Two commentaries on intra-African trade,

pointing to the potential impact of the AfCFTA:

1. Global Trade Review’s (GTR) Africa trade briefing: Rebecca Harding, CEO of Coriolis Technologies, discusses Sub-Saharan Africa’s trade performance, its projected growth and developments around intra-Africa trade. Extracts:

   The fastest-growing export sectors over the last five years have been vegetable oils and grains, fruit and nuts, and automotives. Growth in each of these sectors is expected to slow in the coming years but is still positive. Across the hard commodities, the values of oil and gas, iron and steel, aluminium and rubber are set to fall, suggesting that the region will be caught in the slipstream of broader increased tariffs on these sectors imposed by the US as part of the current trade tensions. This highlights an important point: Africa is an emerging market, and this is perhaps more important than the fact that it is dependent on commodities for its exports. There is a huge amount of potential for growth because it has a young and motivated population and policies that are beginning to focus on the importance of driving this growth through intra-regional trade. But while pan-African infrastructure development remains patchy, and there are trade tensions between the two biggest trading nations globally, Africa will continue to face challenges in terms of driving its exports. One country that appears to be breaking loose from its dependency on commodities is Ethiopia. While its top sector exports are dominated by soft commodities and precious metals, since 2013 its exports of machinery and components have grown by over 16% annually, its exports of footwear by 14% and its exports of electrical products and equipment by nearly 10%. Its largest African trading partner is Somalia, and although China is also an important partner, Ethiopia’s exports to China have slowed slightly since 2014.

   Of more interest, perhaps, is the alternative infrastructure that is emerging around electronics and computing. Machinery and components, imports of which include computers and data storage, is Africa’s largest import sector after mineral fuels and is expected to reach a value of around $48bn by 2023. Similarly, electrical machinery is the fourth-largest import sector and is also expected to grow to a value of approximately $40bn by 2023. These are sectors which improve communication and enable moves towards a stronger manufacturing base.

   All of this, along with the increase in fertiliser imports projected for the next five years (as seen previously in Figure 5) suggests that Africa is beginning, albeit slowly, to focus its intra-African trade around supplying its needs for food. This is a positive development because it ensures the sustainability of growth rather than reliance on trade with larger partners from outside the region. The numbers are small, and the picture is incomplete because data reporting is poor, but even so, this may be the beginning of an encouraging pattern. [Related analysis by Dr Ted George: Why is so little value added in Africa’s soft commodity value chain?]

2. Fitch Solutions Macro Research on the AfCFTA: Attractive opportunities, but few winners over the next decade

   Countries with strong trade diversification scores and robust industrial sectors will also see viable opportunities to expand the scope of trade. According to the Fitch Solutions Trade Diversification Index, in Africa the countries with the most diverse baskets of goods traded and trade partner mixes are Egypt, South Africa, Togo, Senegal, Morocco, Mauritius, Kenya, Rwanda, Tanzania, Côte d’Ivoire, Senegal and Ghana. These countries are not heavily reliant on a small basket of primary goods exports, generally have the region’s strongest agricultural and services sectors and have a wide array of regional and global trade partners. This highlights the flexibility of their trade and investment environments which will enable them to adjust to shifting regional and global trade trends.

   Small- and medium-sized enterprises that account for around 80% of all trade on the continent will benefit from increasing formalisation and streamlining of trade procedures and governance. Additionally, the telecommunications and financial sectors could see gains as digital payments will be needed to carry out the larger volume of transactions. Overall, businesses in Egypt, Morocco, South Africa and, to a lesser extent, Ghana, Ethiopia and Kenya are likely to be the best positioned to benefit from the agreement in the short-to-medium term.

   According to UNCTAD, enhanced trade facilitation could boost intra-African trade to approximately 21.9% of total trade by 2022, compared to 15.5% without it. According to the latest available data from Trade Map, Africa’s total exports to the world stood at $476.6bn in 2018, while total imports stood at $548.6bn. Africa has maintained persistent trade deficits with the rest of the world for years which can be attributed to the low complexity of regional value chains and onerous tariff and non-tariff barriers. As a result, the majority of Africa’s import sources are outside of the continent. The continent’s top import sources are China (which accounted for 17.2% of Africa’s imports), followed by France (5.4%), the US (5.1%), Germany 4.7%) and India (4.6%).

