tralac’s Daily News Selection
SACU’s reforms in shreds (Southern Times)
Namibia’s Finance Minister Calle Schlettwein, who last week became the chairperson of the SACU Council of Minister, admitted to The Southern Times that there have been delays in implementing the work programme: ”Well yes, I think our ambitions were high than our achievements will show. The work programme that we have had agreed upon basically says that the customs union, which has been a revenue driven organisation most of the time has to re-emphasize real economic integration and shared productive capacity to improve trade within and amongst each other but also to improve SACU’s ability to trade with finished goods with other blocs. This is within the continent, and the world in general.”
Despite the challenges, Schlettwein believes that SACU has made great strides in gaining market access, the world over. SACU has free market access to the EU through the Economic Partnership Agreement. It also has a market access into the US through the AGOA agreement. “Additionally, we have got a market access into Southern America. We got a market access into the African continent through the SADC free trade protocol, which we are part of. That gives us an opportunity to trade globally. What is missing is enhancing productive capacity, enhancing output of finished goods of which we trade. I think that’s where SACU is in within a good opportunity to create cross border value chains within members so that we complement each other without out-competing each other to become export-driven.” [Lesotho finally explains failure to host SACU Summit]
Marek Hanusch: Why South African manufacturing is under pressure – and what to do about it (World Bank)
This dynamic has a few important implications for South Africa. For one, it helps explain why manufacturing exports barely respond to a depreciating real exchange rate: the real exchange rate captures the differential between prices for traded and non-traded goods. South Africa’s long-term depreciation reflects the relative drop in productivity of South Africa’s manufacturing sector. In this case, clearly, a depreciation will not result in higher exports. Our paper also shows that the dynamic disproportionately hurts the poor: the poor consume relatively more manufactured goods (notably food) than services, so if productivity gains are higher in services, the rich can afford more items in their consumption basket at the same price. The poor do not benefit from a similar gain in the goods they tend to buy. South Africa is cheap for the rich and expensive for the poor.
What does this mean for policy, and for the role of the World Bank? Clearly, the answer is that productivity in manufacturing needs to increase. Linking South African manufacturing more closely with global productivity trends requires a further opening of the economy to international trade—this would need to be done very carefully, however, as it can result in large-scale job-losses in the short-term, as South Africa painfully experienced in the 1990s. The World Bank is already working with the South African government to increase global competitiveness, attract foreign direct investment, and foster regional integration. [The author is Senior Economist in the World Bank’s Global Practice for Macroeconomics, Trade and Investment]
Amidst controversy over the benefits of Nigeria’s signing of the AfCFTA, the Vice President of Nigeria, Professor Yemi Osinbajo, has said that the new trade environment will boost export by 8%. Osibanjo disclosed this at a conference organised by Financial Derivative Company in Lagos yesterday. Represented by Dr Jumoke Oduwole, Senior Special Adviser to the President on Industry, Trade and Investment, he stated: “In spite of the fact that Nigeria just only signed, AfCFTA in terms of readiness, we are not on ground zero. At $35.45bn, Nigeria’s manufacturing value-added, a measure of capacity to produce and export semi and fully finished goods, is about 7 times more than the current average of the top 20 African countries. The concerns raised by some Nigerian stakeholders of the risks of AfCFTA are not without merit. Even prior to the agreement, policies of this administration had identified many of these priorities in the area of competiveness pillar under the economic, recovery and growth plan directly speaks to how infrastructure challenges and how reforms required to deliver an enabling business environment or businesses operating in Nigeria to thrive. And this has been on since 2016.”
