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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: UN | JC McIlwaine

05 Dec 2019

Doing Business 2020: Selected African economy profiles

Angola, Benin, Botswana, Burkina Faso, Burundi, Cabo Verde, CAR, Cameroon, Comoros, Congo, Chad, Cote d’Ivoire, Ethiopia, Eritrea, Eswatini, Equatorial Guinea, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritius, Mauritania, Mozambique, Namibia

African finance ministers redefining usage of financial resources of the African Union

The Committee of Experts Retreat in Cairo, ahead of the Ministerial Meeting of Finance Ministers (F15), deliberated on a range of priority financial issues of the African Union for two days. During the retreat it was highlighted that the participation of F15 in the AU budgetary and financial processes has improved efficiency in resource utilization by eliminating waste and duplications from the budget. It also assisted AU institutions to focus on results. F15 examined the AU budget and prepared recommendations, among other accomplishments.

F15 achievements vis-à-vis implementation of Golden Rules are reassuring according to presentation made during the retreat in that it decreased dependence on external funding such that 66% of the resources are contributed by AU Member States; linked budgets to Medium Term Plans; carried out forecast for revenue and expenditure; budget guidelines strictly encourages preparation and submission of budgets that reflect priorities of the Union; 98% of financial transactions are now paperless among others.

Outlining progress with implementation of Kigali Decision on Financing the Union (the 0.2% import levy), it was reported that 17 countries (31%) reported to be collecting the levy: Kenya, Gambia, Congo Brazzaville, Gabon, Rwanda, Cameroun, Chad, Sierra Leone, Djibouti, Cote d’Ivoire, Guinea, Benin, Sudan, Ghana, Nigeria, Mali and Togo; collectively, these countries are assessed $79,925,060 to regular budget (29%) and $57,829,254 (63%) was collected as of 10 October 2019.

Nigeria Economic Update: Unlocking the productive potential of Nigeria’s people and resource endowments (World Bank)

The focus section of this report analyzes the evolution of productivity in Nigeria and identifies policies and institutions that can leverage productivity growth to accelerate Nigeria’s economic expansion and create new job opportunities. The analysis highlights four key priorities…:

Extract (pdf): Box 1.1. Harnessing the benefits of the AfCFTA

Nigeria can gain from the AfCFTA. It is among the most closed countries in Africa (Figure B1.1.1) and its exports are the least diversified (Figures B1.1.2-3). Because its exports are highly concentrated in oil, they fluctuate with oil prices. Nigeria trades little with other African countries and has few nonoil exports beyond relatively basic agricultural goods. Accelerating diversification and becoming more integrated into the regional and global economy could help Nigeria achieve its potential as an African economic powerhouse.

Nigeria has yet to take a leading role in ECOWAS, or beyond the region in the African Union. The good news is that Nigeria’s signing of the AfCFTA in July 2019 and proactive stakeholder consultation efforts beforehand could signal that it is now more willing to become a driver of continental growth and integration. Today, Nigeria has an opportunity to capitalize on the potential gains of doing so.

Nigeria could leverage integration into the regional market to achieve economies of scale and lower costs for manufacturers and exporters. That would make it possible for its competitive services firms to expand into other countries. Working through AfCFTA, Nigeria could leverage regional market integration to achieve economies of scale, lower costs, build regional value chains, and take a larger role worldwide—e.g., regional value chains can provide a stepping stone into global value chains.

There will be losers and winners. The International Monetary Fund estimates that trade reforms foreseen in the AfCFTA would lead to welfare gains of 1–1.2%, with most gains driven by the reduction of NTBs, e.g., reducing the widespread use of import bans and addressing inefficiencies at borders (Abrego et al. 2019). Nigeria’s short-term revenue losses from AfCFTA’s tariff liberalization would be small and distributed over 10 years (Arenas and Vnukova 2019); the result would be only a 0.2 annual percentage change in tariff revenues (0.1% of tax revenues). In the long run, trade and welfare gains are estimated to increase substantially in response to such other aspects of trade agreements as trade facilitation, elimination of NTBs, and liberalization of services (Vanzetti et al. 2018).

Nigeria’s proactive stance in AfCFTA negotiations would ensure that its private sector can take advantage of new opportunities. At the same time, the federal government needs to address concerns that greater integration could hurt Nigerian manufacturers. To support those who might lose from increased openness, the government has options, among them a new Africa Union facility to support countries that experience revenue declines from the AfCFTA. The African Export-Import Bank has also agreed to provide a credit line of up to $1.5 bn to help members meet shortfalls.

Nigeria’s AfCFTA Forum: tweeted highlights from the presentation by Edward Kallon, UN Resident Coordinator

The AfCFTA would be a game changer when it comes to stimulating intra-African trade. Precisely, Nigeria’s exports to Africa would increase significantly between 10% and 15% in 2040 compared to baseline without the AfCFTA in place. The more ambitious the trade liberalization, the greater the expansion of Nigerian exports to its African partners in agric, food and industrial sectors, offering invaluable opportunities to industrialize through trade. Nigeria’s exports will also increase significantly towards nations outside West Africa, with most impressive expansions to countries such as Botswana, Cameroon, Egypt, Ethiopia, Kenya, Malawi, Morocco, Mozambique, Namibia, Rwanda, Tanzania, Uganda and Zimbabwe.

