tralac Daily News
Ports upgrade and expand to support manufacturing and exports (Global Africa Network)
Almost a third of South Africa’s manufactured exports are produced in KwaZulu-Natal. A number of domestic and international manufacturers are either buying into the province or building new facilities in order to export finished goods.
The Special Economic Zones (SEZs) at Richards Bay and King Shaka International Airport (the Dube TradePort) are key components of the strategy of attracting investors to the province. Dube TradePort attracted R7-billion between 2012 and 2019 and the same amount is expected to accompany the development of Phase 1A and Phase 1F of the Richards Bay Industrial Development Zone (RBIDZ). There are plans to establish a clothing and textiles SEZ in the province to build on the province’s established strength in the sector and an automotive supplier park will be in operation by 2021.
‘We need exploration to grow our industry’ – Minerals Council (Engineering News)
Minerals Council South Africa president Mxolisi Mgojo on Monday during a virtual State of the Mining Nation described exploration as one of the low-hanging fruits that could change South Africa’s economic trajectory in the short term. Mgojo flashed a graph on to computer screens showing the plunge in direct investment, as well as underperformance of the South African economy, and said: “If we don’t fix this, the spectre of a full-blown sovereign debt crisis that is currently facing us will indeed become a frightening reality.”
Africa’s pandemic-hit mining sector faces exploration challenge (Moneyweb.co.za)
Travel restrictions, supply chain disruptions and risk aversion since the start of the Covid-19 pandemic have slammed the brakes on mining exploration in Africa, jeopardising the minerals supply pipeline. Inward investment will be a key focus at the annual Investing in African Mining Indaba virtual conference to be held on Tuesday and Wednesday, with companies looking to capitalise on higher metals prices and the transition to green energy. Without exploration, the continent’s rich mineral resources are at risk of being unutilised as older mines become unviable.
South Africa has received its first consignment of Covid-19 vaccines – but a lot of logistical hurdles, and another two weeks, stand between those doses and the health workers due to receive them. After clearing customs in coordination with the South African Health Products Regulatory Authority (SAHPRA), the one million doses were handed over to Biovac. The bio-pharmaceutical company, formed in partnership with government in 2003, is tasked with overseeing the transport, storage, and distribution of the vaccines. Using an unmarked cargo carrier, Biovac transported the vaccine to a warehouse in Johannesburg. This secure facility is equipped with cold-chain management systems to ensure the stability and efficacy of the temperature-sensitive doses.
Fewer imports cut current account gap to 11-year low (Business Daily)
Kenya’s current account deficit closed 2020 at its lowest level in 11 years, helped by a drop in the import bill and resilient exports as well as diaspora remittance inflows despite the Covid pandemic crisis. The Central Bank of Kenya (CBK) said the current account deficit – which measures the net of hard currency inflows of goods, services and investments versus external payments – declined to 4.8 percent of gross domestic product (GDP) in the 12-months to December 2020, well below the earlier 5.1 percent projections. This is the lowest year-ending number since 2009, when the deficit stood at 4.6 percent.
Kenya spent approximately $2.4 billion (close to Sh250 billion) by end of last year to fight the social-economic pressures of Covid-19, according to the latest International Monetary Fund (IMF) report. The summary of the country’s fiscal measures in response to the Covid-19 pandemic shows the country spent $2.3 billion on non-health measures and $100 million on healthcare. According to IMF, the global fiscal support reached nearly $14 trillion as of end-December 2020, up by about $2.2 trillion since October 2020.
Development partners have so far pledged 234 million U.S. dollars towards Zimbabwe’s fight against the COVID-19 pandemic, Finance Minister Mtuli Ncube said in a joint statement with Acting Health Minister Aaron Murwira ls said Monday. Disbursements by the development partners as at 28 January 2021 stand at 119 million U.S. dollars. The support, in both cash and kind, has been targeted at eight pillars of the country’s response plan, including infection prevention and control, case management and procurement of personal protective equipment (PPE).
A few weeks ago, Fitch Ratings highlighted the Nigerian government’s repeated reliance on its Ways and Means Facility (WMF) with the Central Bank of Nigeria (CBN) as a key indicator of weaknesses in public finance management. The WMF is a government overdraft – a monetary tool that extends credit from the Central Bank to the government when its account reaches zero. According to the report, the CBN’s repeated financing of government budgets could raise risks to macro-stability in the context of weak institutional safeguards that preserve the credibility of policymaking and the ability of the apex bank to control inflation.
