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tralac’s Daily News Selection

tralac’s Daily News Selection

13 Feb 2020

Posted by the African Union: African Innovation Outlook III

Extract from Chapter 3: Status of innovation performance (pdf). This chapter presents the status of innovation performance in the business sector, mainly focusing on manufacturing and services firms from 10 African countries during the period 2013-2015. The 10 countries, with a total of 321 million inhabitants, represent nearly a third of Africa’s population and a total GDP of $630bn in 2016 prices. While 10 countries do not accurately represent a continent of 55 countries, it is a reasonable number from which key lessons can be drawn. While the previous chapter focused on the national R&D system, this chapter provides complimentary information on innovation activities such as capital expenditure on machinery and equipment, R&D and software, as well as expenditure on the acquisition and use of knowledge, product design, personnel training, pilot scale production, and market analysis from a firmlevel perspective. The survey specifically looks at firms that introduced new products and processes, organisational and marketing innovations and other aspects such as challenges faced by firms and sources of useful information for innovations.

Product and process innovations (pdf): A closer look at product (goods and services) and process innovations suggests that process innovations were higher at 33.4% followed by product innovations separately presented as goods (21.6%) and as services (17.0%). However, wider differences were observed among countries (Tables 3.8 and 3.9). For instance, in Seychelles firms reported 66.7% of process innovations and 66.7% of service innovations and goods innovations were at 26.7%. On the other hand, Egypt and Ethiopia reported much lower innovation rates for services as compared to goods and processes. Similarly, firms in Lesotho pursued more innovations in goods (44.4%) and processes (44.4%) than in services (30.6%).

Third Regional Dialogue on WTO Accessions for Africa: WTO membership and AfCFTA implementation in deepening economic integration (UNECA)

Mr Stephen Karingi (Director: Regional Integration and Trade Division of ECA) reflected on what he called “the contrasting narratives on the governance of international trade” coming out of Africa, on the one hand, and the West, on the other, and observed that despite the waning confidence in rules-based multilateral diplomacy, Africa is “affirming and reaffirming its confidence in a rules-based system of economic liberalization as a tool for inclusive and people-centered development.”

Instead of turning against the multilateral trading system, the Dialogue served as an opportunity for African countries to explore the synergies between the AfCFTA and the WTO regimes so as to ensure those countries pursuing accession to the WTO and participation in the AfCFTA approach these twin processes in a coordinated and mutually-reinforcing manner. The dialogue comprised of government representatives from seven of the nine acceding African countries – Algeria, Comoros, Equatorial Guinea, Ethiopia, Somalia, South Sudan, and Sudan. It also brought together representatives from the private sector, civil society, independent experts, academia, international organizations and development partners.

US-Kenya trade negotiations: A chance to get it right (PIIE)

Moving countries from unilateral preferential schemes to reciprocal agreements is a long-standing US trade policy objective, undertaken when Central American countries moved from the Caribbean Basin Initiative to the Central American Free Trade Agreement in the early 2000s. Since then the United States has wanted to enter into free trade agreements in Africa as well. A major concern about potential US-Kenya negotiations is that the parties could settle for a limited deal. Kenya would benefit from a deep preferential trade agreement, but it needs time to forge such an agreement and align its domestic political economy to support it. Kenya needs to revise some of its current trade policies and practices and tackle controversial issues head on.

Plenty of challenging issues will need to be sorted out: high import tariffs on dairy, corn, and other products; sanitary and phytosanitary barriers, like import bans on genetically modified products or complex requirements on meat, dairy, and poultry; restrictions on government procurement; trade barriers in insurance and telecommunication services; and restrictions on FDI in combination with local requirements, among others. Practices such as closing borders or banning imports, like the recent episode of blocking Uganda’s milk supply, will come under pressure. Open consultations with the private sector, good mechanisms to improve coordination among government agencies, and broad communication initiatives would help Kenya get its domestic political economy right. In parallel, Kenya should address some of the main problems impeding private sector growth.

