tralac’s Daily News Selection
South Africa’s WTO ambassador Ms Xolelwa Mlumbi-Peter has been elected as the 2020 chair of the Council for TRIPS. Lesotho’s Mr Refiloe Litjobo will chair the Committee on Balance-of-Payments Restrictions. The full list of 2020 chairs is available here.
The UNECA has postponed the forthcoming Conference of Ministers of Finance, Planning and Economic Development, and all other public meetings until further notice.
The impact of coronavirus is hurting Kenya’s private sector with a Stanbic Bank report released Wednesday indicating that orders for new goods dropped further in February for the first time in more than two years. According to the Purchasing Managers’ Index, private sector firms faced a shortage of raw materials owing to reduced imports from China due to the virus outbreak over the past month. Jibran Qureishi, regional economist for East Africa at Stanbic Bank said the shortage has pushed output prices upwards, as alternative import markets are not as cheap as China. “Unfortunately, it is difficult to assert whether we are at the beginning, middle or end with the coronavirus due to scant and inadequate data points. A scenario where the virus is contained in the next couple of months is probably the best case,” he said. “However, if there is an escalation into new geographies with the disruption potentially extending into the third quarter of 2020, the likelihood of a global recession then increases,” he added.
Coronavirus disruption could cost African airlines $40m in revenue this year, a global industry body said on Wednesday, a potentially devastating hit to often struggling airlines counting on lucrative Chinese routes to fund expansion. IATA forecast in December that African airlines would make a loss of around $200m this year, similar to 2019. Tewolde GebreMariam, chief executive officer of Ethiopian Airlines, Africa’s largest carrier, said the virus had slashed passenger demand. Ethiopian Airlines has faced criticism online for not cancelling flights to China like neighbours Kenya, Tanzania and Rwanda. “The air travel demand for Ethiopian Airlines has declined by 20% due to the corona,” Tewolde told Reuters. “It is a big shock.”
IATA’s January 2020 air cargo data: African carriers posted the fastest growth of any region for the 11th consecutive month in January 2020, with an increase in demand of 6.8% compared to the same period a year earlier. Growth on the smaller Africa-Asia trade lanes (up 12.4% in 2019) contributed to the positive performance. Capacity grew 5.9% year-on-year.
IATA’s January 2020 passenger data: African airlines’ traffic climbed 5.3% in January, up slightly from 5.1% growth in December. Capacity rose 5.7%, however, and load factor slipped 0.3 percentage point to 70.5%.
OECD Economic Outlook: Coronavirus – the world economy at risk
Travel restrictions, and the cancellation of many planned visits, flights, business and leisure events are severely affecting many service sectors. This is likely to persist for some time. Worldwide, Chinese tourists account for around one-tenth of all cross-border visitors, and one-quarter or more of all visitors in Japan, Korea and some smaller Asian economies (Figure 4, Panel A). Exports of travel services to China, including the spending by Chinese visitors, are also significant in many countries (Figure 4, Panel B). The virtual cessation of outbound tourism from China represents a sizeable near-term adverse demand shock. This is already apparent in many destinations; visitor arrivals in Hong Kong, China in February were 95% lower than usual. If the spread of the coronavirus outbreak affects visitor numbers more widely across the major economies, there would be sizeable costs, with tourism accounting directly for 4¼% of GDP in the OECD economies and almost 7% of employment.