Minister of State for Transportation, Senator Gbemisola Saraki, says the National Maritime Transport Policy being developed by Nigeria would lead to improved Foreign Direct Investment (FDI) inflow and enhance the ability of the Nigerian maritime sector to compete internationally. The minister underscored the strategic economic importance of maritime transportation, saying adoption of the transport policy would mark a paradigm shift in Nigeria’s economic competitiveness. The transport policy would also give Nigeria pride of place in the African Continental Free Trade Area (AfCFTA) agreement.
Nigeria-Morocco Pipeline: Nigerian President Shatters Algeria’s Hopes (Morocco World News)
The project of the Nigeria-Morocco gas pipeline has been competing for a few years with the Nigeria-Algeria pipeline project, known as the Trans-Saharan pipeline. From Morocco’s and Algeria’s perspectives, the contest was especially fierce because it is highly unlikely for Nigeria to materialize two projects with similar, even identical objectives. While the Trans-Saharan pipeline came to the forefront several decades ago, the Nigeria-Morocco pipeline became the most prominent pan-African gas transport project in less than five years after it was initially proposed in late 2016.
Minister of Finance Mohamed Maait said Monday the economic reform Egypt adopted during the past years with the support of the political leadership and the great Egyptian people, put the country among the fastest-growing economies in the world. He added that the economic reform program helped Egypt to deal successfully with the impact of COVID-19, a matter that contributed to achieving economic and financial stability.
Lesotho: ‘45,000 textile jobs at severe risk’ (Lesotho Times)
The United States government says it is “disheartened” by Lesotho’s failure to address its human trafficking concerns. This puts the country on the brink, with the real risk of losing billions of maloti in funding under the second compact. The US had given Prime Minister Moeketsi Majoro’s government a 1 February 2021 deadline to address an array of human trafficking concerns failing which Lesotho would lose out on a number of American aid and trade instruments meant to help poor African countries.
News from Africa and Africa’s international trade relations
Policy Brief: African Continental Free Trade Area Completes First Month of Trading (IISD’s SDG Knowledge Hub)
The African Continental Free Trade Area (AfCFTA) has wrapped up its first month of trading, having kicked off at the start of the new year. The nascent and wide-reaching trade area will be watched closely given its scope, size, and potential development impacts, along with what it means for existing regional communities and trading ties with other partners. While the agreement and Phase 1 protocols were adopted in early 2018, the process of securing the necessary signatures and ratifications for entry into force continued through 2019.
The AfCFTA has been designed as a multi-stage process, meaning that the agreement will continue to evolve over time, and more negotiations are planned. The first phase, covering goods and services trade, took effect this year, though talks to finalize tariff schedules and the rules of origin provisions for Phase 1 remain ongoing. Officials say that, given the rules of origin talks cover approximately four-fifths of tariff lines, the AfCFTA’s terms will already apply to trade on those products. Rules of origin, in trade parlance, refers to how much content must be produced locally to be treated as being from that country.
Negotiators will now undertake Phase 2, which involves developing protocols on investment, competition policy, and intellectual property rights (IPR). A third phase will involve the negotiation of an e-commerce protocol.
Pomy Ketema, Counsel at Baker McKenzie in New York, discusses the agreement’s latest developments, and how businesses in Africa can benefit from AfCFTA, noting that the profitability of any endeavor depends on many factors, commercial and otherwise.
There is already a degree of liberalized trade and integration under the eight RECs recognized by the African Union, and other customs and monetary unions that exist elsewhere on the continent. To date, it has been reported that 41 countries and the RECs, including SACU, EAC, CEMAC and ECOWAS, have submitted their tariff offers and service commitments. Admittedly, the implementation process has been slower than anticipated, with tariff books still being updated and administrative procedures getting rolled out.
Local presence brings with it more commitments and higher costs of doing business. Footprint could be managed via ready-to-use industrial parks and special zones, which may provide easy access to major roads, onsite “one-stop” administrative capabilities to handle basic regulatory and procedural matters, and tax and customs deferral until products are introduced into the local market or exported. The incentives offered by African countries vary widely, such as multi-year income tax exemptions based on the industry involved, location-specific tax reductions or reciprocal low-tax-rate arrangements under REC agreements.
