Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Kevin Sutherland | Bloomberg

Diarise (5 August): PIIE Trade Winds, with Anabel González. African perspectives on the WTO and prospects for regional trade cooperation. Is a new African voice on trade emerging? How does Africa view WTO reform and how could it contribute to strengthening global trade cooperation? How can the AfCFTA help Africa recover from the pandemic. Guests:

  • Dr Vera Songwe (Executive Secretary, UNECA)
  • Ambassador Albert M. Muchanga (African Union Commissioner for Trade and Industry)
  • Robert Z. Lawrence (Harvard Kennedy School, PIIE)

A South African trade and development policy special focus: SARS, dtic, BUSA, OECD, Wits University

  1. South Africa: A June trade surplus of R46.63bn (SARS)

    The South African Revenue Service today released trade statistics for June 2020 recording a trade surplus of R46.63bn. The surplus is attributable to exports of R116.31bn and imports of R69.68bn. Exports increased by R10.68bn (10.1%) between May and June 2020 and imports decreased by R16.25bn (18.9%) between May and June 2020. Exports for the year-to-date (1 January to 30 June 2020) decreased by 2.1% to R599.83bn from R612.54bn over the same period during 2019. Imports for the year-to-date of R536.76bn are 13.0% less than the R617.28bn imports recorded during the same period in 2019. The cumulative trade surplus for 2020 is R63.07bn (pdf).

    • Top 5 countries for SA exports: China (13.7%), United Kingdom (7.7%), United States (6.7%), Germany (5.1%), Netherlands (4.2%)

      Top 5 countries for SA imports: China (23.9%), United States (7.6%), Germany (7.5%), India (6.1%), Italy (3.3%)

  2. Minister Ebrahim Patel: Briefing to the Portfolio Committee of Trade and Industry on developments in the steel and sugar industries (pdf)

    Shrinking market: SA share of SACU local market shrunk from 1.6 to 1.2 million tons – the lowest since 1983

    Slowly shrinking SA sugar industry – mainly in KZN. Area under cane has shrunk by 70 000 ha from 430 000 ha in 2000 to current 360 000 ha; loss 2% per annum – the lowest since 1983; Shrinking slowly – 10 year crop – farmers stop investing or switch; Marginal growers going out of business

    • Milling and refining over capacity increasing

    • Job losses in both growing and milling sector

    • Urgent diversification to prevent further shrinkage and create sustainable industry

    • Financial sustainability prerequisite for meaningful transformation

    • Key challenges facing the sugar industry:

      The global sugar price has declined below local cost of production – with no real prospect of improvement

      The Health Promotion Levy (commonly known as Sugar Tax) and eSwatini imports have significantly reduced demand for locally produced sugar resulting in: 50%+ of raw sugar currently exported at a loss; 20-40% excess capacity in milling and refining

      Majority of growers and millers are losing money, many under severe pressure: Likely acceleration of small-scale grower exits; Despite disincentives, unmanaged unilateral capacity reduction a possibility

  3. Call to Action: Local procurement approach beyond COVID-19 (BUSA, Agbiz)

    Our local manufacturing opportunity however needs to extend beyond COVID19 demands, to strengthen and grow our local manufacturing base on an economically feasible and competitive basis. To this end, local procurement advocates have been collaborating to ensure that a holistic approach is applied, prioritizing local procurement in support of economic recovery. These advocates have formed a Technical Working Committee focused on mobilising corporate to support the localisation agenda. Members of the technical working committee include Business Unity South Africa, Business Leadership South Africa, National Business Initiative, Manufacturing Circle, Proudly South African and South African Breweries. We communicate the following Call to Action for Corporate South Africa (pdf):

    • Review your procurement practices and give preference in all cases possible, to companies that are manufacturing locally;

    • Secure procurement commitments to give preference through your entire supply chain to local manufacturers;

    • Earmark procurement opportunities for companies manufacturing locally; and

    • Utilise the procurement portal (Market Access Platform) that influences localisation and transformation, to refer and find high performing suppliers and advertise procurement opportunities to local producers and service providers.

