Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: CCTTFA

Digitising logistics in Africa (Briter Bridges)

Progressively more businesses operating in African markets are adopting digital solutions to monitor their supply chain or broaden their core business. This applies to startups and large, established corporations such as DHL, who recently ventured into the e-commerce space. The 120+ companies showcased in this report (pdf) reflect the sense of optimism that is being detected across the logistics sector, as investors and businesses begin acknowledging that the digitisation wave in Africa is nothing short of an extension of the increase in connectivity worldwide and the increasing affordability of mobile technology across the continent. In this sense, the improved connectivity in Africa represents a key factor towards the integration of the continent’s supply chains into the global market. Although traditional carriers still vastly dominate the logistics industry, technology-enabled services, from delivery apps to warehousing management platforms, are becoming increasingly popular in the sector for the simple fact that they improve service efficiency by crowding out intermediaries, cutting burdensome operational processes, and optimising supply chains. The survey reveals that 80% of the companies were founded in 2016 or later, and 2019 has so far been the year seeing the highest levels of investment in the sector.

Wider economic benefits of transport corridors: evidence from international development organizations (World Bank)

This paper collects meta data on transport corridor projects financed by the Asian Development Bank, Japan International Cooperation Agency, and World Bank and links them to one important wider economic benefit - local economic activity. The meta data cover 47 projects in 16 countries, with appraisal dates between 1991 and 2007. The analysis focuses on answering three main questions (pdf). Which design and implementation characteristics of transport corridors made them more successful in generating wider economic benefits (WEBs)? Which country contexts helped spur local economic activity and generate WEBs? Which complementary policies and institutions - such as development policy reforms - can help ensure and amplify WEBs? [Note: The data set is comprised of projects from 16 countries, namely, Argentina, Bolivia, Cambodia, China, India, Kazakhstan, the Lao People’s Democratic Republic, Mali, Morocco, Mozambique, Nicaragua, Romania, Serbia, Tunisia, Uzbekistan, and Vietnam]

2019 Africa Investment Forum: updates

  1. AfDB, EU reaffirm partnership, ambition to de-risk business environment, create jobs. Collaboration between the two institutions would focus on de-risking the business environment in Africa, providing equity, guarantees and other types of non-grant support, AfDB President Akinwumi and EU Commissioner Neven Mimica said at a news conference held on the sidelines of the Africa Investment Forum. Both men stressed the central role of investment in the transformation of Africa. Mimica said the EU whose goal is to move from billions to trillions in investment over the next decade, was encouraged by the Bank’s recent capital increase. “The Bank is our strategic partner – it important that it is well capitalized,” Mimica said. The parties spoke on several areas of joint collaboration, including EU commitment for investments in Africa and its role as a major partner of the Africa Investment Forum. Mimica said the EU would be supporting risk-sharing guarantees of 70 million euros set to unlock hundreds of millions and creating 175,000 jobs. Supporting investments in job creation in alliance with Africa over the next 5 years, the EU would disburse 60 billion euros in one of the largest guarantee funds created, creating 10 million jobs. The EU also took a tranche of risk in Room2Run, the African Development Bank and partners’ innovative $1 billion synthetic securitization of a portfolio of seasoned African Development Bank private sector loans.

  2. Africa-Europe Alliance: two new financial guarantees under the EU External Investment Plan. Today in the margins of the 2019 Africa Investment Forum, the European Commission signed two guarantee agreements with two member states’ development finance institution: the Dutch ‘Financierings-Maatschappij voor Ontwikkelingslanden N.V’ (FMO) and the Italian ‘Cassa Depositi e Prestiti’ (CDP). These guarantee agreements are part of the implementation of the EU External Investment Plan, the financial arm of the Africa-Europe Alliance for Sustainable Investment and Jobs. Commissioner for International Cooperation and Development, Neven Mimica said: “The agreements signed today, worth €70 million, will help us to unlock more than €500 million in new investment in Africa and the EU Neighbourhood. These guarantees aim at mitigating and sharing the risk with other private investors in countries where otherwise these investments would not be as attractive. They will help to boost access to finance for small businesses, notably in the tech sector – and create up to 175,000 jobs directly and indirectly.” The two guarantees will significantly boost investment and access to finance for small businesses, especially in the technology sector, in the countries covered by the Plan.

