News

tralac’s Daily News Selection

tralac’s Daily News Selection

31 Jan 2020

Selected WTO updates:

Ethiopia has resumed its WTO membership negotiations almost eight years after the last formal meeting of its Working Party. Mamo Mihretu, senior advisor to the Prime Minister of Ethiopia, and chief trade negotiator, shares his impressions: 

Zimbabwe’s Trade Policy Review will take place on the 25, 27 March  

The Standards and Trade Development Facility launched its 2020-2024 strategy, Safe and inclusive trade horizons for developing countries

Borrow with sorrow? The changing risk profile of Sub-Saharan Africa's debt (World Bank) 

This paper documents recent trends in public debt and its composition over the past decade in Sub-Saharan Africa. It argues that although the level of indebtedness of the region as a whole is still lower than the one before debt forgiveness, the risk profile of public debt has increased sharply. The share of concessional public debt has been declining while that owed to private creditors and non-Paris Club bilateral creditors has been rising. The resulting reconfiguration of public debt has led to a significant increase in the region’s debt service. The combined higher risk debt profile and rising debt service might lower the threshold for debt distress in the region.

This paper is organized as follows (pdf): Section 2 documents recent trends in general government gross debt stocks in Sub-Saharan Africa over the past two decades. It distinguishes the evolution of debt across different country groups in the region classified by income levels and the degree of resource abundance. Section 3 zooms in on the external borrowing of the government. It documents the increase in public external debt since 2013 and the rapid increase in public external debt service. Moreover, it presents an overview on sovereign bond issuances in the region over the past two decades. Section 4 indirectly analyzes whether the increase in public debt is associated to greater growth, investment and efficiency of investment, or related to either greater consumption or investment. Section 5 discusses the policy options of countries in the region to manage risks and contain vulnerabilities in public debt. It argues that the policy toolkit of African policy makers needs to be enhanced by implementing strategies to manage the risks of the public sector balance sheet and put emphasis on policies to boost investment efficiency. Section 6 concludes. 

Extract (pdf): Between 2013 and 2015, there was a rapid rise in sovereign bond issuance with more Sub-Saharan African countries accessing international capital markets. These included Côte d’Ivoire, Senegal, Angola, Nigeria, Tanzania, Namibia, Rwanda, Kenya, Ethiopia and Zambia, generating commercial debt exceeding $17.5bn. A total of 13 LICs and LMICs in the region accessed the bond markets during 2013 and 2015. In 2013, the largest sovereign bond issuance shares were made by Gabon ($1.5bn), Nigeria ($1bn), and Ghana ($0.75bn). In 2014, the largest issuances were made by Kenya ($2.75bn), with Ethiopia, Ghana, and Zambia accruing $1bn each. The bulk of these bonds are due between 2021 and 2025 and they are expected to trigger an average repayment of about $4bn annually over that interval. [The authors: César Calderón, Albert G. Zeufack; Related: Kenya is set to hold discussions with the IMF from March about a cautionary facility]

Kenya's bilateral trade relations: selected updates 

(i) Kenya-US trade  

The Cabinet yesterday approved talks with the US on the establishment of a free trade arrangement between the two countries. A cabinet meeting, held at State House, Nairobi, said the negotiations will give Kenyan goods a smooth access to the US consumer market, especially as the African Growth and Opportunity Act (Agoa) comes to an end.

President Uhuru Kenyatta is set to fly to Washington next week where, according to a Bloomberg report, the two countries will announce negotiations on a trade pact that will form a model for other African countries. Foreign Affairs Principal Secretary Macharia Kamau told Bloomberg that the two nations expect real progress on an agreement by the third quarter of this year, depending on how the negotiations go. This comes even as the AU is pushing to have a continent-wide trade pact with the US instead of individual bilateral deals once the Africa Growth Opportunities Act lapses in 2025. The negotiations between Kenya and the US come at a time when trade between the two countries has remained flat, with Kenya exporting Sh47.2 billion worth of goods to the US in 2017 and Sh47.3 billion in 2018.

(ii) Kenya-Qatar 

Kenya’s private sector is proposing to sell flowers directly to Qatar as part of efforts to boost trade relations with the Middle East country. The push for the flower exports to the Middle East was one of the proposals that officials put on the table during the Kenya-Qatar trade and investment forum, which opened in Nairobi Thursday. The forum, organised by Qatar Development Bank led by its executive director for export development and promotion Hamad Salem Mejegheer, seeks to increase bilateral trade between the two counties currently estimated at Sh4.1 billion. 

Kenya has called on Qatari investors to establish a presence in the country's manufacturing sector. Pius Rotich, general manager of Kenya Investment Authority told a trade forum in Nairobi that Kenya is prioritizing the industrial sector because of its huge transformative effect on the economy. "Kenya has put in place a number of policy and tax incentives that will make it attractive for Qatari investors to set up manufacturing plants to produce goods for local and export markets," Rotich said during the Qatar Development Bank-Kenya Matchmaking event. The day-long conference provided a platform for 20 Qatari companies to meet their Kenyan counterparts. Rotich said that Kenya is an ideal base for industrial production because of the number of trade agreements it has signed with the rest of the world that allow locally produced goods to access foreign markets at preferential rates.

