tralac’s Daily News Selection

tralac’s Daily News Selection

03 Oct 2019

Regional Risks for Doing Business 2019: Sub-Saharan Africa (WEF) 

Unlike other regions, the leading risks in 2019 in sub-Saharan Africa did not change from the prior year (pdf): “Unemployment or underemployment”, “failure of national governance”, “failure of critical infrastructure” and “energy price shock” all remain the top four risks. The only issue that emerged as a major concern for business in the region was “fiscal crises”, which ranks fifth this year. These findings reflect the fact that economic and governance concerns are felt deeply among executives and come at a time when sub-Saharan Africa faces opportunities, but also vulnerabilities, because of its growing population.   

Again this year, climate and health risks are not perceived as the most concerning risks to business in sub-Saharan Africa. Guinea is the only country where “spread of infectious diseases” ranked as a major risk, while “extreme weather events” and “natural catastrophes” topped the list only in Mauritius and Mozambique. Looking back at the devastation caused by Cyclone Idai (March 2019), for which costs were estimated at over $2bn, and at the 2,052 fatalities from Ebola so far (September 2019) in the DRC the absence of these risks from the list continues to represent a potential blind spot that could considerably hinder the economic and social progress that the region has achieved.

Debt stocks of developing countries rose to $7.8 trillion in 2018 (World Bank)

Total external debt of low- and middle-income countries climbed 5.3% to $7.8 trillion last year, while net debt flows (gross disbursements minus principal payments) from external creditors tumbled 28% to $529bn, the World Bank’s International Debt Statistics 2020 shows. Although on average the external debt burden of low- and middle-income countries was moderate, several countries have been on a deteriorating debt trajectory since 2009, the report indicates. The share of low- and middle-income countries with debt-to-GNI ratios below 30% has shrunk to 25%, down from 42% ten years ago. Similarly, the share of countries with high debt-to-export ratios has climbed.  Debt stocks were driven up by a 15% jump in China, fueled by investor appetite for renminbi-denominated assets. Excluding the ten largest borrowers (Argentina, Brazil, China, India, Indonesia, Mexico, the Russian Federation, South Africa, Thailand, and Turkey), external debt stocks rose 4%. Sub-Saharan countries excluding South Africa saw debts stocks swell by 8% on average in 2018, and over half the countries in the region have seen external debt stocks double since 2009. Extracts (pdf): 

For sovereign borrowers in Sub-Saharan Africa, 2018 was a banner year for issuance. Sovereign bond issuance by Sub-Saharan countries continued apace in 2018 to reach a new record high of $17.4bn (excluding South Africa) — well over double the $9bn issued in 2017. Major oil exporters, Angola and Nigeria, led the way, issuing $3.5bn and $5.4bn respectively. Cote d’Ivoire, Ghana, Kenya, and Senegal each tapped the markets for around $2bn. .

Proceeds from these issuances were used for infrastructure financing, balance-of-payments support, and refinancing of prior operations. All issues were heavily oversubscribed, a reflection of investor confidence in the region and attractive yields. The 2018 sovereign issues were characterized by longer maturities, and all included a 30-year tranche. Between 2009 and 2018, sovereign borrowers in Sub-Saharan Africa active in international markets (excluding South Africa) issued around $46bn; countries eligible for IDA resources accounted for 85% of those bond issues. [Note: The report includes one-page summaries per country, plus global, regional and income-group aggregates showing debt stocks and flows, relevant debt indicators and metadata for 5 years (2014-2018)]

Second PIDA Policy Dialogue: outcomes  (AU)

In their final communiqué, delegates called upon AU member states and PIDA stakeholders to fast track the assessment of the PIDA mid-term review and engage the preparation of the PIDA PAP 2 with an updated list of the priority projects; promote integrated corridor development using data-driven decision-making models to prioritise projects for commercial viability and promote the setting up of legal frameworks and instruments for corridor management. Also crucial, the delegates recommended the need for the continent to institute an elaborate financing strategy for PIDA projects that member states could use to mobilise funds for projects. 

In addition, it was agreed that PIDA stakeholders engage the private sector,  diaspora and development financing institutions to prepare projects as they could bring huge experience and knowledge into ensuring quality projects are developed and presented for financing. Member states were also requested to speed up ratification of pending legal instruments related to infrastructure, notably the African Maritime Transport Charter and the Intergovernmental Agreement on Trans-African Highways. The communiqué emphasized the use of cross-sectoral approaches, including the maritime sector in the integrated corridor approach, and adopt a framework for exchanging best practices and propose suitable instruments/mechanisms to integrate rural and remote areas in the next phase of PIDA PAP 2. [Maritime transport sector key to corridor approach of PIDA PAP 2

Nigeria and the AfCFTA: Afreximbank President urges creation of specialised agency to take advantage of AfCFTA opportunities. Delivering the keynote address at the 2019 Independence Day Dinner and Gala Night organised by the Government of Nigeria to mark the 59th anniversary of the country’s independence, Prof Benedict Oramah said such an agency should be the arrow-head for achieving Nigeria’s strategic objectives for its membership of the AfCFTA.  According to him, Nigeria’s goal should be set out in a carefully developed strategy and entrusted to an accountable set of people to implement. Prof Oramah described the AfCFTA as a platform for Africa’s collective self-reliance and said that Nigeria had a great opportunity to benefit immensely from it if certain actions were taken at the federal, state and corporate levels in a coordinated manner. 

