tralac’s Daily News selection
Lauren Johnston: How COVID-19 will change China and Africa’s economic relationship (WEF)
One reason for China’s strictness may be earlier research suggesting that different types of Paris Club relief lead to different economic outcomes. Debt stock relief is found to enhance economic growth and a change to repayment terms to induce greater fiscal prudence and better prospects of long-run debt sustainability. This trade-off may lie at the heart of identifying a balance between the two approaches. Another reason could be that China as creditor is not a single lending agency but in fact something of a labyrinth of lending entities. China may even need something of its own “Dongcheng Club” to instigate greater transparency among and between its own international creditors, with Dongcheng being the Beijing district hosting a cluster of the relevant government agencies.
In other words, China joining the G20’s debt repayment freeze is both consistent with its past practice – in offering a repayment freeze where justifiable; but unique – China seldom participates in multilaterally-agreed sovereign debt discussions. The latter has led to hopes that the extreme circumstances induced by COVID-19 may encourage China to go beyond a freeze on repayments and, Paris Club-style, to more magnanimously offer something closer to a debt write-off. Its past behaviour would suggest that is unlikely.
As China nears its milestone of eradicating absolute poverty by 2021, it is especially timely for China and African countries to proactively work together on ‘innovative and pragmatic’ cooperation. This may include what would be a rare offer by China of significant debt stock write-off. It could also include, at the least, re-equating the terms of China’s existing loan stock with those of equivalent loans from the World Bank or IMF. Prospects for such calls would undoubtedly be aided by elevated prospects for sustainable debt and development in debtor countries – something the Belt and Road Initiative could both serve, and also be served by.
Covid-19: Trade experts says AfCFTA could help Africa bounce back (ECA)
The Director of Regional Integration and Trade at the ECA, Stephen Karingi, told an online group of journalists on 11 May 2020 that the AfCFTA could help African economies recover from the impact of Covid-19. “Boosting intra-African trade can serve as an alternative stimulus package for job creation, foreign exchange, industrial development and economic growth,” said Mr Karingi. He said if Africa had implemented agreements and frameworks such as the AfCFTA, Pharmaceutical Manufacturing Plan for Africa, the Comprehensive Africa Agriculture Development Programme, and the Accelerated Industrial Development for Africa plan, “our economies would have been more diversified, stronger, and less affected by COVID19.” Mr Karingi said Covid-19 also highlighted the importance of digital technologies and that “member states should consider front-loading negotiations on e-commerce to coincide with the closely linked phase II negotiations of the AfCFTA.”
David Luke, Coordinator of the African Trade Policy Centre, reiterated the need for Africa to diversify its sources of supply chain, stating “even developed countries that depended on only one or two countries for critical parts of their supply chain are now talking about localising production.” And: “We need to think creatively about how our existing development frameworks could be adapted to emerging opportunities generated by this crisis.”
The request was made by Permanent/Principal Secretaries from ministries that coordinate COMESA regional integration programmes during the COMESA Intergovernmental Committee meeting conducted today by video conference. The meeting was called to consider a raft of regional guidelines that will enable a coordinated approach in responding to COVID-19. Currently, intra and extra-COMESA trade has been negatively affected by the measures that countries in the region have put in place, which differ in extent and severity. The delegates acknowledged that some of the measures are not coordinated at a regional level thus seriously limiting regional trade which involves essential commodities that are in critically demand. Hence, the need for a coordinated approach that will ensure that measures individual countries put in place are harmonized across the region to facilitate the flow of essential goods and services. Given the multiple membership of countries to regional economic blocs: COMESA, the East African Community and the Southern African Development Community, the delegates endorsed the development of guidelines that will provide a coordinated approach across the region. [COVID-19 in COMESA: Situational Update #13]
The Heads of State decided that partner states adopt a harmonised system for certification and sharing of Covid-19 test results.
The Heads of State took note of the EAC Regional Covid-19 Response Plan and its key targeted interventions and directed the ministers responsible for health, trade, transport and EAC Affairs to ensure that it complements the partner states’ national Covid-19 response plans.
The Heads of State noted that information sharing is key during crisis such as the Covid-19 pandemic and directed the ministers responsible for health, trade, transport and EAC Affairs to finalise and adopt an EAC digital surveillance and tracking system for drivers and crew on covid-19 for immediate use by partner states.
The Heads of State took note of efforts by partner states in undertaking bilateral engagements to address cross-border challenges and the EAC Secretariat mission that assessed the situation on clearance processes at the borders during the pandemic.
The impact of COVID-19 on East African economies (Deloitte Kenya)
Due to the fast paced nature of this pandemic and the ensuing government measures and economic impact, we have used available data through 8 May 2020 for the purposes of our analysis in this publication (pdf). In addition to economic outlooks, the publication looks at how governments in each country across the region have responded to the pandemic through social and health-related measures and the fiscal and monetary interventions introduced to safeguard the economy.