   In an African context, only South Africa and Nigeria are in the top 20 import source markets for Africa. South Africa is ranked sixth accounting for 4.5% of Africa’s total global imports with an estimated regional export total of USD25.6bn in 2018, and Nigeria is ranked 20th globally with a low 1.4% share. On a regional scale the top 10 supplying markets for Africa are South Africa (accounting for 38.9% of total regional imports), followed by Nigeria, Egypt, Côte d’Ivoire, Morocco, Zambia, DRC, Uganda, Eswatini and Mozambique. [Note: The analysis, written by Chiedza Madzima, can be accessed after an easy registration process]

EAC updates:

1. EAC Secretariat press statement. Our attention has been drawn to issues raised in a story by The East African Newspaper headlined EAC staff desert stations over pay. At the outset, I wish to clarify that this is a newspaper that we have a lot of respect for at the Community. However, there were glaring errors of fact and accuracy in the article. We wish to clarify the issues raised by the paper as follows: Alleged desertion by staff of their duty stations due to non-payment of salaries; Delay by partner states in remitting their annual contributions to the Community; The Community is on track towards attaining its vision of an integrated East Africa.

2. UNCTAD to conduct survey on regional trade, non-tariff barriers. East Africa’s intra-regional trade has fallen to 0.2% of global trade due to persistent trade disputes and barriers. UNCTAD has now launched a study on the impact of non-tariff barriers on trade. The study was announced after a meeting between Kenya and Tanzania called to resolve outstanding NTBs in July failed to take off. The EastAfrican has learnt that UNCTAD is looking for national consultancies from Kenya, Uganda, Tanzania, Rwanda and Burundi to come up with a report on NTBs for each country. The national reports will then be compiled into a regional document. Unctad Secretary-General Mukhisa Kituyi confirmed that the study is underway, but it was too early to discuss it. “I will comment when we have the results of the survey.”

3. Highlights of the 3rd Trade and Business facilitation Symposium: Enhancing trade facilitation along the Northern Corridor. In her opening remarks, Minister Amelia Kyambadde noted that the main objective of the symposium was to bring together different stakeholders involved in trade facilitation to discuss and exchange views and provide an opportunity to address existing and emerging the challenges faced in the export and import trade. The Minister further reiterated that Government of Uganda remains committed to the EAC Regional Integration processes and putting in place measures to facilitate trade noting that the fact that this symposium is taking place at Mombasa Port, which is the main port connecting the hinterland to international markets is manifestation of the thrust on enhancing trade with our land locked Country. Since 2015, Transit Traffic cleared through the port has witnessed a growth of 6.5%. As of today, Mombasa port has recorded a container growth 14.3%, of this 75% of the transit traffic is destined for the Ugandan market; making Uganda the second largest user of the Port after the Republic of Kenya. [Related symposium updates: Uganda flags hurdles hurting smooth trade with Kenya, Logistics inefficiencies cost shs3 trillion annually, consumers bear the burden; Ugandan traders urged to take advantage of Mombasa port expansion]

4. LAPSSET envisaged to boost Africa’s economic integration. The AUC’s High Representative for Infrastructure Development in Africa, Raila Odinga, stated that a strong case has been made to the AU on the LAPSSET Corridor Project’s strategic position to connect not only Ethiopia and South Sudan, but also connecting to Central African Republic (Bangui) and Cameroon, terminating at Port of Douala. This forms an equatorial land bridge of both road and rail across the African continent, connecting the Indian Ocean at Lamu Port, to the Atlantic Ocean. [Kenya seeking Ksh 2.5 trillion to help fund stranded Lapsset port project]

