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tralac’s Daily News selection

tralac’s Daily News selection

25 May 2020

Trudi Hartzenberg: Some reflections on Africa Day 2020, COVID-19 and the AfCFTA

We will all remember Africa Day 2020. Africa Day, which we have been celebrating on 25 May each year since the establishment of the Organisation of African Unity (OAU) in 1963, and its transformation into the African Union in 2002, is different this year. While government measures and responses to the COVID-19 pandemic make the usual Africa Day celebrations impossible, we hear that many are embracing digital platforms to listen to broadcasts by Presidents, participate in continental workshops and music concerts. We now know it is possible to have policy discourses among stakeholders, to make and implement policy and regulations, and to trade with the support of digital solutions.

In some quarters, it is lamented that the African Continental Free Trade Area (AfCFTA) negotiations have all but stopped, and that trade under the AfCFTA regime will not begin on 1 July 2020. Careful scrutiny of the negotiations process reveals that the initial impressive momentum of negotiations had already slowed down well before the pandemic struck.

Africa deserves a continent-wide free trade agreement that addresses the real challenges that the continent is facing, not only now, during the pandemic, but more generally in a digital 21st century. We know that non-tariff barriers are far more pernicious impediments to intra-Africa trade than tariffs. COVID-19 is serving to bring into very sharp relief this reality, and many other lessons about trade and integration on the continent and in the global economy. And ironically, the pandemic is providing an important opportunity to reflect and appraise where we stand in the AfCFTA negotiations, and to recalibrate where necessary. Let’s not miss this opportunity.

Remarks by the Chairperson of the African Union, President Cyril Ramaphosa, on the occasion of Africa Day: “COVID-19 knows no borders, nationality or skin colour. To address the escalating humanitarian crisis we need to deepen our solidarity. We must ensure the pandemic does not reverse our developmental gains. We must forge ahead with meeting the aspirations of Agenda 2063. We must move ahead with the most ambitious step towards pan-African integration to date, the creation of the African Continental Free Trade Area, and ensure that it is operational soon.” [ pdf Download Remarks (302 KB) ]

A commentary by the Chairperson of the AUC, Moussa Faki Mahamat: It is time for Africa to develop new forms of resilience

There is an urgent need for Africa to develop new forms of resilience. In a world in which multilateralism is sorely tested, Africa must stop expecting solutions from others. Africa should no longer be satisfied with this role of a never-ending reservoir for some, and dumping ground for others. There is an urgent need for Africa to chart its own course. Its food dependency and insecurity are unacceptable and intolerable, as is the state of its road, port, health and educational infrastructure. Africa’s land, forests, rich fauna, mines, energy potential, maritime and inland waterways, hold the necessary resources to provide an adequate response to the needs of its peoples. We should, in full lucidity, boldly opt for an innovative approach that is inward-looking, rather than outward-looking. Let us live on what we have, using what we have, in other words, let us live within our means!

As we embark on this path, our leaders will be closer to our citizens, and our nations will become stronger. In my opinion, this inward-looking and self-reliance approach, will be a catalyst for the renaissance of our nations. It is only when they are tested that nations and states truly emerge. We are now at that point in history. The COVID-19 pandemic brutally reminds us of a major issue, which is the imperative to put a stop to dependency on the exterior. This can be achieved through the twofold objective of living on our own resources, and resolutely focusing on our industrialisation process. Other entities with less resource than we have, were able to achieve this in record time. [ pdf 25 May: African Liberation Day – Declaration by H E Moussa Faki Mahamat (81 KB) ] [Speeches, statements made at the First OAU Summit, 1963]


Africa Regional Integration Index (AU, ECA, AfDB)

The 2019 Index, which builds on the first edition published in 2016, provides up-to-date data on the status and progress of regional integration in Africa. It also helps to assess the level of integration for every REC and their member countries. The report observed that although 20 countries score above average, no African country can be considered well integrated in its region. Even the most integrated country, South Africa, scores 0.625 less than two-thirds of its potential on the scale. The report found that much more needs to be done to integrate regional economies to make them more resilient to shocks such as the current COVID-19 pandemic. Overall, the Index shows that levels of integration on the continent are relatively low with an average score of 0.327 out of 1.

