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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Trevor Samson | World Bank

22 Aug 2019

The East African Business Council convened a workshop today in Nairobi to review the EAC’s Common External Tariff. Selected tweeted highlights:

@KEPSA_KENYA: The workshop is expected to establish a clear collaboration framework within the private sector and come up with consolidated options to expedite finalization of review of EAC CET. A related thread from KEPSA.

@TanzaniaCTI: “A common position in EAC CET Review will help businesses thrive and promote potential sectors in the region. We need to move away from annual reviews of CET” – Mr Allan Ngungi, Director Private Sector Advocacy

@TanzaniaCTI: “Governments in the EAC region are now paying attention to private sector recommendations. We need to use this opportunity to leverage their support” – @pmathuki

@EABCArusha: The EAC should address inconsistencies of the Customs Union and the Common Market to enhance industrial competitiveness, value chains and joint ventures + partnerships – says Jim Mwine Kabeho EABC Vice Chair

The Luanda Agreement: Rwanda, Uganda agree to mend political, trade ties (New Times)

President Paul Kagame has said that the MoU signed yesterday should be implemented in its entirety. Kagame was addressing the press in Luanda after the signing of the agreement. The MoU was signed by President Kagame and President Museveni, as well as Presidents João Lourenço (Angola), Félix Tshisekedi (DRC) and witnessed by President Sassou Nguesso (Congo-Brazzaville). On free movement of people and trade, Kagame reminded that one cannot happen without the other: “When you create a problem for people to move across the border from one side to another, then you have closed the border to people and goods. If there are difficulties going on by trade not going on across the border...when you have people who get arrested when they cross the border, that affects the movement of people, of goods and trade.” A commission for the implementation of the MoU is also expected to be established. The commission will include a minister for internal administration and heads of intelligence. “This Memorandum of Understanding is expected to take effect immediately upon signature,” reads part of the statement. [Related: What next after Angola pact?; Rwanda to open border; Rwanda border remains closed, residents upbeat]

Indonesia-Africa Infrastructure Dialogue (IAID) 2019: the presentations are now available for download. The profiled presentation is by Indonesia Eximbank (which includes details on bilateral trade, 2010-2018). “Indonesia posted a trade deficit with Africa of $1.74bn in 2018 as imports ($6.5bn) exceeded exports ($4.76bn). The main cause of Indonesia’s 2018 trade deficit with Africa are sharply rising mineral fuels/oils and iron and steel imports. Strengthening global crude oil prices in combination with the vulnerable Rupiah in 2018 imply a burden on imports. Moreover, palm oil exports (Indonesia’s main export products to Africa) fell from $2.46bn in 2017 to $2.18bn in 2018.” The Eximbank presentation also provides details of Indonesia’s exports/imports, to/from, Africa, by country; and Indonesia’s exports/imports, to/from Africa, by product.

Country Policy and Institutional Assessment Africa 2018: selected Quick Facts for Ethiopia, Ghana, Kenya, Lesotho, Malawi, Mozambique, Nigeria, Rwanda, Senegal, Tanzania, Uganda, Zimbabwe

WESGRO’s Karen Bosman: “Three key points stood out from discussions at this year’s 18th AGOA Forum – Beyond AGOA, the AfCFTA, and Prosper Africa

Nigeria’s new cabinet: a profile of Nigeria’s new trade and investment minister, Amb Maryam Katagum

Can the AfCFTA revive Ghana’s ailing manufacturing sector?

But for the history books, nobody would have believed that Ghana was once a producer of electronics and electrical gadgets such as pressing irons, television sets and electric bulbs. The sorry state of the manufacturing sector is further amplified in the annual rate of growth and its share to total productivity, measured by GDP. Data from the Ghana Statistical Service show that the manufacturing subsector’s share of GDP averaged more than 30$ per annum in the early 2000s but has been on a consistent decline. From 13.2% of rebased GDP in 2013, it fell to 12.2% in 2018 as growth and momentum in the subsector waned. On paper, the AfCFTA opens countless opportunities for manufacturers. In reality, however, it could further flood our economy with imports, this time round, from peer African countries, and that can easily result in the drowning of our largely weak manufacturing companies.

To avoid this, the private sector needs to first whip up the government and later partner it to draw up a comprehensive policy on how the country can build the capacities of the manufacturing sector to benefit fully from the agreement. That policy must incorporate SMART (specific, measurable, attainable, relevant and timely) objectives that all of us, as a country, will work to achieve. It must also be apolitical and be made the foundation of every political party’s manifesto. Unlike other policies on industrialisation and private sector support, this policy on how we can benefit fully from the AfCFTA must be implemented by a selected group of astute experts and funded by a sustainable funding source. In that regard, it will not be out of place to levy consumers and companies and use the proceeds to transparently resource a committee or a secretariat to build the capacities of manufacturers. [Commentary by Maxwell Akalaare Adombila]

Wandile Sihlobo: African free-trade pact gives reason for hope in agriculture (Business Day)

