tralac Daily News
South Africa is losing more than $62 billion a year because of illicit financial flows (IFFs), which could be used to fund the building of schools, hospitals and safer roads. This was highlighted at a conference on increased illegal trading in automotive components, at the Automechanika event in Johannesburg.
Tyre Import Association of South Africa (Tiasa) chairperson and MD of Treadzone Charl de Villiers said a pilot study by the United Nations Convention on Trade and Development (Unctad) focused on measuring tax and commercial IFFs, revealed that South Africa is losing out on $21.9 billion per year in inward flows and $40.9 billion in outward flows.
These inward flows are being lost because of misdeclarations (either on purpose or by mistake), undervaluation of invoices, tax evasion, round tripping and many other things, De Villiers told a conference hosted by the Tyre, Equipment, Parts Association (Tepa) at Automechanika last week.
“There is a gap in the port operations particularly on those two [issues on misdeclarations and audit/reviews of containers]. We have reported these items but we never see any traction. That means we are losing income from a country perspective, and we are also losing competitiveness together as local manufacturers and importers that are doing the right thing,” he added.
New report says localisation policy locking South Africa into ‘wrong path’ (Engineering News)
A new Centre for Development and Enterprise (CDE) report argues that the South African government’s policy of localisation is locking the country “into the wrong path” of rising protection and rising inefficiency. The report comes as the Department of Trade, Industry and Competition (dtic) continues to prioritise localisation as a central pillar in South Africa’s industrial policy and amid growing concern over what some are describing as the country’s premature de-industrialisation.
Government has responded with a series of initiatives, including a 2021 approach to the social partners represented in the National Economic Development and Labour Council with a call for a 20% reduction in nonfuel imports over a five-year period. In addition, the dtic has for some time been working across various sectors, from steel and automotive to renewable energy and clothing, to develop masterplans to identify opportunities for local industrial development.
Nevertheless, CDE executive director Ann Bernstein argues that, instead of compelling the local manufacture of products, government should be working to shape a business environment that attracts and rewards investment shaped by strong competitive pressures and which is more often export-oriented.
More on South Africa:
Auto sector should consider increased import substitution (Engineering News)
Kenya’s investment allure dips further in EAC region (People Daily)
Kenya has been ranked as the second most difficult country for businesses after South Sudan, according to the Ease of Doing Business in the East Africa Community (EAC) report by the East African Business Council, highlighting concerns about the nation’s business. The report shows that Kenya received a moderately low index score of 3.43, placing it at the sixth position out of the seven partner states surveyed. South Sudan, with a slightly higher index score of 3.5, was ranked seventh.
The report, which surveyed a total of 252 select companies in EAC between June 13 and July 21, 2023, places Rwanda as the best in terms of ease of doing business in the region, with a score of 2.08. It was followed by the Democratic Republic of Congo (DRC) with a score of 2.75.
This means Kenya, the region’s biggest economy, has slipped from the top two positions it held back in 2019 to the bloc’s new member, DRC, which joined in March 2022 and has since become an attractive destination for most companies, including Kenyan banks.
“Based on the analysis of the responses, companies from Trade in Goods and Trade in Service ranked the ease of doing business within their countries, notably Rwanda as Easy (Rank 2.08), DRC as Moderate (Rank 2.75), Uganda as Moderate (Rank 3.05), Burundi as Moderate (Rank 3.18), Tanzania as Moderate (Rank 3.32), and Kenya as Moderate (Rank 3.43),” reads the report in part.
More on Kenya:
The Minister of the newly created Marine and Blue Economy, Adegboyega Oyetola, has said the Lagos seaports are in dilapidation and called for urgent rehabilitation of the facilities.
Speaking in Lagos while on a tour of the Lagos Ports, Oyetola said that government will engage the terminal operators to see how the rehabilitation of the ports can be funded. The Minister also said that he will engage the Minister of Works on rehabilitating the port access roads which are also dilapidated.
“The infrastructure is almost collapsing from what I have seen... However, I am impressed with the management of the NPA (Nigerian Ports Authority) but we need to support them. I am looking forward to a situation where the terminal managers will be willing to contribute to the rehabilitation of the ports. So it is going to be a collaboration between the government and the terminal operators.
Lack of access to information on trade regulations, violence and harassment and lack of access to finance are hurting women and youth-led businesses in East African Community’s cross-border trade. This is according to the East African Women in Business Platform (EAWiBP).
