tralac’s Daily News Selection
TradeMark East Africa and the UNECA released their joint report – Creating a unified regional market: Towards the implementation of the African Continental Free Trade Area in East Africa – this morning:
The report provides the first assessment of the potential impact of the AfCFTA agreement on East Africa and discusses the measures and supportive instruments that will be needed to implement the agreement successfully. Following on from the conclusions of this study, a successful approach to the AfCFTA will entail particular attention on some specific issues (pdf):
Recommendation #1: Standardize as much and as far as possible. The standardization and harmonization of product standards, quality controls, phytosanitary regulations and technical specifications (etc) is crucial to making the continental market work as unified entity. This is arguably what holds back intra-regional trade more than anything else at the current time: non-tariff barriers of the discretionary kind leave traders vulnerable to arbitrary decisions by customs officials. The harmonization of regulatory standards would remove the discretionary nature of many cross-border transactions and provide clear benefits for consumers.
Recommendation #2: Move towards a regional concept of ‘local content’. Many countries in East Africa have national campaigns to promote local content and production. For instance, Uganda embarked on a Buy Uganda100 campaign in 2014, and Rwanda has had a similar “Made in Rwanda” policy in place since 2015. These initiatives have borne some fruits. However, there are limits to the extent to which national authorities can singlehandedly promote their domestic production, especially in the context of a move towards a unified continental market that is supposed to create a level playing field for all. With the implementation of the AfCFTA, success hinges on the rapid emergence of regional value chains. This is unlikely to happen without a concerted effort to induce local content at the regional, rather than at the national, level.
Recommendation #3: Open services to intra-African competition. Much of the discussion on the benefits from the AfCFTA have tended to focus on merchandise trade. Yet this report argues that many of the benefits will spring from the liberalisation of intra-African services trade. Services already constitute more than 50% of the regional economy. If services are opened up to intra-African competition, one of the major benefits from creating a unified continental market will be that it will reduce costs for both consumers and enterprises in a host of services, ranging from financial to transport. A common regulatory environment is an essential element in achieving this objective in the same way that common standards are.
Recommendation #4: Be especially open to FDI from other African countries. A quick way to create regional value-chains, and more employment, is to encourage greater intraregional investment. In Section 2, we established that the level of intra-regional FDI is currently much lower than intra-regional trade. Yet there are remarkable business opportunities on the continent. More than 60% of retail and consumer goods companies plan to expand into additional African countries over the five-year period 2018-2023. The AfCFTA will facilitate the expansion of firms seeking a greater regional or continental presence, and member states should be especially open to FDI from other African countries.
Recommendation #5: Leverage the potential for cross-border digital trade. Although from a very low base, digital trade is currently growing annually at 18% in Africa – which is more than double the global average. As the region that has spearheaded innovations like M-Pesa, East Africa is especially well placed to leverage the dynamism in digital trade. New continental-wide policies under the umbrella of the AfCFTA could provide a major boost to cross-border digital trade, helping to catch up with other regions of the world where it is far more prevalent. The establishment of an African Single Digital Market would be a major step forward. The AfCFTA could provide the basis for such an agreement.
President Muhammadu Buhari yesterday pledged Nigeria’s preparedness to abide by the decision of the tripartite committee comprising Nigeria, Benin and Niger Republic on the partial closure of the country’s land borders whenever the report is submitted. He also said Nigeria was putting measures in place to secure the Gulf of Guinea, following his meeting with President Teodoro Obiang Nguema Mbasogo. The president made the pledge on border reopening when he hosted the outgoing President of the ECOWAS Bank for Investment and Development, Mr Bashir Mamman Ifo, and his successor, Dr George Nana Donkor, in Abuja. A statement by the Special Adviser to the President on Media and Publicity, Mr Femi Adesina, said Buhari told his guests that the partial closure of the borders had brought immense benefits to the country. “We have saved millions of dollars. We have realised that we don’t have to import rice. We have achieved food security. We have curtailed the importation of drugs and proliferation of small arms, which threaten our country,” he said.
