tralac’s Daily News selection
Approval of phase one operational instruments required for the start of duty free trading within the Africa Continental Free Trade Area in July this year hangs in a balance following the continuous impact of the novel Coronavirus Disease (COVID-19) infections that has brought global activities to a standstill. Despite the swearing-in ceremony of the first Secretary-General of AfCFTA, Wamkele Mene last week in Ethiopia – an event which should have been held in Accra on 31st March, 2020 – the growing list of cancellations and postponements of various activities this year because of COVID-19 could potentially delay implementation of AfCFTA in July.
Following the 2nd meeting of AfCFTA Council of Ministers held in December last year in Accra, it was agreed that AfCFTA Council of Ministers should meet in South Africa for an Extraordinary Summit on 30 May 2020 to approve all instruments under the agreement. The Executive Council of the African Union had earlier directed the AU Commission to convene the necessary meetings to conclude remaining work on Rules of Origin, schedules of tariff concessions and schedules of specific commitment on the five priority service sectors by end of March 2020 to enable the finalization of tariff offers and submission of the final report on Rules of Origin to the Extraordinary Summit in South Africa. However, as the rate of COVID-19 infections continue to surge on the continent which has forced countries to take some drastic decisions including travelling restrictions among others, it is likely that the Extraordinary Summit will be postponed.
“It would be unreasonable for any government to direct resources to meet the deadline when the public’s health is so gravely at stake,” Wamkele Mene told POLITICO, adding that he expected heads of state to announce a delay in the coming weeks. “My view now is that the focus should be on saving lives.” Stephen Karingi (director of the trade division at the UNECA): There “is definitely going to be a delay” to the 1 July launch date. “We are already out of the schedule.”
Ethiopia pleads to G20 to rescue African economies. The Government of Ethiopia has proposed measures to be taken by the rich G20 countries, which includes, release of Africa Global COVID-19 Emergency Financing Package — $150bn, supplementary budgetary support, cancellation of all interest payment to government loans and converting remaining debts into long term low interest loans with 10 years grace period before payment, among others. “Africa’s ability to take even modest measures to inject liquidity and cushion its companies and workers from the impact of this calamity are further constrained by the heavy debt burden, the servicing of which alone costs many of them significantly more than their annual health budgets,” it said the Government of Ethiopia in a statement labeled, ‘Three Points Proposal from the Government of Ethiopia to G20’.
Malawi: Statement at the end of an IMF staff visit. With the evolution of the COVID-19 outbreak still largely unknown, the economic outlook is subject to substantial uncertainty. The recent strong agricultural harvests and reconstruction activity after Cyclone Idai have boosted growth, but the growth path for the remainder of the year will depend on the extent of transmission to Malawi of COVID-19 and the magnitude of associated global and regional economic spillovers. Notwithstanding the effects of COVID-19 on the economy, over the medium-term, growth may rise further to 6-7%, backed by infrastructure that is more resilient to shocks from climate change, improved access to finance, crop diversification, and an improved business climate. Inflation is anticipated to decline from 11.5% at end-2019 to 9.3% at end-2020, as elevated food inflation moderates, and gradually converge to 5% over the medium term. The key risk is the potential for deeper disruption to economic activity in Malawi from the spread of COVID-19.
Kenya to seek IMF help, pay arrears, speed tax refunds over coronavirus. Patrick Njoroge, the central bank governor, told a news conference on Tuesday that the government is seeking emergency assistance from the IMF of up to $350m. “This is assistance that doesn’t have the conditionalities of programs ... a lot of this could be directed towards budget support,” Njoroge said, adding that more support will be sought from the World Bank. Kenya has 16 confirmed cases of COVID-19, and the disease is hurting crucial tourism and farm exports. The government expects revenue collection to be hit as both imports and domestic consumption slow, Finance Minister Ukur Yatani told Reuters late on Monday. “We are looking at underperformances as a result of just COVID-19, of about 70 billion (shillings) ... in terms of revenue for the remaining three months (of this financial year),” he said, adding that situation was evolving fast.
Botswana, South Africa trade not to be disturbed by COVID-19. Botswana’s Vice President Slumber Tsogwane has allayed fears of a trade void between Botswana and South Africa, as the latter embark on a countrywide lockdown on Thursday. Addressing the nation on Tuesday, though the national broadcaster, Tsogwane said South Africa’s President Cyril Ramaphosa has assured Botswana trade will not be disrupted.
Coronavirus supply disruptions are the next worry for metals. The spread of the coronavirus across the world has focused metals markets on the risks to demand, causing prices to plummet, but so far investors have largely ignored the mounting threats to supply. A hint of what may be coming was South Africa’s decision on Monday to impose a 21-day nationwide lockdown to try and contain the epidemic, a move that will affect the nation’s mines. South Africa is the world’s largest producer of platinum, the second-largest of palladium and is also a major exporter of thermal coal, iron ore and gold. The country dominates global platinum production, with its output of about 130 tonnes in 2019 nearly six times more than the next biggest producer, Russia. Like most metals, platinum had been hit hard by the sell-off as the coronavirus spread from its source in China to Europe and North America, prompting several nations to shut down much of their economies to contain the disease.
