Building capacity to help Africa trade better

tralac Daily News


tralac Daily News

tralac Daily News

Local news

Trucks Block South Africa Road to Mozambique as Fuel Costs Surge (Bloomberg)

Protesters in a city in South Africa’s north east blocked roads including a key route linking the country to Mozambique with trucks Wednesday as they demonstrated against pump prices rising to a new record. The road between Mbombela, 350 kilometers (217 miles) east of Johannesburg, and White River has been obstructed by parked trucks, as is the N4 highway connecting the city to the border with Mozambique and the port of Maputo, Callum MacPherson, regional operations manager at Hi-Tech Security Nelspruit, said by phone.

the dtic assist SA companies look for export and investment opportunities in Angola (The dtic)

Nineteen South African companies supported by the Department of Trade, Industry and Competition (the dtic) will get an opportunity to explore trade and investment opportunities in Angola when they participate in the 37th edition of the annual Feira Internacional de Angola (FILDA) trade exhibition that will take place in Luanda from 12-16 July 2022. The companies are from six of the country’s provinces and are operating in the agro-processing; chemicals; plastics; electronic; capital equipment; mining and metals; and clothing and textiles sectors.

the dtic assisted the companies to showcase their products and services in the exhibition through its Export Marketing and Investment Assistance (EMIA) Scheme. The objective of the scheme is to develop export markets for South African products and services, and to recruit new foreign direct investment into the country.

Govt, stakeholders discuss investment in logistics (The New Times)

Experts are optimistic about economic gains Rwanda could get by establishing itself as a regional logistics hub, to improve the supply chain and facilitate trade among African countries. Earlier this year, the World Bank, in a report on Rwanda themed ‘Boosting regional integration in the post-Covid era,’ stated that Rwanda, serving as an intermediating node between the East and Central Africa regions, offers prospects to increase revenues and generate efficiency gains through the concentration of logistics services. Given Rwanda’s location, conducive business and trading environment, there is an opportunity for it to become a strong regional logistics hub, Antoine Kajangwe, Director General of Trade and Investment in the Ministry of Trade and Industry said.

“In many ways, we are able to make progress across the region but when you don’t have trade logistics, then you are forced to import from distant countries because they have a way of getting products to you.”

Miraa traders hit with transport, export fees (Business Daily)

The government has introduced a tonnage-based levy on commercial miraa transporters where the traders will pay up to Sh10,000 in licence fees. The new charges contained in the recently published Crops (Miraa) Regulations are part of rules meant to ensure the production of quality miraa, both for export and local consumption. Miraa traders transporting less than 500 kilogrammes of the commodity will pay Sh5,000, while those handling between 1,000 and 10,000 kilos will produce Sh10,000.

The rules seek to impose a Sh30 levy on each kilo of exported miraa and related products and Sh60 per kilo for imports. Export licences will be acquired for Sh20,000 and renewed at Sh10,000 while importers will pay Sh50,000 for the permits and Sh30,000 to renew. Under the regulations, an export permit will cost Sh4,000 while an import permit will cost Sh6,000. The regulations were published in June, three years after they were formulated. Traders have in the past paid varied rates depending on the county of operation, exposing farmers to exploitation.

SGR records flat revenue despite increased cargo (Business Daily)

The Standard Gauge Railway registered a marginal drop in revenue in the first quarter of the year, in a stagnant performance that may delay its break-even. The latest data from the Kenya National Bureau of Statistics (KNBS) shows that the passenger and cargo trains generated Sh3.65billion in the first quarter of 2022, down from Sh3.66 billion between January and March last year, translating to a 0.32 percent drop. Cargo trains accounted for the biggest chunk of the revenue generated in the first quarter of 2022 at Sh3.08 billion representing 84 percent of the total revenue while passenger service posted Sh569.27million.

The flat growth comes at a time when the logistics sector is reeling from the Covid-19 shocks, which affected long-haul transits following the imposed night curfew and restrictions on movement in and out of the Nairobi metropolitan area, Mombasa, Kilifi, Kwale and Mandera.

