tralac Daily News
The party’s over as mining and manufacturing production crash in April (Daily Maverick)
The mining sector has been one of the star performers of the South African economy, but that is like being the highest hill in Holland. Nevertheless, the sector’s reboot in the early stages of the pandemic and red-hot metals prices translated into record company earnings and a tax windfall for the Treasury just when it needed it most.
Among other things, this has been reflected in hefty current account balances, which in turn have kept the rand afloat, South African Reserve Bank data on Thursday showed. The surplus on the current account of the balance of payments widened to R143-billion in the first quarter of this year from R132-billion in the fourth quarter of last year. This is a good thing and helps, for example, to keep the prospects of an International Monetary Fund bailout at bay. South Africa’s trade balance also widened in Q1 to R360-billion from R336-billion in the previous quarter, and the country’s terms of trade improved as well. So it is deeply concerning that production in the mining sector, and its contribution to gross domestic product (GDP), has been in a state of steady decline. Statistics South Africa (Stats SA) said on Thursday that mining production fell by almost 15% in April on a year-on-year basis, and by 4.3% compared with the previous months.
SA to participate in agricultural negotiations in Geneva (SAnews)
Agriculture, Land Reform and Rural Development Minister, Thoko Didiza, will be attending the World Trade Organization (WTO) Ministerial Conference on agricultural negotiations, scheduled to take place in Geneva, Switzerland, from 12 to 16 June 2022. The negotiations are based on Article 20 of the Agreement on Agriculture, which provides for the continuation of the negotiations on issues relating to agricultural support and protection. The last major decision relating to agricultural negotiations was taken at the Nairobi WTO Ministerial Conference held in December 2015, with the elimination of export subsidies.
“To date, progress has been limited with members mainly repeating known positions. The divide remains largely between developed and developing member states,” the department said in a statement. The department said that South Africa’s priority in agricultural negotiations is to achieve a substantial and real reduction of trade distorting domestic support and to ensure sufficient policy space to carry out developmental policies that seek to address poverty, inequality and low economic growth.
“South Africa’s view is that market access negotiations should start once substantial progress has been made with domestic support. This is to ensure that historical imbalances are addressed and the playing field is levelled before engaging in further market access negotiations. “Approximately 70% of South Africa’s agricultural exports are already duty free, incorporating the Southern African Development Community (SADC) Trade Protocol, the Economic Partnership Agreement (EPA) with the European Union, African Growth and Opportunity Act (AGOA) with the United States of America and the African Continental Free Trade Agreement (this agreement is not yet implemented),” the department said.
Sh32bn terminal pushes Kenya’s harbours to top five in Africa (Business Daily)
Kenya now is among the countries with the five largest harbours in Africa after completion and handover of a Sh32 billion container terminal in Mombasa. The Japanese contractor handed over the second container terminal to the Kenya Ports Authority this week in a major boost to maritime trade. The new terminal put up by Toyo Construction Company, brings on board an additional annual capacity of 450,000 Tonnes Equivalent Units (TEUs) to the Mombasa port, a move that will increase turnaround time for ships talking at the facility.
“We shall put our best foot forward to ensure optimal utilisation of this facility for the benefit of Kenya and the region,” said KPA acting MD John Mwangemi. With the completion of the project, the authority has achieved its target of expanding capacity ahead of demand. By 2023, the Port of Mombasa is expected to handle approximately 1.7 million containers up from the current 1.4 million.
Half of small millers shut down on maize shortage (Business Daily)
Half of the small-scale millers have shut their businesses due to a lack of maize in a move that is likely to see consumers pay more for flour. United Grain Millers Association chairman Ken Nyagah said the maize shortage forced processors to shut since the beginning of this month as they lack the financial muscles to import the grain compared with their large-scale counterparts
The maize shortage has also hit large-scale processors that are not milling continuously as they should but at least they are still operating because of the purchases that they are making from Zambia and Malawi. “At least 50 percent of our members have closed because of an acute shortage of maize in the market at the moment. Locally there are hardly in stocks that we are getting from farmers,” said Mr Nyagah. The government allowed millers to import maize outside of the region duty-free but the processors argued that the produce from the world market is more expensive and not economically viable to ship in at the moment. As such, millers are now importing the grain from Malawi and Zambia, with a 90-kilogramme bag landing at Sh5,200 in Nairobi.
