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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Eric Montfort | Flickr

10 Oct 2019

Africa’s Pulse (World Bank)

Sub-Saharan Africa’s economic performance has remained sluggish, hampered by persistent uncertainty in the global economy and the slow pace of reforms to enhance domestic resilience. Regional growth is projected to rise to 2.6% in 2019 (0.2 percentage point lower than the April forecast) from 2.5% in 2018. On the demand side, growth of real gross domestic product weakened due to slower gross fixed capital formation and net exports, thus reflecting weaker investor sentiment against the backdrop of global policy uncertainty. On the supply side, the manufacturing and mining industries saw a modest expansion, while the services sector lost some momentum and agricultural sector growth remained subdued due to drought. The external environment is challenging for Sub-Saharan Africa. Global growth has continued to slow amid rising policy uncertainty due to the renewed intensification of trade tensions in the global economy. Partly as a result, the prices of most of Sub-Saharan Africa’s commodity exports have weakened since the second quarter of 2019. Prices of crude oil and base metals are expected to remain below their 2018 peak. While global financial conditions have eased, capital inflows in the region have remained modest, as trade policy uncertainty continues to weigh on investor sentiment. Reflecting the effect of heightened policy uncertainty on global economic activity, real GDP growth is also expected to slow significantly in other EMDE regions. The Middle East and North Africa, Latin America and Caribbean, and South Asia regions are expected to see larger downward revisions in their growth forecasts than Sub-Saharan Africa for 2019. Extract (pdf):

Leverage the food system, on and off the farm. Improving production and productivity in agriculture has historically had poverty-reducing effects, especially at low income levels, and the conditions for leveraging the food system for poverty reduction in Africa today are especially favorable. Food demand is robust; world food prices are still about 70% higher than they were before the 2008 world food crisis (40% in real terms); and urbanization and income growth provide opportunities for product differentiation and value addition and thus off-farm employment opportunities in agribusiness. The domestic agricultural policy and trade environments (including intraregional) have improved, and political leadership remains largely supportive. Against this background, supply has responded, but insufficiently - Africa’s food import bill has risen steeply, by $30bn over the past 20 years (figure 2.4). Many of these imports could be competitively produced domestically, although climate change and resurging conflict also pose challenges. Yet, the expected climatic changes are not unequivocally detrimental. Maize yields, for example, are predicted to increase in the Sahel and many parts of eastern and central Africa. And agriculture plays an important role in the prevention of conflict - which often finds its origins in climate-related agricultural shocks - as well as in the recovery of fragile states.

Underway, in Arusha: EAC Sectoral Council of Ministers responsible for EAC Affairs and Planning

The SCMEACP will consider the report on implementation of previous decisions of the SCMEACP; a progress on the status of implementation of the EAC Common Market; status of EAC integration (2000 – 2017); consideration of the global and sector-specific priorities for the FY 2020/21; terms of reference for the formulation of the 6th EAC development strategy (2021/22 – 2025/26); the report of the meeting of Chiefs of Immigration and Directors of Labor; and the status of Partner States’ contributions to the EAC budget; and progress on COMESA-EAC-SADC tripartite free trade area negotiations. [Posted: EAC Gazette 2 October, 4 October]

Paul Nugent: The Noepe-Akanu joint border post revisited

I was present for the inauguration of the Joint Border Post (elsewhere known as a One-Stop Border Post) by President Mahama of Ghana and President Faure Togo back in November 2014. The buildings lay empty until October 2018 when it was formally opened for business the mismatch between the grand vision of regional integration, as articulated at the ECOWAS level, and the perceived interests of member states who often have other priorities: [Tanzania and Zambia’s new $6m border post to boost trade]

Here is how the Ghana Exports Promotion Authority intends to reduce the impact of how Nigeria’s border closure (Pulse)

