tralac’s Daily News Selection
Diarise: SheTrades Global (to be held in conjunction with the World Export Development Forum, 18-22 November, in Addis Ababa)
Themes that will be discussed include how free trade agreements catalyze more inclusive trade for women, with a spotlight on the AfCFTA, innovative tools that promote trade and women’s economic empowerment such as the SheTrades Outlook; and priorities that SheTrades private sector partners are acting upon. SheTrades Global will be preceded by two days of closed workshops where women’s business associations will discuss how the AfCFTA can deliver economic opportunities for women. In addition, key SheTrades partners will discuss business models to deliver together on shared goals.
South African exports to the US - worth some R35bn last year - will be at stake when the Office of the United States Trade Representative launches a review of SA's eligibility for duty-free imports under the US system known as the Generalized System of Preferences (GSP). The US federal government announced plans for the review on Friday. The exports threatened include – but go beyond – exports to America under the African Growth and Opportunity Act. AGOA exports are predicated on participating African countries being eligible under GSP rules, the US embassy in Pretoria's spokesperson Robert Mearkle told Business Insider South Africa on Sunday. That implies that should a review end in South Africa being ejected from the GSP, it will automatically be ejected from AGOA too.
"US imports from South Africa under GSP and AGOA equaled a combined total of $2.379bn in 2018," Mearkle said. That is the equivalent of R34.8bn. All those exports will not necessarily halt if they can no longer be sold in the USA duty-free, but they will become price-uncompetitive if any other countries can sell the same items while still benefiting from AGOA, or the broader GSP. "During the review, there will no change to GSP participation or to benefits under the African Growth and Opportunity Act. The government of South Africa will have the opportunity to participate in the review process," said Mearkle. [USTR statement: USTR announces GSP enforcement actions and successes for seven countries]
Simplice A. Asongu: Can a West African currency union work? (Project Syndicate)
After all, the France-backed currency, which is currently pegged to the euro, offers significant advantages, including exchange-rate stability and lower interest rates. Members of the West African CFA franc currency union might not want to risk these benefits by joining an unproven currency union with countries that have a history of high interest and inflation rates. And France itself has an interest in the CFA franc countries’ rejection of the ECO, because they deposit half of their foreign reserves in the French treasury. Despite these formidable challenges, there are reasons to be optimistic about the ECO – beginning with its potential to accelerate regional integration. A successful ECOWAS currency union would likely spur progress on the proposed East and Southern African Monetary Zones. This would go a long way toward advancing progress on the ambitious African Continental Free Trade Area. The eurozone’s experience showed how unruly currency unions can be, and how important it is to continue experimenting and adapting. An ECOWAS union will be no different. But if member countries commit to making it work, the ECO could be a boon to regional – and continental – growth and development. [Note: The author is lead economist and Director of the African Governance and Development Institute]
Services at the Inter-governmental Authority on Development could be crippled following a stalemate on who becomes chief executive officer and chairman of the bloc. Normally a calm organisation focusing on Horn of Africa’s political scene, members seeking to lead Igad for the first time since its formation in 1996 are agitated. The spark occurred 10 days ago when Ethiopian Prime Minister Abiy Ahmed, the current chairman, appointed his former Foreign Minister Workneh Gebeyehu as the executive secretary. Workneh is supposed to take office on November 1, according to details contained in the appointment a letter. Member states complain that the decision did not follow laid down procedures. Ethiopia has chaired IGAD since 2010 when Kenyan President Mwai Kibaki handed the mantle to PM Meles Zenawi. Zenawi died in 2012 but the chairmanship has continuously been held by his successors Hailemariam Desalegn and now Abiy Ahmed, despite it being rotational. In fairness, there were no complaints before, probably because those interested now had other targets. A Somali diplomat told the Nation that the rotation policy “seems to have been discarded years ago”. IGAD bureaucrats, however, told the Nation that there are no wrangles but “competition”.
EAPP Regional Power Market Trade Project: project appraisal report on capacity building issues (AfDB)
The Capacity Building for the Operationalization of the EAPP Regional Power Market Trade Project will provide support to EAPP to establish the regional power market trade in Eastern Africa, thereby improving access to reliable, clean and affordable electricity in the Region. The key output is finalization of shadow market operations, i.e. power market modelling and simulation of the existing bilateral trade, which is a final step in the transition to real market trade. The second output is the full establishment of the EAPP Market Committee, with capacity in regional power market development. The Project will also support the harmonization of regulatory framework for power trading, such as wheeling arrangements to facilitate cross-country power trade. It will also enable the integration of the EAPP and the Southern Africa Power Pool, thereby creating the largest power market anywhere in the world, spanning from Cape Town in South Africa to as far North as Egypt and Libya. This will greatly ease the challenges of access to clean, affordable and reliable energy by enabling countries that will generate surplus power, such as Ethiopia, Kenya and others, to share with those in deficit.
