Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection

All Africans travelling to Nigeria can get visa on arrival from 2019 (Premium Times)

Other Africans travelling to Nigeria will from January 2020 be able to get their visas at the point of entry. This was stated by President Muhammadu Buhari Wednesday at the Aswan Forum for Sustainable Peace and Development in Africa, holding in Egypt. President Buhari equally emphasized that massive investment in transportation infrastructure was necessary for African economic resurgence as this would facilitate the African Free Trade Area Agreement recently signed on by the continental leaders.

“Africa should embark on the provision of transport connectivity by enhancing the development of roads, rail, and air links which will ease the free movement of persons, goods and services within the continent. In this regard, we in Nigeria have already commenced an aggressive drive to upgrade our rail transport system and road networks across the country. We should furthermore promote free trade within and amongst Africa and Africans especially now that we have launched the African Free Trade Area Agreement,” he said.

After challenging year, improvement expected for 2020 (IATA)

The International Air Transport Association forecasts that the global airline industry will produce a net profit of $29.3bn in 2020, improved over a net profit of $25.9bn expected in 2019 (revised downward from a $28bn forecast in June). If achieved, 2020 will mark the industry’s 11th consecutive year in the black. Africa regional outlook: African carriers continue to suffer structural problems of high costs - in large part owing to government taxes and fees - and low load factors. Economic growth in the region has been relatively good and is expected to rise in 2020, but markets are extremely fragmented and inefficiently served in the absence, so far, of a Single African Air Transport Market. As a result, they are projected to show a loss of $200m, similar to 2019. [Nigeria: Operators canvass long-term funding for airlines’ survival]

Ghana: Economic diversification through productivity enhancement (World Bank)

After nearly a decade of strong growth fueled by the boom in commodity prices, Ghana’s economy remains undiversified and vulnerable to external shocks. This report strives to analyze the main challenges for economic diversification from a productivity angle. In looking at a set of high-growth economies of the past, the Growth Report 2008 identified common characteristics of successfully applied growth models - the “ingredients of growth” - to inform policy formulation around the world. However, since independence in 1957, Ghana’s long-term growth dynamics have been mixed and can be divided into three distinct periods. Drivers of the economic expansion of Ghana changed significantly over the years; currently, the service and natural resources sectors provide the main sources of growth. As a consequence of the change in input factors for growth, the contribution of total factor productivity to growth is on a declining path. The structural shift of the Ghanaian economy into services and natural resource sectors comes with two key economic management challenges (pdf). First, Ghana’s shift to services sectors only marginally contributes to labor productivity growth. Second, concentration of economic activity in natural resources increase economic volatility and complicate macro-management.

Markups, market imperfections, and trade openness: evidence from Ghana (World Bank)

This paper investigates the impact of Ghana’s WTO accession on firm-level product and labor market imperfections. The paper exploits a rich dataset of firm-level information to estimate both markups and the degree of monopsony power enjoyed by manufacturing firms. The results indicate that price-cost margins declined while the degree of monopsony power increased in the wake of WTO accession. These diverging dynamics suggest that firms compress real wages to offset loss of market power in the product market due to increased international competition. This gives rise to an increase in the market imperfection gap, which gradually erodes the pro-competitive gains from trade. The paper contributes to the literature by identifying channels through which allocative inefficiencies and misallocation can persist even after trade liberalization.

Promoting SME competitiveness in Botswana: a bottom-up approach to economic diversification (ITC)

Strengthening the competitiveness of Botswana’s small and medium-sized enterprises (SMEs) will help attain the goals of sustainable economic development envisaged in Vision 2036, the country’s development blueprint. According to a new report assessing the competitiveness of Botswana SMEs (pdf), targeted policies would enable Botswana’s businesses to take advantage of opportunities on the horizon, including the African Continental Free Trade Area, and support the diversification of the economy. The report finds that SMEs in Botswana have strengths that could help them go global, and suggests that policies be crafted to address remaining bottlenecks to seize interesting opportunities. For example, companies in the services sector are found to be particularly strong on skills and innovation. Interventions to improve information and communications technology infrastructure could unlock their potential and deliver dividends for services exports.

With a quarter of the population below the age of 25 and one of the highest rates of youth entrepreneurship in the world, Botswana has the potential to benefit from a significant demographic dividend. Yet, Promoting SME competitiveness in Botswana suggests that youth-led companies trail other enterprises when it comes to management practices. Setting up management training for youth-led enterprises would help address these issues. The report builds on data gathered from over 600 Botswana firms using the ITC SME Competitiveness Survey. Based on the collected data, it provides empirical evidence on opportunities to craft strategic competitiveness policies and programmes to boost exports by Botswana SMEs. Survey results indicate that low rates of certification to international standards may hamper efforts to attract international buyers. Support to obtain certification may be particularly helpful in the agricultural sector, where experience has shown it can unlock exports of new products to new markets.

