Building capacity to help Africa trade better

tralac’s Daily News selection


tralac’s Daily News selection

tralac’s Daily News selection

EAC Heads of State will convene an extraordinary virtual summit, tomorrow, to discuss the coronavirus pandemic

EAC Secretariat urges partner states to prepare post COVID-19 recovery plans

The EAC Secretariat calls upon partner states to immediately commence developing National Economic Recovery Plans. The Secretariat has finalised an EAC COVID-19 Response Plan and is developing the EAC Recovery Strategy based on a regional approach. “While many people have already lost their jobs and are struggling to feed their families, there is a window of opportunity to prepare for the time after COVID-19 and to prevent another catastrophe”, says Christophe Bazivamo, Deputy Secretary General in charge of Productive and Social Sectors, EAC Secretariat. The EAC Secretariat further urged partner states to gain efficiencies and try to reduce trade-related costs, to reduce food wastage and losses, improve food storage systems and to resolve logistical bottlenecks. According to Kenneth Bagamuhunda, Director of Customs and Trade, EAC Secretariat, other possible measures could include:

  • reviewing trade and policy options to address COVID-19 impacts

  • reducing import tariffs on essential goods and inputs

  • reviewing domestic taxation policies on essential goods produced locally

  • assessing the potential impact of exchange devaluation

  • instituting stimulus packages to boost local production and promote imports substitution

  • applying monetary and fiscal measures to counter inflationary pressures

  • upscaling trade facilitation to enhance food trade.

COVID-19: Zambia, South Africa working group to ensure smooth flow of essential goods, services (Zambia Reports)

Zambia and South Africa have formed a private sector working group to create a framework targeted at ensuring the smooth flow of essential goods and services during the COVID-19 lockdown across most SADC countries. At the meeting held in Lusaka on Thursday, the countries discussed the necessity of ensuring that South African chain stores operating in Zambia opened their doors wider to local producers and suppliers to ensure that there is business continuity and empowerment during the Covid-19 period, and beyond. Among the other key issues discussed was import substitution, mutual market access, supplier payment systems, banking and financial services, transport and logistics, smoothening of regulatory matters, border clearance and transit insurance, and the creation of the Zambia and South Africa working group on trade and economic facilitation during COVID-19 and beyond.

Speaking at the same event, Shoprite general manager Charles Bota said the chain store buys 43% of its goods from the local market and 3% from local agents who import from outside the country. He said the shop only imports 18% of goods. ZACCI president Jerome Kawesha called on South African chain stores to engage the Zambian private sector regularly and deal with the perception that they deliberately constrain access of local producers and suppliers into their supermarkets and other businesses such as hotels. “We would like to see South African businesses in Zambia signing off-take agreements with our people [local businesses],” said D. Kawesha. ZAM representative Rosetta Chabala added that during this period, “there is need to exhaust local supply capacity before resorting to imports.”

South Africa: Finance minister Tito Mboweni’s briefing on the economy and Coronavirus COVID-19 (GCIS)

In light of our data-dependent approach, we are working tireless to develop a phase 2 set of interventions. Most importantly, the crisis is an important opportunity for government to implement structural reforms to: Restructure the network industries; Liberate SMMEs to be the engines of growth and employment; and Broad-based measures to lower the cost of doing business. We will naturally revise our fiscal framework to take into account the effect of COVID-19 on the fiscus. There are a number of elements to our fiscal response:

  • Putting forward clear estimates of the additional health care costs that will be needed

  • Reprioritising unnecessary expenditure towards these health care costs

  • The impact of slowdown on our projections for revenue

  • It should be costed as much as possible (how much is needed?);

  • It should be temporary (clear timeline of 1 year);

  • It must be crafted as a 3rd line of defence for the vulnerable

  • A clear timetable or plan to stabilize debt over the current forecast period

  • Supported by an economic recovery plan (structural reforms) and a set of reforms within the fiscal system e.g. passing the RABS (road accident benefit scheme), consolidation of public entities and closure of SAA and SAX.