The cargo service remained in operation as the passenger trains were halted in line with the government’s directives, to support flow of goods through the Mombasa port. Despite the flat revenues, the volume of freight transported through SGR increased by 10 percent from 1.39 million tonnes in the first three months of 2021 to 1.53 million tonnes in the first quarter of 2022.

M-Pesa launches interest-free loans for buying goods (Business Daily)

Safaricom has unveiled a zero-interest credit service that will allow millions of its customers to shop for goods up to Sh100,000 and pay later in a move that is set to disrupt the mobile loans market. Users of the interest-free product to be known as Faraja will buy goods and services from as low as Sh20 to a maximum of Sh100,000 and pay the same amount without any extra fees witnessed on other credit products. However, only the normal M-pesa transaction charges will apply at the point of sale on the product to be bankrolled by Equity Bank.

It will work like a digital credit card where a user will have a credit limit of up to Sh100,000, depending on their credit score, to make purchases against and then repay at a later date within the 30-day window.

Safaricom’s till and pay-bill service has risen to take an 85.8 percent market share of non-cash payment for ordinary goods and services, underlining the entrenchment of the mobile money platform in everyday transactions. In the year to March, payments of Sh1.4 trillion were made through the Lipa-na-M-Pesa platform and a total of Sh9.78 trillion was paid through the M-Pesa the popularity of the platform as a means of commerce as opposed to paying via cash.

Animal feeds prices keep rising as yellow maize import flops (Business Daily)

The price of animal feeds has shot up to historic levels as attempts to ship in yellow maize to curb the rising cost flopped with millers citing a shorter import window. The price of a 70 kilogramme bag of layers marsh has now jumped to Sh4,500 from Sh3,800 in April, chick mash is going for Sh4,940 from Sh4,200 while dairy meal is now selling at Sh2,850 from Sh2,500, pointing to tough times for consumers who will have to absorb extra cost when buying animal products such as eggs. The government opened the import window for duty-free yellow maize last November and is expected to close it at the end of October. The millers have not shipped in the commodity since then, citing the difficulty of securing the produce that is free of genetically modified organisms (GMO).

“We cannot import the yellow maize now unless the window is extended. This means that the price of feeds will continue to rise in the coming days unless we get sufficient raw material for processing,” said Joseph Karuri, chairman of the Association of Kenya Feeds Manufacturers.

Mr Karuri said that it would take at least three months before the yellow maize gets to the country because of the longer route that it would have to take following the interruption of trade along the Black Sea, which was occasioned by the ongoing Ukraine-Russian war.

Uganda has attained middle income status, Ubos insists (Monitor)

Uganda Bureau of Statistics (Ubos) has insisted that Uganda has attained middle income status. While addressing a media briefing yesterday, Dr Chris N. Mukiza, the Ubos executive director, said government data for the 2021/22 financial year indicates that gross domestic product per capita is estimated at $1,046, which is within the middle income threshold. On July 1, he said, the World Bank had released its economic update indicating that Uganda’s gross national income per capita for the 2020/21 financial was $840, which meant that the country had not crossed into the threshold for middle income status.

“This created confusion among the general public,” Dr Mukiza said, adding: “The reference periods in the two reports is different. Whereas the report by government was based on the financial year 2021/22, the one by World Bank was based on the financial year 2020/21. Thus, the per capita income in the two reports refer to two different periods, the government of Uganda report being the most up to date.”

Angola, Namibia to open new border posts this year (ANGOP)

The Republics of Angola and Namibia plan to open, later this year, new official border posts at their common border, with a view to increasing trade and consolidating solidarity ties.

The new posts may be opened in the provinces of Cunene, Namibe and Cuando-Cubango (Angola) and Ruacaná, Oshikango and Rundu (Namibia), according to the Director for Institutional Communication and Press of the Angolan Migration and Foreigners Service (SME), Simão Milagres.

Speaking to the press on Tuesday in Lubango, during the opening of the 2nd bilateral meeting between the SME and the Directorate for Migration Control and Citizenship of the Republic of Namibia (DCMCN), Mr. Milagres stressed that the intention was a result of the existing cooperation between the two countries in the context of migration.

