Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection

Ministers of Health of AU member states will meet this weekend to discuss a continental strategy for preparedness and response to the coronavirus disease outbreak. The ministers will:

  • discuss and agree on a continental strategy to better prepare and respond to any new cases of the virus on the continent

  • discuss and agree on a common approach to receiving African students and citizens wishing to return from China

  • share knowledge and information about experimental drugs, vaccines and clinical trials currently being undertaken for the control of the coronavirus disease.

South Africa: PwC unpacks the extent to which coronavirus may dampen the local economy (Engineering News)

“Slower growth in China will hit the South African economy through several transmission mechanisms: firstly, there is the demand for our minerals and mining products; secondly, there is the impact on the balance of trade; and thirdly, there is the potential exchange rate impacts. We were expecting slower Chinese growth to hit South Africa at some point towards the end of 2020, but recent developments have accelerated this slowdown and now we are dealing with suppressed demand a year earlier than we initially thought it would happen,” notes PwC chief economist Lullu Krugel.

PwC further avers that many of South Africa’s industries will see an adverse impact from the virus, including mobile operators, automotive manufacturers, as well as hospitality and retail establishments. The firm adds that three out of four Chinese tourists to South Africa undertake personal shopping activities – China has a burgeoning middle class opting to spend money internationally. The size of the potential decline in Chinese arrivals in South Africa is hard for PwC to gauge at present. Using some simplifying assumptions, the firm estimates a potential loss of at least R200m in Chinese tourist spending.

Commentaries on the proposed Kenya-US FTA:

  • Mukhisa Kituyi, Erastus Mwencha: A note to Kenya on its trade talks with the US. At the technical level, an American FTA is much more than a renewed market access arrangement. First is a demand for easier export of American products into your country. Not dissimilar to the recent exhortation by UK Prime Minister Boris Johnson for more chicken from Dover to populate African kitchens. Secondly, US will pile pressure on domestic reform in the partner country. From radical reform of labour laws to strong intellectual property policing, this initiative flies in the face of food security and increased manufacturing output as espoused in the Big Four Agenda. Kenya will quickly learn why the Southern African Customs Union put FTA negotiations with the US on ice.

    Regarding the end of Agoa, Kenya should follow the tested route of collective negotiation. Over the past two decades, whenever a phase of Agoa has approached a dateline, the 39 beneficiary countries have engaged the US congress collectively; and this legislation which enjoys rare bipartisan support has been given a new lease of life. Kenya should not provide cracks in the armour of those who have pushed for further collective engagement sure in the knowledge that there is strength in numbers. That is what you negotiate on the wholesale market and at a better price than solo efforts on the retail market.

    Regarding the MCA, it is important to note two facts. One, for 16 years, Kenya has been locked out of the grant programme because successive US administrations have been dissatisfied with the level of commitment and action against grand corruption. Secondly, none of the current beneficiary countries of the MCA grants in Africa has negotiated a bilateral FTA with Washington. Beyond the technical challenges and feasibility of a balanced agreement lie the most serious challenges to Kenya’s action. Its impact on the momentum for the AfCFTA and its compatibility with Kenya’s membership of the EAC.

  • US-Kenya deal could spur regional value chains says former US negotiator, Florie Liser. A trade deal with the US could help both Kenya and its neighbors in the EAC by fostering the development of regional value chains, according to a former US trade official. “I think it’d be really fascinating as we go forward with this US-Kenya FTA to see what’s going to be possible not just for Kenya but for other African countries in various sectors,” Florie Liser, a former assistant US Trade Representative for Africa who now heads the Corporate Council on Africa. While at USTR, Liser was the chief negotiator for a trade agreement between the US and SACU, talks for which ultimately stalled. “They could actually develop an ecosystem where essentially you get all of these different input manufacturers to final products,” she said. She pointed to SACU as another example, noting that South Africa has become an exporter of autos and that other countries in the bloc have become parts suppliers.

  • KEPSA to explore investment opportunities emerging from Kenya-US FTA. KEPSA chief executive officer Carole Kariuki said the mutual beneficial agreement between the two states will ensure a balance and be of value to both Kenya and the United States. “Kenya should draw lessons from Morocco on the challenges and opportunities that are emerging with the free trade agreement between Morocco and the US in order to learn and eventually do better,” she urged. In this regard, KEPSA, Corporate Council on Africa and General Confederation of Enterprises in Morocco will work together to learn lessons from the Morocco experience,” said Kariuki. KEPSA and Corporate Council on Africa also agreed to promote mutual interests through cooperation in the promotion of trade and investment opportunities in Kenya.

  • Oluwatosin Adeshokan: Does the Kenya-US free trade deal signal Nigeria’s fall from grace? Nigeria seemed like the prime candidate for a free trade agreement with the United States based on the agreements of the African Growth and Opportunity Act. However, the current policies of the country seem not to indicate it’s not good enough as a trade partner for many of its partners. Adedayo Bakare, an economist and investment researcher at Afrinvest stated the bulk of the trade policies the federal government and Central bank are taking are textbook protectionist and will long term discourage investors from coming to the country. “Nigeria’s import substitution policy and shutting the land borders are sending negative signals to investors and countries saying Nigeria is not open to trade,” said Bakare.