Lamu port livestock exports start in 2023 (Business Daily)
Kenya plans to use the Lamu port in exporting livestock to the Middle East by next year as the country seeks to extend its reach to the world market. Livestock PS Harry Kimtai said the government had set aside Sh500 million for the construction of a livestock facility at the Lamu port. The PS said Kenya has signed various sanitary protocols with the Middle East countries to facilitate the export of livestock products. “We want to establish facilities at the Lamu port that will support the docking of ocean vessels to allow the loading of livestock using the right procedures that take into consideration the issue of animal welfare,” said Mr Kimtai. Kenya has mainly been exporting high-value products such as butter, ghee, powder and long life milk product such as UHT to the Arab nations as it sought to diversify its market beyond the East African region. The Lamu port is ideal for livestock exports because of its proximity to the key animal production areas in northeastern Kenya.
Kenyatta, Mohamud talks clear way for miraa trade, flights resumption (The East African)
Kenya will resume exports of miraa (khat) to Somalia in two weeks following a thawing of relations that saw President Uhuru Kenyatta make his first trip to Mogadishu Thursday since the renewing of diplomatic ties between the two countries last June. Kenya’s Agriculture Secretary Peter Munya said Mr Kenyatta brokered the deal with new President Hassan Sheikh Mohamud on Thursday that will see the lifting of a two-year ban.
Mr Munya said the new Somalia regime had promised improved diplomatic relations. He said the trade talks were cemented after the Kenyan delegation, in which he was part, led by President Kenyatta, attended Mr Mohamud’s inauguration in Mogadishu Thursday. Mr Munya said talks were complete and what was remaining was the signing of the agreement that will also see Somalia sell seafood and other produce to Kenya.
Somalia closed access to its market for Kenya in 2020 following a political fallout between the two countries under former President Mohamed Abdullahi “Farmaajo”. The ban led to a loss of more than 50 tonnes of Kenyan khat valued at more than Ksh20 million ($171,000) a day.
Tanzania exports to Kenya hit Sh272.7 billion in first quarter (The Citizen)
Tanzania exported goods worth $ 118.6 million in the first quarter (January to March) of this year, it was revealed on Wednesday. The increased exports to the neighbouring country has forced the Tanzania Revenue Authority (TRA) to post its officials to Mombasa and Nairobi to facilitate pre-arrival clearance of goods.
During the period Kenya exports to Tanzania were valued at $139.4 million, according to the East African Business Council (EABC).Kenya is also mulling deployment of officials from its taxman, Kenya Revenue Authority (KRA) to the Horohoro-Lungalunga border to facilitate pre-arrival clearance of exports.
Speaking at the EABC Trade Facilitation Forum at Horohoro-Lunga Lunga One Stop Border Post (OSBP), EABC executive director John Bosco Kalisa decried delays at the border. He said it was a pity that clearance of goods at Horohoro OSBP by the Kenyan clearing agents has led to delays and longer
Nankhumwa irked by intended sale of maize to Zimbabwe, pens President Chakwera (Malawi Nyasa Times)
Leader of Opposition in Parliament, Kondwani Nankhumwa, has written President Lazarus Chakwera asking him to intervene and stop the sale of maize by the Agriculture Development Corporation (ADMARC) to Grain Millers of Zimbabwe saying the decision will likely negatively impact Malawi’s food security situation.
He said what is suspect about the decision to sell the maize is the fact that not long ago Minister of Finance, Sosten Gwengwe assured Malawians that ADMARC will not proceed with the deal after it was exposed by the media.
Nankhumwa said the general prediction by experts as well as ordinary Malawians is that there will be hunger this year, adding that the decision to sale the maize therefore defies logic. “Mr. President, you may be well aware that many experts, as well as ordinary Malawians, are against this sale of maize by Admarc precisely because all indications are that many households are likely to face hunger this year due to an anticipated low yield,” said Nankhumwa in the letter.
