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tralac’s Daily News Selection

tralac’s Daily News Selection

04 Oct 2019

South Africa's former chief trade negotiator Wamkele Mene says South Africa can lead on improving the ease of movement of business people across borders on the continent, through the introduction of a trade visa

Global trade arrangements on services under the WTO, which SA is party to,  already make provision for the movement of business people. SA can replicate this in the context of the AfCFTA to demonstrate its commitment to the continent, he said. A large number of African economies were increasingly driven by services such as tourism and telecommunications, which relied on the ability of business people to travel more freely. “In the context of the [AfCFTA] agreement, like we have done in the WTO, this is something we will have to strongly consider and take a lead on.”

Related: Algeria starts its AfCFTA consultations next week (7 October) 

Zimbabwe: Public Expenditure Review with a focus on agriculture  (World Bank)

This report is the last part of a programmatic Public Expenditure Review, with previous reports focusing on education, municipalities, and state-owned enterprises. This report focuses on agriculture which plays a particularly important role in economic development in Zimbabwe: about two thirds of Zimbabweans work in agriculture and it is an important sector both for poverty reduction and food security. Agriculture remains a backbone of the economy and is identified as a priority sector under government’s 2018-2020 Transitional Stabilisation Programme. This PER develops some concrete policy recommendations. The analysis points to strong links between agriculture and the broader economy. While land reform and agricultural spending could have caused macroeconomic dislocations since the 2000s, agricultural production has also been a victim of these dislocations. Rebuilding sources of resilience is critical, and this includes recreating fiscal buffers, beyond agricultural spending. Such buffers are particularly important to mitigate droughts, which are becoming more severe with climate change. Secondly, the analysis suggests that agricultural spending responds to structural constraints, in the agricultural sector, without addressing these constraints it will be difficult to control spending on agriculture. The PER thus develops some immediate recommendations to reduce the cost of the Command Agriculture program, while also looking at the structural issues that need to be addressed to raise productivity in agriculture. Extract (pdf):  

The external environment started to become less favorable in 2011 (Figure 3.10). Agricultural prices started their descent from the highs of the commodity super cycle in 2011, providing less uplift to Zimbabwe’s terms of trade and farming incomes. From 2015, the US dollar started strengthening. Although this partly offset the lower agricultural prices, it affected the competitiveness of Zimbabwe’s exports, in agriculture as well as other sectors. The loss of an independent exchange rate and monetary policy following dollarization meant that Zimbabwe would have needed to make internal adjustments, but most prices—most notably wages – are downwardly rigid. Accordingly, Zimbabwe’s real exchange rate appreciated, most notably in relation to its main trading partner South Africa. The appreciation supported imports but limited Zimbabwe’s ability to strengthen its economic base through exports. Reserve cover (in months of imports) declined (Figure 3.10). Financing the current account gap was rendered challenging by a lack of foreign capital inflows and exacerbated by the lack of access to borrowing from international finance institutions.  

Zimbabwe’s AfCFTA strategy to be finalised by month end (UNECA)  

A two-day workshop to validate Zimbabwe’s strategy for implementing the AfCFTA ended in Harare Thursday with participants agreeing to fine tune the plan to ensure the country effectively benefits from opportunities that will be availed once trading commences under the agreement in July 2020. In closing remarks to the workshop, Ms Beatrice Mutetwa, Chief Director for Economic Cooperation, International Trade and Diaspora in Zimbabwe’s Foreign Affairs and International Trade Ministry, said meticulous implementation of the strategy was key to Zimbabwe benefiting from the free trade area once trading starts. “Now that the document has been introduced and presented to you, it is my hope that you will further digest the document and make more inputs which will further refine the document which will be finalised by end of October 2019,” she told stakeholders attending the workshop, including representatives of the private sector, academia, parliamentarians, civil servants and civil society. “Therefore, the proof of the pudding is in implementation. The onus is on the private sector to seize the opportunities presented by the AFCTA and run with it. Remember that the rules of origin allow one to cumulate with the rest of the continent not just our traditional partners.”

EU launches negotiations to deepen trade relations with Eastern and Southern Africa countries (EU)

Zimbabwe is one of five Eastern and Southern Africa partners (so-called ESA: Comoros, Madagascar, Mauritius, Seychelles and Zimbabwe) that the EU has started negotiations with this week to deepen the existing Economic Partnership Agreement. Given the positive results generated by the current agreement, now in its 8th year of implementation, the five countries have declared their readiness to move beyond trade in goods, towards a more comprehensive agreement. The EU has welcomed this step, especially in the context of the Africa-Europe Alliance for Sustainable Investment and Jobs. Since the initial agreement started to apply in 2012, exports of goods from the five ESA countries to the EU have increased by almost a quarter, reaching nearly €2.8bn in 2018. European businesses are also increasingly investing in the region. The new agreement should cover other important trade related areas and trade related rules, such as services, investment, technical barriers to trade, intellectual property rights as well as trade and sustainable development.  At the request of the five ESA countries, the EU has agreed to provide financial assistance for the setting up of an EPA Coordination Mechanism. Its aim is to ensure appropriate coordination and technical support to the five ESA countries so they can engage effectively in the negotiation process. The Coordination Mechanism has already contributed on the ESA side to the preparation of the scoping phase for the upcoming negotiations.