Growth prospects are very uncertain. The projections are based on the assumption that the epidemic peaks in China in the first quarter of 2020, with a gradual recovery through the second quarter aided by significant domestic policy easing. Together with the recent marked deterioration in global financial conditions and heightened uncertainty, this will depress global GDP growth in the early part of the year, possibly even pushing it below zero in the first quarter of 2020. Even if the COVID-19 effects fade gradually through 2020, as assumed, illustrative simulations suggest that global growth could be lowered by up to ½ percentage point this year (Box 1; Figure 5). New cases of the virus in other countries are also assumed to prove sporadic and contained, but if this is not the case, global growth will be substantially weaker. [World Bank Group announces up to $12bn immediate support for COVID-19 country response]
South Africa: Economy slips into recession (Stats SA)
The South African economy contracted by 1,4% in the fourth quarter of 2019, following a contraction of 0,8% (revised) in the third quarter. Transport and trade were the main drags on overall activity, according to the latest GDP figures. Seven of the ten industries contracted in the fourth quarter. Finance, mining and personal services managed to keep their heads above water, but this was not enough to prevent the economy from sliding into its third recession since 1994. A decline in both freight and passenger transport dampened growth in the transport and communication industry, which slumped by 7,2%. The transport and communication industry contributed the most to the 1,4% fall in GDP (-0,6 of a percentage point). Retail trade sales and restaurant trade were up in the fourth quarter, but this was insufficient to counteract the fall in motor trade, wholesale and accommodation, which dragged the trade industry lower by 3,8%. The industry was the second biggest drag on the GDP. [Bloomberg: Nigeria now tops South Africa as the continent’s biggest economy]
“Discussions focused on the policies needed to support the authorities’ ambitious reform agenda, which aims to further bolster Kenya’s strong and inclusive growth. The discussions covered revenue and expenditure policies needed to reduce the deficit this fiscal year and achieve further fiscal consolidation over the next three years to reduce debt vulnerabilities while preserving high-priority, growth-enhancing public investment and social spending; public financial management reforms to increase the efficiency, effectiveness, transparency, and accountability of public spending; transformation of the banking system through the Banking Sector Charter to further strengthen financial stability and increase access to financing, including for small businesses; modernization of the monetary policy framework; steps to improve governance and strengthen the anti-corruption framework; and reforms to boost growth and improve gender inclusiveness.”
EALA adopts report of Accounts Committee: calls out for improved remittances by partner states, adherence to audit recommendations and enhanced systems
A report of the Legislative Assembly has once again lamented over the declining and slow pace of remittances at the Community. Coupled with this aspect, the Report of the Committee on Accounts (pdf) on the audited accounts of the EAC for the financial year ended 30 June 2018, calls for the speedy conclusion of the Alternative Sustainable Financing mechanism on the one side and the improvement of systems, effective and efficient operations as provided for in the financial rules and regulations of the Community. Chair of the Committee on Accounts, Hon Dr Ngwaru Maghembe, said EAC institutions, projects and programmes continue to face challenges of low absorption due to delayed or non-remittance of funds. According to the Chair of the Committee, the Community in the year under report, had a budget of $115,098,773; while the actual expenditure was $66,918,844 hence an overall performance of 58%. On remittances, the Assembly decried the delays with an amount of $20.27m not disbursed from the partner states in the financial year 2017/2018, compared to $7.85m in the financial year 2016/2017. Out of the total amount, $16.89m, or 83.34%, was due from the Republic of Burundi and the Republic of South Sudan.
Namibia: No strategy yet to capitalise on AfCFTA (The Namibian)
The government is yet to formulate a national strategy on how it can capitalise on the removal of 90% tariffs on goods in Africa because of a lack of funds and is banking on foreign donors to come to the rescue. As a regional bloc, the Southern Africa Customs Union is also behind in submitting the bloc’s schedule of concession for trade in goods, which was supposed to be submitted in January this year. This means the country has five months to draft a country strategy and to agree on which goods to progressively remove tariffs, as the AfCFTA comes into effect on 1 July 2020. According to a ministry of trade’s official Asser Nashikaku, the strategy is not done yet as the formulation of the strategy requires resources, which the ministry does not have: “Currently, the ministry has approached the UNECA for assistance and hope to develop the strategy soon with the assistance of Uneca. We have begun to cooperate towards the development of the strategy.”
