Building capacity to help Africa trade better

tralac’s Daily News selection


tralac’s Daily News selection

tralac’s Daily News selection
Photo credit: CMA CGM

WTO goods barometer flashes red as COVID-19 disrupts world trade (WTO)

The volume of world merchandise trade is likely to fall precipitously in the first half of 2020 as the COVID-19 pandemic disrupts the global economy, according to the WTO Goods Trade Barometer released today. The index currently stands at 87.6, far below the baseline value of 100, suggesting a sharp contraction in world trade extending into the second quarter. This is the lowest value on record since the indicator was launched in July 2016. The Goods Trade Barometer provides real-time information on the trajectory of world merchandise trade relative to recent trends. The current reading captures the initial phases of the COVID-19 outbreak, and shows no sign of the trade decline bottoming out yet.

All of the barometer’s component indices are currently well below trend. The automotive products index (79.7) was weakest of all, due to collapsing car production and sales in major economies. The sharp decline in the forward-looking export orders index (83.3) suggests that trade weakness will persist in the short-run. Declines in the container shipping (88.5) and air freight (88.0) indices reflect weak demand for traded goods as well as supply-side constraints arising from efforts to suppress COVID-19. Only the indices for electronic components (94.0) and agricultural raw materials (95.7) show signs of stability, although they too remain below trend.

UNCTAD’s Global Merchandise Trade Nowcast, May 2020

After the slowdown registered at the end of 2018 and most of 2019, global merchandise trade values were showing signs of recovery in late 2019 and early 2020, when the global economy was hit by the measures taken to contain the COVID-19 pandemic. Based on the data available on 5 May 2020, UNCTAD nowcasts point to a fall of 3.0% in the first quarter of 2020 with respect to the previous quarter. Most of the impact of these measures, however, will affect global trade in the second quarter of the year, with an estimated quarter-on-quarter decline of 26.9%t. Global merchandise trade volumes are also nowcast to fall through the first half of the year, although at more moderate rates.

Trade financing and COVID-19: major interventions needed to backstop trade recovery, warns ICC

In a new paper issued today (pdf), ICC estimates that as much as $5 trillion in market capacity will be needed to return trade volumes close to 2019 levels in 2021. With the WTO projecting that the effects of COVID-19 could cause merchandise trade to drop by over 30% this year, ICC has cautioned that a rapid economic recovery will only be possible if sufficient credit is available to bring trade close to its pre-pandemic trend over the next 18 months. ICC has also called on policymakers to enact emergency legal reforms to avoid delays in the processing of bank-intermediated trade finance products. Building on an earlier memo to central banks and governments, the new paper urges all governments to immediately void legal requirements for trade documents to be presented in hard-copy – with banks facing difficulties maintaining the in-person staffing needed to process paper-based transactions in the context of public health measures to contain the spread of the virus.

Impact of COVID-19 in Africa (UN)

It is too early to know the full impact of COVID-19 on Africa. To date the experience has been varied. There are causes for concern, but also reasons for hope. Early estimates were pessimistic regarding the pandemic’s impact on the continent. But the relatively low numbers of COVID-19 cases reported thus far have raised hopes that African countries may be spared the worst of the pandemic. While the virus is present in all African countries, most countries have recorded fewer than 1,000 cases. The African Union acted swiftly, endorsing a joint continental strategy in February, and complementing efforts by Member States and Regional Economic Communities by providing a public health platform.

This pdf Policy Brief (1.27 MB)  takes a snapshot of immediate impacts of the pandemic on health, economies, peace, security, human rights and humanitarian assistance in Africa. It outlines response measures currently being taken by African and external stakeholders and provides recommendations to protect gains in the fight against the pandemic and maximise opportunities in the recovery for a more inclusive and sustainable future as countries emerge from this crisis.

South Africa: Results from Wave 2 survey on the impact of the COVID-19 pandemic on employment and income (Stats SA)

8,1% of respondents reported that they lost their jobs or had to close their businesses and 1,4% became unemployed, according to the Wave 2 survey on the impact of the COVID-19 pandemic on employment and income in South Africa released by Statistics South Africa. According to the report, almost nine in ten (89,5%) respondents who were employed before the national lockdown remained employed during the lockdown. The survey also found a decrease in the proportion of respondents who usually derive their income from salaries and wages, as well as from own business during the lockdown. On the other hand, the results indicated an increase in the proportion of those who derived their incomes from savings and investments (increasing from 4,8% prior to the lockdown to 6,0% during the lockdown), loans from friends, family and/or businesses (increasing from 1,7% to 3,3%), and claims from UIF (increasing from 0,3% to 2,1%). The percentage of respondents who reported no income increased from 5,2% before the lockdown to 15,4% by the sixth week of national lockdown.