But for US-Kenya negotiations to deliver, Washington needs to move away from the one-sided bilateral deals recently favored by the Trump administration and find the right template. The agreement should also be designed to effectively support regional integration. But to effectively move into a reciprocal relationship with benefits for both parties, it is critical to consider the following [three] points: [The author: Annabel González; Bitange Ndemo: How will the new Kenya-US trade deal fare?]

Free trade agreement between Mercosur and Egypt (pdf, WTO)

The representative of Egypt noted that the Free Trade Agreement between Mercosur and Egypt was signed by the parties on 2 August 2010, and had entered into force on 1 September 2017. The trade liberalization offered by Egypt to the Mercosur states would take place over ten years from the date of entry into force of the agreement. Egypt had already liberalized 1,090 tariff lines for Argentina, Brazil, and Uruguay, and 1,094 lines for Paraguay. An additional 739 lines would be liberalized in 2020 for all Mercosur states. Egypt would also liberalize around 1,700 tariff lines in 2024 and 1,100 tariff lines in 2026. He noted in conclusion that Egypt was looking forward to expanding its trade relations with the Mercosur states through the full implementation of trade liberalization under the agreement. His delegation believed that the agreement would serve as a important tool for the private sector on both sides to help develop trade and investment partnerships.

Isaah Mhlanga: How the new US trade policy will affect SA (Moneyweb)

Essentially you have about 36% of South Africa’s total export that goes to the United States without any tariffs or duties. And that’s quite a significant amount. But if we consider for some subsectors such as agriculture, for instance, that percentage goes to about 75%, which means these are now going to be subject to tariffs, which means it’s going to be much more expensive for us. And because of that access to the US market without tariffs, South Africa has maintained a trade surplus in terms of goods trade with the US since the inception of Agoa in 2000, and exports have increased by 104%, which is a significant growth. If you look at 2018 alone, South Africa exported to the US about R8.5bn, while it imported about R4.2bn, which means we had a trade surplus of R3.76bn, which benefits South Africa quite significantly. And those trade dynamics are likely to change going forward. [The author is executive chief economist at Alexander Forbes]

AU Financial Institutions Initiative: Ghanaian president named as Champion (Xinhua)

Ghanaian President Nana Addo Dankwa Akufo-Addo has vowed to help the African continent towards effectively harnessing African financial institutions as he was named Champion of the African Union Financial Institutions. “Ghana believes that the establishment of the African Financial Institutions are critical for enhanced resources mobilization on the continent,” an AU statement issued late Tuesday quoted Akufo-Addo as saying, as he emphasized that such continental financial institutions “will drive the continent’s financial sector to facilitate its productive transformation and development.”

According to the Ghanaian president, effective establishment of the AU financial institutions requires bold commitments from African policymakers, as leaders of the continent. “We need to take urgent actions for the signing and ratification of the legal instruments of the African Investment Bank and African Monetary Fund, in order to get the required number of ratifications to mobilise Member States towards their operationalization,” he added. As the champion for the AUFI, Akufo-Addo will work together with the African Central Bank, the African Monetary Fund, the African Investment Bank and the Pan-African Stock Exchange.

Bohani Hlungwane: The AfCFTA will be a game-changer for African free trade (Business Day)

The anticipated overall growth in intra-African trade will generate an increasing need for trade finance. The International Chamber of Commerce estimates there is already a trade finance deficit of at least $100bn, even before there is an increase in intra-African trade that should result from a successful implementation of the AfCFTA. This will pose a significant challenge to African banks, as they will require flexibility in risk assessments and financing requirements, given the already very high trade finance deficit. Regional banks, such as Absa Group, Standard Bank and Ecobank, will need more flexibility in their risk assessments for trade deals in order to support corporates as they take advantage of new growth and trade opportunities across the region. This is important, as strong regional banks have proved to be critical in regional economic and trade development in other regions, such as Europe, North America and Asia. [The author is regional head of trade and working capital for Africa regional operations for Absa Group Limited]

CIPE and NACCIMA position Nigeria’s organised private sector on AfCFTA implementation: The aim is to support MSMEs in Nigeria to articulate policy positions needed to maximize the opportunities presented by an Africa free trade area and to implement vital economic reforms to harness benefits to MSMEs.

