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tralac’s Daily News Selection

tralac’s Daily News Selection

28 Jan 2020

South Africa’s six strategic objectives during its Chairship of the African Union: keynote address by President Ramaphosa (The Presidency)

At the same time, we are presented with unprecedented opportunities for development, most notably the implementation of the AfCFTA agreement. This is a momentous event in the decades-long effort to integrate the economies of the African continent. As the Chair, South Africa is determined to take the project of continental unity, integration and development further, guided by our foreign policy priorities and the Continent’s aspirations as espoused in Agenda 2063. Our domestic priorities - including economic transformation, job creation and the consolidation of the social wage through reliable and quality basic services – depend on a politically stable and economically growing Africa.

Together with our fellow African countries, we must implement the AfCFTA agreement with purpose and determination. We must undertake the detailed work, extensive consultation and complex negotiations required to give life to this agreement. In this regard, South Africa will work with President Issoufou of Niger, who is the AU Champion on Continental Economic Integration. This work is directed towards the social and economic development of the Continent, and the realisation of a prosperous Africa based on inclusive growth and sustainable development.

South Africa will need to be pro-active and assertive in seeking common approaches on issues like tariff lines, rules of origin, custom controls, trade in services and new generation issues like competition and intellectual property. We will also need to address issues like the ease of doing business in different African countries.

We know that the AfCFTA will only become a reality if the infrastructure between African countries is developed. Infrastructure is at the core of Africa’s social, economic and political challenges. It is crucial for sustainable development and inclusive growth, and for diversification through industrialisation and value addition. As the Champion of the Presidential Infrastructure Champion Initiative under NEPAD, South Africa has a critical role to play – and must act on the opportunity presented – in profiling infrastructure development in support of the AfCFTA.

In this role, South Africa can also develop linkages between the SADC Regional Infrastructure Development Master Plan and the Presidential Infrastructure Champion Initiative. On this basis, it is proposed that South Africa hosts a High Level Forum on Infrastructure during its term as AU chair.

Up before Dawn: Experimental evidence from a cross-border trader training at the DRC-Rwanda border (World Bank)

Small-scale cross-border trade provides opportunities for economic gains in many developing countries. Yet cross-border traders - many of whom are women - face harassment and corruption, which can undermine these potential gains. This paper presents evidence from a randomized controlled trial of a training intervention that provided access to information on procedures, tariffs, and rights to small-scale traders to facilitate border crossings, lower corruption, and reduce gender-based violence along the DRC–Rwanda border. The training reduces bribe payment by 5 percentage points in the full sample and by 27.5 percentage points on average among compliers. The training also reduces the incidence of gender-based violence by 5.4 percentage points (30.5 percentage points among compliers). The paper (pdf) assesses competing explanations for the impacts using a game-theoretic model based on Hirschman’s Exit, Voice, and Loyalty framework. The effects are achieved through early border crossings at unofficial hours (exit) instead of traders’ use of voice mechanisms or reduced rent-seeking from border officials. These results highlight the need to improve governance and establish clear cross-border trade regulations, particularly on the DRC side of the border.

Gender mainstreaming in AfCFTA national implementation strategies: an inclusive and sustainable pathway towards gender equality in Africa (UNECA)

Although there are a number of provisions in the AfCFTA Agreement that can expand the capacity of women to participate in economic and trade opportunities, the benefits of AfCFTA for women are not automatic. Furthermore, consideration will need to be given to the potential differential impact of AfCFTA provisions and the implementation of the Agreement in a manner that opens up new opportunities for women, in particular vulnerable women; enhances their economic participation as a whole; and helps them to integrate more fully into high paid sectors of the economy. [The author: Nadira Bayat]

Rwanda Economic Update: Accelerating digital transformation (World Bank)

This edition’s forecast of Rwanda’s economic growth for 2019 is revised upward from the 7.8% projected in the REU14 to 8.5%. The stronger growth is driven mostly by the unexpected magnitude of the fiscal expansion. Medium-term growth also looks strong with annual growth projected to be about 8%. Although the current public investment push will continue in the medium-term, this issue’s high growth scenario assumes that the role of the private sector in investment will grow; public investments alone may not sustain growth at 8% over the medium-term.

