Building capacity to help Africa trade better

tralac’s Daily News selection


tralac’s Daily News selection

tralac’s Daily News selection

Tomorrow: G20 leaders will convene by video conference to discuss coronavirus

Leaders from the Group of 20 major economies will convene a video conference on Thursday to discuss the coronavirus epidemic, the Saudi secretariat said, amid criticism that the group has been slow to respond to the global crisis. G20 finance ministers and central bankers agreed during a separate video conference this week to develop an “action plan” to respond to the outbreak, which the International Monetary Fund expects will trigger a global recession. A subsequent statement offered few details. [António Guterres: G20 summit provides chance to rally strongly against coronavirus threat]

Jim O’Neill: The G20’s Pandemic Moment (Chatham House)

Now consider the economics of social distancing. As soon as it became apparent that our policymakers were heeding the Chinese method of trying to suppress COVID-19, it was immediately obvious that our economies would - at least for a short period - sustain the collapse of GDP that China self-imposed in February. From industrial production and other regular monthly data, the Chinese economy has declined by around 20%. It is quite likely many other economies - probably each of the G7 countries - will experience something not too dissimilar in March. And, to stop our complex democracies from further immediate pressure including social disharmony, governments in many countries have needed to undertake dramatic unconventional steps. Here in the UK, our new chancellor effectively had three budgets within less than a fortnight. And outside of the £330bn loan policy he has announced, at least £50bn worth of economic stimulus has been announced.

World Bank Group, IMF Call to Action on debt of IDA countries

With immediate effect - and consistent with national laws of the creditor countries - the World Bank Group and the International Monetary Fund call on all official bilateral creditors to suspend debt payments from IDA countries that request forbearance. This will help with IDA countries’ immediate liquidity needs to tackle challenges posed by the coronavirus outbreak and allow time for an assessment of the crisis impact and financing needs for each country. We invite G20 leaders to task the WBG and the IMF to make these assessments, including identifying the countries with unsustainable debt situations, and to prepare a proposal for comprehensive action by official bilateral creditors to address both the financing and debt relief needs of IDA countries. We will seek endorsement for the Proposal at the Development Committee during the Spring Meetings (April 16–17).

Karen Ongley, Abebe Aemro Selassie: Protecting the health of Africa’s people and their economies (IMF)

The IMF is making $50bn available via rapid-disbursing emergency facilities, including $10bn on highly concessional terms for low‑income countries. With this, we are accelerating efforts to back countries in the region. So far, we’ve received requests for emergency financing from close to 20 countries, with requests from another 10 or more countries likely soon. Our member countries need us more than ever. Discussions between IMF teams and country officials are advancing quickly, and we expect the first wave of this support to be delivered in early April. The pandemic will have a substantial economic impact on sub-Saharan Africa, in three ways:

David Ndii: Thoughts on a pandemic, geoeconomics and Africa’s urban sociology (The Elephant)

Where things go from there will depend on how much external financial support from international finance institutions – bailouts if you like – will be available. The IMF has announced that it could make up to $50bn available quickly to low-income and emerging market countries. This is not much – it’s less that the IMF’s 2018 bailout package to Argentina ($57bn). Besides this, the IMF can lend its members normal loans of up to a total of a trillion dollars. (A trillion dollars is in the order of 1.2% of global GDP.) Although the IMF uses a complicated formula for each country’s quota, I will use pro rata to illustrate how the IMF might allocate bailouts. On a pro rata basis, Nigeria could borrow $4.5bn, Kenya could borrow $0.8bn and Ghana could borrow $0.5bn. By way of comparision, Kenya’s lapsed precautionary facility was $1.5bn, while the facility recently extended to Ethiopia is $2.7bn. If every emerging market needs a bailout as a result of the financial crisis, there won’t be enough to go round.