The survey further indicated that about a quarter of respondents (25,8%) reported that their incomes decreased during the national lockdown, while over half (56,2%) said that their income had stayed the same. Approximately one-third of respondents (33,4%) reported that COVID-19 and the national lockdown will have no impact on their ability to cover their financial obligations, while 18,7% and 18,2% of respondents indicated that it would have a major or moderate impact, respectively. [TIPS: The economy and the pandemic - Week 11 to 17 May]

When digital payment goes viral: Lessons from COVID-19’s impact on mobile money in Rwanda (Next Billion)

Since the lockdown was implemented, the growth in person-to-person (P2P) transfers, in both value and volume, has been phenomenal. After a rapid increase in the first week of lockdown, this high level has remained as the “new normal,” with slower but continued growth up to the end of April (see figure). For comparison purposes, in the first week of January, the total value of funds sent via a P2P transfer was RWF 7.2 billion ($7.6m). In the last week of April, the value sent reached RWF 40 billion (over $42m) – an increase of over 450%.

COVID-19 and African businesses: A focus on Mauritius (ATPC)

Among the respondents to the continental survey, 84 represent companies that have activities in Mauritius and which can further be divided into 38 international firms (i.e. 45%) that operate not only in Mauritius but also elsewhere in Africa and 46 national enterprises (55%) operating solely in the Mauritian market and therefore that are not exporting. In terms of size, the 84 surveyed enterprises operating in Mauritius can be divided into: 25 micro (11 international and 14 national), 27 small (9 international and 18 national), 19 medium (8 international and 11 national) and 13 large (10 international and 3 national). In other words, from the sample, the majority of SMEs (i.e. 60%) operate exclusively in Mauritius, while large companies tend to do business in Mauritius as well as in other African countries (over three-quarter of the total).

The vast majority of interviewed Mauritian businesses (78%) indicated being highly to severely impacted by COVID-19 crisis. This perception does not vary according to the type of business (i.e. goods or services) or whether the firm is exporting or not. However, larger-sized companies tend to be slightly less affected, with around two-thirds of the respondents reporting high to severe impacts on their business. Mauritian companies are on average running at 50% of normal capacity, with local firms operating at relatively lower capacity (41-50%) than those that trade (51-60%). But among exporting companies, the micro enterprises are relatively most currently underperforming (at around 31-40% of capacity utilisation) than others, while amongst non-exporting companies, micro enterprises are the ones running with relatively highest capacity (51-60%). [Mauritius free of Covid-19 cases for past three weeks]

Uganda: COVID-19 causes Shs789 billion revenue shortfall to government (Daily Monitor)

Government revenues suffered the hardest beating in April, falling below target by a whopping Shs789.8 billion. This is the latest indicator of how the coronavirus has battered Uganda’s economy since March when it broke out. According to the Ministry of Finance Performance of the Economy Report for April 2020 (pdf), all the projections were below target. In its projections, the government had hoped to receive Shs1.8 trillion but could managed to collect Shs965 billion. The government had planned to collect Shs1.5 trillion but only managed to get Shs931 billion which means that there was a shortfall of Shs547 billion, which is one of the biggest deficit in a single month in recent times. Although the government hoped to get 128 billion in grants (money that comes from donors to support the budget) it received Shs28 billion. In the report, the government says that import taxes had the biggest shortfall of up to Shs314 billion with companies in countries of origin or destination countries remaining closed for long periods in the month as countries struggled to control the virus. [Download: Performance of the economy report - April 2020]

Corona row threatens Sh61 billion Tanzania, Kenya trade (Business Daily)

The simmering diplomatic row between Kenya and Tanzania over the Coronavirus pandemic restrictions is threatening to disrupt billions of shillings worth of trade deals between the two countries due to retaliatory border closures. Dar-es-Salaam appears to have reacted to President Uhuru Kenyatta’s order on Saturday to ban movement across Kenya’s borders with Tanzania by blocking Kenyan trucks at the Lunga Lunga/Horohoro and Taveta/Holili border points. President Kenyatta exempted cargo trucks but said drivers would have to be tested for Covid-19, prompting a Tanzanian regional commissioner to order a blockade of Kenyan trucks, citing hostile treatment.

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