tralac Daily News
South Africa is staring down the barrel of yet another huge fuel hike in June – as much as R3.50 per litre – due to stubbornly high oil prices, and a volatile rand. This has created the perfect storm in the road freight logistics sector, according to Gavin Kelly, chief executive officer of The Road Freight Association. “No one would have thought that we would see such increases in the fuel price as we have experienced over the past six months. “As we reel from these increases, the possibility of one of the greatest price increases that we have ever seen is looming,” he said.
The Russia-Ukraine conflict and resultant sanctions on Russia have disrupted global energy and food trade, increased logistics costs, and fanned inflationary pressures, creating a challenging environment for businesses and policymakers alike.
“Trade with Russia and Ukraine will suffer, adding to already strained global supply chains. Longer-term, sanctions and a reduction in trade with Russia, could result in the redrawing of some supply chains and trade routes, but this all takes time and comes at a cost,” said captain Rahul Khanna, global head of Marine Risk Consulting at AGCS. Ships need fuel, and those costs are rising, said Kelly. There are still fewer ships at sea due to the pandemic, and there are constraints in the global logistics chains that not only articulate into delays, but into demand, which has an upward price-pressure effect, he said. “Once goods are landed, they then find their way to either consumers or manufacturers via the dependable road transport network, and that is where the next leg of the logistics journey is impacted by fuel increases. We have all felt, and will continue to feel for some time, the effects of more expensive fuel.”
South Africa Seeks Indian Investments In Special Economic Zones (Businessworld)
Indian companies can reduce their lead time to access the African market to three days from eight days by investing in South African Special Economic Zones, said a top official from the South African consular office in Mumbai. “There are more than 13 Special Economic Zones in South Africa, where Indian companies can invest and export to entire Africa, USA and European Union, with which we have trade agreements,” said Andrea Kuhn, Consul General, Consulate General, South Africa in Mumbai. She was speaking at an interactive session organised by MVIRDC World Trade Center Mumbai and the ‘All India Association of Industries’.
Dean Hoff, Consul Economic, Consulate General, South Africa, “In agro-processing, we are negotiating with the Indian government to export avocado, table grapes and litchis.” Indian companies can invest in the agriculture value chain in South Africa as we are a major producer of citrus fruits, maize, corn, soyabean, sugar and dairy products, Hoff said.
“But still bilateral trade volume is around USD 15 billion, which can be enhanced with the dynamic initiatives of the South African Consul General in Mumbai. In order to stimulate trade and investment with South Africa and the entire African continent, WTC Mumbai and AIAI proposes to organize an Africa Conclave in association with all the trade missions of African countries in India in future,” Kalantri said added.
Namibia is ready to work with other African countries for the realization of Agenda 2063, an official said Monday at the commencement of the Discover Namibia Intra – Africa Expo and Business Summit at the coastal town of Swakopmund.
Speaking at the event, the Deputy Prime Minister and Minister of International Relations and Cooperation, Netumbo Naandi-Ndaitwah in a statement said the government supports proactive initiatives, like the establishment of the Africa Economic Leadership Council and its programmes such as the summit. “Such unique initiatives add value to the Africa Continental Free Trade Agreement (AfCFTA) and provides practical meaning to the implementation thereof,” she added. Naandi-Ndaitwah believes that such initiatives will empower more young people, thus enabling them to play a significant role in the mainstreaming of the economy as that is the main objective of African leaders.
“The implementation of the AfCFTA provides an opportunity for job creation and greater market access. As well as the further support of the regional and continental goals on regional integration in respect to the SADC within the AU roadmaps of development,” she added.
“If we continue the culture of exporting raw materials out of the continent without value addition happening in Africa, we must know that we are exporting African jobs to other countries. These, leaves African youth in poverty, forcing them to risk their lives on the high seas running after their jobs whereby, they will be labelled as illegal immigrants,” she said.
Kenya coffee output set to fall 10pc on fertiliser crunch (Business Daily)
Kenya’s coffee production in the 2022-23 season is projected to drop by 10 percent to 700,000 bags on the back of rising prices of fertiliser, the US Department of Agriculture (USDA) says in a newly published report that tracks coffee production in the country. The surge in global fertiliser prices began at the beginning of 2021 due to the impact of the Covid-19 pandemic. The ongoing war between Russia and Ukraine has worsened the situation. Currently, fertiliser prices in Kenya stand at Sh6,000 per 50 kilogramme bag, a 71 percent increase from a year earlier. The rise in prices is also due to producer countries such as China, Russia and Turkey restricting exports to protect their farmers compounded by heavy consumption demand from India, Brazil and US buying up large quantities, hence reducing available global supplies.