Rwanda: Why government has mixed feeling over Doing Business Ranking (New Times)
However, despite the reforms and progress, the report ranked Rwanda 38th globally from 29th in its previous ranking. The drop was traced to an indicator, protecting minority investors, where Rwanda was placed 114th globally from 14th in the previous report. The drop in ranking was however not a result of performance but a change in the methodology and approach of measurement. It is this review of the methodology and approach in the process of compilation of the report that led government officials to receive it with mixed feelings. Among the changes made by the World Bank in the evaluation of the indicator was the late addition of assessment of the stock market performance as part of the sub-indicators in the report. According to the latest ranking, for an economy to be seen as having an active stock market that protects minority investors, it has to show at least 10 companies listed and trading equities. Rwanda’s grievances with the review were that it was not communicated as is the standard practice of the World Bank Doing Business Report ranking methodology. [New Times editorial comment: Doing Business report is about results and not ranking]
Madagascar Economic Update: new start? (World Bank)
Growth continued apace in 2019, although moderating slightly to an estimated 4.7%, according to Madagascar’s latest Economic Update. The report highlights two main decelerating factors: export revenues and industrial activity were adversely affected by a significant deceleration in major export markets, and execution of public spending was slow in the first half of the year, as the new government took office following the presidential election at the end of 2018. A post-election rebound in public and private investments is expected to raise growth to 5.3% in 2020, offsetting the impact of softening activity in China, Europe, and the United States. However, risks to the outlook have intensified due to the international context and the potential for higher and more inclusive growth continues to be held back by inadequate infrastructures, low human capital, and weak governance. Extract: Trade and balance of payment (pdf): Weakening export revenues and sustained imports were reflected in a deteriorating current account balance. In the first semester, the current account recorded a deficit of $220.4m, compared to a surplus of $213.9m in the first semester of 2018. The shift mainly stems from a deceleration of export revenues, including from cash crops and nickel. In recent years, vanilla has been the main source of export receipts, supported by exceptionally high prices and robust demand. Both export quantities and unit prices, however, shrank in the first half of 2019. Despite vanilla being a key source of foreign exchange and income for Madagascar, gains are accruing to intermediaries and exporters, rather than to smallholders (see Chapter 3). Nickel is the second largest source of export revenues, and while export volumes continued to grow in the first semester, lower international prices on expectations of slowing demand from China and other major industrial economies have reduced export revenues there as well. [Related blog analysis, by Marc Stocker: Time to review costly tax exceptions in Madagascar]
Djibouti: 2019 Article IV Consultation (IMF)
Large-scale infrastructure investments and a rapid expansion of trade and logistics activities have fueled strong growth in recent years. The authorities’ development strategy aims at positioning Djibouti as a regional trade and logistics hub. Since 2014, the government has promoted investments in ports, free trade zones, a water pipeline, and a railway from Djibouti to Addis Ababa. Against this backdrop, real GDP growth averaged close to 7% during 2014-17, driven by buoyant trade and logistics activities. The latest national account and external sector statistics attest to the importance of these sectors in the economy. Supported by IMF and World Bank technical assistance, the authorities have overhauled their national accounts and international trade statistics to include new information on the activity of ports and FTZs (Annex I). Driven by higher value added in the trade and logistics sectors, nominal GDP was revised up by close to 38% relative to the last Article IV Consultation. Activity in the FTZs grew by about 10.5% during 2014–17, and now accounts for one-fifth of the economy. Exports and imports were also revised up significantly to account for the large re-exports out of the FTZs.
By 2050, Nigeria’s working-age population will have increased 125% (see figure 1). It is estimated 30 million additional jobs will be needed by 2030 to keep the employment to population ratios at current levels, let alone improving them. Even maintaining the assumption of an economic growth rate of 6% per year, only one in four Nigerians entering the labor market will be able to obtain good, wage-paying jobs in the formal sector. The World Bank is currently exploring where Nigerian job-seekers can be competitive in external labor markets, and which skills are in demand in both contexts. This analysis will allow Nigeria to craft a pathway that maximizes the benefits of migration to all parties, including by promoting development and combatting skills drain at home. As shown above, this model will benefit both countries, and promote sustainable economic development. To date, the number of workers involved in these projects is small, and we acknowledge that the model is unlikely to meet all demand, both in Nigeria and abroad. But it should be viewed as one tool which can be used to manage migration in a mutually beneficial way — a tool that is hitherto missing from the development community’s toolkit. The scale of the demographic shifts highlighted above means Nigeria, and key countries of destination, cannot wait until migration flows visibly increase to implement new legal labor migration pathways. Tools such as the Global Skill Partnership should be tested now, in a period of relative manageability, before the scale and pace of migration makes innovation difficult.
Kenya: Only 1 in 100 firms meets China rules for avocado export (Business Daily)
Only one firm out of over 100 has met the requirements laid down by the Chinese for export of avocados to the Asian country, six months after Nairobi and Beijing signed the deal. The deal agreed in April this year between President Uhuru Kenyatta and his Chinese counterpart Xi Jinping allowed Kenya to export frozen avocado to tame pests common with Kenyan fruits. The Government, through the Ministry of Trade, has started negotiations to have the directive eased and allow local firms to export fresh avocado as they work towards laying necessary infrastructure to meet the requirements. “The Ministry of Trade has opened negotiations with China over the matter and we expect a positive response,” said Ojepati Okesegere, chief executive officer of Fresh Producers Consortium of Kenya. [Kenyan bank mulls partnership with Chinese fintech firms]
When two elephants fight: Unstable relations between Nigeria and South Africa threaten the future of pan-African integration (IPS-Journal)
In the long term, the AfCFTA envisions a protocol on free movement of persons and seeks to establish a visa-free zone within member countries and an African Union passport. Given current tensions, however, any such common pan-African project looks to show little promise. And unless the respective governments and elites address their internal challenges and include civil society, labour organisations and the ever-growing informal sector in the debate on national development and wealth distribution, the AfCFTA with its neoliberal inclination will only make things worse. The aggressive expansion of big capital will prevail and intra-continental migration to the economic centres and megacities will increase. If left unregulated and unprotected, exploitation of and rivalry among the poorest are likely to continue their violent trend. Nationalistic sentiments and scapegoating of immigrants spread easily among the downtrodden. [A note on the authors: Ulrich Thum is Resident Representative of the Friedrich-Ebert-Stiftung office in Abuja; Bastian Schulz is the Director of the FES Trade Union Competence Centre for Sub-Saharan Africa based in Johannesburg]