UK-Africa Investment Summit:

Keynote outcomes, speeches

1. pdf UK government statement issued at the closure of the summit (279 KB)

2. Opening speech by UK Prime Minister Boris Johnson

3. Closing speech by International Development Secretary Alok Sharma

Selected commentaries, updates:

• Greg Hands, Erastus Mwencha: The time is ripe to fully unlock the UK and Africa’s trade potential

• Sola David-Borha: Stronger UK-Africa trade and investment ties can turbocharge growth for both regions

• Tony Blair: Britain must open a new chapter in its relationship with Africa

• Peter Beaumont: Tony Blair is wrong. Africa won’t be the answer to Britain’s post-Brexit problems

• AfDB President Akinwumi Adesina announces a new $80m Bank-DFID infrastructure financing partnership

• UK-Africa Investment Summit signed deals over £6.5bn

• CDC Group to invest £2bn in African businesses over the next two years

• Uhuru secures Sh170bn investment deals at UK-Africa summit

• NIPC unveils pdf Nigeria Investment Guide (6.53 MB)

• Ian Scoones: UK-Africa trade and investment – is it good for development?

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tradebarriers.africa: Online tool to remove trade barriers in Africa goes live (UNCTAD)

The tool, tradebarriers.africa, will help African governments monitor and eliminate such barriers, which slow the movement of goods and cost importers and exporters in the region billions annually. An UNCTAD report shows that African countries could gain $20bn each year by tackling such barriers at the continental level – much more than the $3.6bn they could pick up by eliminating tariffs. “Non-tariff barriers are the main obstacles to trade between African countries,” said Pamela Coke-Hamilton, director of UNCTAD’s trade division. “That’s why the success of the African Continental Free Trade Area depends in part on how well governments can track and remove them,” she said, referring to the agreement signed by African governments to create a single, continent-wide market for goods and services.

Complaints logged on the platform will be monitored by government officials in each nation and a special coordination unit that’s housed in the AfCFTA secretariat. The unit will be responsible for verifying a complaint. Once verified, officials in the countries concerned will be tasked with addressing the issue within set timelines prescribed by the AfCFTA agreement. UNCTAD and the African Union trained 60 public officials and business representatives from across Africa on how to use the tool in December 2019 in Nairobi, Kenya. They practiced logging and responding to complaints, in addition to learning more about non-tariff barriers and their effects on trade and business opportunities.

Cross-border runners a far cry from Africa’s free-trade deal ideals (Bloomberg, Business Day)

Border infrastructure in South Africa and Zimbabwe was built in a time when far fewer people and less freight crossed the Limpopo River between the two nations. The SA side is mainly orderly but slow, with lines of people waiting in the sun. The Zimbabwean side is frenzied, chaotic and without any obvious order, but can often be quicker. Both sides maintain archaic police and vehicle checks, endless forms and waiting. Sometimes fights break out when someone jumps the line and tempers become frazzled in the heat and impatience with corruption. It’s a far cry from the vision of leaders who signed the African Continental Free-Trade Agreement, aiming to lower or eliminate cross-border tariffs on most goods and ease the movement of capital and people across the whole continent. Back at the Shell filling station, Farai Mapondera affirms this. “When politicians talk about African trade, they’re talking for the sake of talking,” he said, dismissing chances of governments ever agreeing to open borders. “What we do, we runners, is how most of Africa trades.” [Related: UNCTAD’s Borderline Project helps develop policies to help African women benefit from cross-border trade endorsed]

Unique customs union in Central Africa underway (UNECA)

Work on the establishment of a harmonized customs union between CEMAC and ECCAS in order to consolidate subregional free trade in Central Africa and better harness the advantages of the AfCFTA has reached an advance state. About 40 experts comprising senior customs officials, representatives of trade ministries, delegates from the eleven countries of central Africa and senior officials of the Steering Committee for the Rationalisation of Regional Economic Communities in Central Africa (COPIL) met in Douala, Cameroon, at the behest of the Subregional Office for Central Africa of the UNECA, the CEMAC Commission and the ECCAS General Secretariat (6 - 10 January) to finalize four reports on this endeavour. The studies covered unrestricted trade within a unified free trade area for Central Africa straddling ECCAS and CEMAC; the codification of customs procedures; the impact of the AfCFTA on Central Africa’s economies; progressive trade measures in the subregion. The reviewed studies from the Douala meeting will be channelled to ECCAS and CEMAC statutory bodies, under the banner of Heads of State and Government of the subregion.

Global investment flows flat in 2019, moderate increase expected in 2020 (UNCTAD)

Global FDI totaled $1.39 trillion in 2019, slightly less than a revised $1.41 trillion for 2018. But flows are still expected to rise moderately in 2020, according to the latest UNCTAD Investment Trends Monitor (pdf). The United States remained the largest recipient of FDI, attracting $251bn in inflows, followed by China with flows of $140bn and Singapore with $110bn. FDI flows to North America remained flat at $298bn. But flows to developed economies as a group decreased by 6% to an estimated $643bn - just half of the peak amount recorded in 2007. “The trend for developed economies was conditioned by FDI dynamics in the European Union,” the monitor says, “where inflows declined by 15% to an estimated $305bn.”