SADC proposals on labour migration in the pipeline (The Citizen)
Senior officials and experts from SADC are preparing policy and guideline proposals to widen the scope for employment and labour migration. The officials yesterday started a three-day meeting ahead of the meeting of the ministers responsible for labour and employment from the 16-nation bloc slated for Thursday and Friday, this week. Employment and skills development director in the Prime Minister’s Office (Policy, Parliamentary Affairs, Labour, Employment, Youth and Disabled) Ally Msaki said the proposals would be forwarded to the responsible ministers for discussion and deliberation. “Tanzanians would love to work in, among others, Zimbabwe, Namibia and South Africa. It is a responsibility of ministers to prepare labour migration guidelines and this is why they are meeting to discuss and deliberate on our proposals,” said Mr Msaki. He said it was high time Tanzania capitalised on the region’s opportunities, which include demand for Kiswahili teachers
PIDA PAP2: West Africa consultation workshop for project selections (AU)
The African Union Commission held a regional consultation workshop (26-28 February) for West African member states and their specialised institutions for the project selection process of the second phase of the Programme for Infrastructure Development in Africa, also known as PIDA PAP2 (2021-2030). The workshop aimed to provide the necessary information and tools to prioritize gender inclusive, environmentally friendly and smart infrastructure projects. Once the project selection process is complete and the PIDA PAP2 is developed, it will then be submitted to the African Heads of State and Government for adoption during the AU Summit in January 2021. Ultimately, 58 projects are expected to be selected – 10 projects per the Northern African, West African, Central African, East African and Southern African regions, and one additional project for each of the eight Island States. The sectoral requirement is expected to be filled as at least one project in each region is to be part of the transport, energy, ICT or trans-boundary water resources sectors.
Tanzania leads Kenya in the list of dollar millionaires (The Citizen)
An estimated 499 Kenyans dropped from the rank of dollar millionaires last year, highlighting how the impact of Kenya’s soft economy has hurt persons who each had a net worth of more than Sh100 million. The 2020 Knight Frank’s Wealth Report classified 2,900 Kenyans among the world’s High Net-Worth Individuals (HNWIs) last year, representing a 14.6% drop compared to the 2017 count. Six Kenyans also dropped from an elite group of super-wealthy persons known as Ultra High Net-Worth Individuals (UHNWI) with a net worth of more than Sh3 billion, cutting their number to 42. South Africa led the pack with 1,033 ultra-rich persons followed by Egypt (764) Nigeria (724) Morocco (215) and Tanzania (114) - despite Kenya’s neighbouring country having a smaller economy.
Zimbabwe: US dollar returns to Harare as govt wavers on use of local currency (The East African)
The Zimbabwean economy is reverting back to the US dollar less than a year after the government reintroduced the local currency to assert economic independence. Over the past month, local businesses have resorted to using the dollar and civil servants want their pay disbursed in greenback, making the government’s policy useless. Morgan & Co, a stock brokerage firm said it was clear that Zimbabwe was returning to the dollar instead of cushioning the local currency as shown by the waning confidence in the local currency. “We are perplexed by the fact the monetary authorities in the country exhibit a lack of touch and appreciation of developments within the broader monetary system,” said Morgan & Co in a review of the RBZ’s latest monetary policy. “Our concern is that those that follow economic policy developments in Zimbabwe will have to separate fiction from reality so as to make sound investment decisions.” [Reserve Bank of Zimbabwe: February 2020 Monetary Policy Statement; Editorial comment, The Herald: De-dollarisation opens doors for industry]
Tanzania agrees to open up its market for Ugandan sugar. Tanzania has partly allowed to open up its borders to Ugandan sugar exports following more than a year of being locked out. This was revealed by Mr Japheth Hasunga, the Tanzanian Minister of Agriculture, who, together with a delegation from Tanzania, was in the country to understand Uganda’s sugar production and its capacity. However, he noted, the sugar will be traded under a new arrangement that will only involve government-to-government. “We are satisfied with the current rate of Uganda’s sugar production and we shall start with 30,000 metric tonnes, but that will depend on the prices, we don’t know how much the factories will charge and then we shall place another order. We shall start business as soon as possible,” Mr Hasunga said. Previously, the Tanzanian government had been issuing permits to dealers and millers.
