tralac Daily News
Finance Minister Enoch Godongwana says international and local challenges continue to pose as obstacles in the growth of the economy. This as real Gross Domestic Product (GDP) grew by some 1.6% in the third quarter of 2022.
Speaking at the Pre-World Economic Forum (WEF) business breakfast held in Johannesburg on Thursday, the Minister said the impact of the COVID-19 pandemic on employment and investment continue to have an impact on growth and warned that the ongoing war between Russia and Ukraine could have a devastating impact.
“The theme [for the WEF meeting], Cooperation in a Fragmented World, captures the combination of economic, geo-political and social challenges that are facing the world. Our common challenges here at home are being compounded by all these risks.
“In the face of all of these challenges, this government has been clear that rebuilding investor confidence and mobilising investment, is among the chief priorities this government must achieve for growing our economy,” he said.
The Economic Commission for Africa office for North Africa and the Sudanese ministry of Trade launched on 18 December in Khartoum a four day, joint workshop on Export Promotion and Access to Finance for the benefit of 50 Sudanese SME owners, mostly women.
Sudanese exports, which consist mostly of primary commodities such as gold, oil seeds or cattle, are currently very low, below 3% of GDP in 2021. Most exports go to China and Gulf countries, and only less than 20% to Africa, with Egypt being the main export destination on the continent.
“In an enabling environment, SMEs have a high potential for creating employment and innovation. They can also contribute to reducing poverty and to empowering the poor so that they can realize their productive capacities and integration into society, said Zuzana Brixiova Schwidrowski, Director of the ECA office for North Africa. “It is imperative that the climate for SMEs start-ups and growth is enhanced considerably, with the assistance of the public sector and key players in the private sector, especially finance”, she added.
Since evidence from the rest of the continent shows that Intra-African exports tend to be less commodity focused and have more added value than exports outside the Continent, the AfCFTA is an opportunity for Sudan to boost value adding trade and diversify it, both in terms of commodities and trading partners, said Amal Elbeshbishi, economist at the ECA Office for North Africa. Increased SME contribution to trade and industry are of significant interest for Sudan. Government efforts to support SMEs growth and competitiveness are therefore critical, she added.
Algeria’s economy continued to recover in the first half of 2022, led by a return of oil production to pre-pandemic levels and a continued recovery of the service sector along with a more vigorous agricultural activity. The recovery should continue into 2023, supported by the nonhydrocarbon sector and public expenditure growth, according to the latest edition of the World Bank’s Algeria Economic Update.
External balances recovered and continued to grow on the back of higher global hydrocarbon prices. After growing by an estimated 59% over the first six months of 2022 and peaking in June, the average price of Algerian hydrocarbon exports lost around 26% in Q3-2022. External balances were also buoyed by a notable rise in non-hydrocarbon exports. Algeria’s terms of trade also improved as the dinar appreciated relative to the U.S. dollar and the Euro.
The World Bank’s Economic Update projects Algeria’s economy to grow by 2.3 percent in 2023. Yet the macroeconomic outlook remains vulnerable to fluctuations in global hydrocarbon prices. In the medium to long term, the report says, the non-hydrocarbon private sector must become the motor for Algerian growth and diversification of the economy.
Continued implementation of government structural reform programs, creating greater openness to the private sector, improving the economy’s competitiveness, and strengthening investment in human capital are all essential to the flourishing and resilience of the Algerian economy.
EAC Secretary General Hon. (Dr.) Peter Mathuki attributed the increase in intra-regional trade to political goodwill among the members of the Summit of EAC Heads of State and the relaxation of Covid-19 restrictions in the region amongst other factors.
Intra-regional trade within the East African Community (EAC) is on an upward trajectory, standing at US$10.17 billion in September 2022. The intra-EAC trade, accounting for imports and exports in the 7 EAC Partner States, grew from 13% in 2019 at a value of $ 7.1 billion to 15 % in 2021 at a value of $9.5 billion. By September 2022, the EAC trade value was recorded at $10.17 billion representing a 20% share of Intra-trade to global trade.
Dr. Mathuki disclosed that EAC’s total trade with the rest of the world stood at US$62 billion, adding that there was still room for improvement.