UNCTAD found that flows to developing economies remained unchanged in 2019 at an estimated $695bn, meaning that these countries continued to absorb more than half of global FDI. Analysis of the different developing regions showed the highest growth for Latin America and the Caribbean, at 16%. Africa continued to register a modest 3% rise while flows to developing Asia fell by 6%. Extract (pdf):

FDI flows to Africa amounted to an estimated $49bn – an increase of 3%. Persistent global economic uncertainty and the slow pace of reforms seeking to address structural productivity bottlenecks in many economies continue to hamper investment in the continent. Egypt remained the largest FDI recipient in Africa with a 5% increase in inflows to $8.5bn. The country’s efforts to implement economic reforms have resulted in strengthened investor confidence. While FDI to the country was still driven by the oil and gas sector, major investments in the non-oil economy emerged, notably in telecommunications, real estate and tourism. Despite the increase in Egypt, FDI to North Africa declined by 11% to $14bn, due to a significant (45%) slowdown in flows to Morocco ($2bn from $3.6bn in 2018).

In contrast, FDI to Southern Africa increased by 37% to $5.5bn mainly due to the slowdown in net divestment from Angola. South Africa consolidated last year’s recovery with inflows remaining almost constant at a little more than $5bn. In addition to intra-company transfers by existing investors, investment to the country was led by M&A deals in business services and petroleum refining. FDI flows to East Africa remained steady totaling $8.8bn. Flows to Ethiopia, Africa’s fastest growing economy, slowed down by a quarter to $2.5bn. China was the largest investor in Ethiopia in 2019, accounting for 60% of newly approved FDI projects. Inflows to Uganda increased by almost 50% to $2bn due to the continuation of the development of major oil fields and an international oil pipeline. Flows to West Africa increased by 17% to an estimated $11bn as investment surged in Nigeria by 71% to $3.4bn. FDI to the continent’s largest economy was buoyed by resource seeking inflows in the oil and gas sector. However, the development of a $600m steel plant in Nigeria’s Kaduna state offers some evidence of investment diversification, a long-standing policy objective. FDI to Central Africa rose by 6% to $9.3bn, with the resource-oriented profile of investment persisting.

World Economic Situation and Prospects 2020 (UNCTAD)

Economic diversification is a top priority but has yet to gain much traction in Africa. As growth continues trending with commodity price cycles, the need for a systematic diversification of the productive structure is clear. Industrialization lies at the heart of this transformation. However, other than in Egypt and South Africa, economic diversification across the continent remains low, though recent improvements are evident in a few countries, including Ethiopia, Morocco and Rwanda, as a result of proactive industrial policies. Also, global value chains tend to bypass the continent, as most African countries still export mostly raw or minimally processed goods.

There is some cause for optimism, however, as last year witnessed one of the most relevant policy developments in recent years. The agreement establishing the AfCFTA was adopted in 2018 and entered into force in 2019. The AfCFTA—on track to launch in mid-2020—will create a single market for goods and services covering 1.2 billion consumers with aggregate income of close to $2.5 trillion. The Free Trade Area is expected to promote regional trade and investment integration, which has so far remained disappointing. This will likely encourage the diversification of export markets, as trade costs have been shown to be a decisive factor in firms’ decisions (see box I.1 below). Since a significant portion of intra-African trade occurs in manufacturing, there are also expectations that the AfCFTA can promote industrialization and the creation of higher-paying productive jobs. However, these benefits are contingent on the strengthening of productive capacities. For this, a much broader and more strategic set of policies is needed for the development and support of key areas such as infant industries, FDI, innovation, science and technology, and labour markets.

Extract from Box I.1: Exporters in Africa. What role for trade costs?

Afonso and Vergara (2019) analysed the performance of exporters in Africa and the role of trade costs using a range of export indicators from the World Bank’s Exporter Dynamics Database. The results show that exporting firm entry and exit rates are higher in Africa than in other regions of the world. This high turnover means that many firms in Africa begin exporting but stop almost immediately. Box figure I.1.1 illustrates the exceptionally low survival rate of exporting firms in Africa. On average, less than 30% of firms in Cameroon, Guinea and Malawi continue exporting after their first year, in comparison with 41% in developed countries and 43% in other developing regions.

African countries also exhibit higher rates of entry and exit for export products and low rates of export product survival. Among incumbents in Botswana, for example, more than 70% of exported products, on average, had not been exported the year prior. At the same time, over 70% of products exported the year prior were not exported the following year. This contrasts with rates of only about 40% of products in developed countries. Entry and exit (turnover) rates for export destinations are also higher in Africa (see box figure I.1.2). In Guinea and Senegal, about 40% of markets were new destinations (not explored the previous year), and about 40% of export destinations used the year prior were not used again the following year.

The elevated rates of entry and exit for exporting firms, export products and export destinations underscore the volatility of export activity in Africa. This reflects a lot of experimentation, but it also suggests that African exporters have difficulties in maintaining trade relationships. While this is certainly associated with the level of development, there are many underlying factors that could be at play as well, including market inefficiencies, profit uncertainties, a lack of information about foreign markets, and limited productive capacities.

Econometric analysis confirms that trade costs are a key factor explaining differences in the behaviour of exporting firms in Africa compared to exporting firms in other regions. In addition, trade costs partly explain differences in the characteristics of exporting firms among African countries (Afonso and Vergara, 2019). In fact, trade costs play a disproportionate role in affecting the size and survival of new African exporters in comparison with exporters from other regions. For instance, a reduction of 20% in trade costs has been associated with a 14% increase in the average size of new exporters and a 0.5% increase in the one-year survival probability. In addition, differences in trade costs across African countries are a relevant factor in explaining the lower market diversification of exporters from landlocked countries. However, trade costs seem not to play a significant role in product diversification.