News

tralac’s Daily News selection

tralac’s Daily News selection

21 May 2020

The 2nd edition of the African Regional Integration Index will be launched tomorrow. Further details of the webinar can be accessed here.

South Africa: Masondo punts common currency as key to intra-African trade (Moneyweb) 

A post-Covid-19 global economy could deepen the trend of economic protectionism, and Africa should seize this moment to build intra-continental regional value chains and trade, which will only succeed through the introduction of a common currency, says Deputy Finance Minister David Masondo. Masondo was speaking in a webinar hosted by the University of Johannesburg on Wednesday, which focused on how Covid-19 will influence the emerging global world order. In Africa, Masondo said in addition to tackling the transport infrastructure and other capacity issues that have been a barrier to facilitating more intra-African trade, the continent needs to introduce a common currency. He said the AfCFTA agreement was “a good base to respond to the regionalisation and economic nationalism” across the world but if trade were to take place in multiple currencies it would introduce “exchange rate risks” that would restrict the number of imports and exports that can be facilitated. [Trade barriers, changing currencies: Economic experts weigh in on a post-coronavirus world]

Pandemics know no borders: In Africa, regional collaboration is key to fighting COVID-19 (World Bank Blogs)

Many African countries are all too familiar with the social and economic upheaval posed by outbreaks of infectious diseases. Recent experiences with Ebola are fresh in peoples’ minds across West and Central Africa, as are those with TB and HIV/AIDS in Southern Africa. As a result, African countries understand the need for regional coordination in overcoming public health challenges. The World Bank Group has responded swiftly to each of these health emergencies – often through a regional response designed to counter immediate threats while also strengthening countries’ capacity to be proactive in detecting and responding to outbreaks. There are important lessons to draw from these experiences as we combat the coronavirus pandemic:

  1. First, leverage existing regional networks and operations to catalyze an immediate, large-scale response.

  2. Second, maximize economies of scale for scientific collaboration across borders

  3. Third, while providing social support now, lay the groundwork for regional cooperation to support recovery of the economy and jobs – so essential for reducing poverty as we go forward.

COVID-19 presents a classic example of why regional coordination, cooperation, and integration are key to Africa’s future. Given the ease with which diseases can spread across countries, we will continue to draw on our regional programs to support countries in managing pandemic prevention and control. The virus knows no borders, and efforts to support regional coordination and cooperation will be essential to defeating it, both in Africa and around the globe. [The author, Deborah Wetzel, is Director, Regional Integration for Africa, the Middle East and North Africa]

The impact of Covid-19 on the manufacturing sector in Kenya (KPMG)

On sales: An overwhelming number of respondents (93%) have experienced a fall in turnover, with at least 23% registering losses in the range of 65-100%, and 51% between 30-65%. 78% attributed this to a fall in demand of products. 4% have seen an increase in turnover, while another 4% have not seen any changes. The sectors that have seen an increase in turnover are Metal & Allied (18%), Chemical & Allied (6%), Paper & Paperboard (5%) and Food & Beverage (3%). The worst hit sectors are the Textile & Apparel and Timber, Wood & Furniture sectors followed by the Leather & Footwear sector.

On liquidity: 8 out of every 10 participants are experiencing cash flow constraints while 9 out of every 10 agree or strongly agree that they are facing challenges in being paid by their customers, as they too need to look at their finances and prioritize their payments. What was a common issue before businesses were affected by Covid-19 has been exacerbated further by the pandemic. For MSMEs, the numbers are grimmer: 64% are having challenges in meeting tax obligations, 76% are finding it difficult to pay salaries and wages, and 79% are struggling to pay for other operating costs.

On logistics: 76% of the respondents experienced challenges in locally sourcing or shipping in raw materials. An example is the leather industry which has been impacted “because with the lock down people are not able to get the raw hides from up country”, as Niaz Hirani, Chair – Leather & Footwear Sector explains. With the majority of raw materials and machinery coming in from countries such as China, India and Egypt, and the added challenges of: seeking credit insurance covers from banks; depreciation of the Kenya Shilling; suppliers invoking the force majeure clauses in their contracts; and other countries imposing their own restrictions, many will not be able to replenish their stocks if the lock down measures are not lifted in the short term. Currently, 69% of manufacturers have raw material stock levels that could only last for 0-3 months.

Kenya: World Bank approves $1bn financing to address COVID-19 financing gap

The World Bank Board of Directors yesterday approved a $1bn budget support operation for Kenya, which helps close the fiscal financing gap, while supporting reforms that help advance the government’s inclusive growth agenda, including in affordable housing and support to farmers’ incomes. The Kenya Inclusive Growth and Fiscal Management Development Policy Financing, is the second of a two-operation programmatic series aimed at recreating fiscal buffers over the medium term and crowding in private investment. Preparation of this DPF preceded the COVID-19 pandemic, but its approval is timely, since it will help to fill the financing gap generated by the severe, ongoing shock to Kenya’s economy. The DPF thus complements the recently approved Kenya Covid-19 Emergency Response Project which seeks to prevent, detect and respond to the COVID-19 outbreak and strengthen national systems for public health emergency preparedness.