According to the Deputy CEO of GEPA, Albert Kassim Diwura said to address this issue he believes the African Continental Free Trade Area is the way to go. He said “it has always been like that but it is now well pronounced…the bigger weights will always like to bulldoze their way and this is why I think that AfCTA is the way to go. For us, it is just wise that we position ourselves strategically, follow all due protocols and take advantage. The standards must be met and definitely, once they have signed unto the AfCFTA, all these problems will be solved,” he added. [Nigeria shuts trade borders:here’s why GUTA is complaining]

Nigeria: President Buhari’s 2020 budget presentation (Pulse)

The 2020-2022 MTEF and Fiscal Strategy Paper set out the parameters for the 2020 Budget. We have adopted a conservative oil price benchmark of $57 per barrel, daily oil production estimate of 2.18 mbpd and an exchange rate of N305 per US Dollar for 2020. We expect enhanced real GDP growth of 2.93% in 2020, driven largely by non-oil output, as economic diversification accelerates, and the enabling business environment improves. However, inflation is expected to remain slightly above single digits in 2020. Accompanying the 2020 Budget Proposal is a Finance Bill for your kind consideration and passage into law. This Finance Bill has five strategic objectives, in terms of achieving incremental, but necessary, changes to our fiscal laws. These objectives are: Promoting fiscal equity by mitigating instances of regressive taxation; Reforming domestic tax laws to align with global best practices; Introducing tax incentives for investments in infrastructure and capital markets; Supporting Micro, Small and Medium-sized businesses in line with our Ease of Doing Business reforms; Raising revenues for government. [Buhari: World Bank, IMF, others ‘publishing inaccurate data about Nigeria’

25th Nigerian Economic Summit: keynote address by Atedo Peterside

Before going into prescriptions it is important to update this audience about the current structure of the Nigerian economy, which is significantly different from what prevailed in 1993 in 5 important areas: Over 50% of our GDP now comes from the services sector; Inward diaspora remittances now eclipse the oil and gas sector as the number one source of forex for Nigeria; Our ICT sector’s GDP contribution has since outgrown the oil and gas sector share of GDP and so it should be heralded and nurtured instead of being attacked by rogue regulators as has become fashionable; The split of aggregate demand between the Private Sector and the Government Sector (all 3 tiers) is now 91.5%/8.5%; In 2018, Nigeria’ Foreign Direct Investment inflows slipped behind Ghana’s for the first time.

We cannot afford to approach the next 25 years by repeating the errors of the last 25 years. The shared responsibility includes getting the elite to become less insular or less sycophantic and to learn to speak truth to power. The recently appointed Economic Policy Advisory team is a step in the right direction by FG. Their job will be made a lot easier if this Summit can help establish an elite consensus on the unfinished business that is still holding us back from building and sustaining a strong economic future for Nigeria. [Related NES updates: President Buhari’s remarks; Key highlights, Adoption of global standards key to maximising benefits of AFCTA, says Ecobank MD]

Nigeria and the IMF: IMF staff statement. Spurred by one-off increases in imports, the current account turned into a deficit in the first half of 2019 after three years of surpluses. Gross international reserves have fallen to below $42bn at end-August 2019, mainly reflecting a decline in foreign holdings of short-term securities and equity. The exchange rate in various windows remained stable, helped by steady sales of foreign exchange by the Central Bank of Nigeria. Carryover from 2018 to 2019 helped increase public investment spending in the first half of 2019, but revenue underperformed significantly relative to the budget target in the first half of 2019. Over-optimistic revenue projections have led to higher financing needs than initially envisaged, resulting in overreliance on expensive borrowing from the CBN to finance the fiscal deficit. Federal Government interest payments continue to absorb more than half of revenues in 2019. The outlook under current policies remains challenging.