“Whereas the Index edition we are releasing today has data cut off points in 2019, the present COVID-19 pandemic has reopened the question of whether enough is being done in advancing regional integration as a means to help Africa withstand systematic shocks such as the one being experienced today,” said Stephen Karingi, Regional Integration Division Director at the ECA. “This index is both a measurement exercise and a call to action; to build resilient economies through integration. It will identify the solutions needed to truly build an integrated Africa.”

Table of contents (pdf):

  1. Section 1. Principal findings

  2. Section 2. The strengths and weaknesses of the continent and its regions

  3. Section 3. Africa’s most and least integrated countries

  4. Section 4. Country scores

Figures

  • Overall scores of REC member countries

  • Scores on the five dimensions of regional integration

  • Countries’ scores and rankings on regional integration

  • Scores and rankings on each dimension of regional integration

Maps

  • Map 1. Africa’s most and least integrated countries

  • Map 2. Africa’s high performers on the five dimensions of regional integration

Top five performers in each dimension of regional integration

  • Map 3. Trade integration

  • Map 4. Productive integration

  • Map 5. Macroeconomic integration

  • Map 6. Infrastructural integration

  • Map 7. The free movement of people


pdf Informal traders: A balancing act of survival (495 KB) (UNECA)

Informal traders in Africa’s urban cities and towns have saluted the easing of restrictions and introduction of relief schemes. The eagerness to persist with business amid the COVID-19 pandemic captures a desperate survival strategy. The policy measures introduced so far, however, seem to have overlooked a large section of informal traders. Many informal traders reside in cross-border communities or travel long distances to trade across borders. These informal cross border traders are not eligible to concessions targeted at domestic informal trading. Unlike in Harare, in Mutare, a border town close to the border with Mozambique, many informal vendors have had their produce confiscated and set on fire by Zimbabwe Republic Police.

Yet, informal cross border trade is a significant phenomenon in Africa. Several studies suggest that the value of informal trade may even exceed the value of formal trade with neighboring countries. This trade not only serves border communities, but also provides a lifeline for urban cities spanning entire corridors. Along the Abidjan-Lagos corridor in West Africa, traders refer to this as a “chain effect” resulting from the interconnectedness of ECOWAS economies. Informal cross border traders are also acutely vulnerable to COVID-19, both in health terms and economically. This opinion piece tables five priority short-term interventions needed to “optimize” the COVID-19 impact on informal cross border traders. Some combination of the above responses need to happen as soon as possible. There is no time to wait to see how the COVID-19 pandemic unfolds. Informal cross border traders are amongst the most vulnerable in Africa. Delaying action risks detrimental and irreversible damage to these communities, perhaps much larger than the risk of COVID-19 itself. [The authors: David Luke, Gerald Masila, Lilly Sommer; Asmita Parshotam: Mitigating the impact of COVID-19 for Africa’s women traders - what more can we do?]

Related blogs by John Stuart, tralac Associate:


The AfCFTA and measures to facilitate trade could significantly mitigate COVID-19’s economic impact in Africa (Brookings)

Overall, we find that, if the situation were to deteriorate more than expected, with global growth at -4 percent, Africa would experience a decrease in GDP of 7.9 percentage points (Figure 1). In case of the second scenario, we estimate that loss to be 12.31 percentage points. The fall in the world GDP will no doubt lead to a severe fall in the exports demand for African products due to the fall in the global demand. Given the specificities of African economies, the negative impact would be more than proportional. In addition, the impacts will be higher the more trade between Africa and the rest of the world is important. The AfCFTA will thus have the advantage of boosting intra-African trade, contributing to mitigate the rapid decline in African GDP. Notably, we estimate that Eastern and Western Africa will be hardest hit, with decreases in GDP of -9.76 and -8.87 percentage points, respectively, in the first case, and -14.55 and -13.51 percentage points in the second case. These two subregions will likely experience the stronger trade shock due to their dependence not only on minerals, gas, and oil exports, but also on the production and export of electronics.