Related: Editorial commentary by Lagos-based newspaper, Vanguard: As the frenzy over the delay, the rigmarole and the eventual assent to the African Continental Free Trade Agreement, AfCTA, dies down, we draw attention to the task ahead given its implications to Nigeria’s economy:
Growth slows in Africa for Moroccan banks (Africa Report)
The activity of Morocco’s banks outside the kingdom’s borders is generally decelerating, according to a recent report by the Moroccan central bank. This is due to a slowdown in some countries and international regulations that modify the evaluation of financial results. Last year was a slower year for Moroccan banks in Africa. The three groups with a strong presence on the continent, Attijariwafa Bank followed by BMCE Bank Of Africa and the Banque Centrale Populaire (BCP), had more than Dh284bn ($29.6bn) in assets at the end of 2018, representing an increase of just 1.8% compared to the previous year. After an expansion period – from 2012 to 2015 – the appetite of Moroccan groups has decreased. In 2018, BCP was the only one to establish itself in new territories. It acquired Banque des Mascareignes, located in Mauritius, which itself has a banking subsidiary in Madagascar.
The World Bank has posted an extensive set of Background Notes on São Tomé and Príncipe growth and development policy issues. Profiled reports:
Where has trade growth come from in São Tomé and Príncipe? The main findings of this note are as follows: Trade remains important for São Tomé and Príncipe, especially imports to satisfy local demand. Total exports have been increasing,both for goods and services. Goods exports, however, remain highly concentrated in cocoa exports to the EU market. Export trends for goods have tended to sustain this dependence, with very little expansion in the extensive margin, and thus with limited diversification of goods exports. This is despite relative comparative advantages in other agricultural products, such as coconuts, dried fruits, and seafood and preferential duty-free and quota-free access into the EU and other developed countries’ markets. Meanwhile, exports of services have increased rapidly, led by travel services. São Tomé and Príncipe exports more services than goods and it has become a net exporter of services. Creating strong (backward) linkages between the tourist industry and the rest of the economy could sustain growth in other industries that, in turn, can support export diversification.
Is it sustainable to have a large current account deficit and a fixed exchange rate? Sao Tomé and Príncipe pegs its currency, the dobra, to the euro and has both persistent current account deficits and a persistent inflation differential with the Euro Area. In other countries, these characteristics have proved to be unsustainable over time, as rising debt and a worsening trade imbalance leads to the abandonment of the peg. This note examines whether this might be the case in STP, and finds that, despite some vulnerabilities, there does not appear to be an immediate threat to the peg, as the country’s current account deficits seem to be determined not by its trade balance but by its capital balance, which is largely sustained by inflows of aid and remittances. This background note has four sections: [Related Background Notes: Stock take on business environment reform in São Tomé and Príncipe; What is the potential and hindrances for the tourism sector?]
Botswana, Zambia to construct railway across Zambezi at Kazungula (Southern Times)
Zambia and Botswana have signed a $259m agreement to construct a 430-kilometre long railway to link the two countries across the Kazungula Bridge to bolster bilateral trade. The project, it is envisaged, will reduce transit time and transportation costs for both the people and goods traded and will boost trade among other member states in the region. A statement seen by The Southern Times, shows that Zambia Railways Ltd and Botswana Railways’ boards resolved during a meeting in Kasane to facilitate the construction of the lengthy line. The railway project dubbed “Mosetse-Kazungula-Livingstone” will be commissioned by June next year. The actual cost of the project will be determined after undertaking a feasibility study.
Tanzania joins Kenya, Uganda in fall back to old railway (The East African)
As Tanzania continues with the construction of the standard gauge railway, the government has also embarked on revamping the old metre gauge railway network built by colonialists over a century ago. Tanzania’s recent move mirrors Kenya’s and Uganda’s, both of whom have announced plans to revamp their old lines amid uncertainty over the progress of the joint SGR line on the Northern Corridor, due to lack of funding. Tanzania Railway Corporation’s managing director Masanja Kadogosa said the renovation would end years of neglect. Phase one of the programme, which started in early 2018 of the northern railway network from Tanga port to Moshi railway station, covering 353km, is complete. It was fully funded by the government at Tsh5.7 billion ($2.1m). A section of the line connects to Kenya at the junction of Kahe railway station with a branch passing through Taveta border and connecting to the Mombasa-Kampala line at Voi in Taveta hills in Kenya. The line has been out of commission for years from neglect and lack of funding, which resulted in the cargo trains suspending services since 1994. The Minister for Works, Transport and Communication, Isaack Kamwelwe, said the government has started the process of purchasing 22 locomotive engines for passenger wagons, 1,430 cargo wagons and 60 passenger wagons to be used for operations once the first section is complete by December this year.