Kenya: CBK data reveals exports have hit a three-year low (Business Daily)

Total exports fell to Sh595.28 billion in the year to December from a record Sh612.88 billion a year earlier, Central Bank of Kenya data has revealed. The dip pushed Kenya’s trade deficit – the gap between imports and exports – to a record Sh1.16 trillion from Sh1.145 trillion in 2018 despite a flat growth in imports. Total imports dropped by 0.09%, or Sh1.54 billion, to Sh1.756 trillion. CBK data indicates income from tea shipped abroad last year stood at Sh113.67 billion, a significant Sh25.16 billion dip compared with nearly Sh138.84 billion a year earlier. The earnings from Kenyan tea – used to blend other varieties globally due its superior quality but fetches relatively low value because it is exported raw – were the lowest since 2014 when they stood at nearly Sh94.0 billion. CBK data shows that coffee exports fell Sh2.58 billion to Sh20.91 billion in 2019 compared with the year before, while horticulture’s rose Sh5.04 billion to Sh110.70 billion.

Ensuring economic viability and sustainability of coffee production (pdf, CCSI)

For this report, we developed a new economic model of supply and demand in the coffee sector, which forms the core of our quantitative analysis. The model simulates a global price equilibrium between 136 consuming countries and the farming decisions in 3024 coffee-growing regions. Our report is also grounded in extensive desk research and at least 72 interviews with 86 people, representing producers, small and large companies, civil society organizations and multi-stakeholder platforms, research institutions and academics, and others.

Will the coffee sector continue following a business-as-usual trajectory of limited and piecemeal sustainability endeavors, which would ultimately result in further concentration of coffee producers and heightened supply risks? Or will the coffee sector undertake strong concerted efforts to support a more sustainable and resilient future for producers and the sector overall? We suggest that each coffee-producing country develop a National Coffee Sustainability Plan (NCSP), that accounts for differentiated needs, challenges, and opportunities within the country’s coffee sector. There is not a one-size-fits-all approach for NCSPs. However, each NCSP should include a focus on the following collective goods: [Kigali will host the third World Coffee Producers Forum in July 2021]

2020 Off-Grid Solar Market Trends report (World Bank)

The off-grid solar industry has grown into a $1.75bn annual market, providing lighting and other energy services to 420 million users and remains on a solid growth curve, a new World Bank Group and GOGLA report shows. The 2020 Off-Grid Solar Market Trends report finds that the industry has made tremendous strides in the past decade. Since 2017, revenues from the off-grid solar industry continue to rapidly grow, increasing by 30% annually. To date, more than 180 million off-grid solar units have been sold worldwide and the sector saw $1.5bn in investments since 2012. Extract (pdf):

Companies are moving into new geographies and underserved markets in pursuit of scale. Several providers in East Africa have expanded into new markets, especially in West Africa, as established markets become more saturated. In Nigeria, companies are introducing new products; for example, Zola launched its Infinity backup product to serve the large unreliable grid market in that country, and Beebeejump offers an SHS product with an AC inverter, a category in which several other companies are currently testing products.

Around 70% of the population without access in Sub-Saharan Africa and Asia–Pacific could afford to pay the monthly installments for a Tier 1 multi-light product, so the current addressable market for this product is 476 million people. The remaining 240 million people who cannot afford a Tier 1 OGS product are mostly concentrated in Sub-Saharan Africa, which reflects the region’s lower ability to pay compared to Asia–Pacific. The addressable market for a basic SHS (21–50 Wp) is smaller at 43% (310 million people) of the global target population. While this affordability gap persists for quality-verified, Tier 1–enabling products and above, almost all people in these markets can now afford an entry-level, single-light pico product.

The largest concentrations of people with unreliable grid connections are in South Asia and West Africa. In South Asia, while grid access rates have expanded rapidly, some 832 million people have an unreliable grid connection (Figure 9). This translates to about 46% of all grid-connected people. In West Africa, the majority of all grid-connected households in Guinea and Nigeria report not having electricity “half of the time.”

AfDB joins other DFIs to deepen private investment in fragile states (AfDB)

Representatives of 27 development finance institutions met at the University of Oxford (11-13 February) for a follow-up forum to strengthen private investment inflows into fragile or conflict-affected economies. The Commission for State Fragility, Growth and Development, a partnership of the World Bank Group’s International Finance Corporation, CDC, the UK’s DFI and International Growth Centre of the London School of Economics organized the meeting. Participating institutions agreed to cooperate in rolling out pilot interventions in a number of fragile states. Africa’s premier DFI, the AfDB co-organized the forum, and agreed to lead a pilot intervention in Madagascar going forward. The Bank will also participate in joint implementation of pilot programs in Ethiopia, Democratic Republic of Congo and Sierra Leone. Participants at the 2020 meeting discussed developments in pilot programs, launched last year at the inaugural forum, in a number of countries. Other topics included managing the higher risk associated with operating in fragile environments, including the use of de-risking tools; and mechanisms to maximize the impact of donor-supported investment facilitation. Participating institutions agreed the following:


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