5. All set for revamped Kisumu port launch. Transport Cabinet Secretary James Macharia said on Tuesday that the growing demand for oil products in the region is expected give impetus to efforts at reviving the revamped port ahead of its opening tomorrow. President Uhuru Kenyatta and his Ugandan counterpart Yoweri Museveni, Tanzania’s Pombe Magufuli and Felix Tshisekedi of the DRC are expected to open the port upgraded at a cost of Sh3 billion. Macharia said as a long-term solution, the state is still considering an extension of the Standard Gauge Railway from Naivasha or the revival of the old metre-gauge railway, if the latter plan takes too long. The option of connecting the SGR to old Naivasha-Malaba metre gauge, he said, was just an interim measure. “We had to look at the economics, but if the SGR (connection) takes too long, the Nakuru-Kisumu line remains an option we can turn to because Kisumu is part of the Northern Corridor,” said the CS in an interview. He said the move by Uganda to build a similar jetty as the one by the Kenya Pipeline Company in Kisumu was key in reigniting the triangular trade between Kisumu, Jinja and Mwanza.

6. Timelines for EAC single currency to be revised. EAC member states are set to start discussions on revising the timelines for the start of the single currency regime, after realising that it would be difficult to set up the necessary institutions and achieve the set macroeconomic benchmarks with only five years to the 2024 deadline. Bank of Uganda Governor, Emmanuel Tumusiime-Mutebile, said several challenges stand in the way of fully implementing the East African Monetary Union Protocol. He said it is important for the region to assess the practicability of the current timelines, which require member countries to comply with macroeconomic convergence criteria at least three years before the single currency regime starts. He said there has been significant progress towards the EAMU Protocol in terms of harmonisation of monetary policy frameworks, exchange rate policies, rules and practices governing bank supervision, and payment systems. “However, there have been delays in realising targets set out in the EAMU roadmap and there are several challenges that could further impede the full implementation of EAMU Protocol. It is therefore imperative that we assess the realism of the timelines,” Mr Tumusiime-Mutebile said at the 23rd Ordinary Meeting of the EAC Monetary Affairs Committee in Kigali last month.

7. Kenya’s Nicholas Nesbitt re-elected as EABC business group Chair. The East African Business Council, Thursday, re-elected Nicholas Nesbitt from Kenya as Chairman, during the 20th EABC AGM held in Nairobi. Nesbitt is the Chairman of the Kenya Private Sector Alliance, and was first elected to the EABC helm in June 2018 during the body’s 19th annual general meeting. The annual meeting also elected Rwanda’s Denis Karera, Uganda’s Mwine Jim Kabeho and Tanzania’s Salum Shamte as vice-chairs and members of the EABC executive committee to strategically guide its mission to promote sustainable private sector driven growth. Nesbitt urged EAC governments to enhance public-private dialogue and formulate policies that will solve logistical challenges, fix fragmented value chains, and enhance value addition of products in the region to be competitive in light of the AfCFTA.

8. How Rwandan businesses could benefit from newly launched KCB’s Biashara Club. Businesses and enterprises who will become members of Biashara Club, a club launched by KCB Bank Rwanda Plc will enjoy a range of benefits including training, links to markets and business counterparts across the world. The club which started with about 400 entrepreneurs of the bank’s micro, small, and middle enterprise businesses is intended to grow and strengthen their customer relationships according to Innocent Ntwari, the Senior Manager in charge of Personal Banking and Channels at KCB Rwanda. The KCB Biashara Business Club will essentially provide a platform for the growth of the Bank’s SMEs by offering business solutions and advisory services to the entrepreneurs whilst leveraging on the expertise of the Bank’s strategic partnerships.

Nigeria’s president tells cenbank to stop providing FX for food (Reuters)

Nigeria’s President Muhammadu Buhari has told the central bank to stop providing funding for food imports, his spokesman said in a statement on Tuesday, a move that has raised questions about the bank’s independence. “President Muhammadu Buhari disclosed that he has directed the Central Bank of Nigeria to stop providing foreign exchange for importation of food into the country,” Tuesday’s statement said. “Don’t give a cent to anybody to import food into the country,” Buhari said, according to the statement, which said that the call was in line with efforts to bring about a “steady improvement in agricultural production, and attainment of full food security”. The latest move comes only weeks after Central Bank Governor Godwin Emefiele in July said the bank would ban access to foreign exchange to import milk.