tralac’s Daily News selection

tralac’s Daily News selection

20 Mar 2020

WTO cancels its ministerial conference: now what? (Borderlex EU)

The organisation may still hold a special ‘General Council’ meeting in Geneva in lieu of the ministerial, but this is likely to be vastly lower profile. While ‘MC12’ was never expected to yield major breakthroughs on the most contentious issues, there was slim hope for an outcome on fisheries subsidies, domestic regulation in services, investment facilitation and electronic commerce. Outcomes on these issues remain legally and technically possible even without a ministerial conference. However, this cancellation unquestionably reduces their likelihood as it removes a natural deadline and further reduces the political imperatives to reach a deal. [The author: Dmitry Grozoubinski]

Global, Africa-regional perspectives on the impact of COVID-19:

  1. S&P Global: COVID-19 exacerbates Africa’s social and macroeconomic vulnerabilities. Without knowing when the new coronavirus will peak with regards to Africa’s prime tourism season, there is a lot of uncertainty around the potential impact on tourism receipts and remittances, an important component of African sovereigns’ balance of payment. The average contribution of tourism receipts to total exports stood at around 15% at end-2018 for countries that reported these numbers. Moreover, a sizable portion of the tourism and remittances flows to Africa is from Europe, where the disease continues to spread. The impact would depend on the region’s ability to contain the virus, allowing travel and tourism flows to resume for peak season, generally between May and September. For a few African countries, tourism flows contribute to more than 50% of their exports (see chart 2). These countries would consequently have to replace these funds in order to have access to foreign currency resources. Similarly, the sharp decline in economic performance in Europe and elsewhere will also constrain remittances. [Companion analysis: The global recession is here and now]

  2. China’s coronavirus slowdown: Which African economies will be hit hardest? So what does all of this analysis mean? Should the countries “outside the danger zones” like Kenya and Nigeria stop complaining? No. The trade problems they are experiencing are real, and the UN Economic Commission for Africa has also just released analysis confirming this. However, as middle-income countries, it is a realistic proposition that their own governments can and should shoulder the responsibility of identifying the most vulnerable businesses and people within the countries and use all the domestic tools available to help avoid increases in poverty. In contrast, many of the low-income African countries in the “danger zones” have high percentages of populations in extreme poverty – such as Madagascar with a 75% poverty rate. For these countries, international support from all directions – multilateral organizations such as the World Bank, the African Development Bank, high-income countries such as the G7, as well as China itself – is going to be crucial. The list of 14 least developed countries within our “danger zones” could be countries to prioritize. [The authors: Hannah Ryder, Angela Benefo]

Country perspectives:

  1. South Africa: Address by DTIC Minister Ebrahim Patel at the discussion earlier this week at Nedlac (pdf, Agbiz)

    Government has done modeling on the various scenarios based on global demand, drawing on local and international sources. These all show that the impact can be serious and that we need to manage that which can influence and shape. Key points to note…:

    It will be necessary to work closely together to ensure we maintain confidence across the society and work in a flexible, fast-response manner, to limit the health and economic impact of COVID-19. Within each of the constituencies, appropriate coordinating structures that can be mobilised rapidly, should be set up. In particular, the private medical profession and the pharmaceutical and medical supplier industries will need direct contact with Government on a daily basis.

  2. COVID19-related export control measures – has South Africa adopted the same yet? (tralac)

    The rapid spread of the coronavirus disease (COVID19) has increased demand for and raised concerns about the availability of personal protective equipment (PPE) essential to prevent further spreading of the disease. PPE include face shields, protective spectacles, respiratory masks, protective garments, suits and gloves, among others. Due to the increased demand for PPE and concerns about availability, several countries have imposed temporary export bans and/or restrictions on specific PPE.

    Thus far, South Africa has not adopted similar actions; neither are aware of any ongoing process of adopting the measures banning or restricting PPEs exports to any country. The government gazette does not include any such measures. Even the South African Revenue Service has not provided any information related to such measures (as at 19 March 2020). [The author: Talkmore Chidede]

  3. Kenya: Agriculture sector leaders seek government intervention on horticulture sector crunch

    On 16 and 18 March 2020, Agriculture Sector Network (ASNET) led other industry leaders in two consecutive meetings with government Ministries (EAC & Regional Development and Industrialization, Trade and Enterprise Development) on the developing concerns in the horticulture sector following COVID-19 outbreak. The first meeting was with the Principal Secretary, State Department of East African Community, Dr. Kevit Desai and the latter with Cabinet Secretary, Ministry of Industrialization, Trade and Enterprise Development, Ms. Betty Maina at their respective offices. Over the last one week, following travel bans to many destinations in Europe and Asia, the fresh produce subsector had been severely hit with flower exports dropping by 50% due to cancellation of orders for direct sales and collapse of the Amsterdam auction. This means huge losses for flower firms in both the short and long run. Other subsectors of agriculture affected were the farm inputs and cereals. With the sowing season fast approaching, most seed companies had recorded delays in the delivery of various planting seeds either due to the virus outbreak or bureaucracies associated with the PVoC requirements. Leaders agreed that agriculture’s role in the national economy was central and in the wake of this crisis, there is a need to stabilize the sector both in the short-run and long-term.