Buhari Seeks Total Democratization of West African Subregion (This Day)

President Muhammadu Buhari has declared that Nigeria will continue to seek consensus on the full resumption of democratic governance throughout the 16-nation West African subregion. Responding Thursday in Lisbon, Portugal, to commendations by President of the Portuguese Parliament, Augusto Santos Silva, on the role Nigeria is playing under the present administration, stabilizing West Africa and Guinea Bissau in particular, the President regretted that three countries in the subregion have slipped back to undemocratic, military rule saying the former Portuguese colony was lucky to have survived those attempts.

While attributing some of these reversals to the process of development which the new nations will pass through, the Nigerian leader said Nigeria will continue to work within the framework of the Economic Community of West African States (ECOWAS) to reverse the unwanted situation, stressing that “we have to go back to proper democratization.”

Why DRC market is exciting to CRDB (Dailynews)

CRDB Bank has said it will champion social development in the Democratic Republic of Congo (DRC) with a 30 million US dollars (70bn/-) subsidiary. The lender said in a statement on Wednesday from Lubumbashi, the DRC’s second-largest city that it finalised plans to launch operations in Congo in the second half of this year. The investment is part of CRDB Group’s regional expansion strategy, targeting the larger Eastern African market.

The Group CEO and Managing Director, Mr Abdulmajid Nsekela said that in regard to the DRC subsidiary, which will be based in the commercial hub of Lubumbashi, the bank has already got approval from the Central Bank of Tanzania (BoT) since last May. “We see the DRC as an exciting market for us since it provides a unique opportunity for our Group to transform lives beyond our borders,” Mr Nsekela said.

‘Manufacturers under severe pressure over diesel, raw materials’ (The Sun Nigeria)

Members of Nigeria’s Organised Private Sector (OPS) have expressed concern over consequences of rising diesel prices and raw materials now threatening local manufacturers.

Beyond the need for diesel for transportation logistics, the stakeholders noted that the current model of high dependence on the national grid to power businesses has continued to hobble production processes in the economy, considering the vastness of the country which does not support the highly centralised regime of national grid.

They argued that the continued ownership and control of the transmission component of the power supply chain is also a challenge to grapple with, as many manufacturers are left to generate their own electricity to bridge supply gap.

Challenges slow growth in manufacturing (New Telegraph)

The first six months of year 2022 for the country’s manufacturing sector was marred by profound trajectories, including the sudden war between Russia and Ukraine, importation of contaminated petrol, subsidy crisis, elections and new alcoholic tariff among many others. These challenges slowed the pace of growth and performances in the real sector of the economy.

Already, members of the organised private sector (OPS) have expressed worries that the fragile Nigerian economy in terms of performance and growth trajectory is going to pose challenges to the country’s manufacturing sector as greater attention is expected to be paid to political issues than economic transformation by the Federal Government. Not too far in the beginning of the year 2022, specifically in the first week of January, government announced new excise duty on carbonated and non-alcoholic drinks despite outcry from OPS for government to reconsider the move. Since then, it has been one challenge and the other in the country’s manufacturing sector, with many firms forced to review their operations.

Another major happening in the half year under review was the promoters of the the Africa Continental Free Trade Area (AfCFTA) disclosing that the abnormalities being experienced in the foreign exchange rate conversion were costing multilateral trade in the continent an estimated $5 billion yearly and also playing a major role in the continent’s GDP retrogression. Precisely, the management of Af- CFTA said that was the reason the Pan-African Payments and Settlements System (PAPSS) of the Afreximbank was debuted to assist the continent to save the $5 billion annually loss from the accruals conversions to dollars in exchange rate.

Following the announcement by the Central Bank of Nigeria (CBN) on new circular on e-Valuation and e-Invoicing for import and export, the Manufacturers Association of Nigeria (MAN) urged CBN to hold on its implementation until stakeholders were consulted. MAN suggested to the apex bank that there was need to ensure that CBN does not go ahead to implement the guidelines without accommodating the constructive inputs of stakeholders, especially those whose businesses would be negatively impacted. The Director-General of MAN, Segun Ajayi-Kadir, stated that the association was concerned about the new CBN circular on E-Valuation and E-Invoicing for import and export as it related to some measures of impact on the foreign exchange (forex) profile of the country.

