Towards the AfCFTA Country Business Index: ad-hoc expert group meeting to review methodological approach

The ECA has proposed the establishment of an AfCFTA Country Business Index (ACBI) that will be used at country level to assess and monitor constraints faced by the private sector as they trade in Africa. By putting the private sector at the heart of monitoring the effectiveness of the AfCFTA, the ACBI will encourage countries to effectively implement the AfCFTA in the interest of those for whom it is designed. Having such an index that assesses and monitors trade enabling factors (including tariffs and non-tariffs measures) and induced costs faced by private sector operators will help to deepen the implementation of the AfCFTA.

The proposed ACBI intends to be a robust and unique tool for measuring and monitoring businesses’ experience with AfCFTA implementation at the country level, including identifying shortcomings and ways in which implementation can be improved. The Index will allow for cross-country comparisons to reward countries that are doing well in effectively implementing the AfCFTA, and through doing so encourage countries to develop a more conducive enabling business environment throughout the continent. The meeting (2-3 September, Addis Ababa)) will be attended by experts from member states, RECs, the private sector, academia and development institutions with interest in regional integration issues, in particular the AfCFTA. [Download: pdf Concept Note (205 KB) ]

Mark Pearson: Need for a paradigm shift of regional integration in Africa (ECDPM)

The regional integration agenda in Africa is under threat, mainly because of complacency, donor dependency and lack of ownership of the integration agenda by African countries themselves. Our research on the COMESA programme, which exemplifies these problems, has shown that: It is difficult to argue that the COMESA integration targets, along with the AEC integration targets were, prima facie, too ambitious; The top-down planning approach has its flaws but if – and only if – the implementing states have the political will to implement what has been agreed, sufficient resources are made available, and the rule of law is applied to the implementation process, a top-down approach can be an effective method of achieving integration; The timing of the African (or COMESA) integration agenda is de facto, not too ambitious; Although COMESA countries are either LDCs or lower or middle income developing countries, they could pay more to support African economic integration and could pay their own portion of the COMESA budget in full and on time. It would not be difficult for COMESA Member States to re-invigorate COMESA and for COMESA to, once again, be one of the foremost regional economic integration organisations with a good track record of integration instruments and, in the process, create additional momentum for the ACFTA. For this to happen, COMESA Member States may want to consider the following (pdf):

Johnson Nkem: Will the AfCFTA open the gateway for women in agribusiness? (International Policy Digest)

The changes in the movement of goods and services envisaged under the AfCFTA rekindles the plight of the informal economy operatives and beams the spotlight on women who have always vehemently strived to move food products around locations and across borders but often without institutional support and access rights to produce and undertake the transactions. There are emerging opportunities in designing regional food systems to enhance food security in Africa. This requires preparedness in using the market to provide the pull factor for the aggregation of interconnected information about a specific set of foods, their supply chains, and revealing the opportunities they hold in the region to enhance their production and distribution. The food economy of West Africa, for instance, is estimated to be $178bn in 2010 representing 36% of the regional GDP.

The regional food market now dominates emerging economic opportunities. This requires the preparedness in making a significant shift from subsistence-based to a market-based system for the food economy that is driven by Africa’s human resource endowment of women and youth. Leveraging on technological innovations creates new pathways and opportunities for empowering women in generating prosperity under the AfCFTA. These include raising the value from agriculture and promoting inclusivity in the development of regional value chains. Building the capabilities of women and reinforcing the establishment of women networks will strengthen their capabilities in readiness for emerging opportunities for co-creation and co-ownership of regional value chains, to expand revenue generation.

Dorothy Tuma: Why AfCFTA’s success depends on including informal, women-run enterprises (AllAfrica)

There is renewed optimism that Africa’s small and medium sized businesses could be big winners with the launch of the AfCFTA - the world’s largest such trading zone with a combined current GDP of $2.5 trillion and a market of over one billion people. Given the challenges that have prevented Africa’s SMEs from becoming competitive, however, we must ask how this will change under the AfCFTA. What does it mean to be competitive? So how will SMEs benefit from AfCFTA? Consider the typical informal business example of Jane Were (not her real name): [Note: The author chairs the East African Women in Business Platform, which represents the views of 20,000 women business owners in six partner states]

Ghana launches Automobile Bill: declares tax holidays for car assembly plants (MyJoy)

Cabinet has approved the much talked about Automobile Bill to officially give a legal framework for the assembling of vehicles in the country. For this reason, import duties on new passage vehicles, SUVs and other trucks will be increased to 35%. Launching the Automobile Bill, Trade Minister, Alan Kyeremanteng detailed the policy framework for the bill explaining that the move is to – in the long run – reduce the import of vehicles which amount to 85,000 each year costing over $1bn. What this also means is that all investors venturing into the establishment of vehicle assembly plants will enjoy corporate tax holidays. According to Mr Kyeremanteng: “The initial scope of the Ghana Automotive Development Policy is to provide the necessary framework to establish assembly and manufacturing capacity in Ghana. Fiscal incentives on new vehicles for registered assemblers will include a corporate tax holiday of 5 years for enhanced SKD Registered Assemblers”.

