tralac’s Daily News Selection
(i) Africa’s money for African development: A future beyond aid (7 November, Accra). The event is part of series of high-level meetings to be held by the senior management team of UNDP in Africa, dubbed the UNDP Africa Cluster Meeting. Discussions will focus on the future of development in Africa and how to capitalize on the implementation of the AfCFTA, as well as opportunities emerging from the Fourth Industrial Revolution.
(ii) SADC Ministers of Health, HIV and AIDS (7 November, Dar es Salaam)
Africa's Development Dynamics 2019: achieving productive transformation (AUC, OECD Development Centre)
Without bold policy changes, most African businesses may not be ready for reaping the benefits of the AfCFTA which is projected to offer African firms the new opportunities of a 1.2 billion consumers strong continental market. Africa's Development Dynamics 2019, released today, shows that Africa’s expanding domestic markets offer great opportunities for transforming production systems across the continent. Africa recorded 4.6% annual GDP growth between 2000 and 2018; with domestic demand accounting for 69% of it. The continent’s growth is projected at 3.6% in 2019 and should remain robust at 3.9% between 2020 and 2023. The regional demand for processed food has been growing 1.5 times faster than the global average. Large Pan-African firms and some dynamic start-ups are seizing these opportunities to grow, as highlighted in the report. However, the report finds that Africa needs more dynamic enterprises to turn these opportunities into higher profits, more investment and new, decent jobs.
This is especially true of small and medium enterprises in employment-intensive sectors. Firms fail to tap the growth in neighbouring markets: exports of consumption goods to other African markets decreased from 0.8% of Africa’s GDP in 2009 to 0.5% in 2016. Currently, most African firms are losing out to new competitors both at home and in emerging markets. Only 18% of Africa’s new exporters survive beyond three years. Productivity is not catching up. Since 2000, Africa’s average labour productivity has stagnated at around 12% of US levels. The Africa-to-Asia labour productivity ratio has decreased from 67% in 2000 to 50% in 2018.
AfDD 2019 puts forward a systemic approach to productive transformation by focusing on three sets of policies. Develop effective clusters of firms, by providing them with business services that improve specialisation in niches, reinforce linkages between the most productive ones and the others, and address skill shortages. Encourage the creation of regional production networks to generate economies of scale between African countries, attract new investors, develop complementarities within the value chains, and avoid a competitiveness race to the bottom. Enhance firms’ abilities to thrive in new markets. Policies can provide extra support to exporters by removing non-tariff barriers to the continental trade, simplifying administrative procedures and custom services, and improving connective infrastructure - especially flights, roads and ports.
The Federal Government has listed five conditions for reopening of the country’s land borders for goods importation from neighbouring countries. As one of the conditions, the Federal Government said Nigeria would not accept imported goods that were repackaged by neigbouring countries and brought to Nigeria. It said the conditions which would be presented to Benin and Niger Republic in two weeks, must be met before the Nigerian land borders would be re-opened. The Minister of Foreign Affairs, Geoffrey Onyeama, disclosed this during the meeting of the Inter-Ministerial Committee on the Temporary Partial Closure of Land Borders in Abuja on Monday. He insisted that neighbouring countries must respect ECOWAS ‘rules of origin’ if they must bring goods into the country. The preconditions for both goods and humans coming into the country, however, applied to all ECOWAS member states. Onyeama said that goods imported for the Nigerian market must be escorted directly from the port of member states to the nation’s land borders. These conditions, the minister said, would be presented to Benin and Niger Republic at a tripartite meeting scheduled for next two weeks in Nigeria. He also said that the only travel document allowed for anybody coming into the country through the land borders is the passports, stressing that the country would not accept any other documents such as the identity card.
Olu Fasan: Nigeria is trampling upon the world legal order (BusinessDay)
Of course, at the heart of all this is Nigeria’s determination to pursue its own development agenda without international constraints. But the truth is that it could do this without breaching international rules by legally using any of the several safeguard and escape provisions in WTO law. For instance, Nigeria could invoke Article VXIII that allows “governmental assistance to economic development”, including supporting infant industries, or the emergency safeguards provisions under Article XIX if it felt too much imports were damaging its domestic industries. Nigeria could invoke these provisions provided it negotiates with other WTO members with a substantial trade interest and offers acceptable concessions to them. What’s more, Nigeria could justify the closure of its borders on the ground of curbing smuggling or customs enforcement under Article XX or on the ground of national security under Article XXI, provided the border closure does not constitute “a disguised restriction on international trade”.
But everyone knows that the underlying reason for the border closure was not smuggling or national security concerns, but the protection of local industries, and, thus, it’s a disguised restriction on international trade! Truth is, Nigeria’s deep-seated protectionism is not compatible with its international legal commitments. It would have to decide whether to comply with its international obligations, legally invoke the escape provisions in international trade agreements or withdraw from them altogether. It cannot continue to trample on international rule of law. The border closure, apart from its economic and social costs, has done further damage to Nigeria’s already battered reputation for utter disregard for international rule of law.