He said that following the High-Level Summit on the Common Market Protocol held in July 2022, the EAC is reviewing the issues impeding integration, adding that the issues would be discussed in the next Council of Ministers. “257 NTBs have been cumulatively resolved since 2007. This is in tandem with the bloc’s goal to increase the volumes of intra-regional trade,” he said. Dr. Mathuki further said that EAC Ministers/ Cabinet Secretaries in charge of Trade and Finance had adopted 35% as the 4th Band of the EAC Common External Tariff (CET).
Senior Officials from the Southern African Development Community (SADC) attended a workshop to consider the outcome of the assessment of the implementation and relevance of the SADC Protocol on Finance and Investment in light of new demands of industrialisation and deeper regional integration, in Johannesburg, South Africa, from 21st to 22nd November 2022.
The SADC Protocol on Finance and Investment seeks to foster harmonisation of the financial and investment policies of the State Parties in order to make them consistent with objectives of SADC and ensure that any changes to financial and investment policies in one State Party do not necessitate undesirable adjustments in other State Parties. Among others, this outlines SADC policy on investment, requiring Member States to enact strategies to attract investors and facilitate entrepreneurship among their populations. Member States are encouraged to implement legislation that creates a favourable environment for investment, such as tax incentives that ease financial burdens for private firms seeking to invest in the Region.
The workshop deliberated on the presentation made by the consultant concerning the consolidated regional report on the assessment of the implementation of the SADC Protocol on Finance and Investment. The presentation underscored that the evolving context within which the Protocol is being implemented is important for its future orientation; the Protocol itself has undertaken various shifts which have shaped its orientation; and that regional structures implementing the Protocol have been highly supportive. A number of recommendations were provided for enhancing implementation of each Annex.
Over 1,282 Regional Customs Transit Bonds, amounting to US$1billion have been executed in the Northern and Central transport corridors in 2022 alone signifying a reduction in cost of transit and transport of goods by between 15 and 20 percent. The two Corridors link Kenya, Uganda, Rwanda, Burundi, Tanzania and DR Congo which are part of 13 countries that have joined the COMESA Regional Transit Guarantee (RCTG) Scheme. Other countries in the scheme are Djibouti, Ethiopia, Madagascar, Malawi, South Sudan, Sudan and Zimbabwe.
The RCTG, also known as Carnet, is a Customs transit regime designed to facilitate the movement of goods under Customs Seals in the region. It provides a uniform basis for transit movement through the region, where only one guarantee is used to cover goods in transit throughout all transiting countries. Currently, it is fully operational in Burundi, Kenya, Rwanda, Tanzania and Uganda.
Currently, 1,077 Clearing and Forwarding Agents and Sureties are participating in the scheme with over 80% of them being small and medium-sized businesses. Fifty-one insurance companies are participating while the Premium collected as of 31 December 2021 amounted to US$833,530.
Connecting the free movement of goods and services and the free movement of persons is essential to harness the benefits of intra-African trade and economic integration. But while many African countries have ratified or signed the African Continental Free Trade Area (AfCFTA) agreement, the AU’s free movement protocol (AU-FMP) has not received as much attention.
This briefing note analyses the links between the AfCFTA and AU-FMP and the free movement protocol’s role in facilitating labour mobility, with a view to enhancing intra-African trade and economic integration. It provides insights on the mobility-related challenges and opportunities that have been created by the AfCFTA, as well as recommendations on how to strengthen the implementation of labour mobility-related aspects of the AU-FMP and the AfCFTA.
African Export-Import Bank (Afreximbank) on 15 December 2022 in Cairo operationally launched the Afreximbank TRADAR Club, a prestigious member-driven network aimed at empowering international businesses and executives to transform trade and investments in Africa through trusted trade intelligence and advisory services. According to Afreximbank, TRADAR Club will deliver innovative digital tools and networking opportunities, helping members to discover new markets; grow their business; save time; access dedicated expert support; post and respond to new business opportunities; network; meet business/trading partners; and more.
Afreximbank described TRADAR Club as the primary gateway through which exporters, importers and investors will access curated trade intelligence and advisory services to support their market expansion decisions and network with other businesses.
The operational launch event featured a high-level panel discussion on ‘Why better African trade data is needed to deliver enhanced decision making and growth for businesses.’