He noted that while the promise of the AfCFTA in terms of development outcomes was not in question, the road ahead was likely to be rough and turbulent, saying that Nigeria should consider triggering an adjustment process for operators in sectors likely to be negatively impacted and putting in place arrangements to support those that could become competitive by simple re-tooling and transforming from import substitution to export orientation. He also urged the government to make credible trade information available to Nigerian businesses interested in international trade, especially intra-African trade, arguing that while the AfCFTA creates the legal basis for a potential pan-African market in goods and services, the creation of that market was the job of economic agents whose operations were usually driven by information. 

Zimbabwe and the AfCFTA. ECA's Batanai Chikwene: “Zimbabwe’s national AfCFTA implementation strategy, like another policy documents will not implement itself. We have to invest heavily in execution and implementation. The government will have to provide an environment in which exporters and importers can do business and set up firms that can compete globally. The importance of ensuring coherence among fiscal policies, monetary policies, industrial policies and trade promotion initiatives is critical and cannot be over-emphasised. Ongoing efforts to implement key economic reforms are a step in the right direction and should be commended. And, results from such efforts are beginning show.” 

South Africa, Nigeria bilateral relations  

(i) Trade and development issues in the joint communique. Both Presidents noted with great satisfaction the economic cooperation between the two Republics and welcomed the steps to increase trade volumes as well as private sector investments. They welcomed the important role of the Business Forum, which took place on the margins of the State Visit. The two leaders further welcomed the decision to establish a Joint Ministerial Advisory Council on Industry, Trade and Investment. The inaugural meeting of the Council would be held not later than April 2020, in Abuja. The Council is expected to serve as a critical vehicle in facilitating and promoting private sector participation in the economies of both countries.

Both leaders took note of the significant footprint of South African businesses operating in Nigeria in sectors such as telecommunications, mining, aviation, banking and finance, retail, property, entertainment and fast foods industries. They also noted and welcomed the business activities of Nigeria’s small, micro and medium enterprises, as well as the investment of Dangote Sephaku Cement in South Africa. The two Presidents further endorsed the reestablishment of the Republic of South Africa and the Federal Republic of Nigeria consular Forum to meet twice a year. Both leaders reaffirmed their commitment to working together in pursuit of sustainable peace and economic development on the continent in the context of AU Agenda 2063 and the AfCFTA.

(ii) Media briefing: remarks by President Cyril Ramaphosa. Nigeria accounts for 64% of South Africa’s total trade with the West African Region and is one of our largest trading partners on the continent.  We noted with appreciation the increasing presence of South African companies in Nigeria, and agreed on the need to promote greater investment by Nigerian companies in South Africa. As part of our efforts to increase economic cooperation, a Nigeria South Africa Business Forum is meeting today comprising business delegations from both countries. We will urge our business people to take advantage of the great opportunities in our respective countries for trade, investment and collaboration. As governments, we have committed ourselves to creating an enabling environment to for doing business in our respective countries. We have identified key sectors for investment to boost economic growth and development. These sectors include roads and rail infrastructure, mining, manufacturing and agro-processing. 

Launch of 100,000 SME’s for 1 Million Jobs by 2021 campaign (NEPAD)

The AU Development Agency-NEPAD, on the margins of the 74th session of the UN General Assembly launched the ‘100,000 SME’s for 1 million Jobs by 2021’ campaign at the AU Permanent Observer Mission. As part of its integrated approach to development in Africa, the AU Development Agency-NEPAD places special emphasis on harnessing Africa’s youthful demographic dividend in line with the AUC  Chairperson’s ‘1 million by 2021 Initiative’ (pdf). The initiative aims to provide concrete opportunities for 1 million young people by the year 2021, in the areas of education, employment, entrepreneurship and engagement. The campaign aims to leverage strategic partnerships, build ecosystems of efficiencies and test new ideas to move the needle on youth development, especially for young women. AUDA-NEPAD will also ensure that regional partnerships are developed amongst young SME’s for regional trade, based on the opportunities that will be unlocked by the AfCFTA.

Women’s Entrepreneurship Accelerator launched (ITC)

Mary Kay Inc., a leading advocate of women’s empowerment and entrepreneurship, has announced the Women’s Entrepreneurship Accelerator, a multi-partner initiative designed to inspire, educate, and empower women entrepreneurs around the world. With no qualifying barriers to participate, the ground-breaking initiative is a strategic collaboration developed in consultation with six UN agencies: UN Women, UNOP, ILO, ITC, UNGC, and the UNDP. The Accelerator will offer a guided digital curriculum supplemented by on-the-ground training and mentorship. In addition, it will serve as an advocacy platform to eliminate entrepreneurial roadblocks for women, ranging from digital literacy to legal reform - enabling women to fully participate in the growth of their local and national economies.

Exporting financial services in Latin America and the Caribbean (World Bank)

According to the WTO, trade in services has become the most dynamic segment of world trade, growing more quickly than trade in goods. While travel remains the most exported service both worldwide and in Latin America and the Caribbean (LAC), other services are becoming relevant for both developed and developing economies. Among them, financial services is one of the most important categories in terms of value. Worldwide, the value of financial services exports rose in real terms between 2008 and 2017. Nevertheless, this global trend of rising exports of financial services was not reflected in LAC, where they contracted between 2008 and 2016. The economies of Latin America and the Caribbean have significant potential to export financial services. To take advantage of this opportunity, governments in the region can work on a variety of fronts to raise their economies’ competitiveness in this area. Two specific challenges are the availability of human capital and electronic infrastructure.

Today's Quick Links:

Tanzania: Investment Act review targeting natural gas sector

African Grain Trade Summit 2019Africa urged to remove trade barriers in food value chain

Inaugural West Africa Fertilizer Financing Forum: update

The WEF's India Economic Summit began today in New Delhi

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