(i) Ambassador Dan Kazungu (Kenya’s High Commissioner to Tanzania): Full implementation of the Single Customs Territory, Harmonization of the legal and regulatory framework in the EAC.
(ii) Kenyan ambassador John Mutinda Mutiso: Need to embrace East African identity, Need to address institutional memory challenges, Kiswahili as a local regional dialect, Benchmarking against best performers in trade and investment promotion, such as ASEAN, Continuous dialogue on how NTBs can be resolved, EABC to consider the establishment of a diplomatic interface desk to ensure a sustainable partnership.
Building the capacity of the private sector to engage in the oil and gas industry will boost local skills development, job creation and inclusive economic development. There is little doubt that small and medium size enterprises form an integral part of socio-economic transformation; and so, their engagement in the nascent petroleum sector is imperative. SMEs, for instance, contribute about 27% to Tanzania’s GDP. In Uganda, SMEs account for about 18% of the GDP and 99% of Ugandan businesses. In Kenya, SMEs’ contribution to the GDP stands at about 33.8%. In the larger part of the EAC region, SMEs represent the biggest part of all registered enterprises in nearly all activities, averaging 60% in number or 90%, if micro enterprises are also included. It should however be noted that oil and gas is a new resource in East Africa, and that SMEs lack adequate capability to effectively compete for contracts in the sector.
The paper comprises four sections. Section One provides a general background and context to the oil and gas sector in Kenya and Uganda, the oil and gas value chain, potential business opportunities for SMEs, and key milestones in SME participation in Kenya and Uganda. Section Two examines the SME legal and policy framework in both countries, including regional instruments that seek to promote SME development and the ease of doing business, general and country-specific constraints to effective SME participation in the petroleum sector, as well as the challenges and opportunities for women and youth enterprises. The paper ends with a conclusion highlighting some of the key issues relating to SME participation in the oil and gas sector in Kenya and Uganda. [The companion country policy briefs: Kenya, Uganda]
Investment climate in South Africa: discussion paper (pdf, EU Chamber)
This paper has been prepared for the Southern Africa Europe CEO Dialogue 2019 (Ambrosetti Forum) and the South Africa Investment Conference 2019. The paper analyses the status of the investment climate and conditions of doing business from the angle of EU companies operating in South Africa as well as prospective investors. This paper identifies five key investment climate issues where strategic policy recommendations are proposed.
In recent years, GDP growth has averaged 2%, but fiscal and macroeconomic imbalances have built up. Since 2016, rising government spending and low revenue from SACU have widened the fiscal deficit. Public debt has increased, domestic arrears have accumulated, and international reserves have declined. Absent policy action, the economic outlook remains fragile. In 2019, growth is projected to decelerate to around 1%. In a scenario with no policy action, IMF staff expect the fiscal deficit to remain large and domestic arrears to accumulate, weighing on the economic outlook. Growth would remain subdued over the medium term as fiscal imbalances persist and the private sector remains hamstrung. Downside risks to this outlook include lower SACU revenue and possible fiscal slippages. Eswatini’s key challenges are to implement fiscal adjustment measures to reduce the fiscal deficit and stabilize public debt, and roll out structural and governance reforms to boost long-term growth and reduce poverty and unemployment.
Ambassador Lin Songtian: Sharing development opportunities through opening up (IOL)
As South Africa hosts the second Investment Conference (5-7 November, Johannesburg), the second China International Import Expo (CIIE) will be held in Shanghai (5-7 November). These two grand events not only are a coincidence of timing, but also highlight that China and South Africa, as two major emerging markets, firmly support trade liberalization and economic globalization, and demonstrate our two countries’ solemn commitment and concrete actions to open up our markets to the world. As a pioneering undertaking in the history of international trade, the CIIE is the world’s first ever state-level import expo. The first CIIE held in Shanghai in 2018 achieved great success, reaching deals worth of $57.8bn. Its unprecedentedly large scale, high-end expo and fruitful outcomes have been universally acknowledged by the international community.
New WEF reports:
(i) World Economic Forum Global Future Council on Infrastructure: "Infrastructure is far from being a staid industry devoid of innovation – indeed, new technologies and ideas are flourishing. Integrating these innovations, which could change the way infrastructure is designed, developed and delivered, requires aligning stakeholders, implementing effective strategies and creating fertile enabling environments. This will allow existing innovation into the space and provide opportunities for new ideas. The Council thus decided to create a guidebook, contained here (pdf), that explores major questions about how to bring the Fourth Industrial Revolution to infrastructure."
(ii) Policy Pathways for the New Economy: "Implications for governments on future paths for policy-making in three important and interrelated areas are developed in this White Paper (pdf): The future of innovation policy: How does innovation policy need to evolve to ensure more productive and inclusive economies? The future of labour policy: How must labour policy be updated for the new world of work? The future of fiscal policy: How will approaches to taxation and government spending have to adapt to the transformation of labour and product markets?"