Building capacity to help Africa trade better

tralac’s Daily News selection


tralac’s Daily News selection

tralac’s Daily News selection

tralac’s Trudi Hartzenberg: South Africa’s response to the COVID-19 pandemic

We’ve already seen that global cooperation and support are absolutely essential at this time. It is not only developing and least-developed countries that need assistance from others. The current experience of Italy and Spain, for example, is a very stark reminder that developed countries also need assistance. We cannot ignore the fact that we are inter-connected as communities, as societies, as regions, as the African continent, and of course globally. For all of us, both now and post-COVID-19, a fundamental recalibration of purpose, values, community and the nature of collective action is required. COVID-19 is a reminder that many 21st century challenges, including climate change, transcend national borders. While national responses are necessary, they are not sufficient. Hopefully COVID-19 will help us to reinvent multilateralism.

EU, 15 WTO members establish contingency appeal arrangement for trade disputes

The EU and 15 other members of the WTO today decided on an arrangement (pdf) that will allow them to bring appeals and solve trade disputes among them despite the current paralysis of the WTO Appellate Body. Given its strong and unwavering support for a rules-based trading system, the EU has been a leading force in the process to establish this contingency measure in the WTO. The Multiparty Interim Appeal Arbitration Arrangement mirrors the usual WTO appeal rules and can be used between any members of the Organisation willing to join, as long as the WTO Appellate Body is not fully functional.

Coronavirus could cut global investment by 40%, new estimates show (UNCTAD)

Updated estimates of COVID-19’s economic impact and revisions of earnings of the largest multinational enterprises (MNEs) now suggest that the downward pressure on FDI flows (pdf) could range from -30% to -40% during 2020-2021, much more than previous projections of -5% to -15%. Since then, 61% of the top 100 MNEs that UNCTAD tracks have issued earnings revisions that confirm the rapid deterioration of global prospects. And 57% have warned of the global demand shock’s impact on sales, showing that COVID-19 is causing problems beyond supply chain disruptions after a production slowdown in parts of China. In addition, the top 5,000 MNEs, which account for a significant share of global FDI, have now seen downward revisions of 30% on average for 2020 earnings estimates. And the trend is likely to continue. The hardest-hit sectors are the energy and basic materials industries (-208% for energy, with the additional shock caused by the recent drop in oil prices), airlines (-116%) and the automotive industry (-47%).

G20 Leaders’ Virtual Summit: selected updates

  1. Official statement: We are gravely concerned with the serious risks posed to all countries, particularly developing and least developed countries, and notably in Africa and small island states, where health systems and economies may be less able to cope with the challenge, as well as the particular risk faced by refugees and displaced persons. We consider that consolidating Africa’s health defence is a key for the resilience of global health. We will strengthen capacity building and technical assistance, especially to at-risk communities. We stand ready to mobilize development and humanitarian financing.

    Consistent with the needs of our citizens, we will work to ensure the flow of vital medical supplies, critical agricultural products, and other goods and services across borders, and work to resolve disruptions to the global supply chains, to support the health and well-being of all people. We commit to continue working together to facilitate international trade and coordinate responses in ways that avoid unnecessary interference with international traffic and trade. Emergency measures aimed at protecting health will be targeted, proportionate, transparent, and temporary. We task our Trade Ministers to assess the impact of the pandemic on trade. We reiterate our goal to realize a free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment, and to keep our markets open.

  2. President Cyril Ramaphosa. The African Union Bureau met this morning and decided to give meaning to the concept of solidarity by establishing the African Coronavirus Fund to help fund Africa’s work in fighting this virus. A few African countries were able to raise $20m in just 30 minutes. We invite G20 countries to support this African initiative by donating to this fund. [Peter Fabricius: G20 nations back Ramaphosa’s appeal to give Africa economic aid to fight Covid-19]

  3. WBG President David Malpass. I’m particularly concerned about poor, densely populated countries such as India, where weak health systems need massively scalable investments in human capital, supplies and infrastructure. We are working hard to provide support through our public and private sector tools. We have new COVID-related projects underway in 56 countries, and we’re encouraging other MDBs to co-finance follow-up tranches. In 24 countries, we’re restructuring existing projects in order to direct funds to the health emergency.

  4. WTO Director-General Roberto Azevêdo hailed the group’s resolve to “ensure the flow of vital medical supplies, critical agricultural products, and other goods and services across borders,” part of a broader commitment to “minimize disruptions to trade and global supply chains”.


