Building capacity to help Africa trade better

tralac’s Daily News selection


tralac’s Daily News selection

tralac’s Daily News selection
Photo credit: World Bank

The G20’s action on debt is an important first step; now for the hard part (The Africa Report)

A commentary by Brahima Sangafowa Coulibaly, Donald Kaberuka, Louise Mushikiwabo, Ngozi Okonjo-Iweala, Strive Masiyiwa, Tidjane Thiam, Trevor Manuel, Vera Songwe:

The G20 FMCBG’s call for the private sector to join the debt relief, while welcome, must be bolstered by tasking the IMF to work with the Institute for International Finance and the African Union to develop solutions guaranteeing debt sustainability and continued access to capital markets in the future.

Private sector debt is not only a higher share of African external debt, but it makes up a disproportionate share of the debt servicing cost. For several African countries, even where debt levels remain relatively low, the interest cost now accounts for 20% or more of government revenues.

Without significant private sector participation, the standstill will fall short of its objectives. Country participation in a standstill on the private debt should be voluntary. We believe it is in the long-term interest of countries classified as IBRD to participate, so there should be significant incentives in place to encourage their participation, using various levers described below.

To adequately confront this funding crisis, we must be bold and innovative. We believe a special purpose vehicle could be created to serve as a bridge finance facility to be accessed on a voluntary basis. If adequately structured, participating countries would benefit from a lowering of their cost of debt whilst keeping their hardearned market access, and investors would hold paper that would be much more liquid and with enhanced credit. The multilateral institutions working with the IIF and Africa should be tasked to explore this option as they develop work outs for the bilateral debt.

Download:  pdf Communiqué: G20 Finance Ministers and Central Bank Governors Meeting - 15 April 2020 (218 KB)

AUC, Afreximbank, Afrochampions, UNECA: Communiqué on the need for a coordinated trade and investment response to the COVID-19 pandemic

In addition to ongoing initiatives, such as the setting-up of the African Union Covid-19 Response Fund and the appointment by the African Union Chair, Cyril Ramaphosa, President of the Republic of South Africa, of Special Envoys, to mobilize international economic support for the continental fight against COVID-19, the AUC, Afreximbank, UNECA and the Afrochampions Initiative are issuing a call to action to AU Member States and institutions, including research institutions, think tanks financial institutions, corporations and the academia, to evolve a collaborative and coordinated trade and investment response to the COVID-19 crisis, building on the AfCFTA as a tool for developing domestic, regional and continental value and supply chains, as well as driving the Post Pandemic economic recovery, growth and development.

In particular, the Pandemic and the attendant challenges in sourcing critical medical supplies and equipment have highlighted the critical gaps in Africa’s productive and manufacturing capacities, as well as the need to build domestic, regional and continental value and supply chains. AU member states must therefore resist the temptation to adopt nationalist and protectionist measures and postures, imposing restrictions to trade and disrupting value and supply chains, but must look instead to coordinating regional and continental responses and measures to address the health and economic challenges. Pooled and integrated intermediate industrial inputs procurement strategies, for instance, are no longer academic; they are an indispensable element of the urgent imperative. So also is the need to recognize the opportunities afforded by cooperation in harnessing the likely resilience of services trade even as the continent strives to support the current levels of cross-border trade in goods. In this connection, the AfCFTA must be the rallying initiative to drive the post Pandemic economic recovery and the strengthening of African domestic, regional and continental value and supply chains.

AfroChampions: Will COVID-19 derail AfCFTA start of trading?

Extracted recommendations: How to salvage and keep AfCFTA on track amidst COVID-19 disruptions:

  • AfCFTA negotiations should continue via online and video-conferencing platforms. If done right virtual negotiations could prove to be even faster and cheaper than face to face meetings for certain aspects of the negotiations process.

  • The July 2020 date for Start of AfCFTA Trading should not be postponed even if the pandemic persists into July. If AfCFTA trading can take off in the middle of this battle – even if symbolically – will send a strong signal; it should be one of the symbolic victories for Africa in the midst of a crisis. Initial AfCFTA trade can focus on critical goods needed to fight the pandemic such as pharmaceuticals and food products. Governments should ease border crossings for these goods. The AfCFTA can be one of Africa’s main weapons to beat COVID-19.