In Kenya, projected GDP growth in 2020 now stands at 1% from 5.7% due to the gravity of the pandemic; with the economy seeing a decline in tourism activity, export revenues, and a disruption in the supply chain. In Ethiopia, the country is expected to grapple with high unemployment, and GDP growth has been revised to 3.2% from 6.2% in 2020. Similarly, the outlooks in Tanzania and Uganda show a similar trend with GDP growth being revised to 2% and 3.5% respectively (decline in 3.3% and 1.8% percentage points). Tanzania is showing waning demand for mineral exports considering global supply chain interruptions. The economy in Uganda is also faced with the disruption of supply chains and weakened global demand for goods.
Kenya: Industries shed 30000 in Covid-19 control measures (Business Daily)
More than 30,000 formal jobs have been lost in the manufacturing sector and 80% of the existing jobs are vulnerable as the Covid-19 pandemic continue to bite. Manufacturers now said the job situation remains grim as the stimulus package the government unveiled takes longer to create the desired impact in the disrupted business environment. In a report set to be launched today, the jobs assessment which also contains several recommendations on how to keep one of the key pillars of President Kenyatta’s Big Four agenda alive. The retail, agriculture, beverages and textile sectors create the largest number of jobs and contribute up to 60% of the manufacturing sector gross domestic product. Kenya Association of Manufacturers chairman Sachen Gudka did not readily disclose details of the report he calls, “a feel on the pulse of the sector”. The report that KAM worked out together with audit firm KPMG found that between five and eight out of 10 jobs have been impacted by the pandemic with employees working less, taking pay cuts or on the verge of losing their jobs. [Kenya and the IMF: Request for disbursement under the Rapid Credit Facility]
Mining in Africa: Covid-19 lockdowns lifting, but logistics challenges to persist (Fitch Solutions)
The lockdown of mining activity in Sub-Saharan Africa will continue to ease over the coming weeks, allowing more mines to resume production. Lockdown measures peaked in April, with major markets including South Africa, Namibia and Zimbabwe enforcing various levels of restrictions on mine operations as part of wider national efforts to curb the spread of Covid-19. We expect that economic expediency will be the main factor driving a continued easing of restriction on mining sector activity. Where present, mining generally accounts for a significant portion of GDP in SSA economies, and an even larger proportion of export earnings. This latter point is particularly relevant given the severe depreciatory pressure being placed on emerging market currencies since February. Although mining lockdowns will ease, logistical factors will generally prevent a return to pre-Covid-19 production rates in 2020. This was a key factor underpinning the series of downward revisions we recently made to our mine production forecasts for SSA. The main logistical constraints on production include the following: [Note: The report is available after a quick registration process]
What Zambia border closure means to four countries (The Citizen)
Closure of the Tunduma-Nakonde border in the fight against Covid-19 will deal a heavy blow to the economies of Tanzania, Zambia, the DRC and - partly - Zimbabwe, analysts say, calling on swift resolution. The Tunduma-Nakonde border crossing point is Tanzania’s busiest, as it connects Dar es Salaam, with Lusaka (Zambia), Lubumbashi (DRC) - and, to some extent, Harare in Zimbabwe. Data produced at the launching of the convertibility and repatriation of the Tanzanian shilling and the Zambian kwacha in February this year show that over 70% of goods in transit which are imported through Dar es Salaam port pass across the Tunduma-Nakonde border. On average, the value of cargo passing through the border annually to destinations in Zambia, DRC and Zimbabwe is estimated at $1.5bn. But, this is now disrupted, following the Zambian government decision to close the border with Tanzania ostensibly in efforts to curb further spread of Covid-19. The decision - which became effective yesterday (Monday) came after the Nakonde district recorded 76 new Covid-19 cases on Saturday, its highest single day increase so far.
SADC energy sector braces for Covid-19 impact (SA News Features)
According to SAPP, South Africa, which is the largest producer and consumer of electricity in the region, has experienced a 40% decline in peak system load since it embarked on a coronavirus nationwide lockdown on 27 March. South Africa accounts for more than 70% of the installed electricity generation capacity for the 12 SAPP member countries, according to the 2018 SADC Energy Monitor. Being the largest economy in southern Africa, South Africa also consumes the bulk of the power generated in the region. According to SAPP, Zimbabwe has experienced a reduction of 25% of its system load since the country embarked on a lockdown on 30 March. Other countries with significant demand reductions are Botswana where the Botswana Power Corporation has experienced a 1% decline in system load, while NamPower of Namibia has reported a decrease of 10% for its load. A similar situation has been reported for other SADC member states such as Lesotho, Malawi and Zambia.
Today’s Quick Links:
WTO DDG Alan Wolff: “The time now is for action rather than reflection”
World Bank: Uganda skills and jobs analysis