The African Development Bank Group has formally introduced its new initiative that will join hands with the African Union to boost Africa’s capacity to produce drugs, vaccines, diagnostics, and therapeutics all along the value chain, to help build its pharmaceutical sector.
The African Pharmaceutical Technology Foundation (APTF) was the focus of a forum hosted by the African Development Bank under the theme: “Technology Access for Pharmaceutical Manufacturing: The African Pharmaceutical Technology Foundation.” The event was part of the 2nd International Conference on Public Health in Africa in Kigali, Rwanda, on 14 December.
According to the African Development Bank, the continent imports more than 70% of the medicines it needs at the cost of $14 billion annually. Changing the game to enable African countries develop their capacity to manufacture pharmaceutical products has public health, strategic and economic rationales.
In late 2019, Africa Oil Corp president and CEO Keith Hill told Petroleum Economist that, given Africa’s unproven oil and gas basins, the continent was probably ‘the greatest frontier’, with outstanding opportunities for exploration, production and development companies, including independents
Three years later, the organisation is driving oil and gas exploration in the nation. It is part of a growing trend of independent oil and gas companies recognising the tremendous promise of the underexplored continent, finding ways to thrive, and making a positive impact.
As David Christianson so eloquently put it in a recent blog for Trade Law Centre (tralac), a South Africa-based think tank, “Africa’s gas future is floating offshore”. Floating liquified natural gas (FLNG) units are an ideal way to capitalise on Africa’s abundant natural gas resources. They can be deployed rapidly and more affordably than onshore LNG trains, creating a practical pathway to gas monetisation. London-headquartered independent, Perenco, which has operated in Cameroon for nearly 30 years, is capitalising on these opportunities.
African Export-Import Bank (Afreximbank) has signed a Memorandum of Understanding (MoU) with the Export-Import Bank of the United States (U.S. EXIM) to enhance trade between Africa and the United States of America as well as expand commercial engagements of the African Diaspora community in the U.S. towards facilitating transactions critical to the
Exim President and Chair Reta Jo Lewis signed the agreement with the heads of the African Export-Import Bank, Africa Finance Corporation, and Africa50 at the three-day US-Africa Leaders Forum convened by the Biden Administration on 13 December 2022. During the event, African Development Bank Group Senior Director Chinelo Anohu, who heads the Africa Investment Forum, built on the momentum of the 2022 Africa Investment Forum Market Days – which drew $31 billion of investment interest – meeting with business leaders to explore further investment opportunities to close Africa’s infrastructure gap.
The US-Africa Leaders Summit took place from December 13-15, 2022 in Washington DC, and featured top-level government-to-government talks, private sector engagements, and resulted in a number of trade-related outcomes pointing to enhanced trade and investment ties between the United States and African countries. While not explicitly addressed in the public portions of the meetings, China’s massive investment in African industrial and digital infrastructure provided pointed subtext to the United States’ economic overtures.
The private sector-focused segment of the Summit – the US-Africa Business Forum – was marked by announcements of new investments and initiatives totaling US $15.7 billion.
On December 14, USTR Tai signed a MOU with the AfCFTA Secretariat. The three-year MOU establishes an annual high-level engagement between the United States and the AfCFTA Secretariat, as well as regular meetings of technical working groups “to exchange information on best practices and have an open dialogue to enhance the relationship between the United States and the AfCFTA Secretariat, the AfCFTA member states, and related stakeholders.” The MOU states that areas of cooperation “may include” trade facilitation, digital trade, and regional value chain development.
In her capacity as chair of the Trade Negotiations Committee, the Director-General expressed disappointment with the lack of progress made since the 12th Ministerial Conference (MC12) in June, where members achieved breakthroughs on issues such as fisheries subsidies, WTO response to emergencies — including a waiver of certain requirements concerning compulsory licensing for COVID-19 vaccines, food security and WTO reform.
While MC12 remains a highlight of the year, “we’ve not done much serious negotiating in the past six months,” she told members. “We have a lot of ground to cover and will have to intensify our efforts when we return from the winter break”.
“During these difficult times of economic slowdown, food and energy crises, climate change, and persistent development challenges, the WTO cannot afford to stand aside,” she told members. “We must begin to lay the ground for concrete results before, at and beyond MC13.”
