tralac’s Daily News selection
Diarise: UNCTAD’s eWeek (27 April - 1 May)
The programme features two high-level dialogues, one donor roundtable; and a set of webinars to explore how the COVID-19 pandemic is impacting lives and economies and what policy solutions will be needed to sustain structural changes in the long-run. The first high-level session takes place on 27 April and explores the role of trade and digital policies in coping with the economic fallout of the COVID-19 crisis in Africa. On the panel are UNCTAD Secretary-General Mukhisa Kituyi; AfCFTA Secretary-General, Wamkele Mene; Ethiopia-based Blue Moon’s founder and CEO, Eleni Gabre-Madhin; and Rwanda’s DMM.Hehe founder and CEO, Clarisse Irabagiza. The second high-level session takes place on 28 April and tackles how the empowerment of women digital entrepreneurs can help create more resilient economies.
ECOWAS leaders held an Extraordinary Summit today to discuss measures to combat the impact of COVID-19 in the region. No outcome statement has yet been posted.
“This is no ordinary moment”: President Cyril Ramaphosa’s address, yesterday, to the AU Bureau of Heads of State and Government meeting with African business leaders (GCIS)
As some of Africa’s leading business people, you are essential partners in confronting one of the defining challenges of our lifetimes. The continent’s private sector is well placed to assist in many of our most pressing challenges. Combining our resources, we can implement the screening, testing and contact tracing programmes that have proved effective in limiting the spread of the virus. We can shift manufacturing infrastructure towards the production of essential medical goods and we can collaborate in assuring the resilience of existing supply chains for essential products like food and pharmaceuticals. While many of you are already active in assisting in efforts to fight the pandemic in your own countries, we must realise that only a continental intervention can provide a lasting solution.
The COVID-19 virus does not respect borders. With porous border and active cross-border communities, an outbreak in a neighbouring country will not remain contained there for long. Either we contain the pandemic as a continent, or we do not contain it at all.
We recognise that this is not an easy time for your companies and organisations. While our focus must be on containing the human health crisis, this will quickly give way to a serious economic crisis. The deep global recession that is likely to follow the pandemic will hit Africa particularly hard. Export orders in markets like Asia and Europe will rapidly decline, while key commodity prices will face pressures that will exceed those seen after the global financial crisis more than a decade ago. Trade distortions are likely to disrupt the smooth functioning of logistics networks, while increasing volatility in currency markets and spikes in non-payment by clients may lead to a period of prolonged economic instability that will threaten the viability of many companies. Managing this economic crisis will require similar cooperation to that demanded by the health crisis.
African Union Chairperson Moussa Faki Mahamat: The African Union will facilitate a platform for the African private sector to share experiences of how they have been able to adapt in these trying times of the COVID-19 pandemic. We look forward to more such meetings in partnership with the African Private Sector!
The information available thus far suggests that 80 countries and separate customs territories have introduced export prohibitions or restrictions as a result of the COVID 19 pandemic, including 46 WTO members (72 if EU member states are counted individually) and eight non-WTO members. Most of these have been described as temporary measures. At least two members have already removed some of those restrictions. The products covered by these new export prohibitions and restrictions vary considerably; most have focused on medical supplies (e.g. facemasks and shields), pharmaceuticals and medical equipment (e.g. ventilators), but others have extended the controls to additional products, such as foodstuffs and toilet paper.
Export prohibitions and restrictions applied by large exporters may in the short run lower domestic prices for the goods in question and increase domestic availability. But the strategy is not costless: the measures reduce the world’s supply of the products concerned and importing countries without the capacity to manufacture these products suffer. And exporters also risk losing out in the long run. On the one hand, lower domestic prices will reduce the incentive to produce the good domestically, and the higher foreign price creates an incentive to smuggle it out of the country, both of which may reduce domestic availability of the product. On the other hand, restrictions initiated by one country may end-up triggering a domino effect. If trade does not provide secure, predictable access to essential goods, countries may feel they have to close themselves from imports and pursue domestic production instead, even at much higher prices. Such a scenario would likely result in lower supply and higher prices for much-needed merchandise. The long-term effects could be significant. [ pdf Export prohibitions and restrictions: WTO Information Note (321 KB) ]
The Commissioner for Infrastructure and Energy, Dr Amani Abou-Zeid, and the African Ambassadors to the International Civil Aviation Organization (ICAO) met via video conference to discuss the urgent actions needed to contain the spread of COVID-19 and the continental strategy to assist Africa’s air transport industry during the recovery period. The Ambassadors agreed to work together with the AUC to analyze all necessary actions to contain COVID-19 pandemic and adopt a recovery plan for Africa’s air transport industry by working closely with ICAO regional offices, other key air transport stakeholders and the Member States, to ensure compliance with the requirement to keep the airspace and airports open for critical cargo flights and humanitarian assistance as communicated through ICAO State letters.