FIATA's 2019 World Congress concludes tomorrow: selected updates from its Cape Town conference

(i) Unprecedented disruptions to global trade, freight conference hears. There are major disruptions in global trade due to factors like trade wars and Brexit, according to Babar Badat, president of the International Federation of Freight Forwarders Associations. "Protectionism is occurring and the premise of the WTO is being challenged," he said at the opening of the FIATA conference in Cape Town on Wednesday. "These are times with challenges we have never seen before. It means the reduction of trade and our industry is affected in the front line." He said for FIATA – the largest organisation in the logistics and supply chain industry in the world – seamless connectivity is very important. "Governments need to put investment into infrastructure and the private sector must have good connections with governments and associations to create seamless trade connections," said Badat. "We must have collective thinking in our industry for trade to grow." 

(ii) The 3 biggest problems doing business in Africa. The three biggest hurdles hampering business in Africa are liquidity, infrastructure and corruption, according to Celeste Fauconnier, an economist at RMB. Although politics remains among the top 10 problematic factors making it harder to do business on the continent, it is not among the top three, she said on Wednesday. She spoke at the FIATA conference in Cape Town. Fauconnier explained RMB research on where to invest in Africa: "Regarding the top challenge of liquidity, a business must establish whether it would be easy for a client to pay and if the client has access to hard currency. Furthermore, establish how easy it would be for you to repatriate funds from the particular African country. “  As for Zimbabwe, Fauconnier said that the country actually has the infrastructure needed: "If they start refurbishing infrastructure, I predict Zimbabwe could become one of the fastest growing economies in Africa. I know this is a bold statement, but Zimbabwe borders SA and we have seen a lot of business from SA corporates going back there.” 

(iii) Cross-border organised crime on the rise, warns SA Revenue Service commissioner Edward Kieswetter .  "We still have too many information asymmetries between our data and those of China and India, for example. Therefore, blatant invoicing fraud is a significant focus for us. We want to be a lot more interventionist. If not, the only winners will be thugs and thieves." He said it is very important for SARS employees to be professional and incorruptible - and promised to crack down on offenders. "Any party seeking to collude with our officers must know that we will not tolerate collusion of any kind," warned Kieswetter. "We are considering stopping all mismatched consignments to force compliance or to implement penalties starting in December this year. Let us make sure we define a higher purpose of embracing a common goal between SARS and the freight forwarding industry in order to create better and healthy societies,"

(iv) Drones set to reshape cargo, transportation sector. The emergence of cargo drones is set to radically improve the cargo and transportation sector, as they are able to offer autonomous quality service 24 hours a day, the yearly World Congress of the International Federation of Freight Forwarders’ Association (Fiata), has heard. Massachusetts Institute of Technology (MIT) Aeronautics and Astronautics Professor Wesley Harris explained the benefits of huge, industrial quality drones that are able to move heavy containers. The opportunities presented by these driverless, freight delivery drones would be “reduced costs, reduced time to delivery, reduced environmental impact and transport on demand”, Harris said at the Fiata World Congress in Cape Town on Wednesday. [New technology is focus of FIATA congress in Cape Town

(v) Saudi Arabia aims to be global logistics hub. The Governor of Saudi Arabia’s General Customs Authority Ahmed Alhakbani this week said the country was ramping up its customs services in line with the goals of Saudi Vision 2030, which aims to attract international investment and drive overall growth. Alhakbani told the International Federation of Freight Forwarders Associations (Fiata) World Congress 2019, being held in Cape Town, that the Saudi customs authority was adopting an integrated technical system, while also moving towards automating clearance procedures. It was also among the first customs authorities in the world to adopt blockchain technology for shipping operations.

Replacing fossil fuel generators offers clean-energy options (IFC)

The initial findings of the research are detailed in the report The Dirty Footprint of the Broken Grid: The Impacts of Fossil Fuel Back-Up Generators in Developing Countries. The study explores fundamental questions about the scope and impacts of backup generators that have been largely unanswered beyond anecdotal and local or regionally focused studies. For the first time, we are able to see a global picture of the aggregate costs of backup generators.  The study examines the impacts of backup generators in 167 developing countries. The countries modeled represent 94% of the people living in low- and middle-income countries, excluding China. It explores the extent to which running these engines imposes economic burdens, compromises health, and contributes to climate disruption. It also addresses several basic but important knowledge gaps related to the topic.  The report details the long-term costs of backup generators, finding that users spend $30bn to $50bn annually on fuel, and noting that the value of generators imported into developing countries exceeded $5bn in 2016. In many countries, electric utilities are struggling to keep up with surging demand, suggesting that grid reliability will worsen and spending on backup generation will increase, at least in the near term.

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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to recipients across Africa and internationally, serving in the AU, RECs, national government trade departments and research and development agencies.

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