Women cross-border traders also often face discrimination at the borders where they have high chances of being harassed by border officials, especially when they travel alone, with cases where they are charged higher fees than men. Among the biggest impediments however is lack of information they need to navigate the complex trade rules and regulations despite the existence of a Simplified Trade Regime (STR) on customs procedures and documentation, leading to delays and penalties.
According to TradeMark, the majority of the traders are unaware of Simplified Trade Regime (STR) on customs procedures and documentation, hence avoiding formal border posts leading to a higher cost of business.
DRC makes slow steps in integrating with EAC states (The East African)
Joint Statement from the US and the EU on Support for Angola, Zambia and the Democratic Republic of the Congo’s commitment to Further Develop the Lobito Corridor and the U.S.-EU Launch of a Greenfield Rail Line Feasibility Study (The White House)
On the margins of the Partnership for Global Infrastructure and Investment (PGII) event at the G20 in India, the United States of America and the European Union welcomed the recent commitment by Angola, Zambia and the Democratic Republic of the Congo to develop the Lobito Corridor connecting southern Democratic Republic of the Congo and northwestern Zambia to regional and global trade markets via the Port of Lobito in Angola.
To accelerate this work in partnership with the three African countries, the European Union and the United States are teaming up to support the development of the Corridor, including by launching feasibility studies for a new greenfield rail line expansion between Zambia and Angola. This represents a powerful evolution of the Partnership element of the Partnership for Global Infrastructure and Investment with a collaborative approach that could be replicated in other strategic corridors around the world.
The U.S.-EU partnership will upgrade critical infrastructure across sub-Saharan Africa to unlock the enormous potential of this region. We are excited to join forces to generate economic benefits with our partners in Angola, the Democratic Republic of the Congo and Zambia.
Afreximbank Earmarks $41bn To Finance Local Vehicle Manufacturers, Support Intra-African Trade (The Whistler Newspaper)
The African Export-Import Bank (Afreximbank) has earmarked $1bn to fund local vehicle manufacturers in the continent. The bank has also doubled its financing for intra-African trade from $20bn to $40bn, the Executive Vice President of intra-African Trade, Afreximbank, Kanayo Awani said.
Awani made the disclosure on Monday at IATF 2023 Business Road Show in Lagos with the theme, ‘Positioning Nigeria to Harness the Opportunities at the African Continental Free Trade Area,’ monitored by THE WHISTLER. The road show aims at creating awareness for Nigerian businesses ahead of the IATF – Intra-African Trade Fair 2023 in Cairo, Egypt between November 9-15, 2023.
The IATF is one of the tools adopted by Afreximbank to bridge issues like information asymmetry among companies in the continent. Businesses in the continent remain unaware of the opportunities that exists in each country but more aware of opportunities available in other continents, she said.
She said, “If I were to ask a Ghanian footware manufacturer to source leather, he is most likely to look to New Zealand and South America for supply yet, countries like Nigeria, Ethiopia, Burundi and Sudan have the supply capacity to meet this demand."
Businesses have flagged lengthy border checks and varied quality standards as the biggest threats to Africa’s dream of a seamless market. Companies in countries participating in the African Union-backed pilot initiative to accelerate trade on the continent said it takes several months to get some of the approvals needed.
The African Continental Free Trade Area (AfCFTA) secretariat launched a year-long Guided Trade Initiative (GTI) in October 2022 aimed at stress-testing operational, institutional, legal and trade policy environment under the envisaged world’s largest single market of about 1.4 billion people. The programme covers trade in tens of products like tea, coffee, tiles, batteries, processed meat, sugar, pasta, glucose, dried fruits and sisal fibre
Traders, however, say bureaucratic red tape at border posts are erecting bigger bumps for the free movement of goods than the weak transport and logistics capacity. Africa’s underdeveloped transport networks have been blamed for the rising cost of goods and services by as much as 40 per cent, rendering trade within the continent uncompetitive compared with Europe and other regions.
Digital solutions for safer African roads (The Independent Uganda)
Can AI address Africa’s agricultural trade deficit? (African Business)
African leaders bank on carbon taxes to raise climate finance (The East African)
African leaders are eyeing a new “sin” tax on global emitters as a way of raising money from those who pollute the environment. The Nairobi Declaration – the culmination of the three-day Africa Climate Summit held this week in Kenya – called on the global community to support Africa’s push for carbon taxation to “provide affordable and accessible finance for climate positive investments at scale.”