There is, however, another source of financing that is yet to be talked about, namely, moratoria on bilateral and multilateral debt service. Historically, the multilateral agencies (i.e. World Bank, IMF and African Development Bank-AfDB) are treated as preferred creditors whose debt is non-negotiable. In reality, countries in distress do build up arrears. In terms of substance, a moratorium on repayment translates to the same thing as extending new budget support loans. China, which is now taking the lion’s share of debt service for many countries, could demonstrate that it is indeed a friend of Africa by giving African countries some breathing space on debt repayments.

Afreximbank’s $3bn Pandemic Trade Impact Mitigation Facility

The facility (PATIMFA) will support member country central banks, and other financial institutions to meet trade debt payments that fall due and to avert trade payment defaults, said Afreximbank. It will also be available to support and stabilize the foreign exchange resources of central banks of member countries, enabling them to support critical imports under emergency conditions. In addition, PATIMFA will assist member countries whose fiscal revenues are tied to specific export revenues, such as mineral royalties, to manage any sudden fiscal revenue declines as a result of reduced export earnings. It will also provide emergency trade finance facilities for import of urgent needs to combat the pandemic, including medicine, medical equipment, hospital refitting, etc. The facility will be available through direct funding, lines of credit, guarantees, cross-currency swaps and other similar instruments, according to Afreximbank.

East Africa: Regional trade hit as virus slows down border clearance (Business Daily)

With border closures announced to contain the spread of the coronavirus pandemic, the road transport sector has been hardest hit. The road transport accounts for over 60% of goods movement from ports of entry to the region. Besides shutting of the borders, more checks have been introduced to minimise exposure and curtail export of the virus. Logistics experts have predicted business could reduce by more than half going forward, with players calling for measures to minimise disruption and provide a critical service. Kagure Wamunyu, Africa region chief executive officer at Kobo360, said logistics business will drop by 50% since borders trucks are spending up to two days before they cross the border due to the stringent checks.

Kenya’s borders with Uganda and Tanzania have been shut, with minimal truck movement. This has led to delays in delivery of goods within the region. Mombasa is the gateway to East African countries of Uganda, Rwanda, Burundi, DRC, and South Sudan served by the Northern Corridor. According to the Northern Corridor Transit and Transport Coordination Authority observatory dashboard, 4,397 trucks crossed the Mariakani weighbridge, down from 4,657 the previous week, a number that was expected to reduce during the March 11 and 17 week. At the Malaba border, the average time between issuance of release order and issuance of certificate of export at border crossing between March 11 to March 17 was 80.25 hours, down from 104.30 hours, signaling the small number of trucks that were crossing the border.

The International Chamber of Shipping and the International Association of Ports and Harbours have joined forces to call on G20 leaders to act quickly to protect global supply chains from the impact of COVID-19. In an open letter the two organisations representing the global shipping industry and the worlds ports and harbours set out that:

Tanzania: Mainland Poverty Assessment (World Bank)

The analysis is contained in two parts. The first part is based on the results of the Household Budget Surveys for 2017-18, 2007, and 2011-12; several rounds of National Panel Surveys; and Demographic Health Survey data; it also combines spatial information from the population census and other sources with HBS data to (1) provide a rigorous analysis of the evolution, profile, and determinants of poverty and inequality; (2) explore movements in and out of poverty and their drivers; and (3) examine the distribution of poverty and living conditions across the country at a detailed geographic level. The second part examines the pattern of structural transformation, firm profiles, job creation, and financial inclusion using the rebased GDP figures released in February 2019, plus data from the Statistical Business Register, Census of Industrial Production, national accounts, NPS, Integrated Labor Force Surveys, and other sources. Extract (pdf):

About 96% of Tanzanian firms have fewer than 10 workers and only 1% have more than 50. Among the smallest firms, 60% have only one or two workers. Because nearly half of the firms are not registered anywhere, they are considered informal. Tanzanian firms tend also to be fairly young, with a median age of four years. In general, particularly in wholesale and retail trade and manufacturing, micro and small firms are likely to be informal and younger. Their small startup capital is financed essentially from personal income. Meanwhile, large businesses tend to be older and mainly engaged in formal nonmarket services such as education or health (many are State owned); it may be that formal firms operating in public services have higher chances of surviving and growing.