African trade and integration news

Fixing the Pan-African Payment System for start-ups (The Africa Report)

The latest milestone for the Africa Free Continental Trade Area (AfCFTA) plan is the new interconnected Pan-African Payment and Settlement System (PAPPS) which launched in January this year. It will facilitate cross-border payments, boost intra-African trade and provide expansion opportunities for businesses. This is sorely needed and will significantly benefit Africa’s start-up ecosystem, but five months from launch it’s clear that more needs to be done to ensure it fulfils its potential.

The current picture is concerning: Africa has more than 171 mobile-money wallets – most of which can’t work with each other – more than 1000 banks and more than 12 card networks in 55 countries with little interoperability. Over 80% of African cross-border payment transactions must be routed offshore for clearing and settlement using third-party banks usually located outside the continent. African local currencies need to be converted into hard currencies to make cross-border payments, which leads to significant losses through currency conversion fees as well as reducing the volume and frequency of cross-border trade. This also results in inefficiencies including time lags and high foreign currency reserve requirements for banks. Consequently, Africa’s intercontinental trade remains below its potential – in 2020 the share of intra-Africa trade was just 16%, meanwhile in Asia this figure for the same time period stood at 58.5%.

This new financial market infrastructure connects African markets, enabling cross-border payment in respective local African currencies. However, much more could be done to help start-ups in African countries and deliver the benefits of this new payment system.

Financial experts, academics chart path for good governance (The Guardian Nigeria)

Contemporary issues in governance, economy and trade will take centre stage in Lagos tomorrow, July 8, 2022, as banking and finance experts and academics, including President of Afrexim Bank, Cairo, Prof. Benedict Oramah, launch a festschrift, titled “The New Normal As Option for Sustainable Development in Nigeria.”

The 20-chapter book, written in honour of former Vice President of African Development Bank, and pioneer Pro-Chancellor of Glorious Vision University (GVU), Chief Bisi Ogunjobi, will assess budget financing, trade restriction, human capital development, governance and COVID-19 policy response plan. Other issues to be interrogated are sustainable public economic recovery in Nigeria, security, globalisation and social justice, fallow state of Africa, foreign direct investment and AfreximBank as catalyst for intra-Africa trade and investment

Trade Finance Demand and Supply in Africa: Evidence from Kenya and Tanzania (AfDB)

This report presents the findings of the fourth study in a series of trade finance surveys in Africa. For the first time, we conduct a deep-dive analysis of the trade finance market in Kenya and Tanzania. In doing so, we use data from 804 firms – that cut across multiple sectors of these economies – and 58 commercial banks – that account for over half of all commercial banks in both countries.

Involve border agencies for free movement of goods - ECOWAS Director of Trade (GhanaWeb)

Director of Trade at Economic Community of West African States (ECOWAS) Commission, Kolawole Sofola, has said there can only be free movement of goods and services under Africa Continental Free Trade Area (AfCFTA) if border agencies are brought on board. He noted that intra-regional trade on the continent is relatively low compared to that of Europe [70%] and Asia [60%]. Intra-African trade in 2020 declined from 18% to 16% due to the outbreak of the global pandemic – coronavirus. The disruption in the supply chain by the COVID-19 outbreak led to a decline in revenue.

“One of the challenges perhaps is as tariffs and duties go down, Any products that are made in West Africa should be able to transit freely in West Africa without customs or duties and that’s why we are of Free Trade Area but we also found that there are blockages to the movement of goods…We need to work with our border agencies to make sure that they can process products that move across borders as quickly as possible,” he pointed out. He also called on all heads of government to address the challenges concerning cross-border trade on the continent.