COMESA: Regional energy experts conducting peer review on member states. Energy regulatory authorities in countries that are members of the COMESA Regional Association of Energy Regulators for Eastern and Southern Africa will be going through peer review to ensure their operations are bench-marked against regional best practices. The first peer review is being conducted this week, on the Ethiopia Energy Authority.
Two new UNCTAD analyses of the trade impact of the coronavirus epidemic:
- Coronavirus outbreak has cost global value chains $50bn in exports.
The slowdown of manufacturing in China due to the coronavirus outbreak is disrupting world trade and could result in a $50bn decrease in exports across global value chains, according to estimates published by UNCTAD yesterday. In February, the country’s manufacturing Purchasing Manager’s Index – a critical production index – fell by about 22 points to 37.5, the lowest reading since 2004. Such a drop in output implies a 2% reduction in exports on an annual basis. Because China has become the central manufacturing hub of many global business operations, a slowdown in Chinese production has repercussions for any given country depending on how reliant its industries are on Chinese suppliers. According to UNCTAD estimates, the most affected sectors include precision instruments, machinery, automotive and communication equipment. Among the most affected economies are the European Union ($15.6bn), the US ($5.8bn), Japan ($5.2bn), The Republic of Korea ($3.8bn), Taiwan Province of China ($2.6bn) and Vietnam ($2.3bn). [UNCTAD Technical Note (pdf): Global trade impact of the coronavirus epidemic]
Short-terms effects of the coronavirus outbreak: what does the shipping data say? It is too early to gauge the full economic and trade effects of the Coronavirus outbreak. However, shipping data, based on real-time observations of vessel positions and information about the cargoes aboard those ships, already shows a change in the operational behaviour of container vessels and in the amount of oil products on the water. This article seeks to put these short-term changes in the context of the potential impact of the coronavirus epidemic on China’s manufacturing and trade of oil products. Container ship visits to Chinese ports, measured both in number of vessels scheduled to call and their cumulative capacity in Twenty-foot-Equivalent Units plunged in late January and early February (see Figure 1). At the same time, the ratio of missed port calls (i.e. scheduled vessel calls that do not occur) has risen sharply to levels usually seen in late February and March (see Figure 2). The outbreak and spread of the coronavirus, across China and now the world is influencing decisions by manufacturers, importers and exporters. Immediate actions so far show an un-coordinated and pointillist approach. [The author: Abudi Zein]
At a meeting of the full WTO membership on 2 March, Director-General Roberto Azevêdo set out his views on how members could position themselves to deliver agreements on fisheries subsidies and other issues at the 12th Ministerial Conference in June. He urged them to determine what can — and cannot — realistically be agreed by then, and to do the preparatory work needed to present ministers with a manageable agenda of issues to resolve at MC12.
A new report from the World Bank Group released ahead of International Women’s Day shows that the world could achieve a ‘gender dividend’ of $172 trillion by closing gaps in lifetime labor earnings between women and men. The study, How Large is the Gender Dividend? Measuring Selected Impacts and Costs of Gender Inequality, finds that if women earned the same as men, global human capital wealth could increase by about one-fifth, and women’s human capital wealth could increase by more than half. The World Bank Group also released data on legal barriers that limit women’s employment and entrepreneurship opportunities over the last fifty years, providing insight into the way women’s rights have evolved worldwide. The data, expanding the time series developed by the Women, Business and the Law program, shows that in 1970, women had only half the legal rights of men on average in the areas measured; today, women are three-quarters equal. Globally, a total of 1518 reforms were conducted in fifty years, with dramatic changes in laws affecting a woman’s decision to work. [Companion report: Women, Business and the Law Data for 1971-2020]