    Some of the proposed short-term mitigation strategies include:

    Removal of PVOC requirement for seeds, animal health products and live plants
    Fast-tracking payment of VAT refunds owed to agribusiness firms
    Zero-rating of VAT on farm inputs

    Government facilitation of free movement of food items and products for both local and export markets in the event of a lockdown.

    In the long-term, leaders agreed that there was a need to consider the following mitigation measures:

    Expedite the conclusion of EPA with the EU and formalize Kenya-UK trade agreements
    Set-up an agriculture and food security recovery fund alongside a recovery strategy
    Lobby at EAC to zero-rate farm inputs in the long run to promote sector recovery

    Policy reforms on manufacturing, imports, exports and value addition to diversify markets and de-risk the sector post the COVID-19 crisis.

  4. Looming shutdown of tea auction sends jitters in EAC. The looming shutdown of the Mombasa Tea Auction and suspension of three shipping lines from Mombasa port is beginning to have a grave effect on the economy of the Coast and the greater East African region which depends on this gateway. Already, the coastal economy is reeling from the paralysis in the hospitality sector following the evacuation of tourists and cancellation of hotel bookings as a result of the novel coronavirus. Yesterday, tea traders did not rule out the possibility of suspending the auctions that support a sub-sector which is a means of the livelihood of 600,000 small-scale farmers and employees. A report from the auction reveals that over three million kilogrammes, or 20%, of the volume of tea offered for sale at the Wednesday auction were not sold. Traders in Mombasa warn that if the auction is shut, the multiplier effects on many sectors of the economy like factories, warehousing, transporters and on farmers will be big. “Tea is the most critical agricultural sub-sector and its cultivation and manufacturing spreads across 15 out the country’s 47 counties,” said Dominic Mokua, a tea trade analyst in Mombasa.

  5. Coronavirus hits tourism industry on Kenya’s coast. Restrictions on foreigners coming into Kenya, imposed to curb the spread of coronavirus, have delivered a big hit to the country’s tourism industry, with some hotels on the coast reporting occupancy rates of well below 10%. A spot check in various hotels around the city of Mombasa on Thursday showed most of the hotels now had an average of 7 per cent occupancy rate or less. Tourism is among Kenya’s leading foreign exchange earners, bringing in 163.56 billion shillings ($1.56 billion)last year. Mombasa depends largely on tourism for its livelihood. “We were at 88%, right now we are at 7%. It does not look as if it is growing, and 7% is because of the cancellations we had this week,” Victor Shitaka, general manager of Flamingo Beach Hotel, told Reuters.

  6. Coronavirus may impoverish at least 780,000 Ugandans. Mr Matia Kasaija, the Finance minister, told Parliament on Thursday, the low activity in the industry and services sectors will result into job losses, further leading to economic decline and an increase in poverty levels. Additionally, exports are expected to decline in the last four months of the financial year, on account of a sharp reduction in global demand and travel restrictions imposed by Uganda’s key trading partners in the Middle East, European Union and Asia. “The number of people that could be pushed into poverty is estimated at 780,000,” he said. According to the minister, the tourism sector alone will severely be affected by a sharp drop in tourists visiting Uganda following travel restrictions in the USA, Europe and Asia. “Tourism earnings are also expected to decline significantly in the last four months of the financial year,” he said in a government statement to the House. This will also be witnessed with imports likely to be affected by the prevailing restrictions and a reduction in demand within the local economy. Majority of Uganda’s imports come from Asia, particularly China. Overall, imports are expected to decline by 44% in the last four months of this financial year, he said. Kasaija added that the revenue collections will nosedive for the remaining period of the FY2019/20 (March-June) and in FY2020/21.

Discounted ‘Ugandan’ poultry spark protests (Business Daily)

Kenyan poultry farmers have protested an influx of hugely discounted poultry imports including suspected transshipment alleged to be from Uganda. In a letter addressed to Livestock principal secretary Henry Kimutai, the farmers’ lobby is now demanding government protection against the cheap imports. The Kenya Poultry Breeders Association chairman Humphrey Mbugua said the imports threaten to push them out of business. The association called on the government to intervene to avert job and tax revenue losses as well as prevent waning relevance of local food supplies in regional markets. Mr Mbugua cited processed chicken from Uganda that has flooded the market at nearly half price. He said chicken is imported and sold at Sh250 against a local production cost of Sh290 a kilo. He said unscrupulous traders were repackaging poultry products from the US and Turkey to show they originate from Uganda, to take advantage of the fast growing local market.

The World Bank’s Board of Executive Directors has approved $500m ($250m grant and $250m credit) from the International Development Association in continued support of the Government of Ethiopia’s Homegrown Reform Agenda. The Second Ethiopia Growth and Competitiveness Development Policy Operation (DPO) is intended to accelerate Ethiopia’s economic growth and achieve its vision of becoming a lower-middle-income country. This operation is the second of a series of DPOs and provides both financial and technical support to Ethiopia’s economic reforms. The operation is designed to help Ethiopia revitalize the economy by broadening the role of the private sector and attaining a more sustainable development path. Ethiopia, with support from the operation has:

SADC Council of Ministers meeting: Regarding industrialisation, Dr Tax said the secretariat is finalising an assessment on the status of the sector in line with SADC intra- regional trade. “The study is expected to assess progress made and emerging issues, so as to enable the region to take the needed measures and realise its industrialisation aspirations. It will be presented to the ministerial task force on regional integration, and subsequently to Council and Summit in August 2020,” she noted