There is no single magic formula for operating under the AfCFTA agreement as its framework is layered onto existing trade relationships, and the manner of its application depends on the type of business activity involved and the arrangements among the countries that are implicated in a particular transaction. As a practical matter, low tariff rates are not the sole driver of business decisions. The profitability of any endeavor depends on many factors, commercial and otherwise, and AfCFTA’s value proposition lies in the incremental benefits it offers to enhance long-term value creation for goods and services to be traded in new markets.
The continent is a month old into the implementation of the Africa Continental Free Trade Agreement (AfCFTA).Who are the winners and losers, and how do we minimize the risks of the single market? This is the question many investors home and abroad are asking.
Speaking to Charles Ayitey on Business Live on Joy News, Founder and CEO for EBII Group, Adjoa Adjei-Twum, called for more easing of access to financial and other funding instruments for small scale industries to take advantage of. “These small industries make 70 to 80% of businesses on the continent. They must be exposed to readily avenues streams of credit that will help them scale up and take advantage of this AfCFTA,” she stated.
Even as the single market agreement has started, truly innovative approaches to meet financing needs are called for, beyond the routine method of securing loans from multilateral financial institutions. There’s been a proposal for the formation of a continental public-private partnership, in which African businesses that will profit from the expansion of trade under AfCFTA would be major financiers. Not only are the vast majority of African businesses locally based small and medium-sized enterprises, but also there is a daunting lack of cost-effective infrastructure to get goods and services to market at competitive rates.
Although the implementation of some operational aspects of the African Continental Free Trade Area (AfCFTA) has been temporarily suspended, the agreement would be a very important element to support post-pandemic recovery and to foster economic growth in the medium term in sub-Saharan Africa through the creation of larger and more integrated markets and the promotion of intracontinental trade.
The AfCFTA presents an opportunity for traders, both large multinationals and small and medium-sized enterprises (SMEs), to trade across Africa through a liberalised market for goods and services. Free migration of persons is at the heart of free trade. In Africa, trade is largely propagated through informal cross-border trade (ICBT). In Africa, these traders are predominantly women and youth. A high percentage of about 30%-40% of trade in Africa is through ICBT to the point that some refer to ICBT as “Africa’s Real Economy”.
With this in mind, free migration presents at least three opportunities that would catapult Africa to greater economic prosperity. First, the recognition of informal cross border traders (ICBTs) and their inclusion to the continent’s formal economic matrix. Second, the alleviation of poverty through remittances. Third, building and growing the African economy by reducing reliance on the “colonial economic model”.
The 6th PIDA Week ended on a high note with the various infrastructure stakeholders re-affirming the crucial role of PIDA in the achievement of the main goals of the AU Agenda 2063 for continental integration, prosperity and peace. They further reiterated their commitment to regional integration and the development of integrated and efficient infrastructure.
Memo to Leaders: Three “no regret” decisions for financing Africa’s post COVID-19 future (COVID-19 Africa Watch)
In January 2021, Africa hit a new milestone: with over three million COVID-19 infections, the disease is spreading faster now than during Spring 2020. The fact is, though, that case numbers remain much lower than other world regions, leading to a perception that the disease has largely bypassed Africa. But the economic and social aftershocks have not. Now is the time for world leaders to act, both to contain the economic damage before it gets worse and to help the continent get back on track toward a more democratic and more prosperous future.
Uganda is making substantial progress towards the implementation of the harmonised standards agreed to under the Tripartite Transit and Transport Facilitation Programme (TTTFP). The TTTFP is an undertaking of the three Regional Economic Communities in the East and Southern Africa region, namely COMESA, EAC and SADC. TTTFP, a flagship programme under the Tripartite Free Trade Area Agreement is funded by the European Union under the 11th EDF. The programme addresses cross border transport and trade challenges such as high transport costs and delays through the implementation of harmonised road transport policies, laws, regulations, systems and standards that affect drivers, loads, vehicles and road infrastructure in the countries of the Eastern Africa and Southern Africa (EA-SA) region.
