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tralac’s Daily News Selection

tralac’s Daily News Selection

25 Feb 2020

Starting tomorrow: Gabon’s AfCFTA national awareness and sensitization forum

Postponed: The 21st ordinary meeting of the Summit of the EAC Heads of State

The 21st Ordinary Meeting of the Summit of East African Community Heads of State that had been scheduled for Saturday (29 February, in Arusha) has been postponed to a later date. The postponement of the summit comes in the wake of a request by South Sudan, which said it was currently in the process of forming a transitional government bringing together the government and opposition groups. Also postponed is the 41st Extra-Ordinary Meeting of the EAC Council of Ministers, scheduled to take place from 25-27 February at the EAC Headquarters in Arusha. In requesting the postponement, Mr Mou Mou Athian Kuol, South Sudan’s Under Secretary for EAC Affairs in the Ministry of Trade, Industry and EAC Affairs, said that the formation of the new Transitional Government of National Unity would mean a lot of changes in the government and probably affect its organizational structure.

Report of the EALA’s committee on communication, trade and investment on the delayed ratification and establishment of a trade remedies committee (pdf, EALA)

While the Summit approved the amendment of Article 24(2)(a) of the Customs Union in October 2009, it took the Secretary General five years (10t November 2014) to transmit to the partner states the approved amendment for ratification. This unjustified delay raises serious questions about the level of commitment to the EAC integration the Office bearers had at that time. The month of October 2019 marks 10 years since the Summit of Heads of State approved the amendment of Article 24(2)(a) of the Customs Union Protocol to pave way for the operationalisation of the Trade Remedies Committee. A decade later, as the House debates this report, none of the partner states has ratified the aforementioned provision of the Protocol thus making it impossible to constitute this important Committee.

Despite the delayed ratification, all the Partner States pledged their commitment to expedite the ratification process. They undertook to conclude the ratification of the amended provision of the Protocol and have the instruments deposited with the Secretary General at the earliest possible opportunity. It is apparent that the signing of the AfCFTA will lead to increased volumes of trade in the region and there will be NTBs of continental and global nature. The EAC should create safeguards to enable the region engage firmly in continental and global trade. Therefore, it is important that the partner states expeditiously ratify Article 24(2)(a) of the Customs Union Protocol and operationalise the EAC Committee on Trade Remedies to address issues of dumping, subsidies and surge of imports.

Kenya’s EAC exports hit six-year high after trade rows ease (Business Daily)

Kenya’s exports to top markets within the six-nation EAC bloc jumped to a six-year high in 2019 on the back of easing trade tensions, provisional data shows. Earnings from goods sold to Uganda, Tanzania and Rwanda increased by nearly Sh11.01 billion, or 10.06%, in the January-December 2019 period to hit Sh120.43 billion. This is the highest income from goods sold in the three regional markets since Sh120.68 billion was earned in 2013, according to latest statistics collated by the Central Bank of Kenya. The value of exports to Rwanda accelerated at the fastest pace of 29.95% (or Sh5.34 billion) to touch a fresh record of nearly Sh23.18 billion. Orders from Tanzania climbed Sh3.87 billion, or 13.03%, to close the year on Sh33.61 billion – the highest value since protectionist President John Magufuli’s first full-year in office (In 2016, they stood at Sh34.80 billion).

The unspoken pain of Kenyan companies in Tanzania (Daily Nation)

Although many Kenyan companies doing business with Tanzania may not publicly admit it, they are caught up in a cold war that threatens to freeze them out. They accuse the neighbour of being averse to competition, and any sense of losing out results in arbitrary introduction of charges that ensure Kenyan products attract higher prices. Tanzanian has banned some services offered by Kenyan firms and introduced trade barriers that favour local competitors while frustrating the latter. These frustrations are contained in annual reports and financial statements of many companies pointing to a trade war far from over, but which no one wants to admit overtly. Carbacid Investments Limited, which exports Carbon Dioxide (CO2) to Tanzania, is one of the companies whose operations were hit by introduction of new policies.