The risks to Rwanda’s economic outlook, both domestic and external, have risen. The main risk is the growing reliance on public-sectored investments. Fiscal expansion to achieve the government’s targets for expanding access to infrastructure raises the debt, widens external imbalances, and may crowd out access of the private sector to finance, thus undermining long-term growth. If the reliance on the public sector persists, Rwanda may have difficulties in financing its growth model. Rwanda’s commitment to concessional borrowing and monetary stability reduces the risks to macroeconomic stability, but overall fiscal risks has gone up because of the reliance on the public sector for achieving NST1growth targets. Despite continuing efforts, the ineffectiveness of the private sector remains a major risk to Rwanda’s growth outlook - growth projections for the medium to long term depend on the ability of the private sector to take the lead.

Extract (pdf): External imbalances are widening, reflecting on the one hand wider fiscal deficits and heavy demand for imports and on the other weaker than expected exports. The impressive growth in goods exports in 2017 proved to be a one-off phenomenon; in US dollar terms, since 2018 the growth rate of exports has slowed, and the trend continued into 2019. International prices for the commodities Rwanda exports were low, and export volumes of coffee, tea, and minerals stagnated or declined. Imports grew by 19% in US dollar terms in H1, driven by capital and intermediate goods. In the 12 months ending in June 2019, the current account deficit widened to 8.9% of GDP. The surge in import demand has put pressures on foreign exchange reserves.

Republic of Congo: 2019 Article IV Consultation (IMF)

The external current account is expected to record a substantial surplus for a second year in a row. After registering large deficits that exceeded 50% of GDP over the 2015–16 period, the current account balance reached a surplus of about 7¼% of GDP in 2018. This surplus is expected to continue in 2019 and reach about 8% of GDP. The main factors driving the improvement are the recovery in oil exports and new mining exports coming on stream.

Congo is considered in debt distress due to the accumulated external and domestic arrears. External payment arrears have increased in recent years as financial difficulties have prevented Congo from servicing its debt; by September 2019, Congo had accumulated $181m in official bilateral external arrears, in addition to the stock of unrestructured pre-HIPC arrears. Moreover, Congo has also accumulated substantial external commercial arrears with oil traders, as well as domestic arrears. The total public debt level at the end-September 2019 was estimated at 87.8% of GDP, with external public debt at 62.3% of GDP, of which about 20% of GDP was in arrears. Debt is assessed to be unsustainable, absent restructuring.

Selected Issues report theme: non-oil revenue mobilization - key challenges and reforms. Non-oil revenues in the Republic of Congo have followed a generally positive trend since 1995, though there has been a substantial decline in recent years. From 1995 to 2014, non-oil revenues doubled (Figure 1), reaching 30% of non-oil GDP. However, this positive trend was reversed in 2014 due to the decline in oil prices that triggered a deep economic crisis. Non-oil revenues in Congo are relatively high compared to other oil producing countries in sub-Saharan Africa (Figure 2). However, these calculations need to be interpreted with caution given the fact that non-oil GDP could be underestimated. The authorities should step up revenue mobilization as a key component of their medium-term fiscal strategy. This will require a well-sequenced structure of reforms that includes three key elements:

Ethiopia: IMF Executive Board concludes 2019 Article IV Consultation (IMF)

Executive Directors agreed with the thrust of the staff appraisal. They noted that Ethiopia’s growth model, driven by public investment, had supported rapid growth and remarkably improved living standards over the past decade. At the same time, it has led to a build-up of debt and external vulnerabilities. Directors highlighted the urgency of fundamental reforms to correct macroeconomic imbalances, ease structural bottlenecks, and lay the foundation for sustainable, inclusive growth led by the private sector. To this end, Directors welcomed the ambitious Homegrown Economic Reform Plan, which is appropriately built around macroeconomic, structural, and sectoral reforms. They considered that the plan, together with the authorities’ strong ownership and commitment, deserves Fund support, which would help catalyze private investment and donor financing. Noting high implementation risks amid external vulnerabilities and political uncertainty, Directors underscored that steadfast determination, strong communication, and social protection would be key to obtain a broad-based public buy in. They also urged the authorities to seek additional debt reprofiling from external creditors to improve debt dynamics. Directors supported a comprehensive approach to addressing the exchange rate overvaluation and foreign exchange shortages.