  • The AfCFTA Secretariat, which is temporarily operating out of Addis Ababa, should continue with its staff recruitment and operationalize a fully functional virtual office with newly recruited teams working virtually from their homes across the continent.

  • The African Union should convene a major virtual meeting of African trade ministers to deliberate on ways to keep the AfCFTA on track. A fully virtual mode of meetings should be activated to keep the process going.

  • African Union should request Ministers of Trade to present COVID19-IMPACT reports of their proposed AfCFTA plans or their already prepared BIAT.

  • Each of the member states that have ratified should be made to present a COVID-19-ADJUSTED plan to project how they plan to catch up in the post COVID-19 period.

  • We urge African Union President Cyril Ramaphosa to appoint Special AfCFTA Envoys to assist the AfCFTA Secretary General to coordinate with governments towards salvaging and keeping the process on track.

Download:  pdf Will COVID-19 Derail AfCFTA Start of Trading? Preliminary Assessment and Recommendations by AfroChampions (2.97 MB)

Arkebe Oqubay: How Africa can fight the pandemic (Project Syndicate)

Managing the coming economic crisis also will be critical. This means reducing the damage to the most dynamic sectors as much and as early as possible, because more productive activities have bigger spillover effects and are crucial for recovery and large-scale employment. The biggest mistake would be to place all economic activities on an equal footing and try to make everyone happy. Instead, policymakers should focus on export industries, which are vital to ensure foreign-exchange liquidity, ease balance-of-payments constraints, and generate employment. Encouraging services exports and high-value service activities is also critical, as is ensuring affordable food supplies.

Finding Africa’s path: Shaping bold solutions to save lives and livelihoods in the COVID-19 crisis (McKinsey)

In this article, we present new analysis that underlines the urgency of action required to save lives and safeguard livelihoods in Africa. We also suggest specific approaches that governments, development institutions, and business can take to act decisively on both fronts. These insights build on our recent article “Tackling COVID-19 in Africa.” We focus on three imperatives:

  • Protecting lives. We present new analysis showing that bold steps will be needed to strengthen Africa’s health-system capacity over the next 100 days, at a potential cost of more than $5 billion.

  • Safeguarding livelihoods. We show that the jobs or incomes of 150 million Africans are vulnerable in the crisis, and we share new analysis of the interventions required to mitigate the economic damage.

  • Finding the right path. We consider how governments can make optimal decisions on lockdowns, shutdowns, and shielding of people at the highest risk of contracting the virus, thereby achieving the best possible outcomes in protecting lives and safeguarding livelihoods. [The authors: Kartik Jayaram, Acha Leke, Amandla Ooko-Ombaka, Ying Sunny Sun]

Nigeria to lose over $160m to cocoa, cashew exports over COVID-19 (Nairametrics)

The coronavirus pandemic is expected to cause significant hardship to the non-oil export sector, as Nigeria is projected to lose over $160m to cocoa and cashew exports in 2020. Agricultural exports like cocoa, sesame and cashew exports are predicted to suffer, due to the pandemic that has lockdown economies of nations across the globe. This was disclosed by the Nigerian Export Promotion Council in a report, which was seen by Nairametrics, titled Impact assessment of and Policy Responses to the Coronavirus Pandemic on Agricultural Exports: Early evidence from Nigeria.

What it means: A fall in exports of over $100 million is expected in the cocoa sector due to the declining prices, which can be attributed to the falling demand in Europe. Though Sesame exports are likely to prove more resilient due to a smaller decline in prices and more diversified export markets, Cashew exports are expected to shed $60 million. This is expected owing to the Vietnam Cashew Association’s guidance to enterprises within the country to carefully consider before importing raw cashew.

In brief:

UK provides £1.4m more for UNCTAD’s trade facilitation initiatives (UNCTAD)

The additional funding will enable UNCTAD to continue helping countries establish and maintain national trade facilitation committees, which are key to the implementation of the Trade Facilitation Agreement of the WTO. The new funding phase is the second extension of the collaboration between the UK’s customs authority, the World Customs Organization and UNCTAD to build the capacity of developing and least developed countries towards implementing trade facilitation reforms and meeting their obligations under the TFA.

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