Indeed, a successfully implemented AfCFTA will empower the region to more successfully navigate the hit the region’s economies will take (and are already taking) (Figure 2). In the case of immediate implementation by all African countries—so if 90% of intra-African tariffs are removed according to the AfCFTA modalities—the drop in Africa’s GDP would be -5.2 instead of -7.9 percentage points, in the case of a 4% drop in world GDP (“COVID1” versus “AfCFTA” in Figure 2). The decreasing world demand is then partially compensated by new export possibilities across the continent for African economies, due to the removal of intra-African trade tariffs. In terms of immediate priorities, this acceleration of tariff dismantlement could be supported by customs green lanes, in particular for medical, pharmaceutical, and food products.

With these potential impacts in mind, there are a number of policy measures that policymakers should consider as Africa faces COVID-19 head-on: [The authors: Nassim Oulmane, Mustapha Sadni Jallab, Patrice Rélouendé Zidouemba]

Kenya: Key imports face instant tax demands (Business Daily)

Importers of a wide range of consumer goods - including food, used cars, alcohol, clothing and office supplies - will from 12 August be required to pay taxes immediately their cargo enters the country. The Kenya Revenue Authority has issued a notice that will eliminate use of bonded warehouses for these goods, meaning the benefits of delayed payments of taxes and stock management will soon disappear. Only local manufacturers and new motor vehicle dealers such as East African Breweries Limited, BAT Kenya and Toyota Kenya have been spared from the policy change. “The Commissioner of Customs and Border Control notifies the public that at the expiry of 90 days from the date of this notice, the following goods shall not be warehoused,” Pamela Ahago, who holds the office at KRA, said in a notice published in the Kenya Gazette dated May 13, 2020.

“The above restrictions are likely to have the undesired effect of making the country uncompetitive and less attractive to investors; and is counterproductive to the government’s agenda of developing infrastructure to make Kenya a global and regional logistics hub,” business advisory firm PricewaterhouseCoopers said in a review of the policy change. “Understandably, Customs is tasked with curbing illegitimate trade. However, in its efforts to ensure the proper enforcement of Customs laws and regulations, it must continually strive to facilitate legitimate trade.”


In brief:


pdf Africa Human Capital Plan One Year Progress Report (2.52 MB) : Game changers for investing in Africa’s people (World Bank)

In April 2019, we launched the Africa Human Capital Plan. This ambitious plan sets out clear targets and commitments to boost Africa’s potential through its human capital. After just one year, the plan is well underway, helping African countries build momentum by leveraging investments and policy reforms across key sectors, empowering women, developing solutions tailored to the challenges of fragile and conflict-affected settings, mobilizing technology and innovation, and building knowledge and partnerships.

Extract: The World Bank is also focused on using technology to enhance project delivery and results on human capital. Project teams in Africa have benefited from training on applying blockchain, artificial intelligence, machine learning, and other innovative tools to human capital projects. Since the launch of the Africa Human Capital Plan, training on the Geo-Enabling Initiative for Monitoring and Supervision (GEMS) jumped from 150 to 450 projects, encompassing over 2,000 World Bank clients, partners, and field staff in nearly 30 African countries. GEMS is a tool for project monitoring, supervision, safeguards, procurement, and impact evaluation. It offers geolocated data, with a focus on fragile countries.

Rich geotagged data on more than 100,000 subprojects and activities in Africa have been collected through GEMS. In Mali, for example, over 8,000 project activities have been mapped for increased portfolio coordination through GEMS. Clients and project teams have used the GEMS methodology and tools to enhance their operations related to nutrition, education, and health. Many projects saw a significant impact on measuring project outcomes that support the human capital agenda.