  3. Estimating investment needs for the power sector in Africa 2016-2025. How much investment is needed to realize the AfDB’s New Deal on Energy for Africa? This is the overriding question that is thoroughly analyzed from the bottom-up for 54 countries in Africa, covering generation, inter-connectors, transmission and distribution (T&D), mini-grids and off-grid access options. Underlying the analysis is an unprecedented collection of data, high-resolution regional power investment optimization and a tailor-made access expansion model for the continent. The answer to this question is an average annual investment of $29bn-$39bn until 2025, depending on the continent’s ambition as to avoided greenhouse gas (GHG) emissions. In total, $230bn-$310bn is required until 2025, while an additional $190bn-$215bn is required for the period 2026-2030. The total average annual investment from 2018 to 2030 is estimated at $32bn-$40bn.

IMF statements on Rwanda, Mozambique, Lesotho

  1. Rwanda: Economic activity outpaced expectations in the first half of 2019, with real GDP growing by 10.3%, based on a pronounced increase in construction and services activity. The uptick in construction reflects both public infrastructure projects and private investment. Growth is projected to remain strong, at around 8$, over the next 2-3 years.

  2. Mozambique: The outlook for 2020 is for a strong rebound in economic activity and low inflation. Real GDP growth is projected to reach 5½% in 2020, from 2.1% projected for 2019, supported by post-cyclones reconstruction efforts, a recovery in agriculture, and economic stimulus from further gradual easing of monetary conditions and clearing of domestic payments arrears to suppliers. Construction and other activities should also be boosted by investments in the liquefied natural gas megaprojects. Inflation is projected to remain low, increasing slightly to 5% at end-2020, from 3% at end-2019.

  3. Lesotho: While the authorities’ efforts to maintain economic stability have ensured that international reserves remain at adequate levels, Lesotho continues to face challenges in adjusting to a context of lower SACU revenues. With sluggish growth limiting the potential for domestic tax receipts, an improved outlook for government finances will require strong policy actions on spending. In this context, effective expenditure controls, including careful vetting of new projects and their financing, will be more important than ever. The constrained environment for government finances implies a need to keep public sector wages in check until such time as efforts to increase the size of the economy through private-sector driven growth can bear fruit.

President Cyril Ramaphosa: Remarks on the AfCFTA during a reception for African Ambassadors accredited to Brazil (GCIS)

We are meeting today as we begin the countdown to the launch of the AfCFTA. In addition to its economic impact, the AfCFTA will have far-reaching political, social, physical and international effects. On the economic front, it will improve access to existing markets and lead to the creation of new ones. The free flow of goods and services will enable African businesses and entrepreneurs to expand their horizons and unleash the industrial capability of the continent. The removal of trade barriers will lower prices and benefit consumers. Business costs will be reduced and business efficiency will be raised. On the political front, the AfCFTA will help to consolidate the union among all African states and reduce the potential for conflict. From a social perspective, it is likely to result in a more cosmopolitan Africa as the greater movement of people and skills brings more people of diverse backgrounds and nationalities together. As African countries become more connected to each other through highways and railway lines, through regional power grids and water infrastructure, the continent will undergo a infrastructural transformation. The AfCFTA will also have a broader international impact as Africa will be able to deal with other trade blocs from a position of greater strength, able to demonstrate economies of scale. As the incoming chair of the African Union next year, South Africa will put great emphasis on giving effect to the agreement on the AfCFTA.

