflows to LICs - quite the opposite. The median ratio of inflows/GDP reached new highs - over 6% from 2011 on - with the exception of 2015 and 2016 when the downturn in global commodity prices and tightening US monetary policy pushed short-term capital inflows lower. Foreign direct investment - which makes up most of the inflows to LICs - has been stable and resilient throughout the post-crisis period. In contrast to higher median private capital inflows and tax revenue as a share of GDP, median foreign development aid has dropped by almost half as a share of GDP since 2006. We also see an interesting shift in the sources of FDI over a relatively short period of time. China more than doubled its stock of FDI in Africa between 2011 and 2016 (Figure 5) - and the amount is now closing in on that of large traditional direct investors like the US, UK, and France. Much attention has been paid to China’s role as a creditor to Africa; its role as a rapidly growing direct investor has received less attention. [The authors: Nancy Lee, Asad Sami]
Indonesia-Africa Infrastructure Dialogue (20-21 August, Bali): ministerial briefing
Minister Marsudi expressed her hope that the Indonesia-Africa Infrastructure Dialogue would be attended by around 700 participants from 53 African countries and Indonesia. Like the 2018 Indonesia-Africa Forum, this year’s IAID is also expected to produce a number of concrete business deals with Africa. Minister Marsudi also emphasized three strategies to enhance the cooperation with Africa. First, it is important to improve the trade infrastructure to reduce the trade rates with Africa, through a Preferential Trade Agreement with a number of African countries and its entities. Second, it is necessary to strengthen the African diplomacy infrastructure. Third, it is also vital to increase business activities between Africa and Indonesia, among others by organizing and utilizing the four main events at the IAID 2019 forum in Bali, namely the signing of business agreements, PTA discussions, panel discussions, and business exhibitions.
Kenya urges East African countries to implement road overloading law (Business Daily)
Kenya has challenged its East African neighbours to fully implement regional road overloading law passed in December 2015. The Kenya National Highway Authority (KeNHA) said seamlessly implementing the East Africa Community Vehicle Load Control Act, 2016, will protect roads from overloaded trucks. KeNHA Highway Planning and Design director Samuel Omer said Kenya is way ahead in implementing the law but some EAC member states have been reluctant to enforce it along the Regional Trunk Road Network. Mr Omer said Kenya has positioned itself to handle more transporters with the introduction of virtual weigh stations in its 10 weighbridges along the Northern Corridor. At the stations, trucks are weighed while in motion, meaning that little time is wasted in conducting inspection.
South Africa: Nedbank’s billion-rand debt financing deal with Kenya’s Centum (Moneyweb)
Looking to the rest of Africa to grow its property finance loan book, Nedbank Corporate and Investment Banking has provided financing of more than R1bn to Kenya’s Centum Real Estate, part of Centum Investment Company plc. Nedbank CIB’s property finance division – the largest commercial real estate financier in South Africa, reportedly with a 40% share of the market – said in a statement that the deal is linked to Centum’s Two Rivers mega-development in Nairobi. Gerhard Zeelie, Nedbank CIB’s Africa divisional executive for property finance, notes that the deal with Centum is part of Nedbank’s recent move to grow its property finance business northwards, beyond South Africa. “The focus is on Ghana, Nigeria, Uganda, Kenya, Tanzania, Mozambique and Zambia. We are busy working on a number of transactions with a pipeline in excess of $300m [R4.5bn] and are also keeping a keen eye on opportunities in the Francophone countries in West Africa.”
Sustainability and voluntary certification in the Rwandan coffee sector: Developing an action plan to address opportunities and challenges (IISD)
Rwanda’s coffee sector accounts for 24% of domestic agricultural production. About 400,000 small-scale farmers (representing 80% of the country’s farmers) produce an average of 267,000 to 420,000 bags per year, which accounts for 16,000 to 21,000 metric tons of Rwanda’s Arabica coffee annually, representing 0.2% of the world’s coffee exports and ranking 40th globally. Coffee destined for the export market accounts for 95% of Rwandan-produced coffee, while the remaining 5% is sold on the domestic market. Currently, at least 35% of coffee produced globally is certified or verified under voluntary standards. Over the years 2010–2016, certified/verified coffee production increased at a 24% compound annual growth rate. In the Rwandan coffee sector, specifically, there are at least 24 private standards addressing sustainability. In 2016, it was estimated that 32.3% of Rwandan coffee was standards-compliant. The needs assessments and workshop activities (February 2019) expanded on these challenges and provided related recommendations, which this document describes in detail (pdf). [Bitange Ndemo: The future of food regulation]
World Resources Report: Creating a Sustainable Food Future (World Bank)
With the world’s population expected to reach nearly 10 billion by 2050, a major new report shows the global food system must undergo urgent change to ensure there is adequate food for everyone without destroying the planet. The World Resources Report: Creating a Sustainable Food Future reveals that meeting this challenge will require closing three gaps: a 56% “food gap” between what was produced in 2010 and food that will be needed in 2050; a nearly 600 million-hectare “land gap” (an area nearly twice the size of India) between global agricultural land area in 2010 and expected agricultural expansion by 2050; and an 11-gigaton “greenhouse gas mitigation gap” between expected emissions from agriculture in 2050 and the level needed to meet the Paris Agreement. [Niger to stop importing rice by 2023]
The World Intellectual Property Organization has named Switzerland as the world’s most innovative country. Following Switzerland in the rankings are Sweden, the US, the Netherlands and the UK. India has risen most in the rankings since 2018, jumping five places to 52nd most innovative country. The annual Index, which has been published for the last 12 years by WIPO, and a number of partners, is designed to help policy makers better understand innovation activity, which WIPO describes as a “main driver of economic and social development”. Overall, this year’s Index finds that, despite the global economic slowdown, innovation is “blossoming”, particularly in Asia, but trade disruptions and protectionism are putting this at risk. It also notes that planning for innovation is critical for success. [Downloads, rankings here and here]
Today’s Quick Links:
Namibia-Zimbabwe Joint Commission of Cooperation: Namibia, Zimbabwe urged to join hands on investments
COMESA workshop: Africa urged to establish climate change early warning systems
Reuters special report: The wildcat goldminers doomed by their toxic trade
Trade and foreign aid: Will Boris Johnson bring an end to DfID?
Regional workshop on international merchandise trade statistics: implementing IMTS 2010 concepts and definitions (24-28 June, Johannesburg)
Hanningtone Gaya: Kenya-Somalia maritime dispute quite unfortunate