As Namibia ratifies: Implementation of the Tripartite FTA Agreement is now in sight (Comesa)

The implementation of the Tripartite Free Trade Agreement is now in sight following a spike in the number of countries ratifying and set to ratify the Agreement. Eight countries have so far ratified the agreement with six remaining to attain the required threshold of 14 for the Agreement to enter into force. Namibia is the latest to ratify the TFTA agreement, and today, the country’s High Commissioner to Zambia, Mr Siyave Haindongo, deposited the Instrument of Ratification to the Chair of the Tripartite Task Force Chileshe Kapwepwe, who is the Secretary of COMESA. “Namibia now joins Egypt, Uganda, Kenya, South Africa, Rwanda, Burundi and Botswana in the roll of honour of countries that have ratified the Tripartite Free Trade Area Agreement,” the SG said. Seven countries are in advanced stages of the ratification process: these are Comoros, Eswatini, Malawi, Sudan, Tanzania, Zambia and Zimbabwe. These are expected to complete the ratification process before the end of this year paving the way for its implementation.

Célestin Monga: Africa isn’t ready for currency unions (Project Syndicate)

But Africa’s track record on institution building, especially for overseeing sensitive governance issues involving sovereign states, is poor. Even when rules are adopted and exist on paper, the lack of credible monitoring and enforcement means they stay there. Countries in the SADC and EAC also fail to meet the criteria for optimal currency areas with well-functioning transnational public-finance and banking systems. African political leaders view monetary unions as a stepping-stone toward continental political unity. But a common monetary policy is not adequate to achieve such a goal. No regional integration strategy can survive, much less overcome, pervasive poverty and social tensions. Economic development is a precondition for stable societies. A more appropriate monetary strategy for African countries would be to redesign Africa’s monetary integration project and implement it through concentric circles, with smaller groups of countries that have similar production structures and factor mobility, along with credible transnational fiscal and banking policies. A shared currency pegged to a basket of currencies or with a flexible exchange-rate regime would ensure external competitiveness and yield more economic benefits.

Institutional support to the African Civil Aviation Commission for the implementation of the Single African Air Transport Market: AfDB project appraisal report

The 1988 Yamoussoukro Declaration superseded by the 1999 Yamoussoukro Decision (YD) was was adopted out of the realization that Bilateral Air Services Agreements were too restrictive and hampered the expansion and improvement of air transport in Africa. Indeed, Air transport connectivity in the African continent is significantly lower than in other regions, and only captures around 3% of the global air transport. The YD provides for the full liberalization of Intra-African air transport services in terms of market access, the free exercise of the five freedom traffic rights for passengers and freight by eligible airlines and the full liberalization of frequencies, tariffs and capacity. It is in this context that the Single African Air Transport Market (SAATM) was launched and established on 28 January 2018 as the first AU 2063 Agenda flagship project. The SAATM aims to expedite the full implementation of the YD. The AU gave the mandate of implementing SAATM to the African Civil Aviation Commission (AFCAC. The proposed Project provides for support to the AFCAC as the Executing Agency of the SAATM for the implementation of this initiative.

Although the AFCAC was entrusted with this responsibility, no resources were allocated to enable it to undertake these new functions effectively. A major weakness often associated with the AUC is the lack of durable, goal efficient and reliable project teams and institutions with adequate capacities to undertake implementation. And the YD experience substantiates the latter. The project has been designed considering the SAATM prioritized action plan as well as the results of the Bank’s study on market access and liberalization in 2019. This study highlights inter alia that one of the main reasons for the failure of the YD was the lack of a body with the power to enforce the regulations approved; and conclude that there is need for the support envisaged.

Uganda: Jobs strategy for inclusive growth (World Bank)

Trend growth in Uganda’s economy has not been fast enough to create enough jobs with higher earnings for one of the world’s fastest growing workforces. With almost three quarters of young people still joining the workforce on farms, Uganda’s economic transformation into off farm waged jobs in urban areas must be hastened for faster economic growth. This report identifies 10 key facts from a Jobs Diagnostic analysis which describe the main jobs challenges Uganda faces. It then sets out policy recommendations for a strategy for jobs and economic transformation which focuses on creating more waged jobs in Uganda, encouraging mobility into better jobs in urban areas, accelerating transformation of Uganda’s agriculture, and fostering inclusion into better jobs. Extracts (pdf):