Roberth Simon from NTF said Namibia needs a deliberate approach for AfCFTA, a strategy that will encourage trade with the rest of Africa. Simon also indicated that in light of the incoming trade agreement there is a need to revisit the ‘growth at home strategy’ and perhaps the industrial policy (2012). “The country has to invest in utility infrastructure for the manufacturing sector to become competitive. The legal framework should also incentivise efforts to set up industries,” advised Simon. [Bitange Ndemo: What must be done for a smooth take-off of the AfCFTA on 1 July 2020]
Uganda: URA braces for tough times as African free trade looms (PML Daily)
Uganda is set to lose huge revenue collections accruing from international trade in the next five years, the Uganda Revenue Authority says. The anticipated revenue drop, according to URA, is due to the AfCFTA treaty that all African countries ratified, except Eritrea, a year ago. “We have opened up these borders [under AfCFTA), there is no doubt that the goods that will be coming in our country will not be taxed. Currently, the domestic revenue collections contribute around 58%, compared to international trade that brings in 42%. Now the 42% is going to reduce further to 20%,” Mr Ian Rumanyika, the URA assistant commissioner Public and Corporate Affairs, said on Tuesday. URA collected more than Shs6.8 trillion in net international trade tax during the FY 2018/19. “So, the rest of revenue collection must come from the domestic market. That is why we are asking all Ugandans to be tax compliant,” he added yesterday at the Second Strategic Leaders’ Summit.
Kenya: Cement firms oppose attempts at raising clinker import duty (The East African)
Leading cement manufacturers in Kenya are against a move by National Cement Company chairman Narendra Raval to increase duty on imported clinker from 10% to 25%. Bamburi Cement, East Africa Portland Cement Company and Savannah Cement led firms opposing the increase at a meeting in Nairobi, under the stewardship of the Kenya Association of Manufacturers. However, KAM directed the manufacturers to provide data on their grinding and clinker installed capacity, clinker demand and the capacity of ongoing expansion projects. With this data, KAM will then approach the Ministry of Industry over the proposal.
UNCTAD has rolled out a new project to facilitate regional trade in central Africa. Secretary-General Mukhisa Kituyi launched the project in Kinshasa yesterday. Through the project, UNCTAD will offer technical expertise on the implementation of the WTO Trade Facilitation Agreement to five countries that are members of ECCAS. “Central Africa is facing significant trade facilitation challenges that hamper the region’s economic development,” Dr. Kituyi said. “We want to help cut red tape at borders to facilitate cross-border transactions, foster harmonious regional economic integration and prepare the ECCAS countries for gainful participation in the African Continental Free Trade Area.” Five central African countries – Chad, the Democratic Republic of the Congo, Congo, the Central African Republic and Equatorial Guinea – will benefit from UNCTAD’s empowerment programme for national trade facilitation committees.
South Africa: Border Management Authority Bill update (GCIS)
Home Affairs Minister Dr Aaron Motsoaledi welcomes the passing of the Border Management Authority Bill by the National Assembly yesterday in Parliament. “The BMA Bill is long overdue. I welcome the passing of the Bill by the National Assembly. The BMA will enable the country to manage its borders in a manner that facilitates trade and plugs holes in our porous borders. These porous borders lead to, amongst others, illegal crossing of people, illicit goods, drugs, trafficking of people, particularly of women and children, and stolen vehicles,” said Minister Motsoaledi.
AfroChampions Initiative aims to create a new generation of big African firms (The Africa Report)
The idea is to invest $1trn between 2020 and 2030 in companies “that are highly likely to become African champions,” said Paulo Gomes, President of the Executive Committee of the AfroChampions Initiative, meaning “companies that, in both their operations and capital, go beyond the scope of a country.” “We’ve already identified 20 or so African companies from different sectors (banking, food, logistics, etc.) and our capital raising, currently underway, puts us at between $700 and $800m,” Gomes said, adding that it has a particular focus on Asian, Gulf State and African funds.