The leaders also demanded that other world leaders implement “a mix of measures that elevate Africa’s share of carbon markets” in similar efforts to improve the bloc’s access to climate finance. Kenyan President William Ruto said both carbon taxes and carbon credits have the potential of providing the continent with the resources they need for climate change mitigation but are still underdeveloped and untapped.
“To be able to unlock the resources that we need to be able to drive these new investment and financing opportunities, especially for green energy, we believe it is time to have a conversation about carbon tax,” President Ruto said.
Africa’s vast mineral resources remain untapped (The Standard)
Africa, the world’s richest region for renewable energy potential has a vast untapped resource to drive sustainable development and industrialization. The Africa Climate Summit 2023 served as a platform for fruitful discussions on the Africa Green Minerals Strategy (AGMS) and its potential to reshape the continent’s economic landscape.
With the urgent need to industrialise and enhance economy-wide productivity, reliable energy is paramount, especially for priorities like food and water security. To meet these demands, Africa must diversify its energy sources, with a growing focus on renewable energy alongside fossil fuels, particularly natural gas.
Speaking at a side event during the summit, Paul Jourdan, emphasized AGMS’s alignment with key frameworks such as the Africa Mining Vision (AU 2009), the Africa Commodity Strategy (AU 2021), and the African Continental Free Trade Area (AfCFTA). He highlighted the importance of “green” minerals, including aluminium, chromium, cobalt, copper, graphite, iron–steel, lithium, manganese, nickel, Platinum Group Metals (PGMs), rare earth elements (REEs), vanadium, and zinc, which are central to AGMS.
The 2023 Africa Food Systems Summit held recently in Dar es Salam has called on African leaders to build better food systems and promote food sovereignty, with youth and women at the centre. On the sidelines of Africa’s annual agriculture summit, the African Development Bank Group hosted a food sovereignty and resilience event. This follows the Dakar 2 Food Summit held in Dakar, Senegal early this year.
Dr. Martin Fregene, the African Development Bank’s Director of Agriculture and Agro-Industrialisation, said: “The 2023 Africa Food Systems Forum is a defining moment for highlighting and unlocking innovation. It allows us to take stock of the political, policy and financial commitments African countries have made to achieve productive, nutritious, inclusive, resilient, and sustainable food systems in the continent.”
AU ropes debt management into Agenda 2063 (The East African)
The African Union is pitching what it touts as a local solution to survive mounting debt for members. And the proposals could be tabled to member states as soon as the next summit, signaling the latest concerns about the potential of debt to drain economic targets. The revelations emerged last week at a conference on debt in Dakar, Senegal where officials explained the policy direction.
“As the AUC, we are setting up the African Debt Mechanism that will be adopted next year which will be a platform that will allow us to have information on debt and also to plan on how countries will engage in debt negotiations before getting the loans,” said Dr Olomo at the ‘African Conference on Debt and Development’, an annual forum.
While the decision to establish some form of debt observatory was announced earlier this year, African Union members are expected to adopt it from January 2024 to be in line with AU’s Agenda 2063. “It will also guide African countries on how they are going to engage in discussions when it comes to debt treatment. The AUC is playing that economic role of bringing together African countries to address issues related to debt,” said Dr Patrick Dzana Olomo, the Policy Officer for Investment and Resource Mobilisation, Economic Affairs Department of the African Union Commission.
A series of coups in Western Africa is putting the unity and capability of the Economic Community of West African States, ECOWAS, to the test as it seeks to restore civilian rule in countries such as Burkina Faso, Guinea, Mali and Niger. These four nations have joined forces to resist economic sanctions and potential military action by the other 11 countries within the bloc.
On July 26, the military junta in Niger placed President Mohamed Bazoum under house arrest, accusing his administration of mismanaging the country’s resources and allowing the security situation to deteriorate. In response, ECOWAS imposed trade sanctions on Niger and even threatened military intervention.
But the ongoing political and security crises in Niger, as well as in Burkina Faso, Guinea and Mali, are proving to be challenging for the other ECOWAS member countries.
Deputy Director-General Angela Ellard discussed the important role of international trade in addressing global crises at the Vilnius Conference in Lithuania on 8 September. She also stressed the need to reform the WTO to ensure it continues to be fit for purpose and underlined the importance of achieving outcomes at the WTO’s 13th Ministerial Conference to take place in Abu Dhabi next February.