Agriculturally, the recently launched AfCFTA is an important development, although a reduction of tariffs alone won’t necessarily encourage trade. Much work is to be done across the continent on the lack of infrastructure, costly and prohibitive border processes, corruption and weak institutions. Optimism about the pact stems from SA agricultural growth having been export-driven over the past few decades, and the rest of the continent being a key market. Over the past 10 years it has accounted for an average of 44% of SA exports, which equates to $3.9bn, up from an average of less than 30% in the prior decade. The top 10 markets were Botswana, Namibia, Mozambique, Lesotho, Eswatini, Zambia, Zimbabwe, Angola, Mauritius and Nigeria. It is the SADC that has really underpinned SA’s agricultural exports to Africa, and not so much the overall continent. This is because SADC is a tariff-free zone for SA, and existing infrastructure facilitates trade with its neighbouring countries. [The author is head of economic and agribusiness research at the Agricultural Business Chamber. Related South African agricultural trade news: Fin24: South Africa’s black-owned wines, spirits to get an EU boost; Business Day: SA’s wool sector on edge over Chinese ban due to foot-and-mouth; Business Day: SA poultry industry and government work to boost access to new export markets]

Crossovers in Botswana: women entrepreneurs who operate in male-dominated sectors (World Bank)

To build on its successful rise to upper-middle-income status, Botswana needs to diversify its economy which has been largely driven by the public sector and the diamond industry, which has created few jobs and limited spillovers. One priority for achieving this which has been highlighted in recent work is the need to raise returns to non-farm self-employment, including by improving the productivity of micro and small enterprises. This may be particularly important for women-owned businesses, with research from across the region showing that women owned businesses tend to be less profitable than their male-owned counterparts. Using data collected from microenterprises in Gaborone, Botswana, this paper finds that women who cross over into male-dominated sectors make higher profits and grow larger firms in terms of number of employees compared to women who operate businesses in female-concentrated sectors. Women’s likelihood of entering a male-dominated sector appears to be influenced by their level of education and their exposure to male-dominated sectors, including through work experience. The principal source of data for the study (pdf) is a firm-level survey carried out between October 2017 and February 2018. [The authors: Ludovica Cherchi, Daniel Kirkwood]

Zimbabwe: Government plugs clothing manufacturers rebate loopholes (The Herald)

The Government has moved to plug loopholes in the utilisation of the Clothing Manufacturers’ Rebate after some players in the garment making sector were found to have abused the facility over the past six years resulting in the state losing millions of dollars in potential tax revenue. Finance and Economic Development Minister Professor Mthuli Ncube said although the facility had assisted manufacturers to reduce production costs making local apparel competitive on the export market, some beneficiaries of the scheme were undermining tax revenue and distorting both national and regional value chains and linkages through various malpractices. These included the disposal of fabrics intended for value addition on the domestic market and transfer pricing. The decision by the Government to find ways of curbing the abuse of the facility follows revelations that some clothing manufacturers were using transfer pricing, under-invoicing and incorrect declarations to evade local taxes while taking advantage of preferential trade agreements to realise huge profits in regional markets.

Zimbabwe: Roadmap to the development of a $12bn mining industry by 2023 (GoZ)

Cabinet considered a paper by the Minister of Mines and Mining Development on the roadmap for the achievement of a $12bn mining industry in Zimbabwe by 2023, a 344% increase from $2,7bn in 2017. A detailed document which will outline the achievement of the $12bn mining industry by 2023 will be launched very shortly. Cabinet also considered some of the enablers towards the achievement of the 2023 mining milestone. Cabinet also received an update on progress in the implementation of the following mining projects:

Capital inflows to Sub-Saharan Africa: on a different path (World Bank Blogs)

What explains these different trends and why does it matter? These are the questions that lie at the heart of the analysis conducted by Calderón, Chuhan-Pole and Kubota. Our main message is twofold: one, the evolution of capital inflows shows divergent patterns for SSA and the rest of the world and another, drivers of capital flows vary by type of flow and regions. Plausible policy recommendations arising from the analysis underscore that the SSA countries need to diversify the economic and export structure, develop deeper domestic financial markets, implement policies to promote a productive business environment and create investment opportunities. To sum up, capital flow behavior for Sub-Saharan African countries is different from that of industrial countries due to different economic structures which render different transmission processes. External factors are the main drivers of gross capital inflows into Sub-Saharan Africa, while both domestic and external factors are important for industrial countries and non-SSA countries.

Jumia’s Q2 2019 report shows the future is still highly uncertain for “The Amazon of Africa”

According to the financial report, Jumia’s operating loss increased from $46.5b a year ago to $74.02m in the second quarter of 2019, mainly due to an increase in share-based compensation expense. However, adjusted EBITDA loss, as a percentage of GMV narrowed from -21.4% to -15.8% on better margins. The e-commerce platform that operates primarily in Africa also revealed on Wednesday that its second-quarter revenues improved 58.3% to $43.5m, as marketplace revenues almost doubled year-over-year. The top-line was slightly short of the street projection of $45.88m. Also, the company revealed that its gross merchandise volume grew 68.9% to $311.8m in Q2, on the back of the growth of “active consumers and spend per active consumer.” It said that the number of active customers at the end of the quarter was 4.8 million, up from 3.2 million a year ago. [Africa could emerge as the battleground between Facebook and China as digital currency race heats up]

Creative industries in the digital economy: opportunities for small states. This issue of Commonwealth Trade Hot Topics focuses on priorities for Commonwealth co-ordination of regulations and business support for creative industries in the digital economy as a strategy for mitigating the impact of the digital divide on small states. [The author: Natallie Rochester]

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