  4. Economic Survey of South Africa (OECD)

    In the latest Economic Survey of South Africa, the OECD indicates that the nationwide lockdown enacted in March 2020 reduced activity in mining and industry while bringing the tourism, entertainment and passenger transport sectors to a near-standstill. The pandemic adds to South Africa’s long-standing challenges, the Survey says. Under a so-called double-hit scenario, a new outbreak affecting South Africa and its trading partner countries will curtail exports, deepening the recession to -8.2% in 2020, and limiting the recovery in 2021 to GDP growth of just 0.6%. In the single-hit scenario, where a second wave of the virus is avoided, economic activity will still fall by 7½ percent in 2020 before picking up progressively to growth of 2½ percent in 2021. Extract (pdf):

    Reaping the benefits of participating in global value chains South Africa’s participation in global value chains is more pronounced than that of many of its peers, but remains below the OECD average. In 2015, 23.5% of South Africa’s domestic value added was driven by foreign demand compared to the OECD average of 31.9%. However, South Africa’s domestic value added was higher than in other emerging countries such as Argentina (10.9%), Brazil (12%), Indonesia (18.3%) and Turkey (20%). Tariff liberalisation in the early 2000s mainly benefited the skill– and capital intensive manufacturing sector allowing greater integration in global value chains. Thus, the foreign value added content to exports increased from 22% to about 30% between 2005 and 2016 in the manufacturing industries (Figure 1.21). By contrast, deepening of integration into global supply chains stalled in the service industries over the same period. This development reflects an increase in South Africa’s services trade restrictiveness of recent years in all services sectors.

    South African firms benefit from more global openness to trade. Tariff barriers on imports are significantly lower in South Africa than in other emerging countries such as Brazil, India and Argentina (Figure 1.22). Competitive pricing of intermediate inputs is important due to the high import intensity of many South African exporters. Thus, comparatively low import tariffs on intermediate goods increases the competitiveness of exporting firms. By contrast, tariff barriers on South African exports to developing countries – including Brazil, China and India – far exceed those to developed countries. South Africa has to increase trade access for its firms to fast-growing developing economies to harness growing demand in these countries. It is necessary to push for reduced tariffs on South African exports and the removal of non-tariff barriers. Moreover, further measures should focus on advancing the SADC free trade agreement and pursuing new and re-negotiated trade agreements in markets where there is growing demand for key export products. As recommended in previous surveys, trade facilitation measures should address non-tariff barriers, such as improving the quality and access of infrastructure, as well as the access to export credit and credit insurance. [Overview of the Survey with key findings and charts]

  5. WSG, Telkom team up to address South Africa’s economic challenges (Wits University)

    The aim of this project - led by the new Head of the Wits School of Governance, Professor Mzukisi Qobo and Dr Nomfundo Ngwenya, a Visiting Research Fellow at the WSG - is to provide evidence-based research to be considered by policy makers and other stakeholders such as business, labour and civil society. Although South Africa’s triple challenges of unemployment, poverty and inequality have been amplified by COVID-19, the country’s current economic malaise preceded the pandemic. The project will therefore recognise the epoch-defining shifts presented by COVID-19, but it will not utilise the pandemic as the sole prism through which to view South Africa’s challenges. The team will explore areas such as the role of the state and markets in development (including industrial policy, competition policy, and state capabilities); rethinking macro-economic policy (including fiscal and monetary policy) and sectors identified for future development including the health sector (economic and social); energy and ecology products; agriculture; infrastructure (including transport and other social sectors). They will also study new industries (including digital products, platforms and services) and employment trends and labour markets.