He said it is a fact that food security in this country is largely determined by the availability and accessibility of maize because it is a staple crop, which is consumed by almost all Malawians on a daily basis.
Take advantage of expanded market created by AfCFTA — President Akufo-Addo urges Ghanaian Industries (GhanaToday)
President Nana Addo Dankwa Akufo-Addo has called on Ghanaian manufacturing industries to take advantage of the access to expanded markets created by the African Continental Free Trade Area (AfCFTA) agreement. President Akufo-Addo said one of the main challenges that have affected Africa’s industrialisation drive is the lack of access to expanded markets. He said economies of scale were an important tool for industrialisation but with small fragmented markets in Africa, industrial development had always been a problem. President Akufo-Addo said this on Wednesday in Tema when he commissioned Nestlé Ghana’s Ghc175.4 million-expansion plant for the production of Cerelac, an infant food, for export to countries in West and Central Africa.
Delay in passing standards law slowing Industry growth (News Ghana)
Ghana’s quest to become the number-one trading hub in Africa could end up in an anticlimax if the Standards Authority Bill currently before Parliament is not passed into law with a sense of urgency. The Bill would address the critical issues of Standardisation and Conformity Assessment by empowering the Ghana Standards Authority (GSA) with the requisite legal backing needed to address the current variations of the age-long challenge of substandard goods that flood the country’s markets. Not only does the presence of such crappy goods pose a grave danger to consumers but they also erode the confidence of consumers in patronizing goods from the Ghanaian markets altogether. It is a double jeopardy which the GSA has struggled to address because as it stands now, the Authority lacks the legal mandate. It is a shocking reality that has been ignored for far too long.
FG intensifies efforts to remove Nigerian exports from EU’s restriction list (The Guardian Nigeria)
The Nigerian Export Promotion Council (NEPC) has stated that the Ministry of Industry Trade and Investment, has inaugurated a committee composed of the NEPC and other regulatory agencies to ensure the removal of Nigeria from the European Union’s (EU) restriction list. The Executive Director and Chief Executive Officer, NEPC, Dr. Ezra Yakusah, on the sidelines of its advocacy programme on export trade house, Cairo Egypt, said the committee which has less than two months to go, was specifically set up to make recommendations on how to remove Nigerian products from the EU list. According to him, the Council is also taking proactive measures to ensure that some of these products are removed from EU restrictions by ensuring these products meet stipulated EU requirements. In his words: “Sometimes the problem is due to poor packaging and a lack of mandatory or voluntary certifications. So we decided to take the challenge by deploying our ‘go global, go for certification’ programme to train over 150 Small and Medium Enterprises (SMEs) free of charge. We want to ensure that these products are removed from the EU list.
Egypt extends ban on staples including wheat, flour and corn for three more months - document (Reuters)
Egypt has extended the ban on the export of wheat, flour, corn, lentils, pasta, fava beans and all kinds of vegetable oil for three more months, its trade ministry said in a document seen by Reuters on Wednesday. The ministry said it would allow exports of any excess of the local market’s needs of these goods but only after approval from the ministry. This excess amount would be estimated by the ministry of supply. Egypt banned exporting these staples in March.
Libya oil shutdown expands with threat to close new port (Al Arabiya)
A blockade of Libyan oil output by groups aligned with forces in the east of the country expanded on Thursday and Friday with the closure of two more export terminals, a threat to close another, and reduced production at a major field, engineers said. On Thursday exports were halted at the ports of Ras Lanuf and Es Sider.
Libyan oil output had already fallen by about half to 600,000 barrels per day after groups closed the major Sharara and El Feel fields last month, though work at Sharara briefly resumed this week before stopping again. Groups closing the facilities have demanded that Tripoli-based Abdulhamid al-Dbeibah hand over the role of prime minister to Fathi Bashagha, who the eastern-based parliament backed for that post in March.