Food prices have hit record levels in 2022, creating challenges for food security worldwide, especially for people in the developing countries that import most of their food. An index published by the UN Food and Agriculture Organization (FAO) tracking the prices of the most traded food commodities remained at historically high levels in November (135.7 points) after reaching an all-time high in March (159.3 points).
Although the world has suffered food crises in the past, the current one, triggered by the COVID-19 pandemic and the war in Ukraine, is different, a new UNCTAD report says, because of a stronger US dollar. During past crises, the value of the US dollar fell as food prices climbed. Since the dollar is the main currency for international trade, its devaluation lowered the final price in local currency that people paid for imported food. This provided some relief.
The UNCTAD report says the combination of high food prices and a strong dollar is a “double burden” that many people in developing countries cannot bear, leaving them to face even harder choices to make ends meet – such as skipping meals or taking a child out of school. “For net food-importing developing countries, the international market is a lifeline,” the report says. “As it becomes more expensive to buy US dollars, it also becomes harder for these countries to prevent millions of people from going hungry.”
Global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine, according to the World Bank’s latest Global Economic Prospects report.
Given fragile economic conditions, any new adverse development—such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions—could push the global economy into recession. This would mark the first time in more than 80 years that two global recessions have occurred within the same decade.
In Sub-Saharan Africa—which accounts for about 60% of the world’s extreme poor—growth in per capita income over 2023-24 is expected to average just 1.2%, a rate that could cause poverty rates to rise, not fall.
Strong headwinds suggest that 2023 will be a difficult year for global economic development. Avoiding setbacks will be at least as important as making renewed progress. Developing countries will continue to face overlapping crises with little to no fiscal space for addressing them. In the short term, debt and humanitarian distress are pressing threats, while in the longer term, climate action and
“Only renewables can safeguard our future, close the energy access gap, stabilize prices and ensure energy security,” he said in a video message to the 13th Session of the International Renewable Energy Agency (IRENA) Assembly, taking place this weekend in Abu Dhabi, United Arab Emirates.
The world is still addicted to fossil fuels and the goal of limiting global temperature rise to 1.5 degrees Celsius is fast slipping out of reach, the UN chief warned. “Under current policies, we are headed for 2.8 degrees of global warming by the end of the century. The consequences will be devastating. Several parts of our planet will be uninhabitable. And for many, this is a death sentence,” he said. Renewable energy sources currently account for about 30 per cent of global electricity.
His Five-point Energy Plan first calls for removing intellectual property barriers so that key renewable technologies, including energy storage, are treated as global public goods.
The Secretariat’s information note titled “Decarbonization standards and the iron and steel sector: how can the WTO support greater coherence?” indicates that more than 20 different standards and initiatives exist to support steel decarbonization efforts or are under development. This may create uncertainty for producers, increase transaction costs, and risk trade frictions. Further work is needed to enhance the alignment of standards, including by finding areas for further convergence on specific measurement methodologies, definitions and performance thresholds for decarbonization, the note states. It is also crucial to ensure that developing countries’ perspectives and challenges are considered and addressed.
Improved schedules of services commitments under the WTO’s General Agreement on Trade in Services were submitted for certification by 59 participants(1) in the initiative, accounting for 87 per cent of world services trade. The WTO membership has 45 days to review the improved schedules. The remaining 10 participants will aim to start their respective certification procedures as soon as possible.
“The launch of certification procedures for such a large number of participants is a real success,” said Jaime Coghi Arias of Costa Rica, the coordinator of the initiative. “It moves us one step closer to giving legal effect to a set of disciplines that will increase transparency and predictability in the regulation of services trade and remove red tape for our business communities. This will in particular help micro, small and medium-sized enterprises and women entrepreneurs.”
The global economy is expected to slow further in the coming year as the massive and historic energy shock triggered by Russia’s war of aggression against Ukraine continues to spur inflationary pressures, sapping confidence and household purchasing power and increasing risks worldwide, according to the OECD’s latest Economic Outlook.
The Outlook highlights the unusually imbalanced and fragile prospects for the global economy over the next two years. The global economy is projected to grow well below the outcomes expected before the war – at a modest 3.1% this year, before slowing to 2.2% in 2023 and recovering moderately to a still sub-par 2.7% pace in 2024.