tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection

The Journal of African Trade has posted a call for papers for a forthcoming special issue: The AfCFTA and African trade. This special issue aims to provide a timely collection of articles that shed light on the challenges and opportunities that the AfCFTA presents on the road towards achieving the long-standing goal of closer African economic and political integration, in particular at a time when the rest of the global economy is entering into an unprecedented global crisis after months of escalating trade tensions between the two leading global economies.

Guest Editors for the special issue are Augustin Fosu (Institute of Statistical, Social and Economic Research, University of Ghana), Hippolyte Fofack (Chief Economist, African Export-Import Bank) and Andrew Mold (Economic Commission for Africa, Rwanda). The paper submission deadline is 1 August 2020. The topics considered may include, but are not limited to, the following:

  • Modelling the AfCFTA’s impact (quantitative estimates of the potential socio-economic effects of the AfCFTA)

  • The role of trade facilitation

  • Value-chain analysis

  • Environmental impacts

  • Services trade

  • The role of Regional Economic Communities

  • Rules of origin

  • The impact of Covid-19 on AfCFTA implementation and effectiveness

  • Technological development and AfCFTA

  • Payment and Settlement Systems for intra-African trade

  • Financing the implementation of the AfCFTA

Call for proposals: Digitisation of financial products for cross border traders between South Africa and Mozambique, Eswatini, and Zimbabwe. FinMark Trust is looking for proposals to conduct a scoping exercise of values, volumes, products and general behaviour of cross border informal traders, and to understand their financial constraints. Submissions by 24 July 2020.

The East African Business Council, through the TradeMark East Africa Public‐Private Sector Dialogue for Trade and Investment in Eastern Africa, has posted consultancy opportunities to develop post-COVID19 recovery recommendations for four sectors. Applications close on 25 July.

  1. On a post COVID-19 recovery strategy for EAC businesses. The technical proposal should detail how the consultancy will be conducted with a detailed work plan, methodology and the proposed budget. The main activities of the consultant are:

    • Conducting literature review on available study reports, assessments and other published materials to set the context and the current status of COVID-19 within the EAC

    • Providing an overview on the impact of COVID-19 to EAC businesses while highlighting the relevant sectors including cross border trade

    • Developing a general post COVID-19 recovery strategy for businesses that is tailor-made for MNCs, corporates and SMEs

    • Developing sector-specific recovery strategy focusing on tourism, manufacturing, transport and logistics and agriculture

    • Developing a policy brief on the post-COVID-19 recovery strategy for EAC businesses.

  2. On the regional transport and logistics sector. The EABC is concerned with the disruptions in the global transport and logistics and the rising cost of transport that have tremendously led to the increased cost of doing business. The consultant will:

    • Assess the impact of COVID-19 on the transport and logistics sector (air, road, rail and maritime) in light of the pandemic, taking into consideration the effect on other support services such as clearing and forwarding, warehousing facilities

    • Identify the level of effect (both qualitative and quantitative) to sector players while moving cargo across the EAC land borders amidst the pandemic

    • Analyse partner states’ response to COVID-19 through different stimulus packages and other measures taken in the 2020/2021 budgets

    • Develop post COVID-19 recovery recommendations for stakeholders in the Transport & Logistics Sector.

    • Identify related policy pronouncements related to containment measures that are hindering the efficient flow of cargo across borders and propose recommendations to address such bottlenecks.

  3. On the regional tourism industry. The main activities of the Consultant are not limited to:

    • Assessment of the impact of COVID-19 pandemic on the tourism sector in EAC

    • Analysis of partner states’ response to COVID-19 through different stimulus packages and other measures taken in the 2020/2021 budgets

    • Develop EABC Policy brief on the impact of COVID-19 pandemic on the tourism sector

    • Organize internal validation workshop and present report of the impact assessment of the COVID 19

    • Provide recommendations on how the industry should restructure for resilience in light of global pandemics post COVID-19.

  4. On the regional agriculture sector.

East Africa Economic Outlook 2020: Coping with the COVID-19 pandemic (AfDB)

East Africa’s economies are slowly transitioning from agriculture to services. The contribution of agriculture to the region’s GDP went down from an average of 33.4% at the turn of the millennium to 28.3% in 2018.This was against an increase in the contribution of services to GDP from 44.6% in the early 2000s to 53.8% in 2018. This movement is more prominent in Seychelles, Eritrea, Kenya and Rwanda where services contribute 80%,67%, 60% and 47% of GDP, respectively. However, services are not the higher value-added activities in the region to trigger the desired structural transformation. In line with this shift, the ILO had estimated that the number of employment opportunities in the region’s service sector would have more than doubled to 40.8 million while those in agriculture would have increased at a slower pace from 56.7 million to 97.6 million in 2020. These estimates are no longer tenable given the ongoing supply and demand shocks related to COVID-19-business disruptions have lowered production while the loss of income, fear of contagion and heightened uncertainty has made people to spend less, thus lowering aggregate demand with the service sector being hit the hardest.

Part 1: Recent macroeconomic trends and developments. Potential impact of the COVID-19 pandemic on East Africa (extract from Box 3):

The COVID-19 pandemic will likely be transmitted to East African countries through at least five major channels, namely reduced commodity prices and trade, FDI, tourism and travel, volatility in financial markets, and disruptions in the education and health sectors. The impact on commodity prices, tourism and financial markets is largely expected to be short-term while lasting effects are envisaged for FDI, education and health.