Creative Arts is one of the ways we can promote AfCFTA—Okraku Mantey (BusinessGhana)

Mr. Mark Okraku-Mantey, the Deputy Minister of Tourism, Arts and Culture, says the creative arts industry is indispensable in the promotion of African continental trade and integration. He said the arts and culture industry had long taken up the initiative, with notable exploits within the concept of continental integration. The Deputy Minister, who was addressing a Public Private Partnership Forum (PPPF) held by the Ministry in Ho, said the industry had developed the nation into a layer for creative talents and art icons, and had been instrumental in sustaining trade networks across the Continent. “To talk about the African Continental Free Trade Area (AfCFTA), before we even got to the stage of accepting the policy, we have signed a treaty or pact called the African Continental Free Trade Area, the creative industry have had this culture over the years. “Creative arts is one of the ways that we can market the African continental free trade area because it has already been in that motion for a very long time. And so we need to spread the news that the creative industry is one of the ways we can make the AfCFTA very popular,” he said.

Russia-Ukraine crisis presents challenges for Rwanda, EAC but there’s a silver lining (The New Times)

According to the Food and Agriculture Organisation of the United Nations (FAO), in 2021, Russian and Ukrainian wheat exports accounted for 30 per cent of the global market with sunflower oil exports at 55 per cent. Russia and Ukraine are also significant exporters of maize, barley and rapeseed oil, with Russia and Belarus being leading exporters of fertiliser but both currently under economic sanctions. In the East African Community (EAC), Rwanda, Tanzania and the Democratic Republic of Congo (DRC) source more than 50 per cent of their wheat from Russia and Ukraine, with 11 other African countries in a similar position.

The short-to-medium term global impact is likely to result in price increases anywhere between 8 per cent to 22 per cent in wheat, maize, other coarse grains and oilseeds which FAO estimate could lead to the undernourishment of over 13 million people worldwide. Rwandan Finance Minister Uzziel Ndagijimana has said these price increases were already causing rising inflation and slowing economic growth in Rwanda.

This scenario poses both a threat and an opportunity for the region. The threats are obvious, but the opportunities are for countries to act quickly to enhance food security and open up export opportunities for critical crops and related finished products both regionally and internationally.

Buhari attends IDA for Africa summit in Dakar (Vanguard)

President Muhammadu Buhari departed Abuja, Wednesday, to participate in the International Development Association (IDA) for Africa Summit in Dakar, Senegal.

An institution of the World Bank Group, IDA, is deepening its support to drive a resilient recovery for countries hit by the global crises of climate and COVID -19, growing levels of insecurity and, more recently, by the impact of the war in Ukraine. It hopes to do this through its historic $93 billion 20th replenishment cycle (IDA20) which goes into effect between July 1, 2022 and June 30, 2025.

China’s trade ties with Africa continue to strengthen (Modern Ghana)

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 USD 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 USD 64.8 billion.

A recent report by Economist Corporate Network, supported by Baker McKenzie and Silk Road Associates, BRI Beyond 2020 (Economist report), showed how these strengthening trade links are, in part, a result of favourable financial incentives offered to African jurisdictions by China. According to the Economist report, 33 of the poorest jurisdictions in Africa export 97% of their exports to China with no tariffs and no customs duties. This report noted that bilateral trade was still heavily centred on China’s import of Africa’s natural resources. However, in recent years China had increased its import of manufacturing products from more diversified economies such as South Africa.

A UK-Africa trading partnership for the 21st century (GOV.UK)

The vast, diverse and dynamic Continent can never be defined in a few words: Increasingly its story is one of modern cities – places like Lagos, Luanda and Kigali – where new tower blocks are springing up over the skyline and with young, energetic and educated citizens. It’s a story of a booming fintech industry. Major firms like Nigeria’s Paystack, South Africa’s Yoco, not to mention Chipper Cash, are connecting millions of consumers and entrepreneurs to the global financial system. This is also a story of a continent that is a green energy pioneer.

Of course, for too many people, in too many places, this latest chapter in Africa’s story is yet to unfold.

A strategy that is about building a sustainable, enduring and productive partnership. A partnership in which we use trade’s power to make dependable friends to strengthen the rules-based order. This partnership is about truly understanding Africa’s needs and exploring how our businesses can support them through projects that create jobs, support inclusion and sustainability and bring lasting value. In turn this will build the Continent’s economic strength, so that countries can command a fair price for their vast resources and their people’s skills, that reflects their true worth.