Kurt Davis: Ethiopia could be the first African country to show China it has bargaining power (Africa Report)
The light railway system in Addis Ababa provides a direct view into the successful and tangible economic diplomacy of China across the African continent. This example of mass public transport is unique in sub-Saharan Africa, with the train and extensive track providing a manifestation of development and growth in this populous East African country.
The Chinese Ministry of Commerce has said that it has commenced the export of used cars to Africa, Asia and Europe, with Nigeria as one of the major destinations for the first batch of 300 cars. It said that the first batch of the 300 exported used cars, with a total value of $2.5m, comprised Land Rover, Toyota, Hyundai, Volkswagen, Trumpchi, King Long, Yutong, Zhongtong and WOHO brands and they are being taken to destinations that include the Lagos port (Nigeria), Sihanoukville Autonomous port (Cambodia), Rangoon Port (Myanmar) and Vorsino and Saint-Petersburg ports (Russia). A statement from China’s Ministry of Commerce said: “Although trade in new cars in China last year almost doubled the 13.82 million used cars figure, trading volume of used cars in developed countries, in comparison, was about two times that of new car sales. China is hoping to key into this yawning advantage lying beyond its borders. It is estimated that used car exports may fetch about 60 billion Yuan for China in export value if the market is fully opened up. It is also expected the trade would generate higher auto parts and maintenance service exports.”
Adam Minter: China will be the world’s used car salesman (Bloomberg)
Hints of that disruption are already emerging in another secondhand marketplace: used clothing. As China has evolved into the world’s largest maker and consumer of apparel, it has also become the world’s biggest disposer of apparel, with estimates ranging as high 26 million tons tossed annually. (The US threw out around 16 million tons of clothing in 2015, the last date for which data is available). Data on China’s used-clothing exports are thin, but in 2015 it officially exported $218.2m in used apparel, while the US shipped $575.5m. Within the industry, it’s widely acknowledged that China is the fastest-growing source of used clothes globally. Traders in West Africa claim that the recent surge in Chinese clothing imports has undercut the market for new and used clothes.
Afshin Molavi: Africa and the Middle East: keys to prosperity (Asia Times)
Here is where cities like Dubai and Abu Dhabi, and countries like Saudi Arabia, Turkey, Egypt and Morocco, come in. One of the defining features of our era today is the massive growth in South-South trade and investment. Countries across the “global South” are no longer waiting for the West to come to their rescue with aid or to invest in their markets; instead, they are increasingly also engaged with other emerging markets. Dubai has become something of a Miami for Africa, a major hub for African business, trade, finance and tourism, while UAE entities have become major investors across the continent. Companies like the Abu Dhabi-based Etisalat and Dubai-based Emirates have become household names across the continent, and are major trade and connectivity enablers; the Dubai-based ports operator, DP World, runs eight marine and inland terminals on the African continent. There are an extraordinary 12,000 African businesses registered with the Chamber of Commerce in Dubai. All of this is positive, but it is not one-way. [The author is senior fellow at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies]
Today’s Quick Links:
CNBC interviews Visa’s Suzan Kereere on the role of digital payments in boosting intra-African trade
Akufo-Addo to US House Speaker: Ghana wants more progressive trade relations with US
Flutterwave, Alipay partner on payments between Africa and China
Ethiopian coffee exporters eye young Chinese market
World Bank: The basics of food traceability