UAE wants to boost trade with Morocco via faster shipping: Economy minister (Al Arabiya)
The United Arab Emirates wants to bolster trade with Morocco to reach $7 billion within 10 years from $800 million in 2021, UAE Economy Minister Abdullah bin Touq al-Marri said on Thursday in Rabat.F or that purpose, the two countries will speed up container shipping to seven days from 40 days, al-Marri told Reuters before a visit to Africa’s largest port in Tangier, northern Morocco.
The UAE minister said he would discuss a trilateral deal with Moroccan officials to step up trade between Morocco, the UAE and Israel. The UAE and Israel have a free trade agreement.” This will offer great opportunities for traders and investors,” he said.
Addressing European Energy Security Through Equatorial Guinean LNG Exports (Africa Newsroom)
Rich with 1.5 trillion cubic feet of natural gas reserves and with an objective to become a regional gas processing hub, Equatorial Guinea’s gas journey has been both ambitious and highly successful. A number of exploration campaigns, large-scale project developments and regional partnerships have served as key drivers of the country’s gas expansion agenda, and now, using the African Continental Free Trade Agreement as well as its strategic location on Africa’s west coast, the country is gradually positioning itself as a regional Gas Mega Hub (GMH) as well as global exporter.
What separates Equatorial Guinea from other gas producing countries in Africa is the Ministry of Mines and Hydrocarbons’ GMH initiative, a comprehensive development model to utilize unexploited offshore gas resources to drive energy security and economic growth. Since the launch of the GMH in 2018, the country has made significant progress to enhance exploration and production as well as the development of gas infrastructure and processing facilities, strengthening the country’s export capacity. In addition to processing domestic resources from fields including the 580 billion cubic feet offshore Alen Gas Project, Equatorial Guinea’s Alba Liquefied Petroleum Gas and Punta Europa onshore facility serve as the official processing platform for the entire region. Through partnerships with neighboring producers including Cameroon, Nigeria and the Republic of the Congo, Equatorial Guinea not only processes its own resources but regional reserves, converting gas into liquefied natural gas (LNG), ready for export.
Structural reforms stimulate Somalia’s investment climate (Daily Sabah)
Since the 2012 establishment of the Federal Government of Somalia (FGS), a number of structural reforms have been put in place to boost domestic business and foreign direct investments (FDI). The reforms have, over the last four years, mainly focused on fixing impediments faced by potential investors such as the lack of a comprehensive legal framework, a civil and commercial justice system, weak dispute resolution mechanisms, enforcing contracts and inefficient public financial management systems. The overall enabling climate for investment similarly revolves around issues like land management, public procurement and disposal arrangements, banking regulations, contract management regulations, bilateral trade agreements, as well as free and responsible media. In all these areas, priorities have over the years been identified for policy, legal and regulatory improvements to remove these bottlenecks.
African trade and development news
Investment flows to Africa reached a record $83 billion in 2021 (UNCTAD)
Foreign direct investment (FDI) to African countries hit a record $83 billion in 2021, according to UNCTAD’s World Investment Report 2022 published on 9 June. This was more than double the amount reported in 2020, when the COVID-19 pandemic weighed heavily on investment flows to the continent. Despite the strong growth, investment flows to Africa accounted for only 5.2% of global FDI, up from 4.1% in 2020. While most Africa countries saw a moderate rise in FDI in 2021, around 45% of the total was due to an intrafirm financial transaction in South Africa. “If we exclude this transaction, the increase in FDI flows to Africa, while still positive, would be more in line with what we observed in other developing regions,” said James Zhan, director of UNCTAD’s investment and enterprise division.
FDI to Southern Africa increased almost tenfold to $42 billion. The strong increase was due primarily to a large corporate reconfiguration in South Africa – a share exchange between Naspers and Prosus in the third quarter of 2021. New project announcements in the country included a $4.6 billion clean energy project finance deal sponsored by UK-based Hive Energy and a $1 billion greenfield project by US-based Vantage Data Centers to build its first African campus.
West Africa sees FDI increase by 48% to $14 billion. Nigeria, West Africa’s largest recipient of FDI, saw its flows double to $4.8 billion, mainly because of a resurgence in investments in the oil and gas sectors.