Africa: Where do rich countries stand on their debt commitments? (The Africa Report)

“Let me be very clear, the UK would like to transfer some of its Special Drawing Rights (SDRs) to Africa through the African Development Bank (AfDB),” Vicky Ford, UK minister for Africa, Latin America and the Caribbean, said at the 2022 Annual Meetings of the AfDB Group in Accra in May. The UK government reiterated that statement on 27 June, and many other developed countries have also expressed their willingness to transfer SDRs to African countries. Recently, Akinwumi Adesina, president of the AfDB, said he was “in talks with Canada and France” on this subject. However, despite all these announcements, nothing has yet materialised.

Deputy Chairperson of the African Union Commission Lead Talks with Visiting COP 27 Presidency Team to Promote the Continent’s Climate Change Agenda (AU)

The African Union Commission, in cooperation with the Embassy of the Arab Republic of Egypt, hosted a team from the COP 27 Incoming Presidency, led by Ambassador Mohamed Nasr, Director of the Climate Change, Environment, and Sustainable Development Department of the Ministry of Foreign Affairs of Egypt and the COP 27 Presidency Lead Negotiator from 29th June until 2nd July 2022.

The visiting delegation met with H.E. Monique Nsanzabaganwa, Deputy Chairperson of the Commission, to discuss the ongoing preparations for the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change. The meeting underlined the significance of the African COP 27 as an opportune moment for Africa to voice its priorities and bring forward its demand with regard to climate change. The meeting commended that Africa will be a cross-cutting theme in all the 11 thematic days planned on the margins of COP 27.

During the visit, the African Union Commission hosted the fifth session of the “Africa Climate Talks: Road to COP 27” series entitled “Towards a Just Transition in Africa” organized the Permanent Mission of the Arab Republic of Egypt in cooperation with the Department of Agriculture, Rural Development, Blue Economy and Sustainable Environment of the. The session highlighted Africa’s commitment to a green transition that is Just and Fair, that accounts for the socio-economic realities in the continent, and Africa’s legitimate rights to development and eradication of poverty.

Inaugural ECA monthly press briefing focuses on the modernization of national statistical systems. (UNECA)

The Economic Commission for Africa (ECA) on Tuesday 5 July launched the ECA Monthly Press Briefing, a channel through which the Commission aims to enhance collaboration with the media and facilitate regular access to its experts and knowledge products. During the event, ECA’s African Center for Statistics (ACS) presented some of its ongoing work and underscored the importance of collaboration between ECA and the media journalists who regularly utilize data and statistics to report the news and put stories into context. ACS Director, Oliver Chinganya, delivered a presentation detailing the work being done by the Center in areas such as demographic and social statistics, economics statistics and geospatial information statistics and more. 

Mr Chinganya discussed the Centre’s realization of the need to update the 2008 Systems of National Accounts (SNA), which is the internationally agreed upon standard set of recommendations on how to compile measures of economic activity.

Global economy news

The Global Findex Database 2021: Financial Inclusion, Digital Payments, and Resilience in the Age of COVID-19 (World Bank)

The fourth edition of Global Findex - the world's most comprehensive database on financial inclusion - offers a lens into how people accessed and used financial services during COVID-19, when mobility restrictions and health policies drove increased demand for digital services of all kinds. Published every three years since 2011, Findex is the only global demand-side data source allowing for global and regional cross-country analysis to provide a rigorous and multidimensional picture of how adults save, borrow, make payments, and manage financial risks. Findex 2021 data were collected from national representative surveys of about 130,000 adults in over 120 economies. The latest edition includes new series measuring financial health and resilience and contains more granular data on digital payments adoption, including merchant and government payments. The Global Findex is an indispensable resource for financial service practitioners, policymakers, researchers, and development professionals.

Training opens new horizons for women in ports (UNCTAD)

Ports are dominated by men. Globally, women’s participation rate in ports is only 18%, according to an UNCTAD port performance scorecard. Their participation in ports’ operations and services departments is even lower at 16%.

UNCTAD’s TrainForTrade port management programme is helping to bridge the gender gap by empowering more women in ports. In 2021, 35% of its trainees were women. “The share of women participants in the programme is very encouraging,” said Shamika N. Sirimanne, director of UNCTAD’s technology and logistics division.