BRICS Business Forum: updates

  1. BRICS business leaders call for stronger economic cooperation. Business leaders from the BRICS bloc of emerging economies on Wednesday called for stronger integration among member countries to deepen economic cooperation amid rising protectionism. Integration “is a necessity and a historic trend, and there is no way to stop it,” Xu Lirong, a Chinese member of the BRICS Business Council, said at this year’s BRICS business forum. “Two-thirds of global production is chain (production) with integrated economies. We are at a new stage of the industrial revolution, with new companies, and right now we are seeing major changes,” said Xu. Xu suggested that BRICS, which groups Brazil, Russia, India, China and South Africa, should adopt a new scheme of economic cooperation, so that member countries “can upgrade their economies,” especially as “the old multilateral practices are under threat.”

  2. Busi Mabuza: Expanding SA’s economic profile is the business of BRICS Summit. Before last week’s second presidential investment conference and this week’s BRICS Summit and the African Development Bank’s Africa Investment Conference, the Industrial Development Corporation and Invest SA prepared a very detailed booklet, The Case for Investing in SA - Accelerating Economic Growth By Building Partnerships (pdf) - outlining the case for investing in SA. It provides an extensive list of available investment incentives and where these opportunities are. We have circulated an electronic copy of the booklet to all the partner secretariats of India, Brazil, China and Russia, and given copies to all the 850 business delegates to the BRICS Business Forum today. These are just not high-level opportunities. These are specific bankable projects. [Note: The author is the chairperson of the IDC and chairs the SA chapter of the BRICS Business Council]

  3. India, China meet at BRICS: New panel for trade deficit should meet early. India and China have agreed that a new committee, headed by senior ministers and set up to discuss ways to pare the $53-billion trade deficit between the two countries, should meet at an early date. This was one of the outcomes of the meeting held between Prime Minister Narendra Modi and Chinese President Xi Jinping in Brasilia on Wednesday. According to a person familiar with the development, Hu and Sitharaman could explore a bilateral understanding on an auto-trigger mechanism coming into effect if imports from China surge beyond a point. Hu and Sitharaman could also discuss India’s concerns on rules of origin such as Chinese goods making their way into India through a third country.

Andrew Green: Germany’s €1B push into Africa  (Devex)

Five years ago, Europe’s “migration crisis” vaulted German policy toward Africa to the top of Chancellor Angela Merkel’s development agenda. While her coalition government agreed Germany needed a development policy that would help stem the flow of people from African countries to Europe, her cabinet struggled to agree on what that policy might look like. This year, as the government began rolling out programs under its €1bn ($1.1bn) Development Investment Fund for Africa, Germany’s development strategy for the continent is finally coming into focus — and it looks a lot like private sector growth. Most of the fund is dedicated to easing the entrance of German businesses into African markets or helping African businesses grow. Details are still scant on AfricaGrow, which will be administered by Germany’s flagship development bank, Kreditanstalt für Wiederaufbau. A BMZ spokesperson told Devex it will launch before the end of November with a focus on funding initiatives with high-growth potential and an export focus, and that there will be no prioritized industries. AfricaConnect is much further along.

It’s all about trade and investment: Trump’s ambassador to South Africa, Lana Marks (Daily Maverick)

Marks also insisted that she saw no danger of South Africa being suspended or disqualified from the trade benefits of the African Growth and Opportunity Act. In 2016 the US provisionally and temporarily suspended some SA AGOA benefits - rescinding duty-free access to the US market on wine and fruit — because of import barriers on US poultry. Recently the threat has re-surfaced as the US trade representative announced in October 2019 a new review of South Africa’s AGOA benefits in response to a petition filed by the International Intellectual Property Alliance about South Africa’s poor protection and enforcement of copyrights. The IIPA - which represents the Motion Picture Association of America and other entertainment, software and publishing groups - has been reported in trade media as saying it had numerous concerns about South Africa’s copyright protection and enforcement regime. “No, it’s not a danger at all,” Marks said about the apparent threat of South Africa losing AGOA benefits. I just don’t see that happening with the current robust relationship, working so closely together. All our agencies working together in such a positive way. I just don’t see that being a problem at all.”

UNCTAD’s Investment, Enterprise and Development Commission concludes tomorrow. Download the presentation by James Zhan: Recent Global Investment Trends and Policies (pdf)


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