Fresh from the passage of the EAC Budget 2020/2021 at a Special Sitting held on January 27th, 2021, the regional Assembly has commenced its Second Meeting of the Forth Session via virtual means. The Session which got underway on January 28th, 2021, with a meeting of the EALA Commission, runs until February 17th, 2021. On top billing at the session, is the debate and possible enactment of the EAC Integrity and Anti-Corruption Bill, 2019. The Bill envisages the promotion of good governance, transparency and accountability in the EAC Organs and Institutions. A number of reports, Motions and Resolutions are also expected to be tabled and or/debated at the sitting.
Scaled up infrastructure, partnerships, integrating gender, de-risking and mobilizing private sector finance are all essential to long-term progress towards the Sustainable Development Goals, participants at the 2021 Climate Adaptation Summit heard. Speaking on the summit’s infrastructure panel, AfDB Vice President for Private Sector, Infrastructure and Industrialization, Solomon Quaynor, said: “African governments cannot afford replacement costs, so it is best to build resilient and quality infrastructure from the onset, as well as implement adaptation improvements on existing infrastructure immediately.”
Linda Thomas-Greenfield, President Biden’s nominee for U.S. ambassador to the United Nations, came under criticism on Wednesday during her confirmation hearing, for a speech she made in 2019 at a now-closed Confucius Institute in Savannah, Georgia. Republican senators argued the speech was overly complimentary of Chinese engagement in Africa. In that speech, Thomas-Greenfield said both the U.S. and China could learn from each other’s experience in Africa in contributing to African development.
The portion of the speech that got the most attention at the hearing, however, was the play on China’s “win-win development” motto: “In the U.S.-China-Africa relationship, win-win-win cooperation is possible and common development can be achieved. If we all took a step back to consider it, we would see that if we banded together to support Africa’s growth and development, we would all be better for it.”
As Virus Variants Spread, ‘No One Is Safe Until Everyone Is Safe’ (The New York Times)
While more than 90 million people worldwide have been vaccinated, only 25 in all of sub-Saharan Africa, a region of about one billion people, have been given doses outside of drug trials, according to the World Health Organization. But as new variants like the one discovered in South Africa migrate to more countries – including the United States – it is becoming ever clearer that the tragedy for poorer countries could become a tragedy for every country. The more the virus spreads, and the longer it takes to vaccinate people, the greater chance it has to continue to mutate in ways that put the whole world at risk.
The new chairman of the US House Foreign Affairs Committee has pledged to put sub-Saharan Africa “on the front burner” of United States foreign policy. “We have an opportunity to redefine America’s foreign policy and to do so in a way that makes it clear that America is back at the table,” Congressman Gregory Meeks said during an online event hosted by the Center for Strategic and International Studies (CSIS). “This is especially true in Africa, which the previous administration spent the last four years viewing only through the prism of competition with China and Russia.”
US Chamber drives for Kenya-US trade deal (Business Daily)
The United States Chamber of Commerce has urged President Joe Biden to seal a new trade deal with Kenya, which was initiated by his predecessor Donald Trump. The biggest and most influential US business lobby group wants the ongoing negotiations for a free trade agreement (FTA) between the two nations concluded fast to pave the way for uptake of business and investment opportunities. “The Chamber supports the negotiation of a high-standard free trade agreement with Kenya, which may serve as a model for future trade and investment engagement with Africa,” said the business group in a series of recommendations for the new Biden administration.
China's free trade agreement with the small island-nation of Mauritius came into effect in January, increasing the Asian powerhouse's presence in the Indian Ocean where its regional rival India has long dominated. The deal was signed in October 2019 and is the first for Beijing with an African country. It is expected to pave the way for China into the large and lucrative African market, and coincides with the launch of the African Continental Free Trade Area, home to an estimated 1.3 billion consumers.
The Global Food Trade Has Been Upended By a Container Crisis (Financial Post)
While it’s not entirely uncommon for containers to transit back empty after a voyage, carriers usually try to backfill them to profit from shipping rates in both directions. But the cost of carrying goods from China to the U.S. is almost 10 times higher than the opposite journey, prompting liners to favor empty boxes instead of loading them, Freightos data showed.
The UN Conference on Trade and Development (UNCTAD) has released two annual publications on key statistics and trends observed in the previous calendar year. Each report is part of a larger effort by UNCTAD to analyze trade-related issues of particular importance to developing countries. The report titled, ‘Key Statistics and Trends in International Trade 2020: Trade Trends Under the COVID-19 Pandemic,’ highlights that although COVID-19 “severely disrupted the world economy,” economic conditions were deteriorating prior to the outbreak. UNCTAD notes that trade tensions between the US and China, fears over a “disorderly Brexit” in Europe, and a negative global output outlook each contributed to a widespread trade downturn in 2019 that preceded the pandemic.
Many countries entered the pandemic with elevated debt levels. Our new update of the IMF’s Global Debt Database shows that global debt – public plus private – reached $197 trillion in 2019, up by $9 trillion from the previous year. This substantial debt created challenges for countries that faced a debt surge in 2020, as economic activity collapsed and governments acted swiftly to provide support during the pandemic.
Increasing tax revenue in developing countries (World Bank blog)
Tax revenue collection as a share of GDP is only 15 to 20% in lower and middle income countries but over 30% in upper income countries. This gap implies that developing countries have less tax revenue to spend on public goods such as infrastructure and good governance. The gap is caused less by a choice of low tax rates and more by challenges associated with tax collection in developing countries: these include informality and misreporting, by both workers and firms. These challenges generate a vicious cycle, where developing countries remain poor because they are unable to mobilize revenue to invest in public goods. Whar policies can build governments’ ability to raise revenue, and leverage that revenue to provide public goods, in developing countries?
This expansion of IDA grants and credits in 2020 and 2021 comes at a price though. Unless shareholders pledge additional contributions in 2021 – the current IDA19 cycle is due to end in June 2023 – or if lending policies change, IDA operations are expected to fall by 35% in 2022. This would mean a drop from $35 billion in 2021 to $22.5 billion in 2022. If more countries are assessed to be at greater risk of debt distress as a result of the crisis, then the sum of IDA funding will fall even further. This is because a greater proportion of the overall IDA envelope will be paid out as grants.
In 2020, the global economy shrank by 4.3% – over two and half times more than during the 2008-2009 global financial crisis. Lockdowns and other preventive measures that governments have put in place to curb the spread of the virus have disrupted economic activity in ways for which societies were largely unprepared. As social distancing and restrictions on movement became the new normal, businesses and consumers increasingly “went digital”, providing and purchasing more goods and services online. Soon-to-be released findings from a study conducted by UNCTAD and eTrade for all partners shows the strong uptake in e-commerce wasn’t a rich world phenomenon. In fact, consumers in emerging economies have made the greatest shift to online shopping.
A new study commissioned by the ICC Research Foundation has found that the global economy stands to lose as much as $9.2 trillion if governments fail to ensure developing economy access to COVID-19 vaccines, as much as half of which would fall on advanced economies. The study clearly demonstrates the economic case to invest in the Access to COVID-19 Tools (ACT) Accelerator, the global collaboration to accelerate the development, production, and equitable access to COVID-19 tests, treatments, and vaccines. While other analyses have highlighted the economic costs of vaccine nationalism, this new study is the first to incorporate both supply and demand shocks, domestic and foreign, at the sector level, for an open economy operating within global supply chains.
The race to resilience: protecting poor and vulnerable communities (UN Environment)
Even if we limit global warming to well below 2°C, or even 1.5°C, the poorest and most vulnerable will feel the weight of further loss and damage. Vulnerable communities are already at high risk from climate-related shocks, including crop failures, spikes in food prices and more diseases. Without efforts to cut emissions combined with adaptation and resilience, another 100 million could fall into poverty this decade. To catch up, it is vital that we focus on three areas. First, we must put financing in place for adaptation. Secondly, we must place a stronger focus on nature-based solutions in updated NDCs. Thirdly, we must unite the nature and climate agendas.
Fisheries and aquaculture are of critical importance for global food security as well as recovering from the COVID-19 crisis, the Director-General of the Food and Agriculture Organization of the United Nations (FAO), QU Dongyu, said at the opening of the 34th session of the FAO Committee on Fisheries (COFI). “The potential of a modern aquaculture to grow and feed the world is extraordinary,” Qu said, noting that 10 percent of the world’s population relies on the fisheries and aquaculture sector for their livelihoods, mostly small producers that need support.
The WCO released a new publication “Customs fostering sustainability for People, Prosperity and the Planet”, which is designed as a look back on the WCO theme for 2020. This publication is aimed at raising awareness of the related WCO initiatives and programmes and of the relevant WCO tools for building Members’ capacity to achieve long-term economic, social and environmental goals at the national, regional and global levels.