Heads of the three regional economic communities, COMESA, EAC and SADC, have issued a joint pdf Statement of solidarity with their Member/Partner States in the face of the coronavirus pandemic (2.61 MB)
COVID 19 in COMESA: Update 9
From the Great Lockdown to the Great Meltdown: Developing country debt in the time of Covid-19 (UNCTAD)
The coronavirus pandemic hits developing economies at a time when they had already been struggling with unsustainable debt burdens for many years, as well as with rising health and economic needs. According to the report, developing countries now face a wall of debt service repayments throughout the 2020s. In 2020 and 2021 alone, repayments on their public external debt are estimated at nearly $3.4 trillion – between $2 trillion and $2.3 trillion in high-income developing countries and between $666 billion and $1.06 trillion in middle- and low-income countries. Conclusion (pdf):
Of utmost importance, in responding to both the Covid-19 shock to developing country sovereign external debt positions as well as to the fragility of such positions even prior to the Covid-19 shock is coordinated debtor country action to pro-actively shape future international agendas and agreements on developing country debt relief and restructurings. These have long failed to address the need for comprehensive, substantive and game-changing ways forward to deal fairly and efficiently with heavy and growing public debt service burdens across developing countries, precipitated by speculative and volatile international net portfolio capital flows from developed countries. In the wake of the Covid-19 crisis, both developing country debtors as well as developed nations’ creditors should make it a priority to safeguard and promote future mutual dealing to shared longer-term benefit on equal terms.
Sweeping preventative measures seem to be curbing the spread of COVID-19 in the Great Lakes region of Africa, but the economic impact of the global pandemic threatens hard-won gains made along the long road back to peace and stability, the Secretary-General’s Special Envoy for the region said on Wednesday. Briefing the Security Council during open videoconference proceedings, Huang Xia urged the international community not to let up on its support for the continent-spanning region that includes Burundi, Democratic Republic of the Congo, Rwanda, South Sudan and Uganda, among several other nations. Citing data from the WHO, the Special Envoy said that the novel coronavirus has so far claimed 131 lives in the Great Lakes region among more than 4766 confirmed cases – but is spreading at a “moderate rate” compared to other parts of the world. So far, strict travel restrictions and quarantine measures seem to be keeping the spread of the deadly virus at bay, he said. But the economic impact is already significant, with many key sectors – including agriculture, mining and transportation – at a near-standstill. [Access a longer summary of the UNSC debate here]
COVID-19 crisis through a migration lens (World Bank)
This Migration and Development Brief provides a prognosis of how these events might affect global trends in international economic migration and remittances in 2020 and 2021. Considering that migrants tend to be concentrated in urban economic centers (cities), and are vulnerable to infection by the coronavirus, there is a need to include migrants in efforts to fight the coronavirus. Migrant remittances provide an economic lifeline to poor households in many countries; a reduction in remittance flows could increase poverty and reduce households’ access to much‐needed health services. The crisis could exacerbate xenophobic, discriminatory treatment of migrants, which calls for greater vigilance against such practices. This Brief is largely focused on international migrants, but governments should not ignore the plight of internal migrants.
Remittance trends in Sub-Saharan Africa: Remittances to Sub‐Saharan Africa decreased slightly, by 0.5%, between 2018 and 2019 to remain close to $48bn. Due to the COVID‐19 crisis, remittances are expected to decline by 23.1% in 2020 to reach $37bn, while a recovery of 4.0% is expected in 2021. As many Sub‐Saharan migrants are losing their jobs due to an almost complete shutdown of economic activities – especially in the construction, hospitality, and other service sectors – remittances are expected to decline in the coming months.
Nigeria remains the largest recipient of remittances in the region, and is the sixth‐largest recipient among LMICs, with an estimated amount of $23.8bn received in 2019, an increase of more than half a billion compared with 2018 (figure 2.11). Ghana and Kenya are ranked a distant second and third in the region, with $3.5bn and $2.8bnreceived, respectively. South Sudan has recently started reporting remittances in the IMF Balance of Payments statistics; in 2019 it had the region’s highest share of remittances, as a percentage of national GDP, at more than 34%. For these countries where remittances account for a large share of GDP, a sharp decline is expected for 2020 as many migrant workers have seen their income plummet, especially in member countries of the Organisation for Economic Co‐operation and Development. [ pdf COVID-19 Crisis Through a Migration Lens (1.49 MB) ]
Commodity Markets Outlook (April 2020): implications of COVID-19 for commodities (World Bank)
Almost all commodity prices saw sharp declines during the past three months as the COVID-19 pandemic worsened. Mitigation measures have significantly reduced transport, causing an unprecedented decline in demand for oil, while weaker economic growth will further reduce overall commodity demand. Crude oil prices are expected to average $35/bbl this year and $42/bbl in 2021—a sharp downward revision from October in both years. Non-energy prices are also expected to fall this year. Metals are projected to decline more than 13% in 2020, before recovering in 2021 while food prices are expected to be broadly stable. The risks to the price forecasts are large in both directions and depend on the speed at which the pandemic is contained and mitigation measures are lifted.
A Special Focus (pdf) investigates the impact of COVID-19 on commodity markets and compares it with previous disruption episodes. It finds that the impact of COVID-19 has already been larger than most previous events and may lead to long-term shifts in global commodity demand and supply. A Box examines the impact of international commodity production agreements, with a particular focus on OPEC, and concludes that OPEC+, the last remaining international agreement to manage supply, is subject to the same forces that led to the collapse of its predecessors.