Tanzania mainland poverty assessment: executive summary (World Bank)

This report summarizes a comprehensive analysis of poverty and inequality in Tanzania and identifies some priority actions if poverty is to be reduced. The first part is based on the results of the Household Budget Surveys for 2007, 2012, and 2018; several rounds of National Panel Surveys; and Demographic Health Survey data. The second part examines the pattern of structural transformation, firm profiles, job creation, and financial inclusion using the rebased GDP figures released in February 2019, plus data from the Statistical Business Register, Census of Industrial Production, national accounts, NPS, Integrated Labor Force Surveys, and other sources. Extract (pdf):

Two-thirds of Tanzanian firms are in manufacturing and trade. About 35% are in manufacturing and 34% in wholesale and retail trade. Manufacturing firms primarily produce food and beverages (39%); textiles, wearing apparel, and leather (30%); and furniture (14%). Only 1% are in high value-added and knowledge-intensive industries. The rest operate essentially in services, especially nonmarket services. Less than 1% are in agriculture; most people working in that sector run their own farms without creating a business.

Despite the predominance of micro firms in the economy, they account for just 24% of employment; large firms account for 28%. About half of Tanzanian jobs (49%) are in medium and large firms, which account for about 4% of all businesses (Figure ES.28). Thus, even though fewer than 0.5% of all firms employ more than 100 workers, they account for about 28% of all employment—their average number of workers is over 370, compared to no more than 2 in micro firms and 9 in small ones. New firms in business for less than five years account for less than 25% of jobs, compared to 36% in firms that have lasted more than twenty years. Though only 50% of firms are formal, they account for over 80% of jobs. In general, firms tend to employ twice as many men as women; the gender discrepancy is slightly higher in small and young firms. The average number of men is two times higher than that of women in these firms, while it is 1.6 times higher in larger and older firms. [Doing Business 2020: Economy profile of Tanzania]

Ethiopia and the IMF: Staff-level agreement on a $2.9bn financing package (IMF)

The Ethiopian government and the IMF staff team reached preliminary agreement, subject to approval by the Fund’s Executive Board, on policies that could constitute the basis for Ethiopia’s new program supported by the ECF and EFF arrangements. The overall objective of the program would be to support implementation of the authorities’ Homegrown Economic Reform Program. The Fund-supported program would consist of five main pillars: Durably address the foreign exchange shortage and transition to a more flexible exchange rate regime; Strengthen oversight and management of state-owned enterprises to contain debt vulnerabilities; Strengthen domestic revenue mobilization and expenditure efficiency to create space for adequate poverty-reducing and essential infrastructure spending; Reform the financial sector to support private investment and modernize the monetary policy framework; Strengthen the supervisory framework and financial safety nets.

Services exported together with goods (OECD Working Party of the Trade Committee)

With the shift towards services of manufacturing firms, the lines between exports of goods and services are blurring. Not only do manufacturing firms rely on services inputs to create value and to organise their activities in global value chains, they also produce and sell services together with goods, a phenomenon described as the servitisation of manufacturing. Companies tend to add value by providing services and aim at offering integrated solutions to their customers. This trend has important implications for trade policy-making as the trade regime for goods and services is not the same. This report contributes to a better understanding of the way firms combine goods and services in their exports by assessing the prevalence of services sold together with goods, using aggregate and micro-data. This information is used to provide a mapping of the manufacturing industries that produce bundles of goods and services with the relevant GATS sectors. This tool can help policymakers assessing interactions between the trade regime for goods and services and can be used to identify where some joint market access is needed. The report then looks at some of the policy implications and barriers faced by services bundled with goods.

In brief:

WTO members meeting as the General Council agreed on 10 December to extend two existing moratoriums related to customs duties on electronic transmissions and the initiation of “non-violation” complaints under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). They also approved the WTO’s budget for 2020.

Jumia: What went wrong at ‘Africa’s First Unicorn’? Vanity metrics, an obsession to list instead of fixing problems, and a problematic workplace culture turned Jumia from unicorn to carthorse.

Chubb takes stake in ATI to boost African trade. Global insurer Chubb has made a $10m equity investment in the African Trade Insurance Agency, becoming the first global property and casualty insurer to invest in the multilateral political risk and credit insurance agency.

Visa, MFS Africa team to take mobile wallets cross-border. The partnership will also include an integration of MFS Africa into Visa Direct, the card network’s real-time push payments, to provide mobile money users a fast, convenient and secure way to send and receive money and remittances directly from/into their mobile money wallets via eligible card credentials.

The Central Bank of Egypt has signed off on a new $600m export credit risk company in a bid to bolster Egypt’s intra-Africa trade links. The new company, which will be based out of Cairo, will seek to help Egyptian companies win contracts for major projects with African governments, which the African Export-Import Bank claims are worth $60bn annually.

India’s total investment in Mozambique amounts to $8bn, representing 25% of the Indian capital invested on the African continent. The figure was revealed in Maputo on Tuesday by the High Commissioner of India in Mozambique during a business conference for companies in the Information and Communication Technologies sector.

The African Union Commission, in collaboration with the African Refiners and Distributors Association, hosted a two-day workshop (10-11 December) to validate “The Benefits of Adopting AFRI Fuel Specifications Roadmap” which aims to ensure superior fuel quality and significant emissions reduction for achieving clean air in Africa. The purpose of the workshop was to meet with the stakeholders and discuss a draft of the study on the socio-economic benefits of harmonized specifications to develop a final report to be presented to the AU for its adoption.

India’s Ministry of External Affairs will hold the 6th edition of the Indian Ocean Dialogue in New Delhi on the 13 December. During the summit, member states will hold high-level discussions on the Indian Ocean Rim Association role within the Indo-Pacific.


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