To fight Covid-19, we must fight intellectual property, trade and investment rules (Mail and Guardian)

Intellectual property rights, investment agreements and trade rules stand in the way of the urgently needed expansion in production of inexpensive ventilators. These rules and regulations act only to protect the profitability of entrenched industries. They cannot be allowed to supersede the basic human right to health. Generic versions of these machines can be built if the firms that own intellectual property are required to give them up. The WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (Trips) lays out a global baseline of intellectual property standards. Most of the technology involved in ventilator production would fall under the Trips definition of patents, requiring a minimum of 20 years of intellectual property protection. But 20-year patents are no longer conscionable, because they increase the cost of equipment and the length of time before it reaches patients.

The stark reality is that the pandemic is already killing people and it is likely to get worse. To address this global crisis, South Africa and other states must ignore the restrictive web of trade, investment and intellectual property rules hindering the rapid manufacturing of ventilators and other medical equipment. The Treatment Action Campaign showed what is possible when, with international support, they successfully challenged those profiteering from the HIV crisis. The same can be done today, if the state is willing to place the sanctity of human lives over the profits of those holding ventilator patents. The Covid-19 crisis reveals the necessity of new systems of trade, public health, innovation, and intellectual property based on a global commons. [The author: Jonathan Cannard]

Coronavirus deals severe blow to services sectors (UNCTAD)

The COVID-19 pandemic has dealt a heavier blow to personal services sectors compared with other recent economic crises, an UNCTAD analysis shows. The pandemic has massively disrupted key services sectors, especially tourism, hospitality and retail. This contrasts with the resilience witnessed during the 2008 great recession and the 2011-2013 eurozone sovereign debt crisis, particularly in comparison to trade in goods. An UNCTAD survey found that in the eurozone, the purchasing managers index (PMI) indicator, a measure of prevailing economic trends, in services and the composite PMI both contracted from above 50 points in January to minus 28.4 and minus 31.4 respectively by mid-March. “The situation is expected to worsen due to the drastic but necessary social distancing and lockdown measures adopted in the eurozone in the last month,” said Pamela Coke-Hamilton, director of UNCTAD’s international trade division.

Tourism at stake: Challenges and measures for small businesses (ITC)

After 21 January, 105 countries have imposed global travel bans, with no end in sight. The World Tourism Organization estimates international tourism receipts could decline by 20% to 30% in 2020 compared to 2019, which would mean a reduction four to six times larger than during the 2009 global financial crisis. Travel and tourism are key industries in many developing countries – and international tourist arrivals constitute a major source of their services export. Out of the ten countries most dependent on travel exports, nine are small island developing states. In six Caribbean states, travel exports account for about half of GDP - Antigua and Barbuda (50%), Grenada (48%), Saint Lucia (47%) – or roughly one-third of GDP with Saint Kitts and Nevis (36%), Saint Vincent and the Grenadines (29%), and Belize (26%). In Asia, Macao SAR and the Maldives are subject of severe hits, with travel exports-to-GDP ratios of 73% and 56%, respectively and in Africa, the Seychelles with a ratio of 35%. As of 9 April, three out of the top ten countries most reliant on travel exports have imposed travel bans themselves. [The authors: Julia Spies, Quan Zhao]

Pamela Coke Hamilton, Janvier Nkurunziza: COVID-19 and food security in vulnerable countries (UNCTAD)

Using the most recent data on food import dependence, UNCTAD finds that low-income countries devote 37% of their merchandise export revenue to food imports, more than five times the share by developed economies. This makes these countries extremely vulnerable to external shocks. UNCTAD also finds that small island developing states (SIDS) are highly exposed to international food market shocks, while regional distributions of vulnerability show that Africa and Oceania are most exposed.