Uganda leads East Africa in fully switching to e-passport (Business Daily)
Uganda has become the first East African Country to fully shift to the new electronic passport, beating fellow EAC members who have been deferring the implementation deadline for the new secure documents. Ugandans who have not acquired the new generation passport now cannot travel out of Entebbe after the country phased out the old document reading machines. The decision to adopt a new generation of passports and phase out old ones was reached by the EAC heads of state in March 2016 in Arusha, Tanzania. Kenya has pushed the deadline for acquiring new generation passports to November after it missed out on an earlier one that had been set for December last year. EAC Secretary General Peter Mathuki in a recent news conference urged members state that have not implemented the e-passport requirement to fast-track the implementation.
“We are encouraging all member states to adopt the new passport in line with the EAC directive,” said Mr Mathuki in a virtual news conference with the journalists.
Nigeria’s export benefits despite its potentials are limited by poor value addition culture in the country, as focus is placed more on the instant profits received from exporting raw materials alone, data has shown. The global economy business and economic data for manufacturing value added ranks Nigeria 40th out of 153 countries with 38.32 percent which is below the average mark of 50 percent signifying that more efforts need to be made in growing the value addition culture. According to the Nigerian export promotion council (NEPC), Nigeria is the fourth largest producer of cocoa worldwide covering 6.5 percent share of global production with cocoa beans accounting for almost 90 percent of the $804 million of Nigerian cocoa exports.
However, data from the Nigerian Export-Import Bank (NEXIM), shows that Nigeria poor engagement in value addition activity is causing Nigeria to lose from the global cocoa and chocolate market as it shows that the global value of raw cocoa export is $10 billion while the total value of all finished goods from cocoa annually is $200 billion with chocolates alone having $100 billion.
This means that despite providing 73 percent of global cocoa production, Africa (Nigeria inclusive) is simply scratching the surface in terms of profits as it enjoys less than 5 percent of the wealth obtained from the value addition process.
Textile Industry: Still on the Brink (This Day)
Stakeholders in the Nigerian textile industry have argued that only urgent intervention by the federal government would save the industrial sector
The President of the Nigerian Textile Manufacturers Association (NTMA), Mr. Folorunsho Daniyan, arrived at the scheduled press conference on the state of the textile industry on May 12, 2022, conscious that the textile industry in Nigeria is on the verge of collapse.
He said: ”Ordinarily, the year marking our 65th anniversary (which is this year) should have been time for celebration and popping of champagnes. But this, sadly, is not our situation. If the truth must be said, our industrial sector is dying and needs urgent interventions from the federal government to keep it alive.”
Nigerian textiles used to be a key manufactured product that was exported through the formal channels and by way of cross-border trade in West and Central Africa. However, the export of textile products suffered a setback between 2003 and 2008. Textile exports touched their lowest ebb in 2006 however recovered some lost ground in 2007and 2008. Today, the situation is even worse as our exportability is next to zero.”
The cost of importing petroleum products of all kinds into Nigeria has soared to over $28 billion on an annual basis, Blackgold Energy Authorities, an oil and gas consulting and advisory firm, has revealed. The Principal Consultant, Blackgold, Dr. Oladunni Owo, disclosed this yesterday in Lagos at the ongoing two-day Nigerian Content Midstream/Downstream Oil and Gas Summit, with the theme: “Towards Maximising Potential in the Midstream and Downstream Oil & Gas Sector – A Local Content Perspective.” “Nigeria’s total import for petroleum products is about $28 billion per annum. Nigeria is the largest producer of crude in Africa and third largest importer of refined products in Africa. “Nigeria’s per capita refining is about 0.002 barrels per day, that’s very embarrassing,” she stated.
The Central Bank of Nigeria (CBN) on Saturday debunked reports that it planned to replace the conventional Naira notes in circulation with digital currency, otherwise known as the eNaira, in due course. This is as the African Development Bank (AfDB) Group’s Board has approved a $ 1.5 billion facility to support African countries deal with the impact of the Russian-Ukraine war impacting food prices and availability. CBN’s Director of Corporate Communications Department, Mr. Osita Nwanisobi, said the misleading statement purportedly made at a stakeholders’ engagement on eNaira adoption in Asaba, Delta, was misconstrued and therefore, urged the public to completely disregard it.
Nwanisobi further explained that the digital version of the Naira is meant to complement the existing currency notes and therefore, would circulate simultaneously with the conventional Naira notes as means of exchange and store of value.
He said the adoption of the digital legal tender, aside from its safety and speedy features, would also ensure greater access to financial services by the underbanked and unbanked populace thereby enhancing financial inclusion. He urged the public and business owners to embrace digital currency as it offers more possibilities.
Recently, Mozambique’s growth trajectory has been driven by pandemic-related restrictions, the conflict in Cabo Delgado, extreme damage by tropical storms, and by commodity output and prices. Moreover, the hidden debt scandal in 2016 also impacted external funding in the country. Not all is negative—at the same time, new opportunities in the energy sector are opening doors for an economic boost. More specifically, the country is taking steps into a new direction toward creating an environment that enables private investment in the off-grid sector leading the country towards a more positive trajectory.
Mozambique’s electricity sector has traditionally been state-directed and in the recent years, the energy sector’s efforts have strongly focused on the development of gas reserves in the northern part of the country. It also faces structural challenges such as non-cost-reflective tariffs that limit its ability to direct sufficient investment into increased energy access. The country aims to achieve universal energy access by 2030 and major investments are needed. The important role of off-grid solutions and the private sector in contributing to the national goal of universal energy access is outlined in various sector policies, but the policy environment has not been conducive to this developmental trajectory due to lack of a specific licensing regime.
Mr Mzé Abdou Mohamed Chanfiou, Minister of Economy, Industry and Investment, and WTO chief negotiator noted that despite the recent successive external shocks suffered by his country, which is a net importer of more than 60 per cent of its basic necessities, the Comoros remains committed to the bilateral and multilateral aspects of negotiations, with a view to concluding the accession process in a timely manner.
“The accession process is making remarkable progress, to the point of having concluded bilateral negotiations with Japan, Brazil, Canada, the United States and the European Union, opening the prospect of the Comoros’ formal accession to the WTO this year, 2022.
“We must recognize and salute the Comoros’ determination, dedication and dynamism,” said the chair, who also recognized the contribution by WTO members by actively engaging with the Comoros and ensuring that this accession file continues to receive due attention. In addition, trade-related technical assistance provided by international development partners has contributed enormously to the process of accession.
Soy, the magic bean of Togo’s economy (Trade for Development News)
In 2020, Togo, a tiny country squeezed between Ghana and Benin in West Africa, was the first exporter of organic soybean to the European Union, ahead of China and India. This was unthinkable just five years ago.
Soybean is not indigenous to Togo. It was introduced to the country in the 1980s by the German Development Cooperation (GIZ) to provide protein-based food supplement to reduce malnutrition. Testing the different types of beans is important to selecting the varieties best matched to Togo’s soil and climate. In 2015, the Government of Togo partnered with an agricultural research center to test new varieties of seeds and select the most promising ones.
The World Bank has approved a US$350 million loan to support the Government of Morocco in the launching of its Blue Economy program. The program aims to improve job creation and economic growth, as well as the sustainability and resilience of natural resources and food security, which has increased in importance given the impacts of the war in Ukraine. Building on past World Bank engagement in coastal development in Morocco, the Blue Economy Program for Results (PforR) aims to develop institutional frameworks, improve the integrated management of natural resources, and strengthen selected sectors for a climate-resilient blue economy in targeted areas.
“Bordered by the Mediterranean Sea and the Atlantic Ocean, Morocco’s potential for developing its Blue Economy is strong. Its coastal areas already contribute to more than 50% of GDP and jobs in the country, and there is more untapped potential in both existing and emerging blue sectors like aquaculture, seaweed farming, and renewable marine energy. As laid out in the diagnosis of the New Development Model, Morocco has the opportunity to develop coastal clusters that attract investments and creates jobs while ensuring sustainability,” said Jesko Hentschel, World Bank Maghreb Country Director.
African trade news
Kagame in Davos for World Economic Forum (The New Times)
President Paul Kagame has arrived in the Swiss town of Davos where he joins over 50 Heads of State for the World Economic Forum annual meeting. Convening over 2000 leaders and experts after two years without in-person events, the forum is centred around the theme “History at a Turning point: Government Policies and Business Strategies,” which comes against the backdrop of the Covid-19 pandemic. According to a statement, President Kagame will co-chair a session “Forum of Friends of the African Continental Free Trade Area” to discuss the progress made in the implementation of the AfCFTA. The head of state will also speak on preparing for the next pandemic alongside Bill Gates and leaders in the field of health.
With the launch of the African Continental Free Trade Agreement, Member States stand to benefit from wider market access for seed trade. This will lead to competitiveness of the seed industry and pricing given the ongoing efforts by the African Union Commission and partner organizations in seed policy and regulatory harmonization on the continent. Sharing the success story on the status of harmonization efforts in the Common Market for Eastern and Southern Africa (COMESA) region, the interim Chief Executive Officer of the Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA), Dr John Mukuka, stated that achieving regional seed security, would essentially require Member States to leverage on harmonised regional seed regulatory frameworks that offer opportunity to support and facilitate exchange of germplasm and/or varieties among countries, audit one another’s seed production systems including reduction in costs of varietal certification.
Countries with less developed seed systems will access improved varieties from neighbouring countries with better supply system while those States with well-developed seed system will benefit from simplified processes and wider markets. This implies that countries with high comparative advantage in the production of certain seed crops will be encouraged to produce surplus.
He observed that a functioning seed system is one with seed policy instruments, functional institutions to regulate seed certification, variety release processes, production and distribution channels. He further noted that there were more similarities than differences in the seed trade harmonization efforts among Regional Economic Communities (RECs) in Africa implying that they have a lot in common, and hence it is time to consider continental harmonization in view of the African Continental Free Trade Area (AfCFTA).
How governments across Africa defend troubling seeds regulations (Down to Earth Magazine)
Governments in African countries justify rush to formalise the seed sector citing acute food scarcity in the continent
Africa is grossly food-insecure and a net importer of food. According to the United Nations, the continent will have the world’s highest number of people living in hunger — 433 million — by 2030. It spent $35 billion on importing food in 2020 and the amount is estimated to increase to $100 billion by 2030 as the gap between demand and local production widens. How the agriculture sector performs has ramifications for the economy. The sector accounts for 32 per cent of Africa’s gross domestic product and employs more than 60 per cent of the continent’s labour force, largely in the poorest countries. Nearly three-fourths of sub-Saharan Africa’s (SSA) population is small and subsistence farmers, but it accounts for over 75 per cent of the agricultural output. According to The Seed Sector in Africa: Status Report and Ten-year Action Plan (2020-2030), a report published by the African Union Commission (AUC) in 2021 to guide the continent’s agricultural policy: “At the farm level, yields must increase if surpluses available for trade are to be realized.
The AUC assessed that increasing area under agriculture was not sustainable. So, it suggested: Key to increasing productivity is adoption of high-yielding varieties, fertilizers, and other inputs. Of all the inputs, high-quality seed is perhaps the most important, as it determines the upper limit of what farmers can achieve. Improving access to new high-yielding and climate-smart hybrid varieties requires increasing seed production and expanding distribution through increased competition in the seed system.
Africa Must Digitalize to Achieve 4th Industrial Revolution (Walta Information Centre)
Africa must develop high computing capacity to achieve the 4th industrial revolution, said Paul Tiyambe Zeleza, Associate Provost and Professor, Case Western Reserve University, Cleveland Ohio. Prof Zeleza was the key speaker at this year’s ECA Annual Adebayo Adedeji Lecture session at the 54th Africa’s Conference of Ministers of Finance, Economic Planning and Development (CoM2022) in Dakar, Senegal. The 4th industrial revolution, he noted, is an agenda for everyone as it will transform all sectors from education to technology and health.
“Africa was marginalized in the previous three industrial revolutions and the continent should ensure it’s not left behind in the fourth industrial revolution,” said Prof Zeleza. “Africa must promote digitalization, rethink capital expenditure, and develop holistic online curriculum system to achieve its economic, digital transformation. We must walk the talk on constructing integrated, inclusive, innovative and sustainable developmental institutions,” said Prof Zeleza.
The fundamental structures of African economies, he said, have remained the same since colonial times. In fact, dependency on primary commodity production and export has increased.
Twenty-one customs experts from the COMESA Secretariat and eight Member States have completed a three-months training on the Automated System for Customs Data (ASYCUDA)World Functional and Technical Courses. ASYCUDA is supplied by the United Nations Conference on Trade and Development (UNCTAD). Over the years, the system has evolved through various versions and the current one is known as ASYCUDAWorld. Through this system, UNCTAD developed advanced software applications for Customs Administration and the trading community to comply with international standards when fulfilling import, export and transit related procedures.
As of 2022, thirteen COMESA Member States namely Burundi, Comoros, Djibouti, DRC, Eritrea, Eswatini, Madagascar, Malawi, Rwanda, Seychelles, Sudan, Uganda, Zambia and Zimbabwe use different versions of ASYCUDAWorld and one Member State Eritrea is using ASYCUDA++ to facilitate merchandise trade as well as providing national and regional trade statistics.
In consideration of this provision and the regional action plan towards the Digital Free Trade Area, COMESA Secretariat and UNCTAD signed a Co-delegation Agreement in 2018 under the European Development Fund (EDF 11) Trade Facilitation Programme to develop and implement a Customs Automation Regional Support Centre (CARSC) and Trade Information Portal (TIP) at the Secretariat. This training on ASYCUDAWorld Functional and Technical Courses is among activities on the development of the CARSC.
Northern Corridor Complements LAPSSET - Ambassador Meles (Walta Information Centre)
A delegation headed by Ambassador Extraordinary and Plenipotentiary of the Federal Democratic Republic of Ethiopia to Kenya, Meles Alem, and representatives of the Governments of Kenya and South Sudan with regards to the Lamu Port-South Sudan-Ethiopia- Transport (LAPSSET) Corridor Project paid a scoping mission to the Northern Corridor Transit and Transport Coordination Authority (NCTTCA) Permanent Secretariat, Kenya Port Authority (KPA) and the Northern Corridor Infrastructure including SGR and the Mariakani Weighbridge in the Coastal Kenyan City of Mombasa. As development partners in the LAPSSET Corridor Project, representatives of the United Nations Economic Commission for Africa (UNECA) and New Partnership for Africa (NEPAD) Kenya were also part of the scoping mission.
Ambassador Meles Alem underscored the fact that the Northern Corridor that is adjacent to LAPSSET complements the latter while providing Southern Ethiopia with more port options in the region.
Ambassador Meles noted that KPA needs to promote the Port of Mombasa in the Ethiopian market as it is a landlocked yet most populous country in the region. He said, Ethiopia and Kenya have jointly inaugurated the Moyale One-Stop-Border-Post, the Moyale-Hawassa Highway, and the first three berths of Lamu port, which are part and parcel of LAPSSET and KPA needs to further expedite the untapped Ethiopian market.
Burundi Reaffims Support to COMESA (COMESA)
President Evariste Ndaishimiye of Burundi has reaffirmed his government’s commitment and support to COMESA’s regional integration agenda and called for deeper trade within the 21 Member States. He has urged the region to focus on implementing programmes that benefit the people by encouraging the growth of businesses and interaction. He said this during a meeting with a delegation from COMESA Secretariat led by Secretary General (SG) Chileshe Mpundu Kapwepwe in Bujumbura.
“Our government believes in the ideals of COMESA and we are determined to continue working to deepen trade and integration with the other Member States,” said President Ndaishimiya during the meeting held on 18 May 2022 at the Presidential Palace.
African Coffee Summit to be held in Nairobi (The Standard)
Kenya is set to host the first G25 African Coffee Summit (ACS) in Nairobi starting tomorrow. The conference dubbed Sustainable Development and Economic Growth in the African Coffee Sector will bring together Heads of State from 25 coffee-producing countries who will re-evaluate the overall performance of the sub-sector. Agriculture PS Francis Owino said the summit will provide a platform for the coffee-growing countries to address the challenges they face. “Coffee has contributed immensely to national GDPs and the socio-economic development in rural infrastructure, education, health, employment, and poverty eradication,” Dr Owino said. He added: “It is a major source of raw materials to the agro-processing industries and contributes to narrowing trade imbalances between Africa and her trading partners.”
Africa’s aviation safety and security recently came under the searchlight of the global aviation regulatory body, the International Civil Aviation Organisation (ICAO). The continent, despite doing so much, still has a lot of gaps to close, just as the liberalisation of air transport in Africa, otherwise known as Single Africa Air Transport Market (SAATM), came under focus at the summit, writes WOLE SHADARE
Africa’s aviation industry took the centrestage in Abuja, last week, as the International Civil Aviation Organisation (ICAO), Directors- General of Civil Aviation in Africa, the African Civil Aviation Commission (AFCAC), the representative of the Singaporean Government, among other groups of aviation intelligentsia, gathered to discuss the myriad of problems confronting aviation safety, security and the liberalisation of air transport in the continent. ICAO Secretary-General, Juan Carlos Salazar, while addressing Africa’s aviation leaders last week in his opening of the 2022 AFI Aviation Week, highlighted the tremendous potential future for aviation in Africa that could be achieved through the realisation of regional commitments and underscored the critical role aviation should play in states’ pandemic recovery planning.
The secretary-general highlighted that air transport growth rates in Africa were among the fastest in the world prior to COVID-19, noting, however, that “we must also recognise together that recent results could have been much more robust if not for persisting regulatory barriers, financial constraints, and the slow pace of air transport liberalisation here.”
The Director-General of Nigerian Civil Aviation Authority (NCAA), Capt. Musa Nuhu, said the AFI Aviation Week was the biggest regional conference that ICAO has for the African region and the Indian Ocean, stressing that it comprises a lot of regional plans for Africa.
One of the key components of the AU Agenda is SAATM, which is a flagship project of the African Union Agenda 2063, an initiative of the African Union to create a single unified air transport market in Africa to advance the liberalisation of civil aviation in Africa and act as an impetus to the continent’s economic integration agenda. SAATM will ensure aviation plays a major role in connecting Africa, promoting its social, economic, and political integration, and boosting intra-Africa trade and tourism as a result. The International Air Transport Association (IATA) fully supports this initiative, which will open up Africa’s skies and promote the value of aviation throughout the continent. Openair arrangements boost traffic, drive economies and create jobs.
The African Development Bank Group’s Board of Directors has approved a $1.5 billion Emergency Food Production Facility to help tackle the global food crisis sparked by the Russian-Ukraine conflict. The funds will help 20 million African farmers produce an extra 38 million metric tons of food to address growing fears of starvation and food insecurity on the continent.
Overcoming Africa’s challenges includes building back from Covid-19. Early in the pandemic, the Bank provided a crisis response facility of up to $10 billion to African countries to help overcome its social and economic impacts. It also launched a $3 billion Covid-19 social bond on the global capital markets, at the time, the highest ever US dollar denominated social bond. According to the Bank’s president, Dr. Akinwumi Adesina, this helped provide social protection to about 30 million vulnerable people.
Vulnerable Africa faces heavy climate finance shortfall (The New Times)
Africa needs about $1.6 trillion to address climate change annually from 2020 to 2030, however it only gets three per cent of the total global climate finance, according to Akinwumi A. Adesina, President of African Development Bank Group. He said while addressing the media on May 23 in Accra, Ghana, to kick off the Bank’s Annual Meetings that will go through until May 27.
Under a theme dubbed “Achieving Climate Resilience and a Just Energy Transition for Africa” central bankers from Africa will convene to share climate change and energy transition challenges that their countries face and showcase policy responses to tackle these challenges. Africa, which accounts for just four per cent of the global greenhouse gas emissions, is short-changed by climate finance. “Africa is not getting enough resources to tackle climate change. Climate financing mobilised globally falls short of Africa’s needs by $100-$127 billion per year since 2020-2030,” noted Adesina.
According to him, data has it that Africa loses about $7-15 billion due to climate change annually and it is expected to rise to $50 billion a year by 2040.
The developmental state model and the experiences of South Korea present at least four propositions for Africa’s aspiring late industrializers. First, although successful cases of developmental states are concentrated in East Asia, their development process was by no means coincidental. It was demonstrably autonomous, driven by the need for rapid development, and can been replicated in other regions. Second, the industrialization and economic transformation that the developmental state requires can be gained within a relatively short time-span if policies are coherent and the institutions implementing them rigorous enough. Countries such as South Korea, Singapore, and Taiwan were literally catapulted from abject poverty to relative affluence in less than half a century by focused and determined governments. Third, the developmental state is the product of a social compact for development, which can only be assembled in the presence of long-term commitment. It requires institutional discipline and effort in research and development, supervision and coordination, and implementation, monitoring, and follow-up. It demands unrelenting support from the political leadership as well as the private sector. Fourth, while the developmental state must be grounded in realism, South Korea’s success partly lay in the ability of its leaders to stake out an ambitious development agenda and dare their country to “dream big”.
How currency sanctions on Russia could disrupt trade with Africa (Brookings Institution)
Financial sanctions tend to hurt both the sanctioned and the sanctioner, but they also threaten to hurt countries that are financially interlinked with the sanctioned country. Recent sanctions levied on Russia by the United States and the European Union in response to Russia’s invasion of Ukraine are disrupting global trade and financial networks across the world, including in Africa. The sanctions prevent U.S. and eurozone banks, their foreign affiliates, and Russian banks based in the U.S. and eurozone countries from facilitating dollar and euro transactions on behalf of Russian entities. The problem for Africa is that roughly 95 percent of all trade is invoiced in these two sanctioned currencies alone and that a vast majority of Africa’s $14 billion trade with Russia is likely denominated in these two currencies.
This paper uses a recently released dataset that measures the currency of trade invoicing to estimate the share of African trade that will be disrupted—that is, current financing pathways rendered inexecutable—due to the sanctions levied by the U.S. and eurozone countries on Russia (we call these effects “disruptions,” rather than losses, because they have not yet been realized, and it is uncertain how trade partners in Russia and Africa will respond to reduced financing options). We find that currency sanctions alone have the potential to disrupt 1.8 percent of all African trade and, for some countries, upwards of 5 percent of trade revenue.
VDMA: “Free trade can bring Africa and EU together” (The NewsMarket)
Many African countries are modernizing their economies at a rapid pace, particularly to meet the challenges of climate change. “European machine technology can play an important role in moving African countries forward economically. The expansion of renewable energies is a good example of this,” says Ulrich Ackermann, head of the foreign trade department at VDMA, on the occasion of German Chancellor Olaf Scholz’s trip to Senegal, Niger and South Africa. It is precisely for the major challenges such as adapting to climate change, the sustainable use of water and marine resources, the introduction of circular economy systems, and the reduction of environmental pollution that European machinery and plant manufacturers provide the technical solutions. In this way, they can contribute to the sustainable further development of the African industrial structure as well as to the creation of local jobs - also with suitable skilled labor development.
Although the mostly medium-sized mechanical engineering companies from Germany and Europe have recognized Africa’s growing market potential, many are still hesitant about entering the market. Exports to Africa so far account for only a good 2 percent of all German exports in the mechanical and plant engineering sector, with by far the most shipments going to South Africa and Egypt. Investments on the African continent, which require an established business, are only available in manageable quantities.
As a result of the global Corona pandemic and the looming conflicts between the U.S. and China, many companies in the machinery and plant engineering sector will now try to position themselves more resiliently and review their supply chains to do so. “This can bring the two neighboring continents of Europe and Africa closer together. Africa wants to advance free trade and thus has similar goals to the EU,” emphasizes Ackermann.
Global economy news
DG Okonjo-Iweala highlighted Cote d’Ivoire’s proposals to the WTO on improving access to trade finance for small businesses in Africa and underlined the acute financial constraint, notably the lack of trade finance, that sub-Saharan Africa is facing.
Global surveys show that, while around 30% of international trade finance goes to SMEs, banks reject some 40% of applications from such companies. This rejection rate is higher than for any other type of companies. According to the African Development Bank, the rejection rate for letters of credit applications increased by 30% during the pandemic.” She stressed that the pandemic had accentuated trade financing gaps in Africa, which, prior to the pandemic totalled about USD 80 billion per year, representing about 20% of the African trade finance market.
DG Okonjo-Iweala said the lack of availability of trade finance or its availability at higher costs than the world market are major obstacles to the integration of African countries into world trade.
She concluded: “For countries to be successful in international markets, their logistics, transport, border-crossing and trade-finance costs must be competitive. Controlling these costs requires expertise and training, which eventually reduces transaction costs.” The workshop will contribute to achieving this goal, she added.
The latest outlook scales back the earlier optimism in the barometer from February, which suggested that trade might have been approaching a turning point, with stronger growth expected the near future. In April, the WTO forecasted 3.0% growth in the volume of world merchandise trade in 2022, down from the 4.7% growth predicted as of last October. The current barometer reading is broadly consistent with the April projection, but forecasts are less certain at the moment and should be interpreted with care.
Required documents for export from Least Developed Countries (LDCs) such as proof of non-manipulation or Certificate of Origin which increase the cost for export should be cancelled and replaced with self-certification.
The suggestion was made by Pan Sorasak, Minister of Commerce of Cambodia, while attending a discussion on “Solving trade barriers for recovery” as part of the World Economic Forum Annual Meeting 2022 in Davos-Klosters, Switzerland on May 23. Minister Sorasak laid stress on the significance and necessity to remove and reduce trade barriers through trade facilitation in the country, the region and the world, an important way for rapid economic recovery.
The World Economic Forum’s Community of Chief Economists expects lower economic activity, higher inflation, lower real wages and greater food insecurity globally in 2022, pointing to the devastating human consequences of the fragmentation of the global economy. Reversing previous expectations for recovery, the majority of respondents to the latest survey expect only a moderate economic outlook in the United States, China, Latin America, South Asia and Pacific, East Asia, sub-Saharan Africa and the Middle East and North Africa in 2022. In Europe, the majority expect the economic outlook to be weak.
“We are at the cusp of a vicious cycle that could impact societies for years. The pandemic and war in Ukraine have fragmented the global economy and created far-reaching consequences that risk wiping out the gains of the last 30 years. Leaders face difficult choices and trade-offs domestically when it comes to debt, inflation and investment. Yet business and government leaders must also recognise the absolute necessity of global cooperation to prevent economic misery and hunger for millions around the world. The World Economic Forum’s Annual Meeting this week will provide a starting point for such collaboration”, says Saadia Zahidi, Managing Director at the World Economic Forum.
With wheat prices expected to increase by over 40% this year and prices for vegetable oils, cereals and meat at all-time highs, the war in Ukraine is exacerbating global hunger and a cost-of-living crisis. Over the next three years, chief economists expect food insecurity to be most severe in sub-Saharan Africa and in the Middle East and North Africa. At the current trajectory, the world is on track for the worst food crisis in recent history, compounded by the additional pressure of high energy prices.
As supply chains enter their third year of disruption, governments and business are rethinking their approach to exposure, self-sufficiency and security across their supply chains. Chief economists consider it likely or highly likely that multinational companies will both localize and diversify their supply chains in the next three years, realigning them along geopolitical fault lines.
The November 2021 edition of the Chief Economists Outlook identified “deglobalization” as an emerging trend driven by the impact of the pandemic. The war in Ukraine and its geopolitical and economic fallout is accelerating these trends, with declining physical integration and increasing friction in the virtual space. A majority of the chief economists polled for May’s Outlook expect higher fragmentation in the markets for goods, technology and labour in the next three years, while most expect services to remain stable or be more globalized.
There is little debate that globalization has created significant economic opportunities and lifted millions out of poverty. But its focus on growth and competitiveness has also been criticized as a source of inequality and economic disruption. Add to this the fundamental economic transformation the world has undergone since the pandemic began, the ongoing climate crisis and renewed geopolitical turbulence, and it’s clear that globalization is at a crossroads. A new white paper from the World Economic Forum’s Centre for the New Economy and Society takes a look at what our global economic future might look like. Four Futures for Economic Globalization: Scenarios and Their Implications puts forward four possible trajectories for the evolution of globalization by 2027. It considers how globalization may evolve as economic powers choose between multilateral integration and fragmentation, both at a political level and in their technology policies.
THE MARITIME industry has warned that the war in Ukraine since March is likely to exacerbate ongoing supply chain disruption, port congestion and crew crises caused by the Covid-19 pandemic. Allianz Global Corporate and Specialty (AGCS) yesterday said the war had already caused widespread disruption to global shipping, with the loss of life and vessels in the Black Sea, disruption to trade with Russia and Ukraine, and the growing burden of sanctions. “Longer term, sanctions and a reduction in trade with Russia could result in the redrawing of some supply chains and trade routes, but this all takes time and comes at a cost.”
When investing is sustainable from an economic, social, environmental and governance perspective, it can provide not only capital but also drive job creation, alleviate poverty, encourage technology transfer, and upgrade industries. It can increase peace and stability and advance climate and environmental goals, addressing some of the greatest challenges the world faces today. However, despite this potential, many of the frameworks that guide investment were designed in another era and have not been updated to reflect today’s realities and priorities. The challenge is to develop a coherent vision for international investment, under which different investment reform processes and initiatives can be aligned and mutually supportive. At the same time, capital earmarked for sustainable investment has been growing dramatically, even during COVID-19, reaching more than $35 trillion. Yet well over 95% of this pool remains in developed economies. The challenge is therefore not the availability of capital, but the flow of this capital to where it is most needed: productive investments in developing economies.
We are excited to announce the launch of the World Investment for Development Alliance (WIDA) at the World Economic Forum’s Annual Meeting 2022. By bringing all relevant stakeholders onto one platform, WIDA can enable conversations and coordination to identify opportunities for collaboration.
Russia’s economy is ‘imploding’ as exports to the sanctioned country plummet, trade experts say (Business Insider Africa)
Russia’s economy is collapsing as exports to the sanctioned country plummet in the face of President Vladimir Putin’s ongoing, unprovoked war in Ukraine, trade experts suggest. The “economy is imploding. We forecast a GDP collapse of -30% by end-2022,” said Robin Brooks, chief economist at the Institute of International Finance trade group, in a Sunday tweet. Brooks added that according to data compiled with help from IIF researcher Jonathan Pingle, exports from 20 countries to Russia were down 50% in April compared to the same time a year prior.
Monthly exports from Russia to other countries, however, were up 64% in April compared to the same time a year prior, Brooks said on Monday, as oil and gas sales become a bigger part of Moscow’s revenue.
The two years of unprecedented pandemic-produced shocks that stressed supply chains and saw the FAO Food Price Index for staples like vegetable oils and cereals increase by 182% and 68%, respectively, have been immediately followed by Russia’s invasion of Ukraine, exacerbating an already dire food security scenario. When farmers suddenly become soldiers in the world’s breadbasket – where the two countries, combined, produce more than a quarter of the world’s barley and wheat – it naturally sprouts concerns about the risks of having our food supply concentrated in a handful of countries. Many are asking… If a war in Ukraine is causing food insecurity in Egypt and Nigeria, is this really a system we want?
The Russia Ukraine war has impacted food security in countries like Egypt and Nigeria
Some have suggested that a major shift to “on-shore” food production is the logical solution. We have even seen some countries impose export bans on certain essential goods. But these solutions ignore the critical role that open markets play in preventing food shortages. Indeed, protectionism will only increase commodity prices across the board and contribute to a global economic downturn.
The era of trade liberalization not only produced better economic outcomes, but also reduced hunger and famine, and enhanced food security – all during a period of rapid population increase.
However, the current crisis has demonstrated that we may have over-optimized for efficiency in some cases by relying on concentrated centers of food production.
To strengthen resilience, we need to diversify our supply chains, especially for critical goods such as food. This will require us to improve access to services across borders that are essential to the production and transportation of agricultural products.