“Our economists estimate that if the world were to decouple, real GDP loss would be at least 5% on average, and more for developing and least developed countries. And the opportunity cost of decoupling as opposed to further economic liberalization is 8.7% of real income at the global level. By contrast, reinvesting in multilateral trade liberalization can create significant income gains compared to fragmented trade scenarios. Deconcentrated and more diversified global chains, and those that include countries and communities that are now at the margins of the global economy, are key to better resilience, especially in times of crisis. In short, the world needs to re-globalize instead of de-globalizing.
At the WTO, we have a vision for such re-globalization: it will be green, digital, services-based, and inclusive. Last year, global trade in services grew by 15 per cent and reached $6.8 trillion, or just over one-fifth of total world trade in both goods and services. We estimate that the share of services in world trade grow further to reach one-third by 2040.”
G20’s New Delhi Declaration is a successful balancing act (Peoples Dispatch)
The 18th Summit of G20 (Group of 20) concluded in New Delhi with the adoption of a joint declaration on Sunday, September 10. The declaration reiterated the G20’s commitment to UN Sustainable Development Goals and raised the need to reform global decision-making with the inclusion of more voices from the Global South.
Host nation India was able to pull together all the participants to agree to the New Delhi declaration, despite earlier speculation that the war in Ukraine may play a spoiler. Russian foreign minister, Sergey Lavrov, who attended the summit instead of president Vladimir Putin, praised New Delhi for preventing the West from pushing its agenda and “politicizing” the forum at the cost of the Global South on many issues including the war in Ukraine. The declaration omitted the use of the word aggression in the context of the Ukraine war, which had been a major point of contention.
The declaration reiterated that the G20 is the “premium forum for international economic cooperation” and not “the platform to resolve geopolitical and security issues” while acknowledging the impact of these issues on the economy. The attempt by the West to use the G20 platform to push its agenda on geopolitical issues has often been criticized by some members of the G20.
Noting that “no country should have to choose between fighting poverty and fighting for our planet” the declaration pressed for greater cooperation to tackle the issues related to climate change and to ensure “sustainable, inclusive and just transitions” in the world. The declaration underlined the need to have increased efforts and financing to achieve the Paris Agreement to tackle the rise in global temperature and other climate issues. The G20 agreed to take steps to limit the rise of temperature to 1.5 degree Celsius by 2030 but rejected any push to have a time-bound phasing of fossil fuels as demanded by some countries and the UN earlier.
India’s G20 Presidency opens up trade opportunities to African Union as a permanent member (The Sunday Guardian Live)
India’s G20 Presidency on Saturday witnessed a transformative change with the induction of the African Union as a permanent member of the grouping, a move which will strengthen the G20 and also strengthen the voice of the Global South, of which India has been a staunch advocate. “The African Union has been made a permanent member of the Group of 20 countries,” Prime Minister Narendra Modi said on Saturday in opening remarks at the 18th G20 Leaders’ Summit, as he invited the AU, represented by Chairperson Azali Assouman, to take a seat at the table of G20 leaders as a permanent member.
Bringing in the African Union—a bloc of 55 countries from the African continent that was launched in 2002—as a member of G20, has been a key India objective to fructify during the ongoing G20 summit. In June 2023, Modi said that he had written to G20 counterparts to provide the African Union with full membership at this G20 Summit.
The two partners are opportunely placed with India committed to deepening trade and investments with Africa and increasing knowledge and technology transfer with the region. The India-Africa trade volume that stood at nearly USD 100 billion in 2022-23, has the capacity to go beyond doubling the trade volume to USD 200 billion by 2030, considering that both regions together have 3 billion population with very favourable demographics.
The induction of AU in the G20 comes amidst implementation of the Africa Continental Free Trade Area (AfCFTA) agreement, which complemented with the strong transportation and logistics networks, will help boost bilateral trade flows between the two sides.
Markus Engels, Secretary General of the Global Solutions Initiative stated: “As the focus of the G20 shifts to the Global South, we need to ensure that southern voices, perspectives and issues are right at the top of the global agenda – especially for problems like climate change that disproportionately affect nations from the Global South. Both regions need to work together if we want to have an impact.” Furthermore, with India, Brazil and South Africa at the helm of the G20 from 2023 to 2025, it will also be crucial to build bridges between the G7 and G20, Engels adds.
10 benefits for African Union as a member of the G20 (The New Times)