DG Azevêdo requests WTO members to share information on trade measures related to COVID-19. In a 24 March message asking all members to submit information to the WTO Secretariat about recent trade and trade-related measures, DG Azevêdo called specific attention to the policies members had introduced in response to the coronavirus outbreak. “The current COVID-19 pandemic represents an almost unprecedented health crisis, and members are understandably responding by introducing legislation and policies to seek to combat this health emergency,” he wrote. “These include measures that are trade-related, such as export measures and economic support programmes.” [WTO’s COVID-19 and world trade resources page]
G20 Finance Ministers and Central Bank Governors conference call: IMF Managing Director Kristalina Georgieva. Third, what can we, the IMF, do to support our members?
We are concentrating bilateral and multilateral surveillance on this crisis and policy actions to temper its impact. We will massively step up emergency finance - nearly 80 countries are requesting our help - and we are working closely with the other international financial institutions to provide a strong coordinated response.
We are replenishing the Catastrophe Containment and Relief Trust to help the poorest countries. We welcome the pledges already made and call on others to join. We stand ready to deploy all our $1 trillion lending capacity.
And we are looking at other available options. Several low- and middle-income countries have asked the IMF to make an SDR allocation, as we did during the Global Financial Crisis, and we are exploring this option with our membership.
Major central banks have initiated bilateral swap lines with emerging market countries. As a global liquidity crunch takes hold, we need members to provide additional swap lines. Again, we will be exploring with our Executive Board and membership a possible proposal that would help facilitate a broader network of swap lines, including through an IMF-swap type facility.
IFC’s response to COVID-19 pandemic has four components. #2: $2bn from the Global Trade Finance Program, which will cover the payment risks of financial institutions so they can provide trade financing to companies that import and export goods. IFC expects this will support small and medium-sized enterprises involved in global supply chains.
Statement: COVID-19 in COMESA (pdf)
African Trade Insurance Agency affirms support for African business now and during the post-COVID-19 crisis recovery
Anis Chowdhury, Jomo Kwame Sundaram: Stronger UN leadership needed to cope with coronavirus threat
Crisis Group on COVID-19 and conflict: Seven trends to watch
South Africa saw a dip in foreign direct investment in 2019 compared to the previous year, with inflows falling to R66.8bn ($3.78 billion) from R72.1bn, the central bank said on Tuesday. A key part of President Cyril Ramaphosa’s plan to revive growth in Africa’s most developed economy hinges on luring foreign capital, but prolonged power outages caused confidence among investors to wane along with industrial activity. The sharp jump in local coronavirus infections, which saw Ramaphosa announce a nationwide lockdown for 21 days starting on Thursday, is set to pile further pressure on an economy already in recession and suffering intense financial market volatility.The bank’s figures in the quarterly bulletin showed equity outflows of nearly R63bn in 2019, with sales of R33bn in the fourth quarter and R32bn in the third.
For years, together with its Southern African neighbors, Lesotho was one of only a handful of countries in the world with a Gini coefficient above 50. However, a recent assessment of poverty and inequality in the country suggests that it has made considerable progress towards a more equal society. In 2017 the Gini coefficient stood at 44.6, which, although still high in a global context, marks an impressive decline from 51.9 fifteen years earlier. The decline in inequality was even more impressive when considering the many factors that were pulling against this decline. In 2015-2016, Lesotho had just experienced one of the worst droughts in its history, particularly hurting the rural poor, which had an adverse impact on inequality. The decrease in the Gini coefficient also occurred after employment opportunities in South Africa diminished, which used to be one of the main sources of income of the poor. Finally, it contrasts with the trend in South Africa, where inequality has increased since 1994. [The author: Daniel Gerszon Mahler]
Arkebe Oqubay reviews Resurgent Asia and Lessons for Africa (AfDB Economic Brief)
The significance of Resurgent Asia lies in its timing, coming as it does 50 years after the publication of Myrdal’s Asian Drama: An Enquiry into the Poverty of Nations (1968) – itself a seminal, if pessimistic, book on Asia’s prospects for development based on a decade of research.
The richness of Resurgent Asia lies in the multidimensional analytical approaches through which the author unravels the continent’s transformation. The analysis is underpinned by theoretical understanding, conceptual clarity, a historical perspective, empirical evidence at the Asian, sub-regional, and country levels, and consideration of the underlying drivers and leading development issues. It also looks forward, reflecting on the future of Asia over the next quarter-century without succumbing to “prophecy”. The book emphasizes two important messages: there is no prescribed path or magic wand, or even an “Asian model” for development; and latecomers evolving on their own paths have the opportunity to catch up. Unlike Myrdal’s Asian Drama, which epitomized the European perspective, Resurgent Asia is written from the Asian perspective. The political economy approach is based on “the premise that economic problems cannot be studied in isolation but must be situated in their wider historical, social, and political context”, without overlooking the role of government and politics and while amplifying the analysis of underlying economic and social factors.