We suggest a policy realignment around jobs priorities, not a new economic policy paradigm. Most of our recommendations can be found in many Ugandan strategy documents. The recipe of macroeconomic stability and liberal, outward-looking, private sector-friendly policies that has allowed Ugandan markets to work and Ugandan entrepreneurs to pursue profi ts since the early 1990s, must be maintained. But given Uganda’s stage of demographic transition, and the limited economic transformation Uganda has experienced even since reforms started in the early 1990s, we think laissez-faire policies will take too long to shift workers from traditional farming to the modern sector and towns. The strategy set out here is therefore not agnostic about which products, locations, workers, and what types of jobs Uganda should target in the realigned strategy (or action plan). A full set of policy recommendations is set out in section 3.

Increased net agribusiness exports, the development of agro-processing industries and markets, and fast growth in higher-value food markets from orderly urbanization are important first steps in Uganda’s economic transformation. Uganda is also a large importer of processed foods and a growing importer of unprocessed agricultural products, including cereals. Processed foods accounted for 9% of all Ugandan recorded imports over the 2012–2016 period; fresh (i.e. unprocessed) food accounted for 3% and has been on the rise in 2012–2016. Food import dependency reached almost 13% by 2016.48 This suggests scope for competitive replacement by local domestically grown and produced goods.

Support SMEs transition to exporting. SMEs typically lack knowledge about regional and international markets, potential market requirements, and relationships abroad to find customers. Access to exports boost demand for SME products and allow SMEs to grow. Potential actions include:

  • Establish a specialized agency to support SMEs to export. The Uganda Export Promotion Board could also be strengthened rather than create of a new agency. This agency would support only domestic micro, small, and medium enterprises. This agency would facilitate SME operations; among its services, the agency could assist with tax-related services and exemptions, access to certifications, financial support to attend trade fairs and international events, and training to bid for contracts.

  • Provide specialized consulting services to SMEs willing to export. This technical assistance could be provided by local consultants as well as international advisers for a specific need requiring highly specialized competency; for instance, developing a website, developing a quality management system, prospecting for clients, and developing a marketing strategy. The example of the European Bank for Reconstruction and Development (EBRD) in Tunisia demonstrates the opportunities for SMEs (see Box 3.2).

Germany-SA trade (Standard Bank)

In her two-day visit here two weeks ago, German Chancellor Angela Merkel said that German businesses would be keen to invest in SA but first would want to see less bureaucracy and more legal certainty. Indeed, such ideal conditions are what investors would want too before committing in long-term investment here. Indeed, President Ramaphosa’s government is set to improving the ease of doing business in SA, combatting crime and corruption, and implementing pro-growth reforms.

Current Germany-SA investment and trade relations are reasonable; any further German investment clearly would assist our growth and employment. In 2018, direct investment stock from Germany was R90.4bn, while SA’s direct investment stock to Germany was R56.5bn. Germany is SA’s third-biggest source of direct investment stock from Europe, after the Netherlands (R387.7bn) and Belgium (R191.8bn).

SA currently runs a trade deficit with Germany; nevertheless, the share of SA’s exports to Germany was 8.3% in 2019 (above the historical average of 6.3% 2001-2019) and also above SA’s share of exports to the United States (7.0%); United Kingdom (5.2%); Japan (4.8%); and India (4.6%). Germany is therefore an important SA trading partner. The trade deficit can be attributed to SA’s import values of vehicles (27.8%); machinery (21.4%), electrical machinery (10.6%), and optical, photographic at 5.7% (see footnotes below). [The author: Thanda Sithole]

Ireland gets closer to becoming AFDB member (EA Business Week)

Ireland moved a step closer to becoming a member of the African Development Bank Group after a government delegation on Monday deposited ratification instruments during an official visit to the Bank’s Abidjan headquarters. The delegation, led by Paul Ryan, Director, International Finance Division of Ireland’s Department of Finance, included Patrick Mulhall and Renee Martin of the Department of Finance, and Laura Gibbons from the Department of Foreign Affairs and Trade. Ireland’s application to join the African Development Bank Group as its 81st member, was approved during the Annual meetings of the Board of Governors of the Bank Group in Malabo, Equatorial Guinea in June 2019.