Given these fragilities, major food exporting countries need to respect their commitments under the rules of the World Trade Organization to ensure the free flow of food products and refrain from imposing export bans and other export trade distorting measures that can hamper the availability of food imports in vulnerable food-importing countries. In addition, national authorities should ensure that transborder movement of food commodities is not hampered by border closures as a way of controlling the spread of COVID-19, and also allow food to come to urban centres from producing regions in order to prevent food shortages and panic buying.

COVID-19: The global food supply chain is holding up, for now (UN)

The unfolding COVID-19 pandemic is so far having little impact on the global food supply chain, but that could change for the worse – and soon – if anxiety-driven panic by major food importers takes hold, the World Food Programme (WFP) warned on Friday. In a new report, “COVID-19: Potential impact on the world’s poorest people: A WFP analysis of the economic and food security implications of the pandemic”, the UN agency said that global markets for basic cereals are well-supplied and prices generally low. However, it said, given the highly globalized nature of food production and supply, commodities need to move from the world’s ‘breadbaskets’ to where they are consumed – and COVID-19-related containment measures are starting to make this more challenging.

World Economic Outlook, April 2020: Chapter 1 (IMF)

The COVID-19 pandemic is inflicting high and rising human costs worldwide. Protecting lives and allowing health care systems to cope have required isolation, lockdowns, and widespread closures to slow the spread of the virus. The health crisis is therefore having a severe impact on economic activity. As a result of the pandemic, the global economy is projected to contract sharply by –3% in 2020, much worse than during the 2008–09 financial crisis (Table 1.1). In a baseline scenario, which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8% in 2021 as economic activity normalizes, helped by policy support.

Other regions are projected to experience severe slowdowns or outright contractions in economic activity, including Latin America (–5.2%)— with Brazil’s growth forecast at –5.3% and Mexico’s at –6.6%; emerging and developing Europe (–5.2%)—with Russia’s economy projected to contract by –5.5%; the Middle East and Central Asia (–2.8%)—with Saudi Arabia’s growth forecast at –2.3%, with non-oil GDP contracting by 4%, and most economies, including Iran, expected to contract; and sub-Saharan Africa (–1.6%)—with growth in Nigeria and South Africa expected at –3.4% and –5.8%, respectively. Following the dramatic decline in oil prices since the beginning of the year, near-term prospects for oil-exporting countries have deteriorated significantly: the growth rate for the group is projected to drop to –4.4 percent in 2020.

Food prices are projected to decrease by 2.6% in 2020 and increase by 0.4% in 2021. Supply chain disruptions, possibly due to trade restrictions or border delays, food security concerns in regions affected by COVID-19, and export restrictions in large food exporters are significant sources of upside risk for food prices.

Global Financial Stability Report: Chapter 1 (IMF)

The breadth of outflows - in terms of the number of affected counties - was the largest since the global financial crisis. The depth of outflows was significant for many countries, with South Africa and Thailand witnessing outflows of more than 1 percent of GDP in just two months.

Emerging and frontier markets are facing the perfect storm: An unprecedented combination of external shocks (COVID-19 pandemic, oil price decline, increased global risk aversion, and a prospect of global recession) led to a broad-based sell-off in emerging and frontier markets. Emerging market equity prices have fallen by about 20%, on net, since mid-January despite the most recent rebound (Figure 1.7, panel 1). Currencies of commodity-producing economies (such as Brazil, Colombia, Mexico, Russia, and South Africa) tumbled by more than 20% against the US dollar in the first quarter of 2020 (Figure 1.7, panel 2). Currencies of other emerging markets have been relatively less affected, likely due to stronger currency interventions, as well as lower external vulnerabilities. Spreads of dollar-denominated emerging market sovereign bonds rose to nearly 700 basis points by the end of March—the highest level since the global financial crisis—although they have narrowed some in recent weeks. But for some weaker economies, the current shock was particularly severe as the number of distressed sovereign issuers (those with spreads over 1,000 basis points) rose to record levels (Figure 1.7, panels 3 and 4). Oil-importing economies have generally fared better, but lower remittances, reduced external funding availability, and lower external demand may outweigh the positive impact of lower oil prices.


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