Investment flows to East Africa increased by 35% to $8.2 billion Ethiopia, a central hub for China’s Belt and Road Initiative, saw FDI flows rise by 79% to $4.3 billion in 2021. Four out of five international project finance announcements in the country were in renewables.
Central African FDI remained flat at $9.4 billion While investment flows to Central Africa remained flat, FDI to the Democratic Republic of the Congo rose by 14% to $1.9 billion, with investment trends remaining positive primarily because of flows to offshore oil fields and mining.
FDI to North Africa declined by 5% to $9.3 billion in 2021 Investment flows to Morocco rose by 52% to $2.2 billion in 2021 while Egypt saw its FDI drop by 12% to $5.1 billion. Despite the decline, Egypt was Africa’s second-largest FDI recipient.
Mo Ibrahim: Africa must be allowed to use gas in energy transition (African Business)
Across three days in late May, the 2022 Ibrahim Governance Forum brought together world leaders, climate experts and African youth to discuss the nuances of the climate crisis in Africa and began to articulate the continent’s unique position ahead of Cop27 in Egypt.
Forum founder Mo Ibrahim, the Sudanese-British telecoms billionaire, tells us why he believes Africa needs to be allowed to use its gas resources as a transition fuel to close the energy supply gap.
“Africa’s case” can be articulated around three main points. First, as the least industrialised continent, Africa is the continent least responsible for climate change. However, as, like Covid, the climate crisis knows no borders, this also means that Africa is the most vulnerable to its impact, with less adaptation means.
Second, we need to strike the right balance between climate protection and access to energy for all people on the planet, between climate justice and energy justice.
Last but not least, Africa’s potential in biodiversity, renewable energy sources, and minerals key to low-carbon economy, is to be seriously considered. The continent can play a pivotal role in a green sustainable economy, provided the relevant hurdles are correctly addressed: financial and human capacities, infrastructures, governance.
Cop27 is therefore an opportunity for Africa to put these considerations forward to the global community, and to ensure that the climate debate is inclusive of the continent’s specific needs and potential.
Africa’s development agenda cannot move forward without addressing the continent’s energy gap and at present, there is no other viable alternative to using gas, the least polluting of all fossil fuels, as a transition fuel to close this gap.
global supply chains contribute to carbon emissions through transportation of raw commodities one-way, and processed products back the other – sea freight being by far the worst, as a recent report published by the AFC (Africa Finance Corporation) highlighted. In Africa, boosting local processing of raw commodities and local manufacturing for growing local markets can definitely contribute to lowering carbon emissions at global level. This means a better integrated continent, where intra-African trade is consequently upgraded.
Sub-Saharan Africa’s big companies still resilient to Ukraine war, China slowdown (ZAWYA)
Countries in Sub-Saharan Africa (SSA) still struggle to return to pre-pandemic economic growth, although most rated companies in the region have remained resilient to the impact of the war in Ukraine and slowdown in Chinese economy, according to the latest analysis. So far, many businesses in SSA, particularly exporters, continue to see moderate impact from the ongoing turbulence and don’t see the urgency to tap into capital markets yet, as higher commodity prices tend to offset rising costs, S&P said. ”Increasing commodity prices are benefiting many key countries, but high debt burdens, elevated cost of debt and limited fiscal flexibility remain a drag on sovereigns’ credit quality, while rising food and energy prices, alongside a busy election cycle, will delay fiscal consolidation,” the ratings agency noted. Commodity and energy prices have skyrocketed and financial conditions have tightened due to the Russia-Ukraine conflict, fuelling recession fears. According to the World Bank, food and energy will remain expensive for the next three years.
As for the economies in SSA, there are no signs that the course will change soon. According to S&P, the region’s recovery from the pandemic is still lagging that in other markets.
