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tralac’s Daily News Selection

tralac’s Daily News Selection

04 Dec 2019

Underway, in Dar es Salaam: Regional workshop on informal cross-border trade for empowerment of women, economic development and regional integration in Eastern and Southern Africa

Starting tomorrow, in Lagos: Nigeria's National AfCFTA Forum. The forum is co-organized with the UNECA, the EU, the Manufacturers Association of Nigeria, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, and in collaboration with the African Union Commission. 

Starting on Friday, in Addis Ababa: International Conference on China and Africa - jointly promoting sustainable development. Topics for discussion include (pdf): 

African Continental Free Trade Area: The promotion of industrial development and free trade, notably through the construction of Free Trade Zones, in line with AU Agenda 2063 flagship AfCFTA programme, which was officially launched by the AU in July 2019 and is set to be operational from July 2020, is of great relevance to Africa-China Cooperation. This session will focus discussions on Africa-China development cooperation in areas of trade promotion, including the AfCFTA.

Construction of the Road-Belt Initiative: The Belt and Road Initiative which is expected to connect China to 152 countries including a number of African countries is expect to enable greater infrastructure development and investments. Yet, the specifics of this initiative and its impact on African economies needs to be better understood by all actors involved and aligned and adapted to the development goals of the continent. This session will focus on sharing views from African and Chinese counterparts on the importance of this initiative and its relevance in the scope of the sustainable development.

The effects of Nigeria’s closed borders on informal trade with Benin (Brookings)

The informal sector throughout West Africa, and particularly in Benin, represents approximately 50% of GDP (70% in Benin, in fact) and 90% of employment. Unsurprisingly, informal cross-border trade (ICBT) is pervasive and has a long history given the region’s artificial and often porous borders, a long history of regional trade, weak border enforcement, corruption, and, perhaps most importantly, lack of coordination of economic policies among neighboring countries. Notably, ICBT takes several forms, not all of which are illegal: For example, trade in traditional agricultural products and livestock in bordering countries may involve little or no intent to deceive the authorities, as peasants and herders ignore artificial and un-policed borders.

The economic relationship between the two countries, both members of ECOWAS, is already asymmetric, with Nigeria exerting much more influence on Benin than vice versa. Given Nigeria’s larger population, economy, and natural resource wealth, Benin has adopted a strategy centered on being “entrepôt state,” i.e., serving as a trading hub, importing goods and re-exporting them legally but most often illegally to Nigeria, thus profiting from distortions in Nigeria’s economy. Benin’s dependence on Nigeria is not apparent from official trade statistics, as Benin’s reported trade with Nigeria accounted for only about 6% of Benin’s exports and 2% of Benin’s imports in 2015-17. These official statistics are very misleading, however, as they do not reflect the vast informal trade along the border.

Nigeria’s heavy dependence on oil and many dysfunctional economic policies have created an environment for ICBT between it and its neighbors, mainly Benin and Togo, to flourish. The wide gap between the official and black-market rates of the naira; Nigeria’s subsidized fuel prices; import barriers (Table 1); poor trade facilitation (Table 2); and Benin’s poor business climate have incentivized local traders to turn to the informal cross-border trade. [The authors: Stephen Golub, Ahmadou Aly Mbaye, Christina Golubski; Related analysis by Oxford Policy Management: Benin’s informal trading with Nigeria]

No date yet to reopen Nigeria’s borders, Buhari insists

Nigeria's border closure in national interest: Sanusi, Fayemi

Ethiopia is well positioned to become the textile and apparel manufacturing hub of Africa (ITC)

The International Trade Centre recently organized, under the Partnership for Investment and Growth in Africa project, a dialogue on Ethiopia’s potential to become the next textile and apparel supply base for the world. The discussion was organized in collaboration with the Ethiopian Investment Commission and the China Chamber of Commerce for Import and Export of Textile and Apparel. The event (19 November) gathered more than 100 international buyers, potential Chinese investors, representatives of Chinese and foreign-owned companies in Ethiopia and representatives of Ethiopian institutions. 

Mr Sileshi Lemma,  Director General of the Ethiopian Textile Industry Development Institute:  “Chinese investment has contributed to the growth of the sector through knowledge and technology transfer, closing local companies’ capital gap and opening up new markets, and the government is looking forward to working with more Chinese investors and international buyers to further develop the sector.” Underlining the magnitude of Chinese investment in Ethiopia, which makes up 60% of overall FDI in the country during the last two decades, Ambassador Tan Jian advised:  “The Ethiopian Government should focus on addressing the concerns of existing investors, because they will talk to other potential investors about the business environment and will influence their investment projects.”

