tralac’s Daily News selection
Erastus Mwencha, Tom Pengelly: The UK must do all it can to keep trade out of Africa flowing (tralac, The Telegraph)
Covid-19 has now spread to all corners of Africa and, as the rate of infections increase, the continent’s economies are coming to a crashing halt, risking the reversal of two decades of economic progress. Trade has been the heartbeat of Africa’s economic success, with the UK alone importing £12.7bn in goods and services from Africa in 2016, much of which from the agriculture sector. But this vital economic activity, and the millions of livelihoods it sustains, is under threat.
Trade volumes in the East African Community are down by up to 25% since the beginning of 2020, with even worse damage in the informal sector. There are warnings of a food security disaster on the continent. The threat is not only from Covid-19 itself. As Dr Dirk Willem te Velde, of the Overseas Development Institute, explains: “Some in the UK – and other large economies around the world – are arguing for autarky or increasingly protectionist policies that would wreak havoc on trade with Africa, often disguised as well-meaning social and environmental objectives, or attempts to protect domestic businesses and jobs. These protectionist voices must be resisted.”
Policymakers must understand the full consequences if stringent new production standards are imposed on imports, as some in the UK are calling for. [CNBC Africa: The economic impact of COVID-19 on trade in East Africa]
Afreximbank’s Hippolyte Fofack: Shifting from reliance on commodities crucial for Africa (Business Day)
Every crisis, though tragic, presents opportunities. The combination of the coronavirus downturn and oil price war has underscored the perennial risk of commodity dependency. It has also accentuated the need to expand industrial and manufacturing capabilities in Africa. Many countries on the continent are reliant on overseas imports for essential goods, including staple foods, while intraregional trade remains largely fragmentary. As the coronavirus circles the world, African leaders face a dire challenge. Closing their borders might shield their countries against the unchecked spread of the virus, but risks starving their populations and curtailing access to critical medical equipment that is in short supply in the region.
Targeting industrialisation to address supply-side constraints in the post-coronavirus era will not only mitigate countries’ exposure to commodity price volatility, it will also produce the goods needed to boost intra-African trade and ensure effective implementation of the African Continental Free Trade Area when trading under the agreement begins in July. Its implementation presents the perfect occasion for countries to focus on the opportunity side of the current crisis to be better prepared for the next one.
Two-way trade in the January-March period dropped 14% year on year to $41.23bn as the closure of Chinese factories and ports in January and February – as part of a nationwide effort to contain the spread of Covid-19 – damaged both exports and imports, according to official figures from China’s General Administration of Customs. China’s imports from Africa, mostly raw materials for industry, such as oil and metals, fell by 17.5% in the quarter to $19.8bn, while exports dropped 10.5% to $21.4bn.
Namibia: February trade statistics bulletin (pdf, Namibia Statistics Agency)
In February 2020, Namibia’s total merchandise trade amounted to N$13,084 million which is 9.8% lower than N$14,503 million recorded during the same month of 2019. This decline is mainly attributed to value of exports, which fell by 29.8%, as opposed to an increase of 8.7% in imports. This resulted in Namibia to record a trade deficit of N$3,317m compared to N$588m recorded during February 2019.
South Africa emerged as Namibia’s largest export destination, absorbing 21.8% of all goods exported while China occupied the second position, absorbing 14.3% of the total exports. Botswana in the third position accounted for 9.5% whereas Spain was responsible for 7.1% of Namibia’s total exports and finally Canada whose contribution to domestic exports stood at 6.6%.
South Africa accounted for the largest share of 43% of the value of all goods absorbed into Namibia during the period under review, followed by Zambia contributing 13.4% to Namibia’s total imports from the rest of the world. Peru’s contribution stood at 11.8% of total imports and hence ranked the third largest source of imports for the domestic economy. India and DRC’s respective share to the country’s total import bill stood at 7.9% and 3.5%, hence, occupying fourth and fifth position, respectively.
The African Development Bank Group is ready to provide fast, flexible and effective responses to lessen the severe economic and social impact of the COVID-19 on its regional member countries including the private sector. As the primary channel for its efforts to combat the crisis, the Bank is proposing a COVID-19 Rapid Response Facility that will provide a flexible range of support within the UA 7.4 billion envelope, including:
Up to UA 4.1 billion for sovereign operations for ADB countries;
Up to UA 2.3 billion for sovereign and regional operations for ADF countries; and
Up to UA 1 billion for ADB non-sovereign operations in all African countries.
The CRF will provide UA 6.4 billion of financing directly to regional member countries in 2020. This is almost four times the expected annual debt service payments from RMCs to the Bank Group and will ensure substantial positive net transfers for all eligible countries in 2020 to address the crisis. The Bank’s projections show that the African economies imminently face losses of tens of billions of dollars in foregone GDP, and potentially hundreds of billions over the longer term. The Bank has developed some initial scenarios:
Quantitative model-based estimates of the impact of COVID-19 indicate that it would cost Africa GDP losses between $22.1bn, in the base case scenario, to $88.3bn in the worst case scenario, equivalent to a contraction of projected GDP growth for 2020 of between 0.7 and 2.8 percentage points.