Interview: BRICS commitment to multilateralism important for holding world together -- South African scholar (China.org.cn)

The BRICS commitment to reinforcing multilateralism during its recent summit is important as the group has a capacity to exert influence in the world, Philani Mthembu, executive director at the Institute for Global Dialogue, a South African foreign policy think tank, has said. Multilateralism “is what holds the world together and could help build a better world for all.” But over the last few years, the role played by multilateral institutions, such as the World Health Organization, World Trade Organization and the United Nations, has taken a hit, and multilateralism has been confronted with challenges, Mthembu told Xinhua in a recent interview.

How Africans can assess the value of the latest G7 summit (The Conversation)

Leaders of the world’s seven advanced economies have once again pledged economic support for Africa and other developing countries. But the realisation of these commitments depends on political developments in the Group of Seven (G7) countries, specifically the United States, the outcome of Russia’s war with Ukraine, and whether Russian president Vladimir Putin retains his grip on power. How each of these political developments will pan out is difficult to tell. But each has an important bearing on the decisions African leaders must make in terms of which power blocs, if any, they align with.

African governments especially face many challenges, amid escalating tensions between western democracies, Russia and China. Africa’s interests would be best served if its leaders were to avoid being drawn into the hostile divide between Russia and China and the west. But it may not be possible to avoid taking sides while trying to maximise advantageous partnerships.

The G7 summit offered the most recent insights for Africa into how the western advanced nations are considering their stakes in Russia’s invasion of Ukraine, and the impact that could have on developing nations. Sorting substance from rhetoric will take time. African scepticism as to whether the west will deliver has merit. As African governments assess the significance of the G7’s promises of support in areas of vital concern to Africans, four key political possibilities could advance or derail them.

Trade restrictions are inflaming the worst food crisis in a decade (World Bank)

The worst global food crisis in a decade was one of the top issues discussed at the 12th ministerial meeting of the World Trade Organization last month . It is a crisis made worse by the growing number of countries that are banning or restricting exports of wheat and other commodities in a misguided attempt to put a lid on soaring domestic prices. These actions are counterproductive—they must be halted and reversed.

The price of wheat, a key staple in many developing countries, has shot up by 34 percent since the Russian invasion of Ukraine in late February. Other food costs have also risen. In response, as of early June, 34 countries had imposed restrictions on exports on food and fertilizers – a figure approaching the 36 countries that used such controls during the food crisis of 2008-2012.

These actions are self-defeating because they reduce global supply, driving food prices even higher. Other countries respond by imposing restrictions of their own, fueling an escalating cycle of trade actions that have a multiplier effect on prices.

How Farm Subsidies in Wealthy Countries Harm African Producers | Alexander Jelloian (Foundation for Economic Education)

It’s estimated that in 2021, approximately 490 million of Africa’s almost 1.4 billion people lived on less than $1.90 per day. To get a sense of African poverty, note that 9 of the 10 poorest countries are in sub-Saharan Africa. Many factors cause Africa’s underdevelopment, but contrary to what some may think, the continent’s economic prospects are far from hopeless. Indeed, even in the developed world, much can be done to help improve the lives of millions of the world’s poorest people. If we in the West are to help those that we proclaim to care about, one of the first policies to go should be price-distorting agricultural subsidies.

Western (and Chinese) subsidies are bad for many African farmers. Africa relies on commodity exports, and when developed states dole out gargantuan sums of money to domestic producers, global commodity prices fall. These subsidies not only waste an enormous amount of taxpayer money, but by artificially lowering commodity prices, subsidies distort the price mechanism and prevent African producers from earning the fair market price for their labor. The case study of cotton subsidies impacting West African producers illustrates this phenomenon well. The four West African countries that have a significant interest in the global cotton trade are Benin, Burkina Faso, Chad, and Mali. Together they are known as the Cotton-4. They are all on the United Nations’ Least Developed Countries list and collectively earn about 60 percent of their total crop revenue directly from cotton. The Cotton-4 countries only produce about 3 percent of the world’s cotton.


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