Ghana wants to grow more cashews: but what about unintended consequences? (The Conversation Africa)

Over at least the last decade, one of Ghana’s most vital breadbaskets has been converted into cashew nut production to feed export markets. Bono East, Bono and the Ahafo regions - previously known as the Brong Ahafo region - are being transformed by cashew production. This growth has positioned Ghana as one of the largest producers of raw cashew nuts in Africa. Cashew nut production has increased four fold across the continent since 2000. In Ghana, a number of social, economic and political circumstances in Ghana have enabled spectacular expansion. Given the current - and expected future - challenges facing Ghana’s domestic food security, there is an urgent need to critically assess agricultural development policies and donor aid initiatives. There is also an urgent need to examine export led priorities, including in particular, cashew nut sectoral planning. This will be important to ensure the lure of export led growth does not compromise local food security.

South Africa: Cheap imports a threat to SA’s cement industry (Moneyweb)

The local cement manufacturing sector has been hit by a double whammy of cheap imports together with lower demand brought on by South Africa’s flagging economic growth. Now the industry is calling out for support from government: it wants tariffs imposed on cement imports, largely from China and Vietnam, as well as special designation from the Department of Trade and Industry for government construction contracts to use local cement. The Concrete Institute, an industry body representing SA’s major cement companies including PPC, AfriSam, Lafarge, Sephaku Cement and Natal Portland Cement, is leading the call and has applied to the International Trade Administration Commission of SA for what it refers to as “safeguard action” against cheap cement imports. It has also sent a letter alerting the DTI of its plans to seek approval for “special designation” of SA-made cement to be used in state infrastructural projects. The move is along the lines of a similar agreement the struggling steel sector has already secured from the DTI. [Francois Baard: Claims about chicken tariffs incorrect]

South Africa: Special Economic Zone regime proposals ‘make no sense’ (Moneyweb)

The latest proposals to refine the Special Economic Zone regime have been described as unrealistic and unreasonable. National Treasury announced in the Taxation Laws Amendment Bill that only companies whose expansions result in a 100% increase in turnover will be eligible for the beneficial tax benefits of a SEZ. It is also proposed that only newly established businesses will qualify for the tax benefits. Duane Newman, joint MD at Cova Advisory, expressed his frustration with the latest round of proposed changes to the regime. He says it makes no sense for Treasury to stop activities it is trying to promote in the first place. He says a company cannot control its turnover – and what happens if the expansion only results in a 95% increase in the turnover; is the company then disqualified from the tax benefits?

Botswana: Choppies pulls out of SA, Mogae to step down (Mmegi)

Regional grocer, Choppies is pulling out of South Africa and has called for expressions of interest into the acquisition of its holdings. The group’s long standing chair and former president, Festus Mogae will also step down, the apparent culmination of boardroom disputes between himself and suspended CEO, Ramachandran Ottapathu. According to its last available records, Choppies, a Fast Moving Consumer Goods operator in eight African states, had 88 stores in South Africa, mainly in the country’s northwest platinum mining province. The group first entered South Africa in 2008 and rapidly built up its presence, with the stores accounting for 36% of Choppies revenues as at the half year to December 2017. In a statement to the BSE (pdf), Choppies announced it had already issued a request for Expressions of Interest to investors interested in taking all or part of its footprint in South Africa. “The board has completed a strategic review of its South African operations and has concluded that exiting the South African market is the appropriate strategic decision,” the statement reads. [Simon Allison, Dhashen Moodley: Rise and stall of Southern Africa’s most remarkable supermarket chain]

The extent of engagement in global value chains by firms in Rwanda (World Bank)

Using administrative data for an exhaustive sample of formally registered firms, reveals that the engagement of Rwandan firms in global value chains is remarkably limited. The paper documents several patterns of firm-level exports and compares firm characteristics between exporters and non-exporters. It also illustrates which firm-level characteristics are good predictors for a variety of extensive margins of export and import activities. The analysis includes firms from three goods-producing sectors, agriculture, mining, and manufacturing, but focuses mostly on manufacturing firms. The results indicate large differences between small and large exporters in terms of export market participation, type of products exported, and destinations served. GVC engagement has increased over the 2008-2016 sample period, especially for manufacturing firms, but this is a slow process with frequent set-backs. We distilled the following eight takeaway messages (pdf): [The authors: Garth Frazer, Johannes Van Biesebroeck]

Industrialization on a knife’s edge: Productivity, labor costs and the rise of manufacturing in Ethiopia (World Bank)

In this paper, I assess Ethiopia’s competitiveness and attractiveness as an investment destination by comparing the productivity and input costs faced by firms based in Ethiopia to a sample of manufacturing exporting countries. Given the current strategic importance of the garment sector, I select comparison countries that are garment exporters in Africa (Kenya), and Asia (Bangladesh, India, Vietnam). I use harmonized data from the World Bank Enterprise Survey, which enables me to construct aggregates figures for sales for worker (a measure of productivity), total labor costs, capital stock, firm size, and a somewhat noisy measure of value added. My main finding is that Ethiopia’s labor cost advantage is more than offset by low productivity with respect to all but one of the comparison countries (Bangladesh).

Ethiopia’s industrialization is thus on a knife’s edge. Its fundamentals make it competitive with respect to the countries at the bottom of the productivity distribution. In recent years, the increase in labour costs has also been modest compared to these countries. However, given the likely pressure on wages that will result from further expansion of the manufacturing sector, additional gains in productivity will be crucial in order to secure Ethiopia’s position as an attractive investment destination. The low productivity of Ethiopian firms is not explained by differences in size, capital, or sector. However, Ethiopian firms score particularly low on a measure of the quality of management. The most critical area is that related to the management of workers. In particular, the quality of selection, incentives and retention practices is lower than in all comparison countries. This suggests a need for reformed labor management practices. [The author: Stefano Caria]