Tanzania Economic Update: Realizing the potential of agriculture for inclusive growth and poverty reduction (World Bank)

Tanzania was again one of the top growth performers in the region. Official GDP figures show that growth remained steady in the first half of the year, driven by higher public investment and by a recovery in exports. Inflation has been low and stable, and the balance of payments is quite sound despite a widening current account deficit. Exports are recovering from last year’s contraction. The Government’s Tanzania Development Vision 2025 and the Five-Year Development Plan (FYDP II) set out ambitious goals for reducing poverty and sustainably industrializing so that the country can achieve middle-income status by 2025. The government recognizes agriculture as central to realizing its objectives of socioeconomic development, which are well-articulated in the Second Agriculture Sector Development Program (ASDP II). Extract (pdf):

Because Africa’s regional markets are fast becoming the main targets for both African and non-African food exporters, belief in the quality and integrity of Tanzania’s food safety certification for exports will be critical to commercial success. The recent successes of both Rwanda and Uganda in growing market share in regional inland markets for high-nutrition baby foods illustrates what can be done.

Approaches to ensuring food safety systems have been identified: Build up leadership and address duplication of institutional mandates; Prioritize public spending; Shift to a risk-based food safety system; Over the long term, move from compliance with compulsory regulation to facilitation and creation of incentives for compliance with voluntary regulation; Harmonize rules and processes within the East African Community.

More efficient phytosanitary inspection and certification procedures in an exporting country like Tanzania can reduce the burden on export businesses and possibly encourage more trade. Initiating the phytosanitary certification process electronically and enhancing on-site inspection and issuance of certificates would allow products to be packed and sealed in the same place as they are inspected. This would reduce transport and logistics costs and allow for immediate export after inspection.

Can the new European Commission deliver on its promises to Africa? (Chatham House)

If the EU is serious about its rhetoric on equal partnership, it must therefore move beyond convoluted hybrid proposals. Delivering on the Juncker administration’s proposal to increase funding for external action by 30% for 2021–27 would mark an important first step, particularly as this involves streamlining that would see the European Development Fund – the financial instrument for EU-ACP relations – incorporated into the main EU budget. The new commission should therefore continue to exert pressure on the European Council and European Parliament to adopt this proposal, as negotiations on this financial framework have been repeatedly subject to delay and may not be resolved before the end of the year.

Beyond this, proactive support for the AfCFTA and for structural transformation more broadly must be prioritized ahead of vague promises for a continent-to-continent free trade agreement, as held out by Juncker in his final State of the Union address in 2018. The significance of internal EU reforms for Africa should also not be discounted. The EU’s Common Agricultural Policy, for instance, has placed the African sector at a particular disadvantage and has made it harder to compete even in domestic markets, let alone in the distant EU export markets. EU efforts to stimulate inflows of private investments into the African agricultural sector, abolish import tariffs and offer technical support for African producers to satisfy EU health and safety regulations will be of little use if they are undermined by heavy subsidies across Europe. [The authors: Damir Kurtagic, Fergus Kell]

Africa Cloud Initiative: update (GIC)

The German Development Ministry (BMZ) has announced seven flagship digital projects in Africa. The announcement coincides with a special cabinet retreat focusing on Germany’s digital future, held at Meseberg Palace. The BMZ is investing nearly 270 million Euro in over 200 digital projects in Africa.

Germany’s Development Minister Gerd Müller: “There are more people online than offline in the world. Nowhere is digital technology spreading faster than in Africa. Over the last five years, the number of internet users there has increased threefold. We must wake up to the digital development happening in Africa. If we don’t, we will miss the chance to create enough opportunities for education, training and jobs. Today we are launching the Africa Cloud Initiative. This new platform offers e-learning opportunities to young people in remote and rural areas of Africa. The content of these courses, aimed at vocational trainers, young farmers and digital entrepreneurs, will be developed locally and can be downloaded onto a computer or smartphone. Local partners and a coach then offer learners support. The courses will begin in January 2020 at our Green Innovation Centres for the agriculture sector in Africa.”

Unsustainable management of West Africa’s urban population growth raises business risks (Fitch Solutions)

Rapidly rising populations, high unemployment and competition for diminishing resources in a period of lagging infrastructure development and uneven economic growth will exacerbate operational risks for firms operating in the West Africa region over the medium term. Urban population growth will increase pressure on utilities, transport networks and natural resources and this in turn will drive up energy, water and transport reliability risks. While rising urbanisation will raise the need for structural reform implementation and boost opportunities for infrastructure developers, failure to plan and build sustainable infrastructure will weigh on growth by deterring investment and impeding economic diversification and employment creation. Extract:

Congestion risks at major container ports will ramp up in tandem with trade growth, thereby increasing supply chain delays across a broad spectrum of sectors. Growth in economic activity over the medium term will also place greater pressure on regional ports that are already buckling under the strain of rising trade volumes amid ageing infrastructure and slow execution of port expansion projects. Nigeria’s supply chains are overly reliant on the country’s poor-quality road network and congested ports, which heighten costs for businesses due to the high likelihood of disruption caused by congestion, traffic accidents, security issues and energy and fuel shortages. Although competition to establish regional leadership for port capacity is ramping up (mainly from expansive projects taking place in Ghana, Cameroon, Côte d’Ivoire and Nigeria), we believe that the scale of these expansions will not be sufficient to meet demand in the medium-to-long term. Increased urbanisation will lead to higher demand for imported goods (including manufactured consumer products, food and fuels), while exports will continue to rise in tandem with agriculture and mining sector output that account for the bulk of exports. [Note: The report can be accessed after registration]

Annual report of the Council for Trade in Services to the General Council (2019): table of contents (pdf)

Notifications made to the council pursuant to GATS Articles iii:3, v:7 and vii:4

An inclusive approach to transparency and notification requirements in the WTO

Operationalization of the LDC services waiver

Work programme on electronic commerce

Update of the Secretariat background note on mode 4

Cybersecurity measures of China

Cybersecurity measures of Viet Nam

Recent developments in trade in services statistics

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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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