Kenya: Technology is our best bet to end illicit trade (Business Daily)

The Kenya Revenue Authority is up in arms against illicit trade and contraband, fighting this menace through the roll-out of the Excisable Goods Management System (EGMS) on bottled water, juices, energy drinks and soda. EGMS went live on 13 November and stakeholders have been adequately prepared and educated through numerous sensitization and engagement fora. Issues raised at every engagement level have also been comprehensively and exhaustively addressed to ensure that all parties set off for the voyage in the same coach. The EGMS system was first rolled out in 2013 on tobacco, wines, spirits and beers through affixation of excise stamps on the products. The implementation of the EGMS system on these products has been beneficial, reflecting a positive impact on revenue collection. This implementation saw a significant improvement in collection in the sector within the financial year in which EGMS was implemented. Thanks to EGMS, excise revenues in this sector have risen from Sh700 million back then to more than Sh5.7 billion per month (excluding excise from airtime and financial services) currently. EGMS is a system for protection of excise tax revenue which comprises a secure excise stamp production and accounting with track and trace functionalities. It further supports the identification and interdiction of illicit products along the supply chain. [The author, Elizabeth Meyo, is the Commissioner for Domestic Taxes Department at the Kenya Revenue Authority] 

South Africa: SARS' attempt to shield SA from cheap Chinese imports dealt a blow (IOL)

In a judgment delivered last week at the North Gauteng High Court, Judge Neil Tuchten ordered the South African Revenue Service to release 11 containers belonging to Bedfordview-based Dragon Freight. SARS  had withheld the consignment after it arrived at the Durban harbour from China in September. Dragon Freight said in papers deposed at the court that SARS refused to release the containers even though they were cleared. The company said SARS  had maintained that it was withholding the clothes because they were too cheap compared to similar types of clothing found locally. Dragon Freight feared that SARS  would also confiscate 22 more containers that were still headed for the country. The group imports for shops operating in Chinese shopping centres around Johannesburg. 

Judge Tuchten ruled in favour of Dragon Freight largely on grounds that SARS did not dispute the urgency of the importer's court application. SARS  maintained before Judge Tuchten that the clothes were incorrectly invoiced, and expressed worry they would be sold too cheaply. Speaking to The Star ahead of Judge Tuchten's ruling, Dragon Freight's attorney Richard Meaden said it appeared SARS held the consignment as part of its drive targeting low-cost imported clothes. It would not come as a surprise if the state adopted stringent “anti-dumping” laws following this case, Meaden said.

South Africa: Impact of land expropriation without compensation on international law and treaties to which South Africa is a signatory (PMG)

The Department of Trade and Industry had been requested to brief the committee on South Africa’s international obligations in respect of the expropriation of land and the obligation to pay compensation when land was expropriated. The DTI had also been requested to explain what had been done to align South Africa’s international obligations with the developmental obligations contained in the Constitution. Extract from summary of presentation by Ambassador Xavier Carim (DDG: International Trade and Economic Development Division): 

Terminations of BITs formally commenced in 2013 but BITs contain what is referred to as a “survival clause”. Following formal termination, the already existing investment protected under those BITs continued for a period of time varying from 10 to 15 or 20 years.  14 BITs had been formally notified for termination, and the survival clause was in effect for 12 BITs. A New Investment Act was adopted in 2015 and a new Model BIT was developed in SADC. With respect to the matter of expropriation and compensation, the following was relevant: If land of a foreign investor is expropriated and that investor is a citizen of a country that has a BIT with South Africa (including where the survival clause is in effect), the affected investor would be in a position to invoke a legal challenge under the BIT against the Government if the investor were not satisfied by the amount of the compensation.

Three arbitrators under terms of International Settlement of Investment Disputes  would make a determination on the matter. While the outcome could not be predicted, arbitrators might take into account national legislation but their primary reference would be the terms of the BIT itself. On the question of compensation, past cases indicated that the standard has tended to be the “market value” of the investment immediately before the expropriation took place. The Government might face a challenge if the new legislation could be construed to impact negatively on the land value of a foreign investor. Some of the jurisprudence on investment treaties referenced a standard of “legitimate expectation” in respect to returns from investment. 

Ambassador Carim drew the Committee’s attention to the relevant eligibility requirement set out in the United States General System of Preferences. While that system did not constitute an international obligation for South Africa, it did set a standard to benefit from preferential access provided under the GSP to the US market. The relevant criterion reads: 

Stakeholders worry as Nigeria loses IMO council seat again (Guardian) 

For the fourth time, Nigeria has failed to clinch the coveted Category ‘C’ seat on the International Maritime Organization Council. This development, which apparently dampened the morale of stakeholders in the industry, would again deny Nigeria the pivotal role of contributing in taking key decisions in the global maritime space. Category C comprises countries, which have special interest in maritime transportation or navigation, and whose election to the IMO council will ensure the representation of all major geographic areas of the world. At an election held during the 31st Session of the IMO, Nigeria lost to Kenya by one vote in the Category C elections. Kenya got 111 votes to come 20th, while Nigeria got 110 votes to make 21st. Saudi Arabia got 106, Poland 101, and Liberia 100. However, Egypt, Morocco, South Africa, and Kenya retained their seats in the 20-member Category C of the IMO.

Effective division of labour between the AUC, RECS, Member States, RMs: TOR for the recruitment of a consultant (pdf, AU) 

In order to attain the above objective, the specific purpose of the study includes the following: Prepare a clear and an effective division of labour between the AU, RECs, Member States, Regional mechanisms based on the guiding principle of subsidiarity and based on their respective competencies; AU at continental level, RECs at regional level and Member States at national level. These three levels should work in synergy to address the same issue in a very coordinated manner with clear alignments and timeframes. The work should also take into consideration the following aspects: Policy planning and formulation; Policy adoption; Implementation; Monitoring & evaluation; Partnerships; and Joint resource mobilisation. [Note:  The closing date for submission of proposals is 11 December 2019]

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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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