Islamic Corporation for the Development of the Private Sector signs MoU with the A-eTrade Group: The scope of cooperation envisaged in the MoU provides for a landmark contribution to Africa’s economic structural transformation, when fully executed, including enabling SMEs in Africa, especially women and youth, to be active participants and beneficiaries of the AfCFTA. “Our goal is to create 600,000 SMEs in 4 years with 22 million jobs, and 5 million SMEs in 15 years with 80 million jobs”, said the CEO and Chairman of the AeTrade, Mr Mulualem SYOUM.

Why exporters need to mind the trade finance gap (WEF)

According to the Asian Development Bank, the current trade finance gap, or the amount of requested trade finance that is rejected, is estimated at $1.5 trillion globally. Half of this is in developing countries in Asia and Africa, with small and medium-sized enterprises suffering the most. The WEF estimates this gap could reach $2.5 trillion by 2025 as supply chains move away from China to poorer developing countries. This not only puts up a major wall between global markets and the SMEs that are otherwise ready to supply them, it also prevents trade from fulfilling its potential to promote growth and development and create jobs. The situation in the least developed countries is dire. The rejection rate for requests of trade finance in Africa exceeds 50%, while the trade finance gap is estimated to be more than $100 billion annually – one-third of the total market value. With few alternatives to bank financing, traders generally abandon the transaction once rejected. Many international banks no longer support cross-continent trade transactions with Africa, for fear of regulatory fines. As a result, finding US dollars to clear trade transactions has become a challenge for local banks.

Prompt submission of notifications urged for full implementation of Trade Facilitation Agreement (WTO)

Members considered 43 notifications received since the last Committee meeting in October 2019. Canada, China, the European Union, Japan, the Russian Federation and the United States took the floor at the meeting to remind members to submit information to the WTO about implementation timelines, trade procedures, contact points and other details required under the Agreement. The US also drew attention to the upcoming deadline of 22 February for LDCs to notify definitive dates when they would implement certain TFA provisions for which they required transition periods. As of 11 February, the current rate of implemented commitments under the TFA stood at 64.7%. Broken down by level of development, this equates to a 100% rate of implementation by developed members, 63.9% among developing members and 29.6% among LDCs.

Uganda Economic Update: Strengthening social protection (World Bank)

The current account deficit almost doubled to 9.8% of GDP in FY18/19 from 5.4% last year, but remains manageable as it is financed by large net FDI inflows. Aided by real exchange rate appreciation, total imports grew by 20% in FY18/19. Merchandise exports performed well (pdf), despite a reduction in the value of coffee exports. Merchandise exports grew 12% in FY18/19, surpassing last year’s pickup in exports totaling 8%. The rise in exports of goods occurred despite export volumes of coffee falling by over 6% in FY18/19 and coffee prices declining by 10%. As a result of such developments, refined gold has replaced coffee as the leading export product in Uganda, growing in value from $343m in FY17/18 to $1.1bn in FY18/19. The latter accounts now for one-third of total merchandise exports. That said, the longer-term sustainability of this development remains questionable. Refined gold exports helped elevate total merchandise exports to over 13.4% of GDP during in FY18/19 from 12.9% of GDP the year before. Traditional export products, such as tobacco and cotton, also performed well with growth rates of 58% and 32%, respectively.

Services sector growth slowed to 4.9% in FY18/19 (Table 1). This was largely due to slower growth in the trade, transportation and storage, and accommodation and food sub-sectors (Figure 5). In FY17/18 these sectors grew on average at almost 9%, but eventually slowed to 3.4% in FY18/19. The slowdown could be on account of slower intra-regional economic activity, following the lingering effects of the South Sudan conflict and closure of the Uganda-Rwanda border.

Climate change and marine fisheries in Africa: Assessing vulnerability and strengthening adaptation capacity (World Bank)

This report aims to assess, to the extent possible, the potential impact of climate change on fisheries and the related well-being of coastal African countries. It focuses on how the observed and anticipated ecological impacts of climate change are likely to affect fish stocks and the fisheries that depend on them and highlights the coastal countries and regions in Africa that are most vulnerable to climate change. Based on these projections, the report further assesses subsequent socioeconomic impacts on coastal countries and communities.