Two-thirds of Tanzanian firms are in manufacturing and trade. About 35% are in manufacturing and 34% in wholesale and retail trade. Manufacturing firms primarily produce food and beverages (39%); textiles, wearing apparel, and leather (30%); and furniture (14%). Only 1% are in high-value-added and knowledge-intensive industries. The rest operate essentially in services, especially nonmarket services. Less than 1% are in agriculture; most people working in that sector run their own farms without creating a business.

Key statistics and trends in trade policy 2019: Retaliatory tariffs between the United States and China (UNCTAD)

This report is structured in two parts. The first part presents a discussion on ongoing trade tensions between the United States and China. The second part discusses trends in selected trade policy instruments including illustrative statistics. The second part is divided into five chapters: tariffs, trade agreements, non-tariff measures, trade defence measures, and exchange rates. Trade trends and statistics are provided at various levels of aggregation illustrating the use of the trade policy measures across economic sectors and geographic regions. Extract (pdf):

In terms of export restrictiveness, transition economies and sub-Saharan African and Latin American countries faced the most liberal market access conditions with an MA-TTRI of about 1.5% in 2018. This was largely due to unilateral preferences granted by developed countries and an export composition tilted towards natural resources that typically face low tariffs. In contrast, exports from East and South Asia faced a higher average level of restrictiveness, about 3.%. For many countries in these regions, trade liberalization in major trading partners aimed at lowering tariffs can still produce substantial export gains.

In view of generally low tariffs, and even when all concessions such as unilateral and reciprocal preferential schemes are taken into account, there remain a significant number of products for which tariffs are relatively high. These high tariffs (above 15%) are generally referred to as tariff peaks and are usually levied on sensitive products. Tariff peaks appear in the tariff structure of many developing countries, but with different patterns. For example, tariff peaks are a large part of the tariff structure of agricultural products of developing countries in South Asia and sub-Saharan Africa, but this is not the case in the transition economies (Figure 5a). Tariff peaks tend to be less prevalent in manufacturing, and less so in natural resources sectors. Tariff peaks tend to be concentrated in some of the products of interest to low income countries, such as the agricultural sectors, but also apparel, textiles and tanning. For example, tariffs on about 10% of international trade in food products (and 25% of the products in this group) are higher than 15% (Figure 5b). Similarly, about 10% of international trade in apparel is subject to a tariff of 15% or more.

The Future of Work in agriculture: some reflections (World Bank)

In the world’s poorest countries, particularly in Africa, labor productivity in agriculture remains at historically low levels. So, what can the role of agriculture as a source of employment be in the future? This viewpoint elaborates on these trends and reviews several policy options, including inclusive value chain development, better immigration policies, social insurance schemes, and ramp up in agricultural education and extension. Extract (pdf):

In China, agricultural wages are keeping pace with non-farm wages, and this underlines the important role of agricultural investments in the development process. In Sub-Saharan Africa, the agricultural share of public spending continues to be well below that in East Asia (3% on average during 1980-2012 versus 8% in Asia). Myriad input, factor, and output market constraints hold agricultural labor productivity back, and integrated solutions that simultaneously overcome a number of these constraints are needed. Inclusive value chain development (iVCD), which links farmers with buyers in contracting arrangements, offering knowledge, access to credit and inputs, and higher (less volatile) prices in exchange for a consistent volume of high-quality produce, provides a market-based solution to do so. Given the challenge to develop self-enforcing incentive compliant contracts, however, iVCD typically does not work well for raising staple crop productivity. Yet, in low income countries, this is where the need and scope for raising labor productivity and poverty reduction is highest. For raising labor productivity in staple crops, more and better public investment in public goods is needed. [The authors: Luc Christiaensen, Zachariah Rutledge, J. Edward Taylor]


Email This email address is being protected from spambots. You need JavaScript enabled to view it.
Tel +27 21 880 2010