Commodity prices and trade: Intra-Africa trade accounted for less than 15% of Africa’s total trade in 2018, with Europe, United States and China accounting for 36%, 6% and 14% of Africa’s trade with the rest of the world, respectively. Reduced economic activity in the COVID-19 affected countries is expected to dampen global demand and prices for commodities including oil and other minerals like zinc, copper, cobalt, and agricultural products. Most East African countries are net commodity exporters with heavy reliance on markets in Asia, notably China. For instance, China accounted for over 90% of South Sudan’s oil exports and over 50% of Eritrea’s market for zinc and copper ore. Consequently, economic slowdown in China will reduce East Africa’s public revenues and foreign exchange inflows and weaken the trade balances. However, net importers will benefit from lower commodity prices. Asia is also a source of inputs for the region’s budding industrial sector, but global supply chains have been disrupted, adversely affecting East Africa’s industry and services sectors.

FDI, overseas development assistance (ODA) and remittances to East Africa will be impacted: East Africa is a leading destination of global investments in mining, manufacturing and related activities, notably construction (infrastructure) and financial intermediation. The COVID-19 induced global economic slowdown and increased uncertainty could significantly reduce FDI inflows to East Africa as investors postpone investment decisions. This is expected to affect countries like Ethiopia, which has consistently ranked among the top 5 FDI host economies in Africa. Implementation slippages are also foreseen for ongoing infrastructure and other investment projects due to delayed delivery of construction materials and equipment sourced from COVID-19 affected countries. Diaspora remittances (accounted for over 10 percent of Comoros’ GDP during 2014-2018) and ODA will possibly be affected by COVID-19 following weak global economic activity.

Tourism and travel: Restrictions on travel to combat COVID-19 have reduced airline travel and accelerated cancellations of hotel reservations. These measures will affect receipts, thereby reducing foreign exchange inflows, and impact service sector-related employment in East African countries with a high dependence on tourism like Comoros (tourism accounts for over 50 percent of export revenues), Kenya, and Seychelles, among others.

Financial markets: Investors are likely to defer investment plans or channel portfolio investments into relatively more stable assets like gold. This is expected to put pressure on local currencies and stock exchanges particularly in Kenya, Tanzania and Uganda. Consequently, COVID-19 could result in short-term in capital flight, depriving East African countries of private finance amid a constrained fiscal space (due to lower public revenue collection) on account of reduced commodity prices, trade and tourism earnings.

Related AfDB analyses:

  1. African Economic Outlook 2020: July 2020 supplement. Real GDP in Africa is projected to contract by 1.7% in 2020, dropping by 5.6 percentage points from the January 2020 pre-COVID–19 projection, if the virus has a substantial impact but of short duration. If it continues beyond the first half of 2020, there would be a deeper GDP contraction in 2020 of 3.4%, down by 7.3 percentage points from the growth projected before the outbreak of COVID–19.

  2. West Africa Economic Outlook 2020: Coping with the COVID-19 pandemic. Prior to the outbreak of the COVID-19 pandemic, the West Africa region was poised to expand by 4.0% in 2020.The magnitude of socioeconomic impact of the COVID-19 pandemic on countries in West Africa may not be known with certainty as the situation remains fluid. However, early assessment suggests that the prospect for initial growth projection is now evidently remote. Thus, under a conservative baseline scenario, the economy is now projected to contract by -2.0% in 2020, 6 percentage points below the projected growth rate prior to the pandemic. Real output could fall by as much as -4.3% in a worst-case scenario with prolonged duration and depth of the spread of the COVID-19 pandemic until the end of 2020. Growth in the region will be affected through a combination of channels, including decline in commodity prices, low financial flows, reduced tourism earnings and heightened volatility in financial markets. Deceleration in output growth will be reflected in negative growth in per capita income of 4.3% with the attendant social ramifications. Extract:

    West Africa’s outward trade orientation and product concentration limits opportunities for intra-regional trade, which stands at about 8.5 of total trade for the region. This exposes the region to external shocks, including the COVID-19 pandemic, which has dislocated global supply chains. With intra-regional trade significantly low, opportunities or market substitution to cushion the impact of the virus on West Africa are limited. West African trade is increasingly extra-regional rather than internally within ECOWAS. China, Europe Union and the U.S account for about 43% of West Africa exports and 57.9% of the region’s imports (see Figure 13). However, as Table 2 shows, intra-regional trade in ECOWAS averaged about 11% of total ECOWAS trade and it has continued to decline since 2016.

What opportunities might Kenya provide US agriculture? (American Farm Bureau Federation)

If Kenya isn’t importing agricultural goods from the US where are those $2.3bn in imports coming from? As it turns out, a pretty wide variety of countries and regions. Kenya is US agriculture’s 13th largest export destination in Africa and 97th largest export destination overall. US ag exports to Kenya in 2019 totaled $53m, less than 1% of the $136.6bn in total US ag exports in 2019. Wheat, pulses and vegetable oils were the top export items from the US to Kenya in 2019. At $27m and accounting for over half the total US ag exports to Kenya, wheat was by far the largest US agricultural export.