Regional Ministerial Forum on Harmonizing Labour Migration Policies in the East and Horn of Africa: selected updates

  1. Presentation by Peter K. Tum (Principal Secretary, State Department for Labour, Kenya)

    Kenyans are present in most regions of the world, including Asia, the Middle East, Latin America and the Caribbean, and Oceania. Lately, there is an increasing number of Kenyan professionals migrating to Canada and Australia. There are 29,448 Kenyan migrant workers who have been cleared to work in Saudi Arabia as homecare managers between March 2019 and January 2020. Kenyan migrant workers contribute significantly to the socio-economic development of the country in terms of skills, expertise and transfer of knowledge upon return. For instance, monthly remittances inflows in 2019 averaged KShs. 23 Billion Shillings (about US$ 228.14 million).

    Kenya lacks reliable, accurate and timely labour market information on its migrant workers. To address this, an information system will be developed that will be useful in projecting labour demand in identified countries, developing skills development programmes to meet foreign labour market demand, dissemination of information on Kenyan migrant workers and estimating and projecting remittances. The Government has embraced an electronic platform (MUSANED1) for facilitating the contracting of domestic workers to Saudi Arabia. The system has increased transparency, reduced recruitment costs by eliminating intermediaries and enhanced provision of information.

  2. Opening remarks by Simon K. Chelugui (Cabinet Secretary for Labour and Social Protection, Kenya)

    A significant number of migrant workers from East and Horn of Africa look toward the EU and the Gulf Cooperation Council member states for job opportunities. This is mainly influenced by the geographical proximity of these regions and hopes of better economic prospects for the migrants. Bilateral Labour Agreements between the member states in the region as countries of origin and the European Union and Gulf Cooperation Councils Member States as countries of destination are the primary instruments through which such labour mobility arrangements are effected. Recent studies have however shown that there exist substantive gaps between existing Bilateral Labour Agreements in the region and international standards. This is especially with respect to the adequacy of social protection available to migrant workers.

  3. Closing remarks by Simon K. Chelugui (Cabinet Secretary for Labour and Social Protection, Kenya)

    Let me share some thoughts on the discussions from this Forum which I believe requires to be emphasized. I agree with the observations by representatives from most countries in the region [Kenya, Burundi, Djibouti, Eritrea, Ethiopia, Rwanda, Somalia, South Sudan, Sudan, Uganda, and Tanzania] that strengthening the capacities of institutions involved in labour migration management has not been accorded the necessary priority. This is despite the challenges facing the region in labour migration management. Going forward, I urge my fellow ministers from all Member States to prioritize capacity building of institutions dealing with labour migration management in our respective countries. We have a responsibility to do our utmost to sensitize our respective governments and all relevant stakeholders to ensure that adequate resources are budgeted for activities on labour migration. This forum can offer opportunities for inter-country learning on best practices towards achieving this. Allow me to also emphasize the proposal to establish a Technical Advisory Committee chaired by the Principal Secretary or Director General for Labour, or an official of equivalent status, from the host country. This Committee, with additional membership from Development Partners, will take the lead in driving the implementation of key agreements from the Forum.

  4. Key recommendations adopted from the Forum

  5. Related:

    Somalia, Ethiopia and Eritrea propose formation of Horn of Africa cooperation

    Advancing multi-stakeholder engagement to sustain solutions: Learning from the application of the CRRF in East Africa to inform a common agenda post GRF