China’s trade ties with Africa continue to strengthen (Namibia Economist)
Trade between China and Africa is growing. The General Administration of Customs of China recently noted that bilateral trade between China and Africa amounted to US$254.3 billion in 2021, an increase of 35.3% from 2020. In the first quarter of 2022, China’s Customs Data confirmed that trade between the two regions increased by 23%, to US$ 64. 8 million.
Africa exported goods worth US$ 105.9 billion to China, an increase of 43.7% from the previous year. China is increasingly importing agricultural products and manufacturing goods from Africa, in addition to its continued strong focus on oil, precious minerals and metals. African imports from China mainly focus on manufactured goods such as electronics, clothing and appliances, and technology.
Data from the Chinese Ministry further revealed that over the last 20 years, China’s trade with Africa has risen 20-fold, showing that China is one of Africa’s biggest bilateral trading partners. To balance the trade gap, China has also pledged to import US$ 300 billion of African products by 2025. The country has also increased the number of products that can be exported to China tariff-free.
Electronic Certificate of Origin to Facilitate Trade in SADC Region (SADC)
Challenges which traders and customs officials have been facing in using the manual Certificate of Origin (CoO) in the Southern African Development Community (SADC) will be resolved as soon as the SADC Electronic Certificate of Origin (e-CoO) becomes operational. The SADC e-Certificate of Origin Framework was approved by the Committee of Ministers of Trade in 2019. The Framework will help to facilitate the application of the CoO electronically, thus easing cross-border trade in SADC. This will result in the smooth movement of goods across the Region to end consumers.
Implementation of the eCoO is expected to contribute to the reduction of non-tariff barriers to trade and enhance participation of SADC Member States in the regional value chain and ultimately, support successful implementation of the SADC Industrialisation Strategy and Roadmap (2015-2063) in the consolidation of the SADC FTA. For the implementation of the e-CoO concept regionally, the Regional eCoO Framework will facilitate to harmonise the process of automation for registration, issuance, approval and transmission of the CoO.
The eCoO systems is equipped with security features such as online e-CoO authenticity verification, optical watermarking technology to distinguish between original and copies of CoOs issued. The e-CoO is being considered under the SADC Free Trade Area (FTA) whose objectives are to further liberalise intra-regional trade in goods and services; ensure efficient production; contribute towards the improvement of the climate for domestic, cross-border and foreign investment; and enhance economic development, diversification and industrialisation of the Region. Currently preparation for launching of the SADC eCoO is underway for July 2022 and it is expected that all Member States will implement the eCoO by 2024.
ECOWAS advocates enabling policy for Africa’s agric devt (New Telegraph)
The Economic Community of West African States (ECOWAS) has said that agribusiness development in Nigeria and other countries in Africa requires the provision of an enabling policy, legal and economic environment. The Head of Agriculture Division, ECOWAS Commission, Mr. Ernest Aubee, explained that agriculture in the continent remains one of the most important sectors, saying that the share of agriculture in the continent’s Gross Domestic Product (GDP) had increased to 19.9 per cent in 2020/2021 from 17.8 per cent in 2019/2020.
He stressed that agribusiness contributed approximately 25 per cent of Africa’s GDP and provided 70 per cent employment, while agriculture-based products accounted for over 50 per cent of all exports from Africa. Aubee noted at an African agribusiness webinar in a paper titled: “Sustainable Agribusiness in Africa,” that increased public and private sector investments on the continent was critical, adding that agribusiness has the potential to drive the socio-economic development of Africa. He said: “Agribusiness refers to the enterprises, industry and field of study of value chains in agriculture and in the bio-economy. It refers to a combination of agriculture and business activities that seek to achieve specific objectives of profitability efficiency and effectiveness and embrace the value chain concept of agriculture from production to consumption.
“However, challenges are access to finance for smallHolder farmers; poor infrastructure from farms to markets, (processing, packaging and markets), inadequate transport networks (road, sea, air), limited agricultural technologies, availability of relevant macro and sectoral policies and regulations to drive the sector; lack of commitment to investments in agriculture in accordance with SDG, AU Agenda 2063/Malabo Declaration, ECOWAP etc. “Also, there is limited local private sector engagements and education and modernisation of agribusiness in Africa.” He recommended building human capacities in the agribusiness value chain with emphasis on women, youths and the poor.