The COVID-19 crisis in Liberia: Projected impact and policy options for a robust recovery (World Bank)

The COVID-19 pandemic continues to exact a toll on the global economy, and Liberia is facing its dire human and economic impact, with real GDP projected to contract by 2.6% in 2020, according to the first Liberia Economic Update. The report shows that the human cost of COVID-19 could be high. The population living below the national poverty line is expected to increase from 55.5% in 2019 to 68.9%, which means that an additional 526,000 Liberians are at risk of falling into poverty. The authors also warn that economic growth could further slowdown if government’s policy response is delayed, not well-targeted, or if the external environment does not improve significantly this year. Liberia’s near-term outlook is highly uncertain (pdf). Under the baseline scenario, a sharp rebound is expected with real GDP growth projected to rise to an average of 4.1% during 2021-22. However, under the downside scenario, real GDP is expected to recover more slowly, growing at an average rate of 3.7% in 2021-22. In both scenarios, the medium-term recovery will be underpinned by the post-COVID-19 normalization of economic activity and the implementation of structural reforms designed to alleviate constraints on productivity growth and support economic diversification.

pdf The COVID-19 crisis and trade facilitation (8.70 MB) (WTO, TFA, ICC, GATF)

To get a more detailed understanding of how the COVID-19 pandemic is affecting the movement of goods across borders and to ascertain how implementation of the WTO Trade Facilitation Agreement might ease the situation, the WTO Trade Facilitation Agreement Facility, International Chamber of Commerce and the Global Alliance for Trade Facilitation decided to carry out an online survey of business, government and other groups. The survey asked government officials and private sector representatives to identify which import, export and transit processes have become more cumbersome or time consuming in the context of the COVID-19 containment efforts, which processes have become less cumbersome or time consuming, and which trade-related processes would have the most positive impact if implemented in the current circumstances.

Digitalisation of trade processes represents a significant opportunity to deliver a trade policy that addresses current needs while also preparing for the future. There have been some indications that in some countries, having measures such as a single window in place has helped with their response to Covid-19, while others have implemented ad hoc digitalisation of their processes to better cope with the pandemic. We need to harness this impetus on digital while also ensuring that these initiatives form part of a cohesive trade policy. Countries also have to resist any backsliding once the immediate shock of the disease has passed. We propose that the WTO Trade Facilitation Agreement provides tools that can help WTO Members to overcome these problems, particularly as trade facilitation measures can reduce the cost of trade and spark competitiveness, productivity, innovation and growth, thus assisting countries with the post-virus period, and economic growth into the future. In this way countries around the world, of all development levels, will be better prepared for any shocks on the scale of the current crisis.

IISD: COVID-19 and food export restrictions. This policy brief draws on the International Food Policy Research Institute’s COVID-19 Food Trade Policy Tracker to compare how governments have reacted to the current crisis with how they did so in the past.

Tsafrir Attar: Setting the new global standard in trade finance digitisation (ICC Guest Blog)

Perhaps finally the future of trade finance digitisation really is now; perhaps now presents an unprecedented opportunity for banks to set the new global standard? While consumers are adapting like never before to the new digital norm, so too will corporate customers, expecting their banking partners to keep pace and to deliver their services without delay or error. But how can banks leverage this opportunity? Quite simply by implementing new technologies and adjusting their services and operations to provide end-to-end digital services with higher efficiency and lower costs. The scope of trade finance digitisation possibility is endless and contrary to some misconceptions, does not require a drastic change in operations.

Adding new automation tools without seamless interoperability to incumbent systems, however, will undoubtedly increase deployment costs and decrease return on investment (ROI). It is far better to streamline operations by eliminating multiple systems that address the same problem and then focus on technologies that connect and facilitate customer engagement. While individual platforms can contribute value to a business, it is far better to use integrated, complementary solutions for greater impact, reduced implementation time, increased ROI and faster results. [The author is Surecomp’s Vice-President of Digitisation]

African Union: Mobility of African health workers comes under the spotlight, post-COVID19

As we move towards a more digitally-aggregated news service, we would like to thank Richard Humphries (@RichardHumphri1) who has worked with tralac to build this daily news selection since its inception. We greatly appreciate your input and wish you well!


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