Botswana: IMF concludes 2019 Article IV Consultation (IMF)

The staff report reflects discussions with the Botswana authorities in November 2019 and is based on the information available as of 21 February 2020. It focuses on Botswana near- and medium-term challenges and policy priorities and was prepared before COVID-19 became a global pandemic and resulted in unprecedented strains in global trade, commodity, and financial markets. It, therefore, does not reflect the implications of these developments and related policy priorities. The outbreak has greatly amplified uncertainty and downside risks around the outlook. Staff is closely monitoring the situation and will continue to work on assessing its impact and the related policy response in Botswana and globally.

Somalia and the IMF

  1. Second review under the Staff-Monitored Program. The Somalia authorities have fulfilled the necessary conditions to reach the HIPC Decision Point, despite continuing challenges. This is a historic achievement and means Somalia has now cleared its arrears and normalized relations with the IMF and other international financial institutions. This will unlock Somalia’s access to new financial resources to fund much needed development and social spending.

  2. Poverty Reduction Strategy Paper: Joint Staff Advisory Note. NDP9 correctly highlights that Somalia’s external debt is unsustainable. The staffs welcome the government’s commitment not to engage in new external borrowing until debt falls to a sustainable level and capacity to repay improves. Even after receiving debt relief at the HIPC Completion Point, Somalia’s debt carrying capacity will be low. Any future borrowing should be carefully analyzed and aligned with Somalia’s future capacity to repay and with the objective of maintaining medium-term fiscal sustainability. Staffs stress that it is critical for the authorities to stay current on all their obligations falling due and not to accumulate any new arrears. The authorities will need to pursue a debt strategy that aligns the fiscal framework to this carrying capacity. As noted in the NDP9 document, strengthening the government’s debt management institutions will be important both during debt relief operations and for better debt management in the future. In this context, staffs encourage the authorities to strengthen the capacity of the Debt Management Unit by developing an action plan to swiftly improve its analytical, negotiation, recording, and reporting capacity.

  3. Enhanced HIPC Initiative-Decision Point document. Somalia meets the requirements to reach the Decision Point under the HIPC Initiative. A Debt Relief Analysis shows that Somalia qualifies for debt relief under the HIPC Initiative’s “export window” based on end-2018 data. After full application of traditional debt relief mechanisms, the country’s NPV of debt is estimated at $3.7bn at end-2018, equivalent to 344.2% of exports of goods and services. The amount of debt relief needed to bring Somalia’s NPV of debt-to-exports ratio down to the HIPC threshold of 150% is estimated at $2.1bn in end-2018 NPV terms. This implies a common reduction factor of 56.4%. As of 9 March 2020, creditors representing 76% of the NPV of eligible debt have committed to provide their share of debt relief under the HIPC Initiative.

Tanzania Mainland Poverty Assessment 2019 (Vol 2): Structural transformation and firms performance (World Bank)

Over the last two decades, private consumption and investment each contributed 3.1 pp to growth; now, services exports are also supporting growth. Between 2013 and 2017, private consumption contributed 2.4 pp to economic growth, accounting for 35% of total GDP growth, and investment contributed 3.6 pp to GDP growth, accounting for 52% (see Figure 1.4, pdf). Recently, the export-import profile has shifted. Tanzania continues to run a considerable trade deficit, mainly because of high goods imports, but the recent shift has been characterized by a lower value of imports and a higher value of exports. Between 2013 and 2017, exports of services grew at an annual compounded rate of 6.8% while imports of services fell by 5.3%. The resulting progressive reduction of the trade deficit drove up economic growth. For instance, the reduction of the trade imbalance contributed 2.1 pp to GDP growth in 2016 and 0.8 pp in 2017.

Determinants of global value chain participation: cross-country evidence (World Bank)

The past decades witnessed big changes in international trade with the rise of global value chains. Some countries, such as China, Poland, and Vietnam, rode the tide, while other countries, many in the Africa region, faltered. This paper studies the determinants of participation in global value chains, based on empirical evidence from a panel data set covering more than 100 countries over the past three decades. The evidence shows that factor endowments, geography, political stability, liberal trade policies, foreign direct investment inflows, and domestic industrial capacity are very important in determining participation in global value chains. These factors affect participation in global value chains more than traditional exports.

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