Guest blog: Global warming and the “Africanisation” of International Investment Law? (ICC)
In August 2021, the United Nation’s Intergovernmental Panel on Climate Change published a report on climate change based on more than 14,000 studies developed by scientists around the world. Issuing a “code red for humanity”, the report makes clear that global warming will only intensify over the course of the next 30 years.
This threat is particularly acute for the African continent. The World Meteorological Organization’s State of the Climate in Africa 2019 report indicates that increasing temperature and sea levels, changing precipitation patterns and more extreme weather are threatening human health, safety, food, and water security on the continent. Now more than ever African States must ensure that the promotion of foreign direct investment through the conclusion of international investment agreements (IIAs) does not undermine environmental protection measures or exacerbate the impending climate crisis. Thus, African States are increasingly incorporating environmental provisions in their IIAs. The breadth of these reforms across the continent, and their influence globally has led some commentators to refer to the “Africanisation” of international investment law.
One example is the 2012 Model BIT of the Southern African Development Community (SADC), which was among the first to impose obligations and responsibilities on investors as opposed to just States, expressly “seeking an overall balance of the rights and obligations among the State Parties, the investors, and the investments” under the agreement. The 2012 Model BIT includes numerous articles that impose obligations on investors concerning the environment, human rights, and corruption. Subsequently, in December 2016, Nigeria and Morocco concluded a BIT that included many of the environmental obligations for investors proposed by the SADC Model BIT and the ECOWAS Supplementary Act on Investments.
Global economy news
Global Supply Chain Disruptions : Competition Policy Implications (World Bank)
This note complements prior World Bank work analyzing the technical drivers of supply chain disruptions from 2021 onwards. The focus of this note is to shed light on the role of market structure and dynamics by: (a) analyzing how market dynamics and industry structure may have contributed to the current situation; (b) outlining implications for value chains in developing countries; and (c) suggesting further policy and research priorities. On the demand side unexpected demand spikes in the United States have created disruptions due to the sheer volume of logistics throughput needed and the sudden, unexpected rebound in demand that is contributing to the “bullwhip effect.” On the supply side, capacity constraints with respect to port-hinterland connections have been the main bottleneck rather than maritime shipping per se. However, this note raises the concern that industry structure and alliance practices within the maritime shipping, shipbuilding, and container manufacturing sectors may be contributing to the extreme reaction of shipping prices. In the short term, policy makers in developing countries can help mitigate the effects of rising shipping costs and decreasing service levels by extending the timeframes of trade finance and removing barriers to overland trade. Although there is little that governments outside of China, Europe, and the United States can do to directly solve the process bottlenecks, market characteristics suggest that the global logistics industry may be susceptible to collusive outcomes, which exacerbate price spikes. Thus, governments could pay closer attention to potential anticompetitive behavior, especially in maritime shipping and hinterland logistics. In the medium to long term, policy makers, regulators, and researchers should more carefully consider efficiency–resilience tradeoffs in the global logistics industry. Key topics to explore include investigations into potential anticompetitive behavior by shipping lines and increased scrutiny over mergers and alliance practices among logistics service providers and the supplying manufacturing industries. Public-private and private initiatives to facilitate data sharing may also help improve forecasting, which could help mitigate the effects of demand volatility. This note was predominantly prepared before the invasion of Ukraine by the Russian Federation, which started in February 2022. In the short term, the war is likely to exacerbate the congestion at European ports and disrupt Asia-Europe rail links, potentially leading to higher shipping prices. In the long term, it remains to be seen whether decreases in global demand due to the war will lower shipping demand and prices. Nevertheless, the long-term structural constraints to competition in the sector highlighted in this note remain the same overall.