Impact of Covid-19 on the South African economy: an initial analysis (SA-TIED)

This paper reports ‘first pass’ estimates of the costs of the lock-down implemented by the South African government beginning on 27 March 2020. It also presents a series of recovery scenarios. Four channels by which a lockdown and other efforts are expected to influence economic activity are distinguished. In total, these lockdown measures have profound economic implications. The implications of the pandemic in the rest of the world, and hence on demand for South Africa’s export, are not as large as the effects of the domestic lockdown but are still very large by any normal measure. In terms of recovery, the ‘Quick’ recovery scenario results in a GDP decline of about 5% by the end of 2020 - an economic outcome that would have been considered catastrophically bad a little more than one month ago. Persistent effects of the Covid-19 would bring even worse outcomes for GDP in line with the ‘Slow’ and ‘Long’ recovery scenarios. [The authors: Channing Arndt, Rob Davies, Sherwin Gabriel, Laurence Harris, Konstantin Makrelov, Boipuso Modise, Sherman Robinson, Witness Simbanegavi, Dirk van Seventer, Lillian Anderson]

Rwanda: GDP growth to slacken in 2020 due to coronavirus. Rwanda’s economic growth is expected to slow to 2% this year from 9.4% in 2019 as the COVID-19 pandemic hits tourism, transport and hospitality, the finance minister said on Thursday. Presenting the draft budget for 2020-21 fiscal year, Uzziel Ndajigimana said growth was expected to rebound next year to 6.3% and improve further to 8% in 2022.

PwC’s Africa COVID-19 CFO Pulse results (pdf): The report captures the views of 55 CFOs in nine countries across sub-Saharan Africa, and compares them to those of 867 CFOs from 40 countries across the globe. The top findings were:

  • Nearly two-thirds (65%) of African CFOs predict a decline of at least 10% in their company revenue and/or profit this year.

  • The vast majority (89%) are implementing cost containment measures, or deferring or cancelling planned investments (60%).

  • 62% of African CFOs estimate it will take more than three months to restore ‘business as usual’.

  • Developing alternate sourcing options (64%) and changing contractual terms (56%) are the main priorities in supply chain strategy.

  • 76% of respondents are very confident about meeting customers’ safety expectations and providing a safe working environment for their employees at their places of business.

  • 60% say remote work is here to stay for some roles, as companies plan to alternate crews and reconfigure worksites.

President Xi Jinping’s address to the 73rd World Health Assembly: Helping Africa must be the top priority in our Covid-19 responseFor the sake of boosting international co-operation against Covid-19, I would like to announce the following:

China will provide $2bn (R36bn) over two years to help with Covid-19 response and with economic and social development in affected countries, especially developing countries. China will work with the UN to set up a global humanitarian response depot and hub in China, ensure the operation of anti-epidemic supply chains and foster “green corridors” for fast-track transportation and customs clearance. China will establish a co-operation mechanism for its hospitals to pair up with 30 African hospitals and accelerate the building of the Africa CDC headquarters to help the continent ramp up its disease preparedness and control capacity. Covid-19 vaccine development and deployment in China, when available, will be made a global public good. This will be China’s contribution to ensuring vaccine accessibility and affordability in developing countries. China will work with other G20 members to implement the Debt Service Suspension Initiative for the poorest countries.


In brief:


WTO establishes nomination window for DG selection: WTO members have established a month-long period in which candidates seeking to succeed Roberto Azevêdo as Director-General may submit their nomination bids. General Council Chair David Walker of New Zealand informed members on 20 May the appointment process for the next Director-General would formally commence on 8 June with nominations accepted from that date until 8 July.

Decisive reforms needed for Vietnam to see full benefits of EU trade agreement (World Bank)

Vietnam needs to fill major legal gaps and address key implementation issues to reap the full benefits of the European Union Vietnam Free Trade Agreement (EVFTA), according to a new World Bank report, expected to be ratified by Vietnam’s National Assembly in its May meeting. The report, Deepening International Integration and Implementing the EVFTA, released today, estimates that by simply enjoying the tariff reduction as agreed, EVFTA could boost Vietnam’s GDP and exports by 2.4% and 12% respectively by 2030, while lifting an additional 100,000-800,000 people out of poverty by 2030. Such benefits are particularly urgent to lock in positive economic gains as they country responds to the COVID-19 pandemic. The report argues that Vietnam could benefit even more from the next-generation trade deals such as EVFTA and Comprehensive and Progressive Agreement for Trans-Pacific Partnership if they stimulate a comprehensive agenda of economic and institutional reforms to facilitate compliance with non-tariff agreements. The report estimates that such reforms would result in a “productivity kick”, increasing GDP by 6.8%, relative to the baseline scenario, by 2030. The report highlights the need for Vietnam to increase capacity to handle certain key issues, including rules of origin, animal and plant sanitary standards, and investor-state dispute settlement.

Related World Bank reports on Vietnam: