tralac Daily News
Nedbank has published its fixed investment report for the first half of 2021, detailing some of the major developments announced for South Africa. The bank noted that fixed investment was exceptionally hard hit by the strict lockdown of last year. While some sources of demand bounced back quite convincingly, the recovery in fixed investment has been much more subdued, running out of steam in the first quarter of this year, contracting by 2.6% every quarter.
“The improvements in public sector investment appears to be related to government’s infrastructure plan, announced last year to accelerate economic recovery and job creation from the depths of strict lockdown in April 2020,” Nedbank said. “Although it is encouraging that the rollout of some of these projects has started, infrastructure investment relative to the size of the economy remains alarmingly low. The rollout will therefore have to gain considerable momentum, and this will need to be sustained for several years, to lift the constraint on the economy, lower production costs and raise the country’s potential growth rate.”
The manufacturing sector featured strongly, recording new projects worth R38.3 billion, the highest since 2018. The electricity, gas and water sector announced projects worth R6.5 billion, which also included projects listed in the government’s strategic infrastructure plan. The mining sector announced projects worth R21.4 billion, the highest since 2013.
Against all odds: economic gloom, the adverse impact of the Covid pandemic and the recent unrest, South Africa’s economy has made an amazing unexpected come-back, driven by a huge tax windfall from strong commodity prices, which have lifted government revenue. At R57.7 billion, SA recorded a massive trade surplus in June – which Stanlib chief economist Kevin Lings has described as “monster” – pushed by precious metal exports, which in the first six months, rose to 96.2%, compared to last year. This has made it possible for National Treasury to announce a R39 billion economic relief package funded by the higher-than-expected tax revenue, with the lion’s share going towards reinstating the R350 social distress grant for the unemployed. However, economist Thabi Leoka warned the economy was not yet out of the woods. “The strong trade surplus is not the salvation to our economic woes. SA needs to diversify its exports, support local businesses, open new markets for them, low- er input costs and look inwards regarding beneficiation. The country should not rely on a commodity boom it has no control over,” cautioned Leoka.
Eskom Holdings SOC Ltd. Chief Executive Officer Andre de Ruyter laid out a funding plan to help the company, which generates the bulk of South Africa’s power from coal, transition away from the use of the dirtiest fossil fuel. De Ruyter said the company is proposing a multi lender loan facility from development finance institutions that would be paid out in segments over a number of years. Mandy Rambharos, the head of Eskom’s just energy transition department, has previously said the transition could cost $10 billion. He said the company is proposing a multi lender loan facility from development finance institutions that would be paid out in segments over a number of years. Mandy Rambharos, the head of Eskom’s just energy transition department, has previously said the transition could cost $10 billion.
Payabill to offer international trade finance to SA’s SMEs (Bizcommunity)
SA’s SMEs have not been able to easily access international trade finance. A local fintech spotted the gap and figured out how to offer international trade finance effectively to this market segment. Traditional lenders have neglected finance for small businesses due to the high costs associated with onboarding and assessing these customers, as well as managing their credit risk. In addition, small businesses do not meet the onerous credit requirements of banks and other specialised firms especially with respect to international trade finance.
Michal continues, “We take risk where it matters at the coalface of SA’s businesses by helping smaller businesses that have little security and struggle to get funding. We pay suppliers when sales aren’t yet guaranteed and take risks where no one else would consider it. We are intent on helping those businesses that are locked out of the market at a time when SA businesses need all the support that they can get.”
This type of finance is particularly relevant for SA’s SMEs wishing to rebuild after recent riots. Many goods categories are in short supply after extensive damage to malls, warehouses and factories and the looting of 3000 stores. The process of bringing goods into the country must begin again with business owners having to fund imports and freight forwarders.
The Namibian Ports Authority (Namport) says recent unprecedented cyber-attacks on South African ports has heightened its awareness on the importance of safety and security amongst regional logistics chains, as any disruptions may have a serious effect on the general livelihoods of people. Namibia’s ports are strategically interlinked with South African ports on a coastal network – and, as a result, the recent attacks even disrupted the smooth flow of cargo to and from domestic ports. This is according to Namport CEO Andrew Kanime, who, in response to New Era questions, vowed that the ports authority takes cyber security “very seriously” and always strives in risk management plans to implement measures to be better prepared for cyber-attacks.
In a bid to further strengthen its bilateral trade, Namibia is exploring the options of exporting diamonds and semi-precious stones directly to India rather than exporting through other countries, according to a senior official of the Namibian government. “Currently, our diamond and semi-precious stones are exported through London to India, and we want to change that so that those commodities can be directly exported to India,” said Gabriel P Sinimbo, High Commissioner of Republic of Namibia. “Equally, Namibia can source agriculture implements and machineries, Information Technology and many more goods from India,” he added.
In 2018-19, India-Namibia bilateral trade was $135.92 million with India’s export valued at $82.37 million while imports stood at $53.55 million. India’s current exports to Namibia includes pharmaceutical products, cereals and preparation of cereals, sugar and sugar confectionery, meat and eatables, glass and glassware plastics, manufacturer of metals, machine tools and transport equipment among others. On the other hand, Namibia exports precious and semi-precious stones, iron and steel, zinc, non-ferrous metals, electrical machinery and equipment.
Fitch Affirms Lesotho at ‘B’; Outlook Negative (Fitch Ratings)
Lesotho’s economy contracted 9.5% in 2020, as infrastructure projects were disrupted as a result of two lockdowns in March 2020 and January 2021. Two of the biggest sectors in the economy, mining and textiles, also suffered from weaker global demand and containment measures affecting the domestic economy. A sharp decline in SACU revenue expected in FY21 and FY22, the impact of the third wave of the pandemic and associated containment measures on revenues and the resumption of capital projects will outweigh continued tight expenditure control using warrants and expenditure cuts backed by a mid-term budget review in October, and some progress on improving revenue collection and broadening the tax base.
Lesotho runs a structural current account deficit. Exports declined significantly in 2020, but this was partly offset by a SACU windfall and weak import demand, resulting in a smaller current account deficit of 2.8% of GDP in 2020. Fitch forecasts widening current account deficits in the coming years as imports related to LHWPII increase. The stock of international reserves fell to USD812 million at the end of March 2021, from USD864 million at end-2020.
Current account deficit seen ending year at 5.2 pc (Business Daily)
The Central Bank of Kenya (CBK) maintains that the current account deficit to close the year at 5.2 percent despite an uptick in imports that has pushed it higher in the past two months relative to the beginning of this year. The current account – which measures inflows and outflows of hard currency – widened to 5.4 percent of gross domestic product in the 12 months to June compared to 4.8 percent at the end of last year. This has been driven by a higher import bill due to rising oil prices and the continuing recovery of the economy that has raised consumer spending and industrial imports. Exports and diaspora inflows have also gone up, although at a slower pace compared to imports. The continuing struggles of the tourism sector have weighed against a lower current account deficit, with arrivals lower by more than 70 percent compared to the pre-pandemic period.
Post-Brexit UK is better positioned to engage Kenya (Business Daily)
The deals concluded by United Kingdom and Kenya during President Uhuru’s trip last week are an indication that a post-Brexit UK is ready to freely engage and expand its investments and influences across the world, especially with commonwealth countries like Kenya where historical socioeconomic links still exist. A look at the deals concluded indicates that Kenya is set to benefit from increased UK investments, trade, health, and education partnerships. However, what is more important for both countries are that high level diplomatic channels have been established for sustainable socioeconomic cooperation. The first priority for the UK is to make up for whatever trade opportunities it may have lost by exiting EU trade block.
Rwandan importers face supply shortages (The East African)
For months now, Rwanda has had Covid restrictions that have affected commerce. However, new markets like Turkey, Egypt, Italy and Dubai have opened up, but the quantity, pricing and consistency of supplies is not enough to satisfy the market. “Importers are suffering because they can’t access China, and shipping costs have also skyrocketed,” said Joseph Akumuntu, the director of the Rwanda Chamber of Commerce at the Private Sector Federation (PSF), adding, “In one month’s time, the stock in warehouses will be depleted and that’s when the market will have it rough. By the end of August the scarcity will kick in. “When we are in a lockdown like now, consumption comes a bit down, but once people come out of the lock down consumption will shoot up and things will be bad,” he added.
The Ministry of Trade and Industrialization has appealed to the business community to strictly adhere to the COVID-19 protocols as the country battles the fourth wave of the virus. Speaking during a press conference on Monday, Industrialization Cabinet Secretary Betty Maina said this will prevent the imposition of stringent measures that would negatively affect the sector. She further assured that the manufacturing industry will continue producing critical COVID-19 protective essentials to help in the fight against the spread of the virus. “The manufacturing sector is also very committed to supplying medical products and supplies used in the management of the COVID-19 cases. My message is simple, I implore you our partners and stakeholders ‘Be part of the solution’. If we can’t do it ourselves, no outsider will come to help us keep our business environment safe,” Maina urged.
Uganda has protested Kenya’s delay in abolishing a seven per cent levy on milk imports following recent bilateral talks meant to resolve the stalemate as Kenya attributes this on third wave of Covid-19 that has hit Uganda. In a letter dated July 19, Uganda’s Minister of Agriculture, Animal Industries and Fisheries Frank Tumwebaze asked Kenya and Tanzania to allow Ugandan milk into their markets after a flawed soft diplomacy strategy. Trade Minister Betty Maina and her Ugandan counterpart had, in April, agreed to abolish the trade barriers that have strained relations between the two neighbouring countries since late 2019. “Despite the fact that many discussions were held between our countries on the subject, the promised actions of removal of the same were not implemented,” Mr Tumwebaze said.
The Ministry of Trade and Industry (MoTI) has identified some 100 potential companies to be guided into the African market with the implementation of the African Continental Free Trade Agreement (AfCFTA), Head of Ghana AfCFTA Coordinating Office (MoTI), Dr Fareed Arthur, has said. The move, which is under the ‘Facilitation programme for companies exporting under AfCFTA,’ a strategic project by MoTI, forms part of efforts to get local companies to leverage the opportunities presented by the continental trade programme. These targeted companies fall under three main categories: companies already exporting into African countries, companies that export but not to Africa, and companies that produce traditionally for the local market. Meanwhile, the Trade Ministry wants Metropolitan, Municipal, and District Assemblies (MMDAs) to ensure that their policies take into account the potential for growing their capacity for export.
NITDA to leverage AfCTFA to build digital market (Daily Sun)
As Nigeria moves towards diversifying its economy using technology, the National Information Technology Development Agency (NITDA) has proposed a partnership with the Republic of Namibia in the areas of innovations and entrepreneurship through African Continental Free Trade Area (AfCFTA). This is because Africa as a continent lost out during the First, Second and Third Industrial Revolutions due to the huge capital investments but with the Fourth Industrial Revolution comes endless opportunities that all it needs is a talented, vibrant, young technology-driven generation. It is, therefore, imperative for African countries to encourage “Made in Africa” products by exploring and exploiting opportunities provided by emerging technologies to build an enviable global market standard.
African opportunities galore (Ahram Online)
The interest of Egyptian companies and international firms headquartered in Egypt in the African market has been growing, with many of them now wanting either to venture into the African market or to increase the volume of their operations across the continent. Prime among them are firms working in the food industry and manifested in particular through their participation in the Africa Food Manufacturing Exhibition held this week in Cairo. The expected rapid growth of African markets is the reason why many international companies are targeting the continent, she said, adding that Al-Wafa, which operates in six countries, is considering venturing into five English-speaking African markets.
The African Development Bank, through its Financial Sector Development’s Trade Finance operations, has launched a Transaction Guarantee instrument designed to provide up to 100% cover for non-payment risk to regional and international banks, for trade transactions initiated by local banks in Africa. The new instrument will provide much needed opportunities for local financial institutions to build relationships with international correspondent banks, increase links to a global network of trade finance partners and reduce the need for cash collateral, thereby increasing access to finance for SMEs across the continent.
Trade remains an important driver of Africa’s social and economic development despite the persistently huge trade finance gap. This is mostly due to lack of liquidity and risk mitigation facilities across the continent and has been exacerbated by recent market developments, such as increased banking regulations and global shocks like the COVID-19 pandemic.
Africa’s strategic priorities to recover better (Africa Renewal)
The UN Office of the Special Adviser on Africa (OSAA) has embarked on a strategic agenda that identified six priorities with great potential to enhance Africa’s development. The strategic agenda is clustered around six thematic areas: Financing for Development: Advocates for access to financing, combating illicit financial flows, enhancing international tax cooperation, engaging credit rating agencies, and reducing the cost of remittances. Sustainable Development to Promote Sustainable Peace: Promotes inclusive and equal institutional practices by countering conflict economies and building cohesive diverse societies as a driving force for peace. Governance, Resilience and Human Capital: Encourages placing human capital at the center of policymaking in Africa to build resilient societies. Science Technology and Innovation: Advocates closing the gap on digital literacy and the digital divide; and tackling issues of intellectual property rights to leapfrog development. Industrialization, Demographic Dividend, and the African Continental Free Trade Area (AfCFTA): Encourages harnessing the demographic dividend to stimulate industrialization through the AfCFTA. Energy and Climate Action: Focuses on Africa’s energy mix, climate change and green growth, energy transition, and environmental policies.
The Southern African Development Community (SADC) Ministerial Task Force on Regional Integration (MTF) and Committee of the Ministers of Trade (CMT) held virtual meetings on 30 July 2021 to deliberate on a number of issues pertaining to the regional integration which includes the implementation of SADC Industrialisation Strategy and Roadmap (2015-2063). Regional integration helps SADC countries overcome divisions that impede the flow of goods, services, capital, people and ideas. These divisions are a constraint to economic growth, especially in developing countries. SADC’s main objectives is to achieve economic development, peace and security, growth, alleviate poverty, enhance the standard and quality of life of the peoples of Southern Africa, and support the socially disadvantaged. These objectives are to be achieved through increased regional integration built on democratic principles, and equitable and sustainable development. On the other hand, the primary orientation of the SADC Industrialisation Strategy is the importance of technological and economic transformation of the SADC Region through industrialisation, modernisation, skills development, science and technology, financial strengthening and deeper regional integration.
Africa needs regional airports upgrade for post-Covid recovery, SITA says (The Africa Report)
Developing countries in Africa may be tempted to take more risks on opening travel compared with rich countries to minimise the economic impact of the pandemic, Assaad says. That means the capacity of regional airports needs to be checked as passenger numbers increase. “It’s not happening most of the time.” The trade association of the world’s airports, Airports Council International, has predicted that in a worst-case scenario, global traffic may take up to two decades to return to pre-Covid-19 levels, and that it is possible that traffic will never fully recover.
Why Qatar, RwandAir deal is likely to hurt Kenya Airways (Business Daily)
The partnership between Qatar Airways and RwandAir is set to reshape the regional airspace with carriers such as Ethiopian and Kenya Airways staring at a possible loss of transiting passengers. The new partnership, which comes at a time when Rwanda and Qatar are at an advanced stage to have the latter take a majority stake at the East African carrier as well as its new airport, will see passengers travelling in either of the carriers connect flights from their hubs in Kigali of Doha. The move implies that passengers from Rwanda, Burundi and Uganda who would travel to Nairobi or Addis for trans-Atlantic flights, will opt to use RwandAir or Qatar to travel to countries like the US. “Africa is a hugely important market for us and this latest partnership will help support the recovery of international air travel and offer unrivalled connectivity to and from a number of new African destinations.”
The East African Business Council (EABC) has today signed a Memorandum of Understanding (MOU) with the MS Training Centre for Development Cooperation (MS TCDC), set to scale up business opportunities for youths in the region. In his remarks during the signing ceremony, EABC CEO said,” the growing population, skills and knowledge of the youth is a great asset for the economic transformation of the EAC region and the continent especially now with developments such as the African Continental Free Trade Area (AfCFTA), digitalization and e-commerce.” The partnership is set to see the two institutions organize and facilitate events, seeking to address policy and regulatory challenges hindering youths from investing in the region.
In the CEMAC region, the ban on raw timber export will no longer become effective on January 1, 2022, as initially planned. It will instead become effective on January 1, 2023. This decision was issued during the videoconference of the CEMAC and DR Congo’s Ministers of Finance, Industry, Environment, Forest, and Budget on July 28, 2021. CEMAC is planning to establish a transitional period, running from January to December 2022, to carry out required studies and mature the wood processing investment projects selected during the first phase of the raw timber export ban process.
Seven African exchanges inch towards shared trading (The Guardian Nigeria)
Cross-border trading is set for a lift as the African Securities Exchanges Association (ASEA) has signed a contract to roll out an African Exchanges Linkage Project (AELP) link technology platform for routing orders and trade confirmations among stockbrokers on NGX and six exchanges. Seven of Africa’s leading securities exchanges are working together under the AELP to boost pan-African investment flows and bring more liquidity to African markets. Cross border deals are transactions that involve more than one financial jurisdiction or involving many stock markets and national regulatory authorities
With an ever-expanding population, countries in West and Central Africa are facing a rising demand for power. According to Kweku Frempong, recently appointed as area general manager for West and Central Africa (WACA) at Aggreko, as countries look to increase their energy generation capacity it is critical to look at flexible commercial and technical solutions that incorporate a mix of thermal and renewable resources. Kweku adds that along with the move to using alternative fuel sources in the region, there is also an aggressive push for decentralised power on the continent, especially in remote areas with small populations where it is not cost-effective to connect them to the grid. “We have seen growth in micro and minigrids in most parts of Africa and this is playing a critical role in ensuring energy security and supporting failing infrastructure.” He says that while it was anticipated that Africa would leapfrog into renewables, the transition has been modest to date.
Protecting Africa’s wildlife from unstainable and illegal harvest and trade and the contribution legal trade and use can provide towards livelihoods and development of Africa’s people is at the heart of a newly signed Memorandum of Understanding between TRAFFIC and the African Union Commission (AUC). Under this agreement, the parties will collaborate to support the African Union Member States’ policies for environment, wildlife management and trade, and conservation and recognise that wild flora and fauna loss affect African people’s livelihoods, especially during post-pandemic recovery. It acts as a framework to combat the illegal exploitation and trade in Africa’s rich wildlife with a joint goal of protecting flora, and fauna on land, wetlands, and marine ecosystems.
3 lessons we can learn from marine protection in sub-Saharan Africa (World Economic Forum)
Across the African continent, we are seeing stories of transformation and hope in marine protection. Gabon has protected 28% of its national waters. Madagascar is using locally managed marine areas to empower its communities. And the Seychelles has restructured its debt for marine conservation – the first in the world to do so. Altogether, Africa has now protected over 1.8 million square kilometres, or 12%, of its waters. The future of Africa’s “blue economy” is brimming with promise but this depends on effective management. However, like the Diani-Chale marine reserve, many of the MPAs in this 12% are simply “paper parks” – MPAs drawn up on paper but not effectively managed.
Building on an Effective Africa Development Strategy (The Daily Signal)
With President Joe Biden’s intent to “revive” the Trump administration’s approach to relationship-building in Africa, to deliver effective commercial engagement across African markets, the Biden administration must build on recent successes and continue the strong starting point. Before the coronavirus pandemic, U.S. exports to Africa posted consecutive gains in 2018 and 2019, and the reciprocal interest from African peers in accommodating U.S. commercial partnerships and investments suggests the prospect of developing greater commercial ties – expanding market access for U.S. firms, promoting reforms and raising standards abroad, and serving supply chain resiliency on both sides of the Atlantic. Promoting U.S.-Africa commercial connections has many advantages beyond boosting trade or foreign direct investment.
If there’s one thing the pandemic has taught us, it’s to expect the unexpected. This is no truer than in the trade world, where China has gained market share notwithstanding its progressive decoupling from the US. SA trade continues to ride high as advanced economies move further into deficit. Recent research by Oxford Economics finds that China’s global market share has grown considerably to 18% over the past couple of years and that it has made the most significant trade gains in market shares in developed versus emerging markets. According to the consultancy, China’s market share gains in developed countries “were triggered in part by the nature of the recent increase in demand for imports in the developed world, which was fuelled by a (temporary) shift from services consumption to goods consumption and a surge in work-from-home (WFH) demand”.
India and South Africa have started bringing pressure on the World Trade Organisation (WTO) ahead of the 12th ministerial meeting (MC-12) scheduled to begin on 30 November, urging it to review a moratorium on imposition of customs duty on electronic transmissions so that developing countries can generate more revenues. “During the coming few months before MC-12, we need to engage constructively on various issues under the (e-commerce) work programme. We also need to have a clear understanding on the scope of moratorium, to enable us make an informed decision on extension or otherwise of the moratorium in the upcoming Ministerial Conference. As we have been repeatedly highlighting, a re-consideration of the moratorium is critical for developing countries, inter alia, to preserve policy space to regulate imports, generate revenue through a simple and direct instrument such as customs duties and achieve digital industrialization,” India said at the General Council meeting of the WTO last week.
“Industry 4.0 is a reality, also in LDCs”, said Bernardo Calzadilla-Sarmiento, Managing Director, Directorate of Digitalization, Technology and Agri-Business, and Director, Department of Digitalization, Technology and Innovation. “New technologies are being used in creative ways to drive structural transformation; as such, we have to break the idea of sequential industrial transformation”. Technologies such as artificial intelligence, big data and drones can help enterprises in LDCs enhance their productivity and competitiveness, and move up the value chain ladder in agriculture, industry, and the services sector. Similarly, digital goods and services trade enhances the opportunity for small‑ and medium enterprises (SMEs) to participate in global trade and enhance their financial inclusion. “Technology has changed the rules of the game and the possibilities are endless”, said Calzadilla-Sarmiento. “While exploring the opportunities, we need to narrow the digital divide, allow LDCs to benefit from the technologies and reduce inequalities, to leave no one behind. In the aftermath of the COVID-19 pandemic, industrialization can also contribute to economic recovery and technology is the fuel to the engine”.
The Chair of the negotiations on agricultural trade, Ambassador Gloria Abraham Peralta (Costa Rica), introduced on 29 July her draft negotiation text aimed at facilitating consensus among members and seeking possible landing zones for an outcome on agriculture at the WTO’s 12th Ministerial Conference (MC12) starting in late November. The draft text sets out suggested ministerial decisions on 7 agriculture negotiation topics: domestic support, market access, export restrictions, export competition, cotton, public stockholding for food security purposes, and a special safeguard mechanism; and one cross-cutting issue, transparency.
Ghana and member countries of the International Monetary Fund will benefit from a $650 billion fund approved by the governing board of the Fund to fight the impact of Covid-19 on their economies. The 190-nation lending institution said its board of governors approved the expansion of its reserves known as Special Drawing Rights, the largest increase in the institution’s history. The fund will help Ghana to deal with rising debts and fallout from the Covid-19 pandemic on its economies. ”This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis. The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and
We need tourism recovery but crisis offers chance to rethink it (World Economic Forum)
This should be the time of year when people are packing suitcases and travel documents for their summer holidays – at least in the northern hemisphere. For many economies, these months are critical, and millions of businesses and workers are eager for tourists to return, especially given how badly the sector has already been hit. Last year was catastrophic for tourism and the millions of people who depend on it. We estimate that the crisis has cost the world about $4 trillion and placed over 100 million direct tourism jobs at risk. The impact is so big because of the numerous suppliers and businesses that are linked to the core sector.
Agricultural biotechnology is a crucial tool for transforming global food systems to meet the United Nation’s goal of ensuring zero hunger by 2030, say some scientists, academics and civil society representatives. Evidence abounds that biotechnology has had a positive overall impact on agriculture in the areas where it has been employed, they say. If adopted more widely across the globe, it could be instrumental in meeting the UN’s Sustainable Development Goal (SDG) 2, which aims to end world hunger, boost nutrition and support agricultural sustainability within the next nine years. More opportunities must be created for farmers to access crop biotechnology if the world’s food systems are to be transformed to meet the challenge of feeding the more than 811 million people who suffer hunger across the globe, he said.
India’s Opportunity to Become a Global Manufacturing Hub (World Economic Forum)
Beyond the unprecedented health impact, the COVID‑19 pandemic has been catastrophic for the global economy and businesses and is disrupting manufacturing and Global Value Chains (GVCs), disturbing different stages of the production in different locations around the world. Furthermore, the pandemic has accelerated the already ongoing fundamental shifts in GVCs, driven by the aggregation of three megatrends: emerging technologies; the environmental sustainability imperative; and the reconfiguration of globalization. The World Economic Forum’s new White Paper entitled Shifting Global Value Chains: The India Opportunity, produced in collaboration with Kearney, found India’s role in reshaping GVCs and its potential to contribute more than $500 billion in annual economic impact to the global economy by 2030. The White Paper presents five possible paths forward for India to realize its manufacturing potential.