Grain shipping trade navigates turbulent waters (World-Grain.com)
COVID-19 lockdowns and the invasion of Ukraine by Russia have created uncertainty across shipping trade lanes. Indeed, perhaps not since the Cold War have supply chain resilience and geopolitical turmoil loomed so large in global trade. The disruptions have arguably impacted the grain shipping trade more than any other, with grain prices and shipping costs soaring. The war in Europe has resulted in Ukraine’s exports of wheat and other agricultural products being largely shut off from the world due to the ongoing Russian blockade and/or its control of export facilities in the Black Sea. This is inflating global food prices and threatening social disintegration in some of the poorest countries of Africa and the Middle East, which depend on Black Sea exports and are struggling to find replacements.
Grain supply chains are not just being affected by the direct impact of war on grain exports from the Black Sea. Tight availabilities of fertilizers amid sanctions on Russia and Belarus have been a major issue for some countries, especially in South America and Africa, Cooper said. “Some countries are trying to resolve supply disruptions via switching to other producers, for example, Nigeria’s purchase of potash from Canada,” he said. Additionally, logistics in the container sector remains difficult, which especially hampers the rice trade between India and Africa and also has been hampering US containerized exports of agricultural products.
Despite the crises, bulk handling companies maintain good results (Logistics Update Africa)
Following two years of playing a central role in maintaining global trade during the pandemic, bulk handling companies are proving their strength and resilience once again in the face of the Russian-Ukrainian conflict. Saving time and lowering the operating costs for their customers, the benefits are numerous, and illustrative of strong and resilient players who support a sector in full rebound.
The current rise in transportation costs is creating uncertainty for many businesses. A study by Economist Impact found that the effect on trade will be most pronounced in Africa and South America. Faced with these rising prices and the need to maintain trade flows, some businesses are trying to reduce costs and transit times by working with companies like Nectar Group, one of the largest providers of integrated unloading and bagging services.
AU Chair Urges Ukraine to Demine Odesa Port to Ease Wheat Exports (VOA)
Senegalese President and African Union Chair Macky Sall on Thursday urged Ukraine to demine waters around its Odesa port to ease much needed grain exports from the war-torn country. Russia’s invasion of Ukraine and Western sanctions have disrupted grain deliveries from the two countries, fueling fears of hunger around the world. Cereal prices in Africa, the world’s poorest continent, have surged because of the slump in exports, sharpening the impact of conflict and climate change and sparking fears of social unrest. If wheat exports do not resume from Ukraine, Africa “will be in a situation of very serious famine that could destabilize the continent,” Sall told French media outlets France 24 and RFI. Russia and Ukraine produce 30% of the global wheat supply. But grain remains stuck in Ukraine’s ports because of a Russian blockade and Ukrainian mines, while Western sanctions on Moscow have disrupted exports from Russia.
WTO Ministerial Conference preview: four key issues to be resolved (The Institute of Export and International Trade)
Next week sees the start of the pivotal 12th World Trade Organisation Ministerial Conference, with decision-makers from around the world coming together to review the current functioning of the multilateral trading system and future priorities for the Geneva-based body. The war in Ukraine and the ensuing global food crisis means this will be “no ordinary ministerial conference,” Business Standard reports.
The IOE&IT here looks at the four most pressing policy issues that are likely to be discussed.
1) The global food crisis
2) Tariff moratorium on e-commerce
3) Environment and trade
4) Covid IP Waiver
At-risk nations seek cash for climate losses, fear UN ‘talk shop’ (Thomson Reuters Foundation)
The surging costs of climate change-driven destruction have made vulnerable nations poorer by about one-fifth, 55 such countries said on Wednesday, as fears grow that U.N. discussions on money for states to repair and avoid harm could become a “talk shop”. “Loss and damage” caused by more extreme weather and rising seas is a key issue at mid-year U.N. climate talks in the German city of Bonn, as negotiators launched a three-year dialogue this week on a topic that has long divided rich and poorer economies. The “Glasgow Dialogue” emerged after a push for a new loss-and-damage fund for vulnerable countries floundered at the U.N. COP26 summit in Scotland last year due to resistance from donors including the United States and some European governments. But small island states and other countries that are already bearing the brunt of a warming world - from more powerful storms in Madagascar to disappearing islets in the Marshall Islands - urged wealthy governments not to hold back progress in Bonn.