The COVID-19 shock would further squeeze fiscal space in the continent as fiscal deficits are estimated to widen by 3.5 to 4.9 percentage points, increasing Africa’s financing gap by an additional $110bn to $154bn in 2020.
The bureau members underscored that the COVID-19 pandemic challenges offer an opportunity to our continent to deploy rapid, strong and lasting responses to create a strong African Tourism Industry post COVID-19 pandemic. The Bureau strongly reaffirmed their resolution to set up immediately a high level Task Force comprised of both Public and private sector and reporting to the Bureau, with a mandate to propose appropriate measures that will help the African tourism industry to recover the devastating impacts of COVID-19 pandemic. [Communiqué adopted by the AU Peace and Security Council (14 April 2020): the impact of COVID-19 on peace and security in Africa]
COVID-19 and the world of work: Sectoral impact, responses and recommendations (ILO)
The COVID-19 crisis is having a devastating effect on workers and employers in all sectors. Workers in essential services such as health and frontline emergency response are at high risk of infection. Grocery workers, flight attendants and autoworkers, are among those who have seen both their health and livelihoods threatened by the pandemic. In a series of briefs the ILO has captured the impact of the crisis on several social and economic sectors, including public emergency services, health services, education, food retail, automotive, tourism, civil aviation, agriculture, maritime shipping and fishing, and the textiles, clothing, leather and footwear industries.
Foreign direct investment and trade in agro-food global value chains (pdf, OECD’s Joint Working Party on Agriculture and Trade, OECD)
This paper seeks to shed light on this topic by mapping the landscape of agro-food FDI, and estimating its impact on participation and domestic value creation in GVCs. It also aims to improve our understanding of the strategic factors that drive multinationals’ investment decisions, as well as the role of policy in influencing cross-border investment. Agro-food FDI is explored by observing variations across sectors, countries and geographic regions in cross-border mergers and acquisitions between 1997 and 2017. The results indicate that the landscape of agro-food FDI has evolved significantly over the past two decades, with important implications for the development and transformation of agro-food GVCs.
Looking across regions, companies in North America and the European Union are the source of half of FDI inflows in agriculture and more than two-thirds in food processing. They invest in agriculture with a broad geographic reach: the European Union, Asia, Central and South America, and Oceania are among the most attractive destinations. In the food sector, however, FDI inflows remain highly concentrated in the European Union and North America. Agriculture and food firms typically invest within their own region, highlighting the important influence of proximity on cross-border investment decisions. Investment appears to be concentrated around specific regional hubs, suggesting that volatility in FDI flows could have important consequences for countries on the periphery.
Extract: These dynamics are reflected in aggregate FDI statistics at the regional level (Figure 2). Primary agriculture accounted for 85% of FDI inflows in Africa’s agriculture and food sectors between 1991 and 2017, and 51% in Asia, compared with just 8% in the Americas and 3% in Europe. On a sectoral basis, Asia received 43% of global FDI inflows in primary agriculture over the same period, while the Americas attracted 36% of the total. FDI inflows in food processing were highly concentrated in Europe (52%) and the Americas (44%).
During the UNSC meeting, FAO Director-General Qu Dongyu presented the key findings of the Global Report on Food Crises - launched jointly by the EU, FAO, WFP and 12 other partners - clearly showing the link between conflict and rising levels of acute food insecurity on one hand, and between livelihood interventions and peace processes on the other. According to the report, even before the impacts of the COVID-19 pandemic hit the global food systems and livelihoods of millions of people at the start of the year, 135 million people in 55 countries were already trapped in food crises situations struggling to cope with high levels of hunger. This is the highest number in the last four years. Almost 60% of all those people in 2019 faced acute hunger in contexts of conflict or instability.
We will guard against any unjustified restrictive measures that could lead to excessive food price volatility in international markets and threaten the food security and nutrition of large proportions of the world population, especially the most vulnerable living in environments of low food security. We agree that emergency measures in the context of the COVID-19 pandemic must be targeted, proportionate, transparent, and temporary, and that they do not create unnecessary barriers to trade or disruption to global food supply chains, and are consistent with World Trade Organization (WTO) rules. We recognise the importance of transparency and commend the Trade and Investment Ministers’ commitment to notify the WTO of any trade-related measures taken, including those related to agriculture and essential foodstuffs. We reaffirm our agreement not to impose export restrictions or extraordinary taxes on food and agricultural products purchased for non-commercial humanitarian purposes by the World Food Programme (WFP) and other humanitarian agencies. [DG Azevêdo welcomes G20 farm ministers’ commitment to safeguard global food security]
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