Uganda and the IMF:IMF staff statement. After last year’s strong performance in domestic revenue collection, execution of the current budget (fiscal year 2019/20) is challenging. Delays in the implementation of some revenue measures and shortfalls in non-tax revenues are likely to widen the overall fiscal deficit. The authorities need to adopt measures of around 1 percent of GDP to safeguard their budget targets and prevent a recurrence of domestic arrears. The government’s medium-term fiscal policy framework rests on the assumptions that oil sector investments proceed as planned, implementation of the domestic revenue mobilization strategy yields ½ percent of GDP in additional revenue collection per year, and the government achieves improvements in public investment management, in particular in project selection, planning, and execution, to ensure that infrastructure investment yields the envisaged growth dividend.

Tanzania: Gold export earnings up 25% in year to August – central bank (Reuters)

Gold exports fetched $1.91bn in the year ending 31 August, up from $1.53bn the previous year. “Gold export rose by 25.1%, driven by volume, and accounted for more than half of non-traditional exports,” the Bank of Tanzania said in its latest monthly economic report (pdf). It did not give figures for export volumes.

Botswana forecasts slower GDP growth, wider deficit this year (Reuters)

Gross domestic product growth in the diamond-producing southern African nation is projected to slow down to 4.3% in 2019, from 4.5% last year, deputy finance secretary Kelapile Ndobano said. Economic growth is later projected to pick up to 4.6% in 2020, supported by ongoing structural reforms aimed at diversifying the economy, he said. “The medium term growth outlook remains positive,” Ndobano told a budget conference. “The non-mining sector, particularly services, will drive growth, signalling that our economy is now more diversified as diamonds are no longer the biggest contributor to growth.” Botswana’s diamond sales fell 16% in the second quarter of 2019, Ndobano said. Debswana, a partnership between Anglo American’s De Beers and Botswana, reported that production fell by 9% to 5.7 million carats in the second quarter.

West Africa Fertilizer Financing Forum: outcomes (AfDB)

A major outcome of the forum was the signing of a MoU between the West Africa Fertilizer Association and ECOWAS. The agreement aims to strengthen the fertilizer value chain in West Africa and set the scene for the implementation of the regional agenda on sustainable agriculture. Financing remains one of the missing links for a robust agricultural value chain in West Africa, participants said. They also pointed out that fertilizer suppliers and distributors are facing several challenges when it comes to accessing financing through commercial banks and other financial institutions. The challenges include limited working capital, a low equity base and lack of trust. Major regional commercial banks attending the meeting expressed their interest in risk-sharing facilities and said stronger collaboration with fertilizer suppliers is needed to facilitate bank access to relevant financial information. Bank representatives also suggested increased working relationships with small and medium fertilizer suppliers and distributors from the West Africa Fertilizer Association in order to boost trade credit with guarantees from the Africa Fertilizer Financing Mechanism.

India’s proposal to tax global digital platforms gets a boost (Mint)

India and South Africa received a boost to their campaign at the WTO against the current moratorium on customs duties on electronic transmissions, after a proposal to advance international negotiations for taxing global digital platforms and digital services was presented on Wednesday at the Paris-based Organisation for Economic Co-operation and Development. OECD’s proposal (pdf) seeks to “re-allocate some profits and corresponding taxing rights to countries and jurisdictions where MNEs (multinational enterprises) have their markets”. “We’re making real progress to address the tax challenges arising from digitalization of the economy, and to continue advancing toward a consensus-based solution to overhaul the rules-based international tax system by 2020,” said Ángel Gurría, OECD’s secretary general. [Note: The new OECD proposal brings together common elements of three competing proposals from member countries, and is based on the work of the OECD/G20 Inclusive Framework on BEPS, which groups 134 countries and jurisdictions on an equal footing, for multilateral negotiation of international tax rules, making them fit for purpose for the global economy of the 21st Century.]

Today’s Quick Links:

Follow debates at the WTO’s Public Forum 2019: Audio recordings of completed sessions; CUTS’ Bulletin No 1, No 2

Commonwealth Trade Ministers Meeting: comments by UK’s International Trade Secretary, Liz Truss

High-level panel highlights urgent need for WTO deal to limit harmful fisheries subsidies

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