(iii) Kenya-Pakistan 

Pakistani traders, facing a slow economy back home, have hinted at setting a base in Kenya saying the country is “the gateway to emerging African markets”. Speaking at the Pakistan-Africa Trade Development Conference, which began in Nairobi Thursday, the delegates said investment in Kenya would grant them easy access to markets in East African Community as well as the continental free trade area. The conference, which is Pakistan’s first of its kind in Africa, attracted more than 300 delegates drawn from the public and private sector from 22 African countries as well as another 150 delegates from Pakistan. President Uhuru Kenyatta said Kenya will be seeking to revive trade relations with countries in Central Asia such as Pakistan, noting that the trade agreements will offer positive benefits to both regions. “Kenya and Africa is seeking to transform itself to a global powerhouse and to achieve that we need to revive trade relations with the China-Pakistan economic corridor. This conference is just the beginning of that journey where we hope to learn from each other.” [Razak Dawood: Pakistan to double bilateral trade with African countries]

Regulatory and procedural constraints hinder Ugandan ICT exports: new UEPB, ITC report

A new report explores the characteristics of Ugandan technology firms finds that the sector promotes intraregional trade and the inclusion of women and youth in the economy. But regulatory and procedural hurdles make it difficult for many exporters to reach foreign markets. The report, Firms’ characteristics and obstacles to ICT services trade: Indicative evidence from a company survey in the Ugandan ICT sector (pdf), was released during the fifth edition of Annual Export Week organized by Uganda Export Promotion Board. The report argues that Ugandan technology companies would benefit from a regional discussion targeting harmonization and ways to ease the regulatory burden on African services trade. Facilitating such a dialogue, ideally during AfCFTA negotiations, is one of nine headline suggestions of the report. The report found that more than half of the 57 companies surveyed already export, and many others aim to follow suit in the next two years. These enterprises mostly target countries in the Eastern African Community region and the rest of Africa. A majority of the exporting companies face trade obstacles such as tough regulations and administrative procedures. Some preliminary recommendations, which could lead to further analysis and technical assistance interventions, have been identified (pdf, extract):

Facilitating a regional dialogue that could ease the requirements imposed on local presence and open opportunities to cross border trade, when possible, is key. The AfCFTA negotiations would represent a unique platform to discuss about harmonization and the reduction of regulatory burden on services trade in the continent. ICT services are part of the five priority sectors adopted by the AU assembly in July 2018. This particular situation demands for an increasing body of research that can enable African leaders to engage into a more data-driven dialogue.

Harmonization of taxation systems and reciprocal recognition of licenses and certifications could also help to ease the burden faced by companies. Governmental sources, consulted during the preparation of the current report, mentioned that Uganda is in the process of harmonizing internal taxes with other partner states under the aegis of the EAC Common Market Protocol as an EAC Draft Policy has already been prepared. EAC members’ efforts to speed up the adoption process will therefore be beneficial for the ICT sector. Focus should be also devoted on the ratification of the EAC Double Taxation Agreement. Ugandan authorities can leverage on the experience of the double taxation agreements that have been already successfully concluded with India, South Africa, Denmark, Mauritius, Netherlands, Norway and the UK. [Related: Museveni tips exporters to up dialogue with govt]

Thwarting smugglers leave Nigerians counting costs of stony rice (Bloomberg)

In Adeola Adejare’s market store in Lagos, two teenage boys separate stones from Nigerian rice, preparing it for sale after the government closed land borders and stemmed the flow of cheap, smuggled grains. “Most people cannot afford to buy” even the least costly local variety, said Adejare, a trader in Daleko, the largest rice market in the country’s financial hub. Sales have plummeted by 90%, with the 47-year-old now considering herself lucky to sell two 50-kilogram bags a day.

Despite widespread discontent over rising prices, many Nigerian farmers are happy with Buhari’s tough stance. Estimates of Nigeria’s grain supply and demand vary wildly - though they point to Buhari’s measures boosting domestic cultivation. Data from the U.S. Department of Agriculture shows the country’s milled rice production increased by 24% since 2015 to reach 4.9 million tons this year, leaving a near 2-million ton deficit. The ban has improved the confidence of planters and expected output for this year is 13 million tons, said Muhammad Sahabi Augie, chairman of the Rice Farmers Association of Nigeria in the northwestern state of Kebbi. Millers are now refurbishing old abandoned facilities and are looking to expand production to about 10 million tons this year -- provided the borders remain sealed, said Peter Dama, the president of the Rice Millers Association of Nigeria, which estimates production to have more than doubled to 6.7 million tons this year. [Related: Demurrage swells, goods spoil as border closure continues]  

Leveraging export diversification in fragile countries: The emerging value chains of Mali, Chad, Niger, Guinea (World Bank)

Despite multiple past efforts, fragile Sub-Saharan African economies such as those of Mali, Chad, Niger, and Guinea still rank among the least diversified worldwide, with natural resources constituting a high share of their gross domestic product or exports. Large-scale production of gold for Mali, oil for Chad, uranium for Niger, and bauxite for Guinea offers substantial opportunities, but also has major shortcomings. This report explores the following questions: What are Mali’s, Chad’s, Niger’s, and Guinea’s main constraints to export diversification as perceived by key exporting firms? How it could be beneficial for these countries to target certain emerging export products? Are their current interventions to promote global value chain adequate? What lessons can be extracted from specific cases? How can trade and logistic policies favor (or hamper) export diversification–led growth? The book lays the groundwork for effective step-by-step multidimensional policies to propel export diversification in fragile economies that are hindered not only by poor governance and weak institutions, but also by their landlocked position (except Guinea), small domestic markets, and business-unfriendly environments.