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Time to make One Stop Border Posts a reality
Traders enjoying facilities, but Partner States challenged to operationalise regional law once in effect
Citizens of the region are set to benefit a great deal through facilities offered by the One Stop Border Posts (OSBPs) in the EAC Partner States. Already where the facilities are running bilaterally, there is facilitation of free movement of persons and the enhancement of trade between the Partner States, an EALA report adopted by the House states.
In the regard, regional legislators are calling for the fast-tracking of all remaining works of the OSBPs to allow its implementation for further integration.
At the same time, it is key for the assent of the OSBP Bill, 2013, in the Partner States to be finalised to give it legal effect in the entire region. It has been stated that Partner States are implementing the OSBP Initiatives bilaterally as they await for completion of the Assent process. At the moment, the Bill which was introduced by the Council of Ministers is in Rwanda for the final assent signature. Already, the Republics of Burundi, Kenya, Tanzania and Uganda have assented to the Bill.
The recommendations are contained in a report of the Communication Trade and Investments (CTI) on the OSBPs in EAC Partner States debated and passed by the House. The report was presented to the House by Hon. Nancy Abisai on behalf of the Committees Chair, Hon. Mukasa Mbidde.
EALA Members undertook an On-Spot Assessment on the One Stop Border Posts in EAC Partner States in the months of April and September 2015. Phase one of the assessment covered OSBPs of Mutukula (Uganda/Tanzania), Mirama Hill/Kagitumba (Uganda/Rwanda) and Rusumo (Rwanda/Tanzania) on 8th to 11th April 2015. The second phase covered Lungalunga/HoroHoro (Kenya/Tanzania), Taveta/Holili (Kenya/Tanzania) and Namanga (Tanzania/Kenya) from 30th September to 3rd October 2015.
The objectives of the One–Spot assessment was to find out the status of implementation of the OSBP initiative project and its effect on the movement of people and the EAC business environment. It also set to interact with stakeholders and identify opportunities and challenges affecting the implementation of effective OSBPs and to come up with relevant recommendations.
Stakeholders who participated in the On-Spot Assessments included Revenue Authorities, Immigration, Bureau of Standards, Police, Clearing and Forwarding Agents, and Traders. Others were Transporters, Local Authorities and Development Partners as well as officials from the EAC Secretariat.
One Stop Border Posts lessen days and facilitate inter-regional and international transport and road transit. According to analysts, when exiting one country and entering another, OSBPs combine two stops into one.
During the meetings, Members were informed that the construction of OSBPs were delayed at the Mutukula (Tanzania side) due to late handover of the site, power outages and floods among others. Mutukula on the Uganda side also had delays occasioned by re-designing challenges, delays in relocation of police posts occupying the area and delay in release of funds among others.
The OSBP on Mirama Hills, which was financed by TradeMark East Africa to the tune of USD 7.8 Million was however completed in time as was the facility at Kagitumba, Rwanda/Uganda border.
Construction at Rusumo border is expected to be concluded in time in December 2015. In Namanga, the Report indicates that construction on the Tanzania side has been completed even though not formally handed over due to a number of outstanding issues. On the Kenya side, a number of challenges continue to hamper the completion including erratic power supply, lack of drive through scanners for goods carrying vehicles and funding shortages.
Generally on all borders, there is limited knowledge on borders with regards to OSBPs, lack of operating manuals and inadequate water supply. In its findings, the report underscores training and sensitisation programs and the need for teamwork.
At debate, Hon. Shyrose Bhanji lamented that implementation of the decisions of the House were overlooked. “I had hoped to hear there is 100% implementation of the OSBPs. The reasons given for the delay are not good. Where is the problem, Hon Speaker,” she posed. “The process of getting the Bill has been costly. It is important that it is effected”, she said.
Hon. Straton Ndikuryayo said the Bill was key in ensuring trade facilitation. Hon. Bernard Mulengani said various basic amenities including school, water and housing were lacking and this may have impact on enhancing OSBPs. He further said Partner States were managing OSBPs on bilateral agreements and there was need to address the matter.
Hon. Hafsa Mossi rooted for awareness creation and requested Investment authorities should avail information on investment opportunities at the border. She further called for the harmonisation of the time zones between the Partner States. At the moment, Rwanda and Burundi are one hour in the time zone behind Kenya, Uganda and the United Republic of Tanzania.
The Secretary-General of the EAC, Amb. Dr Richard Sezibera mentioned that the EAC Summit of EAC Heads of State was keen to assent to the Bills more efficiently. “In the recent past, they have assented to Bills including the EAC HIV and AIDS Management Act, 2012, EAC Conflict Management Act, 2012, EAC Elections Act, 2012 and the EAC Community Emblems (Amendment) Act, 2008. Others are the Customs Management Amendment Act, 2012 and the EAC Supplementary Act, 2012,” he remarked.
The Secretary-General reiterated that the EAC OSBP Bill and the Vehicle Load Bill were currently in Rwanda on the last stop and that the process of assent was on.
Hon. Sara Bonaya noted that the issue of ownership of land was necessary as was the standard of optimal parcels of land for future expansion. Others who supported the report were Hon. Taslima Twaha, Hon. Dr James Ndahiro, Hon. Pierre Celestin Rwigema and Hon. Dr Kessy Nderakindo.
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AfDB Transport Forum focuses on sustainable solutions for transport and integration on the continent
The first-ever African Development Bank Transport Forum (ATF) opened Thursday, November 26 at the Bank’s headquarters in Abidjan, Côte d’Ivoire, with lively debates on how to achieve sustainable solutions to the continent’s transport and integration challenges.
Opening the plenary session of the ATF, Bank Group Vice-President, Infrastructure, Private Sector and Regional Integration, Solomon Asamoah, drew a picture of Africa’s infrastructure. He highlighted the continental unprecedented economic growth and its upward movement, but noted that it needs appropriate policies to fix its transportation problems.
“Africa is a continent with a huge number of landlocked countries for which access to the world economy is vital, but the current transport infrastructure supply will not be sufficient to meet the demand; both in terms of quantity and quality,” he said, adding that “this situation would continue to negatively impact the continent’s efforts to achieve the desired levels of socio-economic growth and to ensure social inclusiveness.”
For Vice-President Asamoah, the challenge is not only financial: the private sector’s full participation is central. He stressed the African Development Bank’s leading role alongside other international development institutions in supporting African countries in their efforts to mobilize resources and scale up investments in transport infrastructure. However, the financing gap remains huge and Official Development Assistance (ODA) alone is not sufficient to fill the gap. He also urged the experts present at the Forum to shape future policies and programs for developing sustainable transportation in an integrated Africa. “Without appropriate policies, no amount of resources will be enough to fix Africa’s transportation problem,” he said.
Asamoah underscored the Bank’s commitment to the overall development of transport infrastructure, and its promotion of sustainable transport and regional integration. He also reiterated the institution’s interest in promoting public-private partnerships and the harmonization of national legislation that can serve as a catalyst for sustainable transport development in the region.
Governments and transport sector operators must work together
The social and economic importance of transport was also on the agenda, at the first panel discussion focusing on “Transport development and emerging challenges in Africa.” The role of innovation in commercial road, railway, air freight and passenger transport, and how governments and airline companies can harmonize their practices and services delivered to enable Africans to travel safely in functional airports.
During that session, Ivorian Transport Minister Gaoussou Touré; Malian Equipment and Transport Minister, Mamadou Hachim Koumaré; European Commission International Cooperation and Development’s Paolo Ciccarelli; International Air Transport Association (IATA) Vice-President, Raphael Kuuchi; and Air Côte d’Ivoire’s CEO, René Décurey, discussed the current situation in Africa and the international road transport market. They all highlighted the role of road infrastructure in Africa’s socioeconomic development.
The panelists pinpointed that despite the opening up of African skies, the continent does not see many companies or competition, as taxes, fares and fuel costs are high in Africa. Capacity building for actors and operators in the transport sectors was also stressed as a key element for sustainable development and integration.
Government officials and airline operators underlined opportunities for developing transport in Africa and potential benefits from the regional integration, but underscored the need for strengthened cooperation and vigorous actions. For African air transport to be competitive, they said, there is a need for adequately investing in transport infrastructure, cancelling the monopoly of airport service providers, reducing fuel prices and taxes, as well as fares and charges.
Movement of goods and people
The lack of appropriate infrastructure and the enforcement of regulatory barriers are such impediments to movement of goods and people on the continent that it is often easier for African countries to trade with the rest of the world than it is for them to trade with their African neighbours.
The AfDB Transport Forum is expected to allow transportation experts at the Bank and their partners and counterparts in the public and private sectors to share best practices and experiences, promote research and development and stimulate continental business and professional networking.
The meeting, which concludes Friday, brought together high-level government officials, experts, development partners, international organizations, private sector, academia, NGOs and other selected shareholders.
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New report reveals Commonwealth edge on trade
Bilateral trade costs between Commonwealth countries are on average around a fifth lower than between other trading partners, according to a major report by the Commonwealth Secretariat.
The report, which was released ahead of the Commonwealth Heads of Government Meeting in Malta, provides a detailed assessment of Commonwealth trading patterns and prospects.
“Our flagship report offers new and valuable perspectives on Commonwealth trade in a global context. We have demonstrated that a Commonwealth connection makes a difference from a trade perspective and we have also suggested policy measures that can help members exploit the huge potential to expand their trade,” said Kamalesh Sharma, Commonwealth Secretary-General.
Trade within the Commonwealth is already substantial and is predicted to surpass $1 trillion by 2020. When bilateral partners are both Commonwealth members, they tend to trade 20 per cent more, save around 19 per cent in costs and generate 10 per cent more foreign direct investment inflows. Evidence also suggests that hundreds of billions of dollars of intra-Commonwealth trade has yet to be exploited, particularly through trade with developing countries.
Although not a trading bloc, the Commonwealth’s favourable trading environment can be attributed to its unique nature: a diverse grouping of 53 countries with shared historical ties, predominant use of one language, similar legal and administrative systems and large, dynamic diaspora networks. The report, The Commonwealth in the Unfolding Global Trade Landscape, highlights the value of membership.
“The Commonwealth advantage is real, which is clearly demonstrated by the evidence in the report. At the same time, it reveals concerns for our small and vulnerable members who are not doing as well. Our members will be able to use this report to help identify the key drivers of Commonwealth trade and the key capacity-building requirements,” said Deodat Maharaj, Commonwealth Deputy Secretary-General.
For many Commonwealth members, particularly small and developing countries, effective participation in world trade continues to be one of the primary vehicles for driving economic growth and realising development objectives. The report examines trade-related challenges in implementing the Sustainable Development Goals adopted by the global community last September. International trade, a cross-cutting issue, is set to play an important role in their fulfilment.
The report sets out five priorities to enhance the trade performance of small and developing countries. They are building productive capacity, managing trade policy and negotiations, tackling implementation gaps, promoting private sector development and establishing a coherent global trade support architecture.
“Using international trade to transform productive capacity is particularly important. While trade preferences have played an important role in helping develop trade capacity, these mechanisms have been eroded. In the report, we recommend Commonwealth countries make the most of them before they disappear. This should be pursued together with trade promotion policies to attract investment and diversify exports,” said Mohammad Razzaque, Acting Director of the Commonwealth Secretariat’s Trade Division.
Thirty-six Commonwealth countries have seen slower economic growth overall since the global financial crisis of 2008. The report explores the relationship between the growth of trade and gross domestic product (GDP) across the Commonwealth to highlight challenges and prospects.
Small states, which make up 31 of the Commonwealth’s 53 members, have suffered a much weaker relationship between the growth of GDP and trade. Competitive disadvantages such as small domestic markets, remote locations that lead to higher trading costs and erosion of trade preferences have resulted in their declining share in global trade. Findings suggest that more effective use of resources, such as foreign direct investment and greater involvement of the private sector, is needed to help capacity-constrained countries improve their trade performance. Aid for trade remains important.
The Prime Minister of Malta, Joseph Muscat and Commonwealth Secretary-General, Kamalesh Sharma will launch the report on 26 November, a day ahead of the biennial Commonwealth Heads of Government Meeting taking place in Malta. They will also announce the launch of the Commonwealth Trade Financing Facility – a guarantee fund set up to give small and developing countries access to trade finance.
» Read a related tralac Discussion here.
Reproduced with permission from The Commonwealth Secretariat.
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tralac’s Daily News selection: 26 November 2015
The selection: Thursday, 26 November
The Pan African Investment Code: meeting to review draft study (AU)
The primary objective of the study is to create a conducive environment to attract greater flows of investments into Africa and facilitate intra-African cross-border investments which are critical to the success of economic integration in the continent. It takes cognizance of the critical role that investment plays to enable the attainment of high levels of economic growth, wealth creation, poverty alleviation as well as enhancing the integration agenda. The specific objective of the study is to elaborate a Pan-African Investment Code model based on international best practices in order to establish the appropriate business climate which would stimulate more investments at the national, regional and continental levels, and develop a roadmap and strategy on how AU MS can adopt this model to suit their respective local situations. The final version of the PAIC will be submitted to the Special Ministerial Technical Committee on Economy, Finance and Integration Matters in March 2016 for consideration and adoption before its submission to the AU Heads of State and Government for its final adoption and subsequent implementation
The expansion of regional supermarket chains: changing models of retailing and the implications for local supplier capabilities in SA, Botswana, Zambia, Zimbabwe (UNU-WIDER)
Over the past two decades, southern African countries have experienced rapid growth in the number and spread of supermarkets. Several factors have been attributed to this growth, including increasing urbanization, increased per capita income, the rise of the middle class, economies of scale and scope, and transport economies. The format and location of supermarkets have also evolved over the years, moving away from serving the traditional high-end affluent consumers in urban areas to successfully penetrating new markets in low-income rural communities, including through more efficient procurement and distribution systems. This spread into rural areas and the rapid proliferation of supermarkets generally has given rise to some important consequences for competitive rivalry between grocery retail outlets, as well as for local suppliers who want to participate in supermarket value chains in the southern African region. [The authors: Reena das Nair, Shingie Chisoro]
Regional growth and integration in Southern Africa: Channing Arndt explains the UNU-WIDER project (video)
Nigerian import curbs hit SA groups (Business Day)
Sales at Mr Price’s Nigerian stores have slowed after the country’s central bank imposed foreign exchange restrictions to stem the flow of dollars out of the country, resulting in delays of merchandise being imported into the country. "Although these are expected to be temporary, the company’s interactions with regulators are focused on urgently re-enabling supply," Mr Price said last week, when it reported its first-half earnings. The group has four stores in Nigeria.
Buhari will decide on MTN's N1.04trn fine, says Minister (Vanguard)
Gavin Keeton: 'Lack of local competition undermines exports' (Business Day)
No more dollars for Angola (Business Report)
Bank of America, which provides most of the dollar notes dispensed by banks in Angola, is halting the supply of greenbacks to the African country, according to two people with knowledge of the matter. The move is already constraining supplies of dollars, used by residents of Africa’s second-largest oil producer for purchases of cars and other imported goods. Banks are limiting the amount of dollars customers can withdraw and encouraging them to use euros and South African or Chinese currency instead. Moneychangers on the streets of the capital, Luanda, say dollars are scarce and are asking almost 20% more in exchange for kwanzas than two months ago, when they have any to sell.
Africa Visa Openness Index: update, intimation of findings (AfDB)
The African Development Bank has moved ahead on finalizing the first Africa Visa Openness Index. The Index ranks African countries on the level of openness/restrictiveness of their visa regimes. Its aim is to drive visa policy reforms across Africa, simplify visa application procedures and encourage positive reciprocity. Facilitating the freer movement of people is anchored in the African Union’s Agenda 2063. The AU’s vision is matched by a call to action to introduce an African Passport and abolish visa requirements for all African citizens in all African countries by 2018. Now, the recent Valletta Summit of the European Union and a call from African leaders has renewed momentum to support migration initiatives across the continent. The Africa Visa Openness Index and documentary will be launched at the African Union Summit in January 2016.
AU, RECs discuss border management (COMESA)
Representatives from Regional Economic Communities and the African Union Border Programme met in Zambia to discuss Border Management in Africa. This was the second meeting of the group and was hosted at the COMESA Secretariat and supported by the German Technical Cooperation Agency (GIZ). The overall objective of the meeting was for the RECs and AUC to coordinate, develop and advance their policies, initiatives and road-maps on border management and cross-border cooperation according the principles of subsidiarity, complementarity and comparative advantage. “COMESA has taken the lead in developing a number of policies to enhance cross border cooperation and border management,” Assistant Secretary General in charge of programmes Dr Kipyego Cheluget said during the official opening of the meeting. These include protocols on free movement and coherent legal migration policy in the COMESA region including the protocol on the gradual relaxation of Visas. So far three countries namely Mauritius, Rwanda and Seychelles have issued circulars relinquishing visa and visa fees for all COMESA nationals on official business.
Selected AUBP resources: African Union Border Programme, GIZ support to the African Union Border Programme, From borders to bridges: IPSS colloquium on African borders
South Africa: implementation of cabinet concessions on immigration regulations (GCIS)
African Population Conference: 'Demographic dividends in Africa - prospects, opportunities and challenges' (GCIS)
MPs endorse Rwanda's re-admission to ECCAS (New Times)
The Chamber of Deputies has passed a draft law that allows the government to ratify an agreement that re-admits the country to the Economic Community of Central African States. The law allowing the government to ratify the agreement that re-admits Rwanda to ECCAS now awaits Senate’s approval before it can be forwarded to the President for assent and subsequent ratification.
Least Developed Countries Report 2015 (UNCTAD)
The headline of the newly adopted 2030 Agenda for Sustainable Development and Sustainable Development Goalsis a global commitment to eradicate poverty by 2030. Nearly half the population of the 48 least developed countries (LDCs) – some 400 million people – remain in extreme poverty, compared with less than a quarter in any other developing country. The LDCs are thus the battleground on which the 2030 Agenda will be won or lost. This is where shortfalls from the SDG targets are greatest, where improvement has been slowest, and where the barriers to further progress are highest. UNCTAD’s Least Developed Countries Report 2015 therefore focuses on the transformation of rural economies.
Table of contents: The 2030 Agenda for Sustainable Development and the rural development imperative, Agricultural productivity: developments, determinants and impacts, Economic diversification, non-farm activities and rural transformation, Gender-based patterns and constraints in rural development, Transforming rural economies in the post-2015 era: a policy agenda
African poultry wrap: region a lucrative destination for exports (The Poultry Site)
African countries are increasingly becoming a lucrative destination for American and European poultry exports with top five producer Spain raising its exports to South Africa by a massive 1064%, as well as registering significant increases for other regional countries such as Benin, Togo and Gabon.
Mozambique: diversifying fish exports (UNCTAD)
The training and capacity building workshop (26-30 Nov) is part of UNCTAD's Project - Building the capacities of LDCs to upgrade and diversify their fish exports - which aims to upgrade the technical knowledge and expertise in beneficiary countries to overcome challenges posed by weak supply capacities and complex international food safety and quality standards on fish exports. Mozambique possesses vast fishery resources and a fisheries sector with a great potential to expand in both domestic and foreign markets. However, a broad range of demand and supply side constraints act as hindrance to the further development of the sector. The main demand side constrains include compliance to increasingly challenging and complex international standards of major fish importing economies.
Talks to restructure $850m 'tuna' bond rattle Mozambique (Bloomberg)
Egypt 'alarmed' at progress of Ethiopia's Renaissance dam construction (Ahram)
Egypt renewed its strong commitment to completing technical studies of the dam in a timely manner 'before it is too late,' Egyptian Spokesperson for the Renaissance Dam and advisor to the Minister of Water Resources Alaa Yassin said on Tuesday. Egypt highlighted the importance of the overdue technical studies and their political significance amid the "alarming" speed of construction.
Tenth round of tripartite talks on Ethiopian dam expected in end of November (Ahram)
China to offer zero-tariff treatment to seven African countries (China Daily)
China is to offer zero-tariff treatment to 97% of commodities from seven listed African countries and Nepal, starting from December 10, 2015, Customs Tariff Commission of the State Council announced recently. The African countries are: The Comoros; the Islamic Republic of Mauritania; Togo; Liberia; Rwanda; Angola, and Zambia.
Lina Benabdallah: 'Is one continent, one country a viable strategy for Africa-China relations?' (Africa is a Country)
Emerging Powers: FOCAC preview
Zambia: Chinese envoy hopes for stable kwacha (The Post)
Africa’s climate opportunity: adapting and thriving (AfDB)
Climate change poses a severe threat to Africa, but it also offers a huge opportunity, according to a new paper from the African Development Bank. The paper, Africa’s Climate Opportunity: Adapting and Thriving, explains how the COP21 climate talks in Paris in December can help Africa deal with the threat and seize the opportunity.
The unequal benefits of fuel subsidies revisited: evidence for developing countries (IMF)
Understanding who benefits from fuel price subsidies and the welfare impact of increasing fuel prices is key to designing, and gaining public support for, subsidy reform. This paper updates evidence for developing countries on the magnitude of the welfare impact of subsidy reform and its distribution across income groups, incorporating more recent studies and expanding the number of countries.
Zimbabwe: Chinamasa presents 2016 budget today (NewsDay)
Tanzania: Pressure mounting on JPM to form maritime ministry (IPPmedia)
Kenya: Quick construction of the SGR pushes up Budget deficit (Business Daily)
SADC, east Africa fight illegal timber trade (Southern Times)
Uganda: Maize grain standards worry farmers (The Observer)
Angola envisages relaunch of coffee production (AngolaPress)
Department for International Development’s settlement at the Spending Review 2015
Services in global value chains: manufacturing-related services (APEC)
India will be among top-100 in World Bank’s ease of doing business next year: Jaynat Sinha (Financial Express)
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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 300 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome. Richard Humphries (Email: This email address is being protected from spambots. You need JavaScript enabled to view it.; Twitter: @richardhumphri1)
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Report proposes solution to failure of rural development behind poverty-driven migration from world’s poorest countries
UNCTAD puts forward new road map for transforming rural economies and eradicating rural poverty
In a bold move, UNCTAD’s The Least Developed Countries Report, subtitled Transforming Rural Economies, presents a road map to address rural poverty, lack of progress in rural transformation and the root causes of migration within and from the least developed countries (LDCs).
The report also invokes the principle that “to will the ends is to will the means” in calling for donors to meet their long-standing commitment to provide 0.7 per cent of their gross national income in development aid. This will allow donors to make allocations in line with the LDC share of global needs to meet the recently adopted Sustainable Development Goals, and which would amount to a six-fold increase in aid to LDCs by 2030.
“In many least developed countries, migration is triggered by rural poverty, reflecting the lack of economic opportunities to earn even a minimally adequate income,” UNCTAD Secretary-General Mukhisa Kituyi said when launching the report. He added: “There can be no sustainable solution to the migration crisis without a poverty eradication-oriented approach to transforming rural economies in these countries.”
Poverty-driven rural-urban migration fuels excessive rates of urbanization in many LDCs. Further, many international migrants come from rural areas – either directly or after first migrating to towns and cities in their own countries. The report’s recommendations aspire to slow this process by focusing on rural development, which emphasizes poverty reduction and thus seeks to “create the conditions for a rural-urban migration process driven primarily by choice rather than necessity”.
Rural development is also critical to the Sustainable Development Goals, which aim to “leave no one behind”. The first Goal aims to end poverty in all forms by 2030. More than two thirds of people in LDCs live in rural areas, where poverty is twice as widespread as in towns and cities. The report indicates that the Goal of poverty eradication will require a doubling of the so-called “global consumption floor” (which is the estimated income per person in the poorest households in the world) in just 15 years, while it has been stagnating for 20-30 years (figure 1).
Shortfalls in rural areas are also much wider for other Goals such as universal access to water, sanitation, electricity and education. Meeting the Sustainable Development Goals in rural areas of LDCs will require a “quantum leap” in the rate of infrastructure investment: more than twice as many people would have to gain access to water each year than was the case in 2011-2012, four times as many to electricity, and six times as many to sanitation (figure 2).
Figure 1. The solid line indicates estimates of the “global consumption floor” – in effect, the income per person of the poorest household in the world – from 1981 until 2011, using two alternative baselines for the calculation ($1 per day and $1.25 per day). The dotted line shows the increase that would be needed to achieve Sustainable Development Goal target 1.1 of eradicating extreme poverty by 2030 – that is, raising the income of the poorest household to the $1.25-a-day poverty line – assuming that there has been no further reduction since 2011. The historical estimates are from Martin Ravallion, 2014, table 1, p. 32. Figure 2. The first two sets of columns show the annual increase in the number of people in rural areas of LDCs with access to water, electricity and sanitation during the 10 years before the adoption of the Millennium Development Goals in 2000, and from then until the latest available data in 2012. The final set of columns shows the annual increase that would be needed from now until 2030 if the Sustainable Development Goal targets of universal access to water, electricity and sanitation by 2030 are to be achieved, based on United Nations population projections. The data for 2000-2012 are from the World Bank’s World Development Indicators database. |
Poverty can only be eradicated if there are employment and economic opportunities for all, with incomes above the poverty line matched by productivity – a process the report terms “poverty-oriented structural transformation”. But, with current policy approaches, such a transformation has barely begun in most LDCs.
In order to achieve this in rural areas of LDCs, the report therefore proposes a new approach, articulated around a three-phase increase in infrastructure investment, and the combination of increasing agricultural productivity and promoting non-farm activities.
By using labour-based construction methods and buying construction materials locally, increased infrastructure investment boosts local demand for food and other consumption goods. The report argues that by helping local producers to respond to this increase in demand, Governments can initiate a virtuous circle of increasing incomes, demand and productivity. The key is to combine upgrading of small-scale agricultural production with the development of more productive non-farm activities, while maximizing the synergies between the two.
A wide-ranging policy chapter highlights a number of key policy priorities and principles to achieve this.
A critical issue is sequencing infrastructure investment and interventions to ensure that producers can respond effectively to changes in market conditions. The first phase focuses on increasing supply potential, combining infrastructure investment which mainly impacts productivity (for example. electrification) with measures to improve supply response. This prepares producers for a second phase focusing on increasing demand as well as productivity, through labour-based infrastructure investment. Together with support to agricultural upgrading and the development of dynamic non-farm enterprises, this prepares the ground for a third phase focused on “opening” by strengthening rural-urban transport linkages, allowing producers to survive the resulting exposure to wider competition and to exploit wider markets.
Financing increased infrastructure investment is crucial. The report calls for donors to fulfil their commitments on the quality of aid as well as its quantity. Furthermore, it proposes an increase in the target for aid to LDCs to a level reflecting their share of global needs to achieve the Sustainable Development Goals, which it puts at 0.35 per cent of donors’ gross national income. If donors did this while simultaneously raising total official development assistance up to the 0.7 per cent target, this would increase aid to LDCs from around $40 billion to $250 billion by 2030, while also allowing a 150 per cent increase in aid to non-LDC developing countries.
More than ever, rural economic transformation will be central to development in LDCs in the post-2015 era; and the SDGs signal both the need and the opportunity for a new approach, given the gap between the progress required by 2030 and that achieved in recent decades. As well as a major increase in infrastructure investment, UNCTAD’s The Least Developed Countries Report 2015: Transforming Rural Economies highlights the some elements of such an approach:
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Successful rural economic transformation depends on a combination of agricultural upgrading and development of non-farm economies, maximizing the synergies between the two.
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Sequencing investments and interventions is critical, to ensure that producers are ready to respond effectively to increased demand and to market opening when they happen.
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Affordable financing is essential: Options may include interest subsidies on microcredit subject to interest ceilings, and in-kind microgrants in remote and isolated areas.
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Agricultural upgrading requires higher and more stable R&D spending, and strong extension services acting as a two-way conduit between R&D agencies and small farmers.
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Adult education and training is important as well as sending children to school, and it should include financial literacy and vocational and business skills as well as basic literacy and numeracy.
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An enabling environment for enterprise requires attention to the demand side as well as the supply side. Information about prospective changes in demand and market conditions is a key element.
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Effective policy coordination is essential at the national level; and producers’ associations, cooperatives and women’s networks have an important role at the local level.
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Fulfilment by donors of their commitments on ODA quantity and quality will be essential; and there is a strong case for increasing the target for ODA to LDCs to 0.35 per cent of donor GNI.
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Innovative approaches to trade and cross-border investment could make a significant contribution to rural transformation in the post-2015 context.
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Developmental regionalism can also have substantial benefits, particularly in sub-Saharan Africa, as can regional and interregional collaboration in agricultural R&D.
NOTE: Forty-eight countries currently are designated by the United Nations as LDCs: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, the Central African Republic, Chad, the Comoros, the Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, the Lao People’s Democratic Republic, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal, the Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, South Sudan, the Sudan, Timor-Leste, Togo, Tuvalu, Uganda, the United Republic of Tanzania, Vanuatu, Yemen and Zambia.
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Global climate deal could transform Africa’s progress, according to African Development Bank
Climate change poses a severe threat to Africa, but it also offers a huge opportunity, according to a new paper from the African Development Bank. The paper, Africa’s Climate Opportunity: Adapting and Thriving, explains how the COP21 climate talks in Paris in December can help Africa deal with the threat and seize the opportunity.
“Climate change is the greatest challenge of our time in development. COP21 presents a unique opportunity to meet that challenge,” said Akinwumi Adesina, President of the African Development Bank Group. “The voice of Africa is crucial to ensure the success of COP21. And the voice of Africa will be heard.”
In Paris, the international community is expected to finalise a new global climate agreement and decide how to finance it, at the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21).
Africa is particularly vulnerable to climate change, yet it produces only 4 percent of the world’s greenhouse gases. Countries that caused global warming have a moral responsibility to help Africa adapt to its effects.
But the new AfDB paper argues that Africa can do much more than adapt. Adapting to climate change while minimising emissions can help drive the economic transformation that Africa needs.
Climate-resilient, low-carbon development can boost growth, create jobs and lift people out of poverty. It can also bridge Africa’s crippling energy deficit: 620 million Africans lack access to modern energy.
To take advantage of this opportunity, Africa needs investment; the new paper argues that COP21 must deliver the finance that will unlock Africa’s potential.
“The current climate financing architecture is not providing the finance Africa needs,” Adesina said. “Much more needs to be done to increase Africa’s access to climate finance.”
Developed countries have committed to mobilising US $100 billion a year from 2020 in climate finance for developing countries. “To meet the $100 billion per annum target by 2020, we must improve the predictability and mobilisation of finance,” Adesina said.
In the paper, the African Development Bank spells out how it is investing its own resources and mobilising new sources of finance. The paper also shows why wider international cooperation is crucial – and needs to be ambitious, efficient and properly financed.
Adesina recently announced that the African Development Bank would nearly triple its annual climate financing to reach $5 billion a year by 2020. AfDB’s climate spending will increase to 40% of its total new investments by 2020.
The African Development Bank has committed almost $7 billion to support climate-resilient and low-carbon development in Africa in the past four years. Its energy investments last year will deliver power that is 90% generated from renewable sources. The Bank also supports the Africa Renewable Energy Initiative and the Africa Adaptation Initiative, both endorsed by the African Union heads of state and government.
As well as increasing its own climate financing, the AfDB is pursuing public and private co-financing opportunities.
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The Low-Carbon Road
The twin challenges of poverty and climate change are tightly interwoven
Two defining challenges of this century are overcoming poverty and managing climate change: if we fail on one, we will fail on the other. Success in rising to both challenges depends on shared recognition of how they are profoundly interwoven, and of the complementarity between sustainable development, economic growth, and climate responsibility. Thus the global agenda on sustainable development, adopted at the United Nations in New York in September 2015 (the Sustainable Development Goals, or SDGs) is critically linked to international action on climate change, including what will be agreed at the United Nations climate change summit in Paris (COP21) in December 2015.
New insights
Three critical insights on economic development and climate responsibility emerged after the previous attempt at an international climate agreement, in Copenhagen in 2009. These insights strengthened the prospects for success at Paris and beyond by demonstrating how the twin challenges of poverty and climate change can be overcome together.
First, there is now much greater understanding of the potential complementarity of economic growth and climate responsibility, particularly through infrastructure investment (GCEC, 2014). To portray these as in opposition to each other – as is often done – is to misunderstand both economic development and the opportunities created by moving to a low-carbon economy. To pit growth against environmental responsibility is diversionary and can thwart prospects for agreement and sustainable development itself.
Second, there is greater awareness of the increasing dangers of delay as the structure of the global economy – particularly in terms of cities, energy systems, and land use – changes over the next two decades. Billions of people are moving into cities, and the number of city dwellers will nearly double in the next three decades or so. Huge and long-lasting investments will pour into the infrastructure of cities – wisely or badly. Energy systems and land use, including the care for and investment in forests and soil, are similarly open to opportunities and risk. High-carbon lock-in of capital and infrastructure is a serious threat: coal and gas power plants, for instance, often need to operate for many decades to generate a financial return on investment. Another risk is the degradation of carbon sinks – natural systems that absorb and store carbon dioxide. The urgency is intensifying with both the pace of structural change to the global economy and persistently inadequate approaches to the management of cities, energy, and land systems.
Third, we know that the use of fossil fuels creates a range of severe problems in addition to climate change. Pollution is destroying lives and livelihoods: many millions a year die globally because of pollution, and many millions more become sick. A recent study by Rohde and Muller (2015) concluded that breathing the air in China is equivalent to smoking 40 cigarettes a day and is responsible for more than 4,000 deaths each day. Air pollution in India is still worse, and Egypt, Germany, Korea, and, indeed, most other countries, rich or poor, have serious problems. Such pollution is mainly domestic, and cutting it sharply is clearly in countries’ self-interest. Fossil fuel prices have bounced back and forth over the past few years, and indeed over a very long period without much sign of a trend. But the cost of renewables is still trending downward and will likely continue so for some time. The long-term prospects for renewables are strong, and many are already competing with fossil fuels without correction for the very strong and negative consequences of oil, coal, and gas use, which have been documented by IMF economists (Coady and others, 2015).
These three new or enhanced perspectives can help frame discussions on climate change in two important ways.
First, they help explain the enormous opportunities for reducing poverty and raising living standards worldwide in the transition from economies’ heavy dependence on expensive fossil fuels and polluting high-carbon technologies to clean and efficient low-carbon alternatives. Plans submitted ahead of the Paris summit show that many countries are already making this transition.
Second, they focus attention on the urgency of accelerating the transition to sustainable low-carbon growth and development. Greater international collaboration – built on a strong agreement in Paris – can foster that acceleration.
These new perspectives highlight the crucial importance of effective international coordination, particularly around financing and technology. Some of the architecture for this collaboration between countries was discussed at the Third International Conference on Financing for Development in Addis Ababa and will continue around COP21.
Climate financing
At previous climate change summits, parties to the United Nations convention agreed that by 2020 rich countries should be mobilizing $100 billion a year, from both public and private sources, to help developing economies make the transition to low-carbon growth and become more resilient to the unavoidable impacts of climate change. (Methods of mobilizing this support were examined, for example, in the 2010 report of the United Nations Secretary-General’s High-level Advisory Group on Climate Change Financing.) An analysis published in October 2015 by the Organisation for Economic Co-operation and Development and the Climate Policy Initiative estimated that developed economies collectively mobilized $52.2 billion in 2013 and $61.8 billion in 2014 in climate financing for developing economies.
Reaching the $100 billion goal is a good test of the sincerity of rich countries’ commitment to supporting poorer countries. Assessing this commitment calls for an understanding of how climate financing, and its associated initiatives, is additional to or represents increments beyond the support rich countries would otherwise extend for economic development. I have argued previously that this can be done in four ways (Stern, 2015).
First, assessment of funded projects – for example, supporting feed-in tariffs for renewables – can look at whether the projects would have come to fruition without this financing. A second test might gauge whether the contribution stimulates action in areas, such as forest protection, that would not otherwise be covered or financed adequately. Third, does the contribution mobilize new sources of financing, such as expansion of multilateral development banks for climate action or carbon pricing revenue that would not otherwise have been forthcoming or available? And fourth, one can measure total official development assistance (including resources designated for climate action) and ask how much it exceeds the amount that would have been committed in a world unaware of the problem of climate change. This last counterfactual is particularly difficult to measure.
Financing for sustainable development
Still more important than the $100 billion a year commitment from rich countries is strong international collaboration on the infrastructure investments needed over the coming two or three decades to foster poverty reduction and growth in the context of rapid urbanization. It is crucial that these investments in infrastructure promote – rather than derail – sustainable development. Global investment in infrastructure on the order of $90 trillion over the next 15 years is needed (GCEC, 2014).
How these infrastructure investments are made – including their scale and quality – will have a critical effect on both sustainable development and managing climate change. These investments represent a great collection of opportunities to drive faster and better-quality growth over the coming decades: less polluted, less congested, more creative and innovative, more efficient, and more biodiverse. But many of those opportunities could be lost through hesitation. There is a danger that high-carbon, polluting, wasteful, and long-lasting structures will be locked in – that forests will be destroyed and soil irretrievably eroded. There is so much that can be done now that it is both in countries’ self-interest and in the collective interest of all countries, with coordination and collaboration.
Most of the $90 trillion investment in infrastructure needed over the next 15 years will be in emerging market and developing economies. Much of it will happen somehow, but it must include both better quality and greater scale than is currently underway and planned.
Investments in infrastructure are a means to an end: sustainable development as summarized, for example, in the SDGs. At the heart of the SDGs lies the elimination of absolute poverty, which means securing a better life for all and, in particular, a world in which every child can survive and thrive. The SDGs also embody a sustainable future for the planet.
Scarcity of infrastructure is one of the most pervasive impediments to growth and sustainable development. Good infrastructure removes constraints to growth and inclusion while fostering education and health. It can empower children and women by giving them access to education, reduce the burdens of obtaining water and fuel, and provide decentralized electricity. Bad infrastructure kills people and leaves unsustainable economic burdens for future generations. Furthermore, at a time of low world demand, a concerted focus on infrastructure can boost global demand in the short run while raising productivity and long-term growth.
Transformation of the global economy
This is a critical moment in the transformation of the global economy, which requires large investments in sustainable cities, energy systems, and other infrastructure. The world’s urban population will increase from about 3.5 billion today to about 6.5 billion by 2050, and forests, agricultural lands, and water systems will come under tremendous pressure. Inadequate infrastructure will cause lasting damage; poorly structured cities and polluting energy infrastructure can impose burdens and inflict damage for decades or centuries to come.
This is a defining moment. Fundamental impediments to the quantity – and quality – of investment, including the risks associated with government action and the availability of appropriate financing, cannot be ignored.
Government-induced policy risk – for example, through inconsistent support for low-carbon technologies or the lack of credible systems for contract enforcement – is the greatest impediment to investment. This is particularly true for infrastructure investment because of the longevity of such investments and their inevitable and intimate links to government policy. As a result, capital for infrastructure financing tends to be priced far too high, often 500 to 700 basis points above the benchmark, when long-term interest rates are close to zero. And the huge pool of private savings – probably $100 trillion or more – held by long-term institutional investors, little of which is currently invested in infrastructure, cannot be mobilized.
The failures around infrastructure in government policy and institutions and the failures of the financial system must both be fixed. Moving on one front alone will not produce the scale of investment needed. The only way to build a better and more productive infrastructure on the scale necessary for climate responsibility and sustainable development is through a concerted set of actions on both fronts (see Bhattacharya, Oppenheim, and Stern, 2015).
On the policy side, first, national authorities should clearly articulate their development strategies on sustainable infrastructure – not one project at a time, but as a comprehensive direction and as development strategies to support the SDGs. This will offer investors confidence that there is clear demand for the services of the infrastructure investment they are considering.
Second, market distortions and policy failures that undermine the quality of infrastructure investments must be tackled. The biggest distortions affecting the quality of infrastructure investments are pervasive fossil fuel subsidies and a lack of carbon pricing, especially a distorted price for coal.
The IMF recently estimated the total cost of fossil fuel subsidies at more than $5 trillion a year, including the failure to price in pollution and climate change, which together account for three-quarters of the total (Coady and others, 2015). And when we take into account the impact of coal on pollution and climate, its real price jumps from $50 to well over $200 a metric ton. Our calculations assume a carbon price of $35 a metric ton of carbon dioxide equivalent (the standard assumption by the U.S. government) and that burning a metric ton of coal produces about 1.9 metric tons of carbon dioxide. If we factor in the carbon costs and, following the findings of Coady and others, we figure the cost of local pollution to be twice that from climate change, we get a cost of about $250 a metric ton for coal. These extra costs are not abstract externalities, but the very real costs of current and future deaths from air pollution and climate change. Without sound policy, these externalities are unpriced, or inadequately priced, so incentives are currently heavily tilted toward bad infrastructure and against sustainability. Wrongly, and perversely, high-carbon is still seen as the low-cost option.
On the financing side, development banks’ capacity to invest in sustainable infrastructure and agricultural productivity – that enhances rather than damages lives and livelihoods – should get a substantial boost to allow them to pioneer and support the changes needed. I saw very clearly when I was chief economist of the European Bank for Reconstruction and Development how a development bank’s participation in a deal can boost the confidence – and thus the scale of investment – of private participants. And because international development banks, and many national ones, are generally trusted as convenors, their investments can exert much stronger leverage. Governance is as relevant for development banks as for central banks. If such banks are well designed and well run, they can develop strong skills in key areas, such as energy efficiency, and bring a full set of financial instruments to the table, from equity and political risk guarantees to loans.
In addition, central banks and financial regulators could take further steps to promote productive and profitable redeployment of private investment capital from high-carbon to better low-carbon infrastructure. Over time, the riskiness of and damage from high-carbon infrastructure is becoming ever clearer. But imperfections in the capital markets mean that borrowing can be expensive when real long-run interest rates are very low. This distorts the market against renewables, whose up-front costs are relatively high. These imperfections worry central banks and regulators, as well as others.
The official community, including the Group of 20 industrialized and emerging market economies (G20), Organisation for Economic Co-operation and Development, and other relevant institutions, working with institutional investors, could lay out the policy, regulatory, and other actions needed to increase their infrastructure asset holdings from $3-$4 trillion to $10–$15 trillion over the next 15 years. In other words, the share of funds held by institutional investors could rise from a small percentage to just over 10 percent.
Together, such action on policy and financing could foster the private sector investment that is essential for fighting poverty and climate change. It would boost both the scale and quality of infrastructure investment and the rate and quality of economic growth. Such a global strategy could galvanize strong and sustainable growth, and it is natural to look to the G20, as the main global economic forum for heads of government and finance ministers, to take the lead.
Prospects for success
So what are the key factors for success in the months, years, and decades ahead? Four lessons should be kept in mind.
First, much, or even most, of the necessary country-level action in the management of climate change is in the vital interest of every country. Second, the urgency of action is even greater than previously thought. Third, it is possible to see ever more clearly the importance of collaboration: rich countries should be setting strong examples and providing efficient and effective financing, and all countries should be sharing and investing in technology. Fourth, strong and collaborative action will usher in a period of extraordinary creativity, innovation, investment, and growth.
These conclusions are particularly important because the so-called intended Nationally Determined Contributions submitted by countries ahead of the Paris summit point to 2030 global emissions that are much higher than consistent with the goal of limiting global warming to 2 degrees Celsius above the preindustrial, 19th century average temperature. And the dangers of warming greater than 2 degrees Celsius are becoming ever clearer.
The pledged action would result in global annual emissions in 2030 of about 55 (or more) billion metric tons of carbon dioxide equivalent (Boyd, Cranston Turner, and Ward, 2015. This is a substantial improvement over projected business-as-usual emissions of more than 65 billion metric tons, but it still far exceeds the 40 billion target most predictions propose to avoid global warming of more than 2 degrees Celsius. The December conference in Paris must not be regarded as a one-off opportunity to set targets, but the first of many steps, followed by regular progress reviews and a focus on learning lessons and accelerating action. In light of the implications of the Paris agreement, it is essential to recognize that the likely high annual emissions over the next 20 years dictate zero carbon dioxide emissions in the second half of this century.
Finally, it is important to understand that climate change is not just an issue for environment ministers and foreign ministers. Implementation of the actions agreed to in Paris must have the support and involvement of presidents, prime ministers, and economy and finance ministries as well. This is about economic development, investment in the future, resource allocation, and priorities: that is the work of government as a whole and economic ministers in particular.
We must remember that this is all about development and growth. This is about the two defining challenges of our century: overcoming poverty and managing climate change. If we fail on one, we will fail on the other.
Nicholas Stern is a member of the U.K. House of Lords, Professor of Economics and Government at the London School of Economics and Political Science, and President of the British Academy. He was previously chief economist of the World Bank and of the European Bank for Reconstruction and Development.
This article is published in the December 2015 issue of Finance & Development (Volume 52, Number 4), a quarterly publication of the International Monetary Fund.
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Investment Renaissance
China is important to the increasing foreign investment in Africa, but its role is far from dominant
Africa’s economic growth has accelerated over the past 15 years and the continent has been receiving significantly more foreign direct investment than in the past. Each development almost certainly plays a role in causing the other.
African economies on average have improved their institutions and policies – changes that not only make for productive and enhanced growth, but also attract more domestic and foreign investment. At the same time there is evidence that foreign direct investment, which involves an ownership stake in an enterprise, has spillover benefits on the recipient economy providing technology, management, and connection to global value chains that should speed economic growth in Africa.
The acceleration of African growth is important because increased growth in the past decade has led to the best progress on poverty reduction on the continent since before 1990. Between 1990 and 2002 the poverty rate in sub-Saharan Africa was flat at 57 percent of the population (living below the World Bank’s $1.25 a day poverty line). But between 2002 and 2011 poverty dropped 10 percentage points. Continued sustained growth is needed to bring poverty down further, and a steady flow of foreign direct investment can help meet that objective.
Recently much attention has been paid to one part of this investment renaissance: Chinese direct investment in Africa. China has become Africa’s main trading partner and Chinese demand has increased Africa’s export volume and earnings. Many observers assume that China has also become the dominant investor in Africa. Indeed, there have been some high-profile, large natural resource investments, including some in countries that have a poor track record of governance – such as Sinopec’s oil and gas acquisition in Angola, the Sicomines iron mine in the Democratic Republic of the Congo, and Chinalco’s mining investment in Guinea. But in fact, although China is an important investor in Africa, and is likely to remain so, it is far from dominant – whether in the resource or other sectors. Moreover, exactly what the recent slowdown in Chinese growth portends for Africa is unclear.
Our research looks beyond the big state-enterprise deals, like the splashy ones mentioned above, to understand the reality of Chinese investment, especially private investment, in Africa. Chinese investment has the potential to become very significant in Africa, partly because the demographics of China and Africa are going in different directions.
Labor force growth
China has been through a period of rapid labor force growth in which it needed to generate 20 million jobs a year. However, that phase is over. The Chinese working-age (15-64) population has started to decline, as it has in most advanced economies. In sub-Saharan Africa, on the other hand, by 2035 the number of people reaching working age will exceed that of the rest of the world combined (IMF, 2015; see Chart 1). Africa and south Asia will be the main sources of labor force growth in the global economy, as workforces elsewhere shrink. That means there is great potential for mutual benefit from foreign investment that flows from the aging economies such as China to younger and more dynamic ones in Africa.
In investigating China’s foreign direct investment (called overseas direct investment by the Chinese), we used firm-level data compiled by China’s Ministry of Commerce. Chinese enterprises that make direct investments abroad are supposed to register with the Ministry of Commerce. The resulting database provides the investing company’s location in China and its line of business. It also includes the country to which the investment is flowing and a description in Chinese of the investment project. However, it does not include the amount of investment. During 1998-2012 about 2,000 Chinese firms invested in 49 African countries. There are about 4,000 investments in the database because firms often have more than one project. The typical investing firm is private and much smaller than the big state-owned enterprises involved in the megadeals that have captured so much attention. Based on the descriptions of the overseas investment, we categorized the projects into 25 industries covering all sectors of the economy – primary, or raw materials operations; secondary, or materials processing; and tertiary, or services. The allocation of the projects across countries and across sectors provides a snapshot of Chinese private investment in Africa.
Some things immediately jump out from the data on the number of investments. The investments are not concentrated in natural resources. The service sector received the most number of investments – such as sales affiliates or operations that provide assistance to construction and transportation. There were also significant investments in manufacturing. Most foreign direct investment is in the service sector both globally and in Africa, so in this sense Chinese investment is typical. Chinese investment is well dispersed in Africa: in resource-rich countries like Nigeria and South Africa, but also in non-resource-rich countries like Ethiopia, Kenya, and Uganda (see Chart 2). Even in resource-rich countries, natural resource projects make up a small portion of individual investments.
We also asked whether factor endowments – such as land, labor, and capital – and other country characteristics influence the number and types of investment projects from Chinese investors. If Chinese investment is similar to profit-oriented investment from other countries, then the number and nature of projects should be related to the factor endowments as well as to other characteristics of the recipient countries. We found that although Chinese foreign direct investment in Africa is less prevalent in sectors that require high-skilled labor, it does tend to gravitate toward those countries with a better-trained workforce, suggesting that Chinese investors aim to exploit the edge these countries have over other countries in the region whose workforces lack the same level of training. We also found that Chinese foreign direct investment is more concentrated in capital-intensive sectors in the more capital-scarce countries, suggesting its importance as a source of external financing for the continent.
Our initial assessment of Chinese investment in Africa looked at the number of investment projects without reference to the size of the investment – which may explain why our findings about the nature of China’s investments did not support the common belief that China is an outsized investor in Africa. But when we looked at investments by size, we also found that China does not dominate foreign direct investment in Africa. Using the Ministry of Commerce’s aggregate data on the stock of Chinese foreign direct investment (that is, the value of the investment in place) in different African countries, we found that at the end of 2011 it was only 3 percent of total foreign direct investment on the continent. Most of the investment came from Western sources. Although that figure may seem small to many people, it is confirmed by other sources. According to the United Nations Conference on Trade and Development (2015) new Chinese foreign direct investment in Africa during 2013-14 was 4.4 percent of the total investment flow – only slightly more than the Chinese share of investment in place. EU countries, led by France and the United Kingdom, are overwhelmingly the largest investors in Africa. The United States is also significant, and even South Africa invests more on the continent than China does.
Moreover, when it comes to the value of investments, China allocates its direct investment in Africa much as other countries do. Chinese and non-Chinese investors are both attracted to larger markets and both are attracted to natural-resource-rich countries. So although most Chinese investments are in services and manufacturing, those tend to be smaller than the typically large-value investments in energy and minerals. Western investment favors these expensive natural resource projects too.
One important difference between expensive investments by China and by Western firms involves governance: Western investment is concentrated in African countries with better property rights and rule of law. Chinese foreign direct investment is indifferent to the property rights/rule of law environment, and its expensive investments tend to favor politically stable countries. This difference makes sense because a significant portion of Chinese investment is tied up in state-to-state resource deals.
China’s slowdown
Analysts have asked whether the recent slowdown in China’s economy, the stock market turbulence in the second quarter of 2015, and the renminbi depreciation in August 2015 may augur a slowdown in Chinese foreign investments.
The underlying issue in China’s economy is that it has relied on exports and investment for too long and is making a difficult transition to a different growth model. Because China is the largest exporter in the world, it is not realistic for its exports to grow much faster than world trade. The recent growth in China’s export volume has been in the low single digits, similar to the growth rate of world trade. There is nothing wrong with China’s competitiveness; it is just facing a slow-growing world market. Depreciation likely would not change the picture much because other developing economies may follow suit.
China’s stimulus package following the global financial crisis of 2008-09 was heavily oriented toward boosting investment and took its investment rate to 50 percent of GDP. That maintained growth for a while, but it has resulted in excess capacity throughout the economy. There are many empty apartments, the capacity utilization rate in heavy industry is low, and there is much underused infrastructure, such as highways in smaller cities and convention centers in cities where there is no demand for them. Because of the excess capacity it is natural for investment to slow and affect the overall growth of the economy. The slowdown in China has had an immediate effect on Africa because it has contributed to declining prices for primary products and declining volumes of exports for African economies.
But the weaker news for the old industrial Chinese economy during the first half of 2015 was matched by some positive news from the new economy. In contrast to industry, the services sectors grew rapidly. Most of the service output is consumed by households, and household income has been rising steadily for the past three decades. Still, the slowdown in investment is bound to have some spillover effect on employment, income, and consumption.
Even though the economic slowdown in China has hurt African exports and export prices, it carries some potential positive news. The deceleration in domestic investment in China means that for the moment China has even more capital to send abroad. Although its consumption rate should gradually rise, for the foreseeable future China is likely to have an excess of savings over investment, which means that it will continue to provide capital to the rest of the world. This can happen in a fairly orderly fashion. The authorities have laid out an ambitious set of reforms that should facilitate the shift from investment-led growth to a model based more on productivity growth and consumption growth. The plans include a number of steps to foster the new model. For example, to allow more labor flexibility, authorities plan to relax rules that tie a household’s government benefits to the region in which the household is registered. They also intend to introduce financial reform to price capital better and allocate it to the most efficient use, and to open up the service sector, which is still largely closed to foreign trade and investment.
A smooth transition should enable China to continue to grow in the 6 to 7 percent range for the next decade. It will not provide increases in demand for energy and minerals on the scale of the past, but it should be a stable source of direct investment for other countries. Africa will have to compete for its share through infrastructure investment, improvements in the investment climate, and strengthening of human capital because, as we found, countries with more human capital attract the more skill-intensive investment from China.
There is, however, a possibility of a more negative outcome. For the first time, Chinese outward investment is exceeding inward investment by a large amount; the slowdown in the domestic economy is part of the reason, as domestic Chinese firms are looking elsewhere for profits. In fact, the net capital outflow from China in 2015 is extraordinary. The IMF’s 2015 Article IV staff report projects a current account surplus of $337 billion. Through September the central bank’s reserves declined by $329 billion. The two numbers together provide a rough estimate of $666 billion in net capital outflows.
If China does not make a smooth transition to a new growth model, it will remain a major source of capital in the short run but it will not grow as well over the medium to long term and thus will not be as important a source of capital. China’s successful rebalancing will be a better outcome for both China and for the rest of the developing world.
Wenjie Chen is an Economist in the IMF’s African Department. David Dollar is Senior Fellow in the China Center at the Brookings Institution. Heiwai Tang is Assistant Professor of International Economics at Johns Hopkins University’s School of Advanced International Studies.
This article is based on the August 2015 Brookings Institution Working Paper “Why is China investing in Africa? Evidence from the firm level,” by Wenjie Chen, David Dollar, and Heiwai Tang.
This article is published in the December 2015 issue of Finance & Development (Volume 52, Number 4), a quarterly publication of the International Monetary Fund.
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MPs endorse Rwanda’s re-admission to ECCAS
The Chamber of Deputies has passed a draft law that allows the government to ratify an agreement that re-admits the country to the Economic Community of Central African States (ECCAS).
Rwanda officially rejoined ECCAS in May, eight years after it pulled out of the regional bloc to “avoid overlapping memberships in several regional community groupings.”
Government officials said the country was rejoining the bloc to further its integration agenda, explaining that the membership consolidates Rwanda’s position in the heart of Africa.
The re-admission of Rwanda took place during an annual Conference of Heads of State and Government of ECCAS in N’djamena, Chad, in May, during which an agreement on the re-admission was signed.
But for the process to rejoin the bloc to be complete, the agreement has to be ratified, which requires approval from both chambers of Parliament.
The Chamber of Deputies yesterday did their bit, approving a bill that authorises the government to ratify the agreement.
Article one of the draft law says that “the Agreement between the Economic Community of Central African States (ECCAS) and the Republic of Rwanda on the readmission of Rwanda in such a Community, signed in N’Djamena in Chad on May 25, is hereby authorised to be ratified.”
Following Rwanda’s readmission to ECCAS, the bloc now has eleven members including; Angola, Burundi, Cameroon, Central African Republic, Congo, Democratic Republic of Congo, Gabon, Equatorial Guinea, Chad, and Sao Tome & Principe.
Rwandan diplomat Olivier Nduhungirehe says that Rwanda’s readmission into ECCAS consolidates its position at the heart of Africa given its other memberships to the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the International Conference on the Great Lakes Region (ICGLR).
While visiting Rwanda last month, the Secretary-General of ECCAS said that Rwanda will be an inspiration of good governance, regional integration, and conflict resolution for other member countries of the bloc.
Ahmad Allam-Mi said he thought Rwanda’s leadership could bring many aspects of good governance to ECCAS.
“The country’s experience of good governance, which is known worldwide, can eventually contribute toward fixing ECCAS. The leadership of President Kagame, who is considered as a champion of good governance ethics in Africa, can also contribute to the integration of Central African countries,” he said.
The official lauded Rwanda for being the “beacon of integration and free movement of people in Africa,” citing the fact that the country doesn’t require visas for Africans crossing its borders.
The law allowing the government to ratify the agreement that re-admits Rwanda to ECCAS now awaits Senate’s approval before it can be forwarded to the President for assent and subsequent ratification.
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SADC, east Africa fight illegal timber trade
The recent signing of the Zanzibar Declaration on Illegal Logging by forest protection agencies in Kenya, Tanzania, Uganda, Mozambique and Madagascar is a hopeful sign of the commitment by eastern and southern African countries to stem the alarming growth in illegal timber trade which is costing the countries billions of dollars.
The deal which was struck at a global gathering on forests in South Africa in recent weeks, aims to improve communication between customs authorities and collaboration among forest officials from the east and southeast African nations.
“The World Wide Fund for Nature (WWF) welcomes the Zanzibar Declaration on Illegal Trade in Timber and Other Forest Products, the first such agreement of its kind in the region,” said Geofrey Mwanjela, head of the WWF Coastal East Africa Initiative terrestrial programme.
“The declaration comes at a crucial time. Illegal trade in timber is expanding at an alarming rate and this new commitment by governments will greatly amplify efforts to reduce such trade at the regional level.”
The declaration was accepted and announced at the XIV World Forestry Congress, one of the largest gatherings of world forestry leaders.
The event was facilitated by WWF, TRAFFIC, and the Southern African Development Community (SADC).
“The Zanzibar Declaration signals a firm commitment by the countries concerned to curtail the illegal and unsustainable timber trade that is benefitting criminals and depleting the natural resources of the region,” said Julie Thomson, TRAFFIC’s East Africa programme co-ordinator.
TRAFFIC is a joint programme by the WWF and the World Conservation Union (IUCN) to monitor wildlife trade and ensure that trade in wild plants and animals is not a threat to the conservation.
Forest experts had for several years bemoaned about inadequate collaboration among national forest agencies and customs agencies across the region.
Lack of collaboration has led to unfettered growth in illegal logging that has seen violent armed groups and other mafia-type business thriving and profiteering from this trade.
In 2014, the United Nations Environment Programme reported that in east, central and West Africa, criminal groups are thought to make more money from selling illegal wood products – up to $9 billion annually – than through street-level drug-dealing.
Forest experts say there is growing intra-regional and inter-regional illegal trade of timber and other forest products flowing across Tanzania, Kenya, Uganda, Madagascar, Zambia, Mozambique, Malawi, as well as further towards the Western and Central Africa termed Africa’s ‘Green Heart.’
Kenya loses roughly US$10 million per year from illegal cross-border trade between Tanzania and Kenya, according to a 2012 study by the Tanzania Natural Resource Forum and East African Wild Life Society.
Tanzania loses around US$8,33 million annually from such trade, according to a similar government report.
“If properly managed, forests provide jobs for workers and homes for wildlife. They also act as a filter pulling planet-warming carbon dioxide out of the atmosphere, so protecting them is crucial for the broader environment,” said Juma Mgoo head of Tanzania’s Forest Service.
“Across the region, the illegal timber trade is flourishing at an alarming pace. Criminal groups are benefiting from the environmental destruction and forests continue to dwindle at unprecedented rates in our region.
“If we continue at the rate which we are going there will be nothing left for our children and their children to enjoy.”
In a presentation at the congress, WWF-Zimbabwe country director, Dr Enos Shumba said it was important for African countries to explore and promote the African perspective for building resilience of different forest ecosystems to withstand economic, environmental and social shocks through forest management.
He highlighted the opportunities for enhancing Miombo woodland ecosystem resilience through participatory forest management referring to environmentally appropriate, socially beneficial and economically viable management of forests for the benefit of present and future generations.
He also stressed the need to enhance the participation of local communities and stakeholders and provision of adequate economic incentives to save forests.
“The existence of enabling governance and institutional frameworks and their enforcement at various levels, as well as functional cross sector coordination and respect for integrated land use planning and its implementation is critical to build resilience and save our forests,” Dr Shumba said.
WWF’s Living Forests Report projects potential forest loss in the East Africa region of up to 12 million hectare between 2010 and 2030.
WWF’s remote sensing analysis has indicated that forest losses from 2000 to 2012 were concentrated in Mozambique (2, 2 million hectares), Tanzania (2 million hectares) and Zambia (1.3 million hectares).
Globally, between 50-90 per cent of wood is harvested or traded illegally, according to United Nations Environment Programme (UNEP), and it’s estimated to cost US$30-100 billion annually.
The Zanzibar Declaration was hammered after protracted debate and negotiations among key stakeholders in the forest sector, national forest agencies as well as regional and international partners and civil society organizations, including WWF.
Environment Africa Zimbabwe country director Barney Mawire told The Southern Times that although illegal timber poaching within the Sadc region is not as prevalent as in central and west Africa, the region needs to strategise and work together to fight illegal timber trade.
“The Zanzibar Declaration is quite noble and this should be tied in to trade bodies such as the Common Market for Eastern and Southern Africa (COMESA),” he said.
“Timber poaching is growing and need to join hands and fight together. This will go a long way towards fighting illegal timber trade.”
Mawire said it was important to have forest experts at the ports of entry to monitor the illegal movement and trade in timber products.
“Forest experts understand the issues better and are better placed in dealing with timber poaching which is increasingly becoming sophisticated,” he said. “We need them at our borders and we need to work with our neighbours to develop new methods to curb illegal timber trade.”
Zimbabwe is losing approximately 330 000 hectares of natural forests and woodlands per year due to the over-reliance on biomass to meet the country’s energy needs.
More than 70 percent of the population depends on biomass for energy needs and this has over the decades depleted the country’s forest cover.
Forest experts say Zimbabwe now has around 15,6 million hectares remaining.
They say logging syndicates work with corrupt police and officials to exploit legislative loopholes that allow them to pass off illicitly obtained fuelwood as legitimate.
Zimbabwe passed a law in 2012 restricting the use, trade and movement of firewood, but with fines that rarely exceed $20 the legislation is proving a poor deterrent, experts said.
Power cuts are making it difficult to keep deforestation under control and forestry experts say it is becoming more difficult to enforce legislation as the situation becomes more about survival.
Deforestation has an adverse impact on the environment and experts warn that the depletion of the country’s forests could worsen water availability.
“Models show deforestation could result in a decline in precipitation of more than 5 percent across Zimbabwe by 2050,” Terrence Mushore, a lecturer at the Bindura University of Science Education was quoted saying in the media recently.
Despite the deforestation woes, Mawire said Zimbabwe had done well in saving its forests.
“Zimbabwe has done well in terms of preserving its forests and fighting illegal timber trade,” he said.
Timber poaching for trade is not as serious as in east, central or west Africa but as a country we need to continuously improve our strategies for curbing illegal timber trade.”
Poor implementation and weak enforcement still remains a major barrier in the fight against illegal trade in timber.
In the absence of political will, effective implementation and enforcement, the damage illegal loggers have done will continue unabated, costing Africa billions.
The future of children, will be under threat from unsustainable timber logging activities.
And, without enforcement, the Zanzibar Declaration, although an important step in the fight against timber poaching, will simply add time to the clock, but without doing anything to change Africa’s illegal timber trade endgame.
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AfDB moves ahead on first Africa Visa Openness Index and showcases Rwanda and Mauritius as top performers
The African Development Bank has moved ahead on finalizing the first Africa Visa Openness Index. The Index ranks African countries on the level of openness/restrictiveness of their visa regimes. Its aim is to drive visa policy reforms across Africa, simplify visa application procedures and encourage positive reciprocity.
Facilitating the freer movement of people is anchored in the African Union’s Agenda 2063. The AU’s vision is matched by a call to action to introduce an African Passport and abolish visa requirements for all African citizens in all African countries by 2018. Now, the recent Valletta Summit of the European Union and a call from African leaders has renewed momentum to support migration initiatives across the continent.
“Promoting freer movement of people lies at the heart of Agenda 2063,” says Moono Mupotola, Director of NEPAD, Regional Integration and Trade at the African Development Bank. “We are working with African leaders to deepen regional integration, strengthen connectivity and drive talent mobility. The Visa Openness Index aims to inspire and inform policy-makers across Africa to build on the benefits of greater visa openness for countries, regions and for the continent.”
To showcase the top performers, the Bank is producing a short documentary on the results and lessons learned of visa openness in Rwanda as a landlocked country and in Mauritius as an island state. A Bank team led by Senior Trade Expert Jean-Guy Afrika and supported by AfDB field offices recently visited both countries to conduct targeted interviews of high-level public and private sector officials. Both Rwanda and Mauritius have seen economic gains in financial services, investment and tourism as a result of their open visa policy regimes. Solutions that have been put in place to help Africans travel more freely to date include electronic visas, regional bloc visas and visa-on-arrival schemes.
The Africa Visa Openness Index and documentary will be launched at the African Union Summit in January 2016.
AU and RECs discuss border management
Representatives from Regional Economic Communities (RECs) and the African Union Border Programme (AUBP) met in Zambia to discuss Border Management in Africa.
This was the second meeting of the group and was hosted at the COMESA Secretariat and supported by the German Technical Cooperation Agency (GIZ). The objectives of the AUBP are to complete the delimitation and demarcation of African borders, to encourage and facilitate cross-border cooperation through joint planning and development of shared cross-border areas.
Further the initiative is aimed at building the border management capacity of Member States in support of pragmatic border management and regional integration activities.
In addition, the declaration noted the need for the AUBP to build partnerships and mobilize the resources required to support the above activities.
The AUBP was adopted in June 2007 through the Declaration by the 1st Conference of African Ministers in charge of border issues and the adoption of the Declaration by the 11th Ordinary Session of the African Union Executive Council.
The overall objective of the meeting was for the RECs and AUC to coordinate, develop and advance their policies, initiatives and road-maps on border management and cross-border cooperation according the principles of subsidiarity, complementarity and comparative advantage.
“COMESA has taken the lead in developing a number of policies to enhance cross border cooperation and border management,” Assistant Secretary General in charge of programmes Dr Kipyego Cheluget said during the official opening of the meeting.
These include protocols on free movement and coherent legal migration policy in the COMESA region including the protocol on the gradual relaxation of Visas. So far three countries namely Mauritius, Rwanda and Seychelles have issued circulars relinquishing visa and visa fees for all COMESA nationals on official business.
He cited other COMESA cross border instruments including the Simplified Trade Regime (STR), the COMESA third party insurance scheme (the Yellow card) the Regional Customs Bond Guarantee Scheme (RCTG) and the Virtual Trade Facilitation System (CVTFS).
COMESA was the first REC to establish trade information desks at border posts in 2009, targeting small scale traders. It has also created Cross Border Traders Associations (CBTAs) and set up cross border infrastructure especially in post conflict areas to improve the living conditions of the local communities for peaceful coexistence.
Ambassador Aguibou Diarah addressed the meeting on behalf of the African Union while Mr. Phillip Kusch represented the GIZ.
» African Union Convention on Cross-Border Cooperation (Niamey Convention)
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tralac’s Daily News selection: 25 November 2015
The selection: Wednesday, 25 November
Additional documentation prepared for the UNECA’s Committee on Regional Cooperation and Integration meeting is now available:
Investment agreements landscape in Africa, Report on Africa’s international trade, Status of food security in Africa
AfDB Transport Forum 2015: sustainable transport for an integrated Africa (AfDB)
The first African Development Bank Transport Forum (26-27 Nov) will bring together high-level government representatives, experts, development partners, international organizations, the private sector, academia, NGOs and other stakeholders to discuss the key issues and challenges facing the transportation sector on the African continent. Transport costs on the African continent are among the highest in the world, both for passenger travel and movement of freight. For African countries, it’s often easier and cheaper to trade with the rest of the world than with each other. The challenge in the transport sector is also social, as 40% of Africa’s population lives more than two kilometres from an all-season road. How can we facilitate the movement of people and goods to meet the increasing needs of producer and consumer markets in Africa? How can we facilitate reliable, safe, sustainable and inclusive travel, both locally and internationally? [Conference www, Hashtag: #2015ATF]
Other conference documentation: Ninth Committee of Directors Generals of National Statistics Office (21–28 November), Commonwealth Heads of Government (27–29 November), 13th ILO African Regional Meeting (30 November – 3 December)
Integrating trade into national development strategies and plans: the experience of three African LDCs (UNCTAD)
This paper examined the experiences of three African LDCs (Ethiopia, Lesotho, Senegal) in mainstreaming trade into their national development strategies. It found that while they have strengthened efforts to better integrate trade into their national strategies, significant challenges remain, for instance with regard to the inclusion of local stakeholders in the trade policy-making process and in addressing the social impacts of trade reforms on vulnerable groups. Against this backdrop, the paper underscores the need for African LDCs to have a more systematic approach to trade policy-making than in the past to enhance their ability to better use trade in support of development. The paper also draws lessons from the experiences of the three African LDCs for other LDCs. [The authors: Amelia Santos-Paulino, Carolina Urrego-Sandoval]
EALA urged to facilitate implementation of Common Market Protocol (New Times)
The East African Legislative Assembly has been called upon to facilitate the implementation of the Common Market Protocol through relevant legislation for the region to benefit from free movement of people and services. The challenge to the regional lawmakers was made by Rwandan Senate president Bernard Makuza while opening a session of EALA sitting in Kigali yesterday. “By delaying the implementation of the protocol, we are depriving EAC citizens the promises made to make the East African Community a common market for free movement of people, jobs, service provision, education, financial access and services,” Makuza said.
South Africa: updates on Zimbabwe Permit Programme, Lesotho Special Permit (GCIS)
The special dispensations for Zimbabwean and Lesotho nationals residing in SA illegally were in part intended consciously to ease the pressure exerted on the country’s Refugee Reception Offices, dealing with a mixed flow of migrants, including of an economic nature. This approach is therefore helping in separating economic migrants from asylum seekers and refugees. The benefits should include enhanced refugee management and refugee protection.
Kenya to host regional research hub at Kemri (Daily Nation)
Kenya is set to host a regional research and innovation hub to enhance study and development in medicine. It will be set up by the government in partnership with the African Network for Drugs and Diagnostics Innovation (ANDi) to bridge the scientific, research and development gap between the region, Africa and the rest of the world.
AUC-FSIN technical consultation, recommendations on food security policy issues (AU)
From 17-19 November 2015, the African Union Commission in collaboration with the Food Security Information Network, a partner initiative between FAO, WFP and IFPRI, held a technical consultation themed ‘Food and Nutrition Security and Resilience Analysis: Are we effectively using the right data?,’ in Addis Ababa, Ethiopia. The objective of the Consultation was to launch a process leading to development of a framework to strengthen national food security and nutrition information systems and statistical capacities, to enhance evidence-based decision making and policy monitoring in the region. [Downloads available]
Agricultural growth in West Africa: market and policy drivers (AfDB, FAO)
Improving policy implementation requires (i) strengthening the implementation, analytic, and monitoring and evaluation capacities of key agencies and organisations charged with implementation; (ii) improving the data base upon which policy decisions are made, and (iii) strengthening the alignment between the interests of the different countries, individual actors, and the region as a whole. Perhaps the strongest incentives for transparent and effective policy implementation will result from encouraging strong national and regional private-sector and civil-society stakeholder groups and a free press that can act as counterweights to inefficient and/or corrupt policy implementation.
Seeds without borders: using and sharing plant genetic diversity to adapt to climate change in Africa (AU)
Accelerating climate-resilient and low-carbon development: the Africa Climate Business Plan (World Bank)
As climate change and variability significantly impact Sub-Saharan Africa’s development agenda, a new World Bank plan outlines actions required to increase climate resilience and low-carbon development in an effort to maintain current and protect future growth and poverty reduction goals. Noting that climate drives most of the shocks that keep or bring African households into poverty, Accelerating Climate-Resilient and Low-Carbon Development: The Africa Climate Business Plan aims to both bring attention to and accelerate resource mobilization for priority climate-resilient and low-carbon initiatives in the region. According to the plan, climate-related factors will make harder for African countries to tackle extreme poverty in the future for three reasons:
Climate change, renewable energies and sustainable use of natural resources in East Africa (EAC)
Unless we act now: the impact of climate change on children (UNICEF)
WorldRiskReport 2015: food insecurity increases the risk of disaster (United Nations University)
Youth Entrepreneurship Policy Guide (UNCTAD)
The Founder President of the Commonwealth Alliance of Young Entrepreneurs - Asia (CAYE-Asia), Rahul Mirchandani, said: “Governments can help build dynamic youth entrepreneurship ecosystems with policy frameworks that serve as catalysts for building cross-border trade, facilitating access to finance, and incentivizing innovative best practices. Young entrepreneurs must also be encouraged to co-create robust peer networks that connect their young businesses with the world.” The guide includes recommended actions for policymakers and contains around 90 cases of policy measures that have had a positive impact. It encourages governments to develop comprehensive strategies that include policies, programmes and institutions while taking into account national socio-economic factors and development challenges. [Download]
The Global Initiative on Decent Jobs for Youth (UNIDO)
Connecting resources and society in Botswana: communique, downloads
Debate about diversification of the Botswana economy beyond diamonds occurs particularly during downturns in diamond prices, but government policy to diversify during past downturns has been limited. The beneficiation programme is a stepping stone. But today there is an opportunity for Botswana to build upon beneficiation and become a continental leader on extraction and a hub of expertise on mining.
Botswana seeks to expedite nickel deal (Business Day)
Botswana's mines minister Onkokame Kitso Mokaila has written to his South African counterpart to expedite the transfer of the mineral rights at the Nkomati Nickel mine to state-owned Botswana Copper, which is one of the central platforms the government will use to diversify its economy away from diamonds.
Kenya: War on corruption splits private sector (Business Daily)
The new assault on graft by President Uhuru Kenyatta has created a rift between the private sector and the chamber of commerce chairman Kiprono Kittony who resigned from the Kenya Private Sector Alliance board. Mr Kittony said the lobby had hijacked an industry initiative when it presented the Anti-Bribery Bill to President Kenyatta on Monday. He said the alliance, with about 200 corporates and 90 business membership organisations, does not represent private business in the country and abroad.
President Kenyatta's statement on the reorganisation of government
Kenya signs e-commerce deal with China (Daily Nation)
Kenya and China have launched an online window to cut out middle men and reduce logistics cost for import and export trade between the two countries. Kenya National Chamber of Commerce signed a deal to bring Chinese e-commerce service Amanbo into the Kenyan market. Under the deal KNNCI will help verify the quality and standards for Kenyans who want to post their products for the Chinese market.
Agreement 'set to spur investments' by Dubai firms in Africa (Out-Law)
India-Tanzania trade: January-August data (IPPMedia)
Mauritius and Australia to cooperate on marine renewable energy (Govt of Mauritius)
What lessons can Rwanda learn from South Korea's development model? (New Times)
Resolution frameworks for Islamic banks (IMF)
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WorldRiskReport 2015: Food insecurity increases the risk of disaster
Report addresses the consequences of possible extreme natural events in 171 countries
What is the connection between food security and disaster risk? This question is the central focus of the WorldRiskReport 2015 by the Alliance Development Works (Bündnis Entwicklung Hilft – Gemeinsam für Menschen in Not e.V.) and the Institute for Environment and Human Security of the United Nations University.
Crises and disasters cause hunger
“The catastrophic effects of natural hazards, such as earthquakes or cyclones, can be decreased by ensuring that people are fed. The hungry are more vulnerable in the event of disasters, wars and conflicts,” said Peter Mucke, Director of Bündnis Entwicklung Hilft and Managing Director of the WorldRiskReport.
Whilst it would be necessary to feed about 1.2 billion more people by 2030 – as much as the current population of India – Mucke feels confident that there are good prospects for achieving the internationally agreed zero hunger objective by the year 2030: “In terms of food volume, there is enough food for everyone. But unequal distribution of agricultural products, food wasting, and losses incurred during harvesting or transportation are the main reasons of the current hunger situation.”
During conflicts and wars food security is as much at risk as during disasters: “Hunger and migration are an outcome.” Since a part of the current conflicts is hard to curtail, Peter Mucke emphasizes the high supply demand in neighbouring countries and refugee camps: “This requires also a better food supply to people in crisis areas and refugee camps.”
WorldRiskIndex 2015
This year, the WorldRiskIndex once again forms an important part of the WorldRiskReport. The index evaluates the exposure to natural hazards faced by 171 countries and assesses the inherent vulnerability in the countries towards suffering from impacts when faced with these hazards. According to the index, the island state of Vanuatu once again faces the highest risk in 2015. It was only in March that the country was devastated by cyclone Pam. Ranked second and third are Tonga and the Philippines, which have merely swapped positions compared to the previous year. Germany is ranked in position 146.
“The vulnerability of a country largely determines whether a natural hazard will turn into a disaster,” said Prof. Jörn Birkmann from the University of Stuttgart, who is responsible for the index. Typhoon Haiyan and Hurricane Sandy illustrate this point. With wind speeds of over 185 km/h (Sandy) and of over 300 km/h (Haiyan), both storms had high levels of destructive power. Yet, wind speeds alone did not account for the differences in terms of the destruction, said Birkmann. Whereas around 210 people died as a result of Sandy in the USA, there were approximately 6400 fatalities in the Philippines. In addition, although the total economic damage was greater in the USA, the share of the economic damage with respect to country’s gross national product was five times less than in the Philippines. The insured damage in the USA was also six times higher than in the Philippines, explains Birkmann on the basis of the WorldRiskIndex.
Interplay between food security and disaster risk
“The report clearly shows that hunger and food insecurity have negative effects on disaster risks because they cause a significant increase in the vulnerability of the relevant population to natural hazards,” said Dr Matthias Garschagen, Scientific Director of the WorldRiskReport and Head of Vulnerability Assessment, Risk Management and Adaptive Planning Section at the United Nations University Institute for Environment and Human Security. On the other hand a disasters can significantly reduce food security.
Floods or cyclone events, for example, often do not only destroy harvests and graneries; they also destroy transportation infrastructure and thereby hamper the provision of supplies to crisis regions. In the worst case, the combination of disasters and food insecurity lead to a fatal downward spiral in which the people affected move from one crisis to the next.
Especially in sub-Saharan Africa, there is overlap between the hotspot regions affected by hunger and those affected by high vulnerability to natural hazards. These areas are also expected to be heavily impacted by climate change, which presents further challenges for food security. “However comprehensive disaster protection strategies may be, they alone will not be sufficient if the international community fails to establish a bold climate policy that takes into consideration the situation of the groups and countries that are most affected by disaster risks,” said Prof Katrin Radtke, Welthungerhilfe and representative of Bündnis Entwicklung Hilft.
“The goal of policy and practice must therefore be to make food security more resistant to crises and, at the same time, to include it as a central element of disaster prevention. The report identifies clear recommendations in this respect,” said Dr Matthias Garschagen. Prof Katrin Radtke stressed the following point: “According to studies by the Food and Agriculture Organization, investments in agriculture are five times more efficient in reducing poverty and hunger than measures in any other sector.”
» Download: WorldRiskReport 2015: Focus - Food security (PDF, 7.17 MB)
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Connecting Resources and Society in Botswana
A Chatham House Africa Programme and De Beers Group Conference
Conference Communiqué
The conference co-hosted by Chatham House, De Beers Group of Companies and the Ministry of Minerals, Energy and Water Resources of the Republic of Botswana, brought together academics, experts, captains of industry and policy makers to discuss the success of the public private partnership between the government of Botswana and the De Beers group in producing long term economic growth in Botswana, and how the country may diversify to prepare for a post-extraction future.
It was acknowledged that the public private partnership between the government and De Beers is one of the longest and most successful in the world. It was highlighted that this partnership has enabled the government to share the benefits of extraction with the population. The partnership contributes to 25% of GDP, and provides one in 20 jobs in the country.
Botswana has built high standards of governance and political stability over the last 40 years. The investment of mineral revenues into human, physical, and financial capital has contributed to the success of harnessing diamond extraction for development. But to maintain these advantages strong governance of the macro economy should be reflected within micro economic enterprise.
The conference also recognised that while a diamond is forever, a diamond mine is not. Historical achievements were reviewed but future trends also mapped over what more could be done both within the diamond industry and in support of diversification. The need for non-diamond growth is high on the policy agenda in Botswana as the value added of GDP from diamonds has decreased, indicating strong growth in other sectors and that industry’s share of export earnings is still high. Development of tradable sectors was particularly encouraged.
The diamond industry in Botswana can support further diversification through the transfer of skills, and entrepreneurship programmes such as the Tokofala programme. Botswana can achieve job creating growth through the expansion of small enterprises into medium sized business. Such initiatives may be catalysed by enabling easier access to finance for small businesses, and partnering with the private sector for the transfer of key business skills.
Stakeholder engagement has evolved to a driving force and the conference discussed how this can be developed further. Such a process should better inform the public of the benefits and complexities of the PPP and the trade offs required for deeper diversification.
The government is a key interlocutor between civil society and business. It has an important function in ensuring social stakeholders benefit from private enterprise, as well as a responsibility to support training programmes for youth to provide skills that grant access to private sector employment both in Botswana and abroad.
Trust between the diamond industry, government and society needs further strengthening and additional transparency could help. For example Botswana could easily supersede the requirements of the Extractive Industry Transparency Initiative by publishing taxes and royalties to the government from the diamond industry.
To attract Foreign Direct Investment in a competitive environment the government must confront the challenges of low productivity and competitiveness. It also faces pressing energy and water shortfalls which impact the investment environment, and the government is constructively confronting these challenges.
Debate about diversification of the Botswana economy beyond diamonds occurs particularly during downturns in diamond prices, but government policy to diversify during past downturns has been limited. The beneficiation programme is a stepping stone. But today there is an opportunity for Botswana to build upon beneficiation and become a continental leader on extraction and a hub of expertise on mining. Diamonds are not the only thing that shine, and the people of Botswana are an even more important resource to invest in and capitalise on to truly connect resources and society.
Turning finite resources into enduring opportunity: The economic contribution to Botswana of the Partnership between the Government of the Republic of Botswana and De Beers
The analysis in this report, released to coincide with the Connecting Resources and Society in Botswana conference, demonstrates the shared long-term vision of the respective partners, and demonstrates a shared understanding that as much value as possible should be generated from the activities of the Partnership in Botswana, for Batswana. Click here to read more.
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Integrating trade into national development strategies and plans: The experience of African LDCs
At the fourth United Nations Conference on the Least Developed Countries (LDCs) held in Istanbul, Turkey, from 9 to 13 May 2011, the Heads of State and Government acknowledged the progress that has been made by LDCs over the past decade. But they also expressed concerns about the high levels of poverty and hunger prevalent in LDCs and committed to assisting LDCs in confronting their current and emerging development challenges and enabling half of these countries to meet the criteria for graduation from LDC status over the next decade.
There is the recognition that trade can play a positive role in reducing poverty and in addressing the complex and multifaceted challenges facing LDCs. However, this potential of trade for poverty reduction and development has not been realised in many LDCs, despite having achieved impressive export and growth performance and also having implemented significant trade reforms, particularly since the 1990s.
The failure of trade expansion to lead to poverty reduction can be ascribed to the fact that it has not created sufficient employment and has also gone hand in hand with an increase in inequality. More importantly, it is a consequence of the fact that trade has not been effectively mainstreamed into the national development strategies of LDCs. Although many LDCs are increasingly making efforts to mainstream trade into national development plans, there is a gap between the rhetoric of trade mainstreaming and its actual practice and outcomes.
In this context, there is the need for governments of LDCs, with the support of their development partners, to strengthen efforts to integrate trade into their national development strategies with a view to unlocking its potential for poverty reduction and development.
This paper discusses the experiences of three African LDCs (Ethiopia, Lesotho and Senegal) in mainstreaming trade into their development strategies, with a view to drawing lessons from these experiences for other LDCs. More specifically, it examines and analyses three policy documents that have been used as instruments or vehicles for mainstreaming trade into national development strategies in LDCs. These are: the Poverty Reduction Strategy Papers (PRSPs); the Diagnostic Trade Integration Studies (DTIS), and National Development Plans.
The three countries analysed were chosen because they are the African LDCs in UNCTAD’s project on “Strengthening the capacities of trade and planning ministries of selected Least Developed Countries to develop and implement trade strategies that are conducive to poverty reduction.” They are also interesting case studies because of their structural differences which make their trade and development experiences relevant for other LDCs.
Although the three are LDCs, Ethiopia and Lesotho are landlocked countries while Senegal is not landlocked. Furthermore, Ethiopia is an agriculturally dependent economy while Lesotho depends more on services and also manufacturing exports. While Senegal also has a large services sector like Lesotho, they both differ from Ethiopia in the sense that they are involved in monetary cooperation arrangements which have implications for trade and also the design and implementation of national development strategies.
The three countries also differ in terms of their main trading partners: over the period 2010-2014 the European Union was Ethiopia’s main trading partner; the United States was Lesotho’s main trading partner; and a large portion of Senegal’s exports went to sub-Saharan Africa. These differences in structure, geography and export markets make the experiences of the three African LDCs useful for drawing lessons for other LDCs.
The aim of the Trade and Poverty Paper Series is to disseminate the findings of research work on the inter-linkages between trade and poverty and to identify policy options at the national and international levels on the use of trade as a more effective tool for poverty eradication. The opinions expressed in papers under the series are those of the authors and are not to be taken as the official views of the UNCTAD Secretariat or its member states.
The previous paper in the series, ‘Trade and Poverty Alleviation in Africa: The Role of Inclusive Structural Transformation’, is available here.
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World Bank Group unveils $16 billion Africa Climate Business Plan to tackle urgent climate challenges
One third of funds expected to come from Bank’s fund for the poorest countries
The World Bank Group on 24 November 2015 unveiled a new plan that calls for $16 billion in funding to help African people and countries adapt to climate change and build up the continent’s resilience to climate shocks.
Titled Accelerating Climate-Resilient and Low-Carbon Development, the Africa Climate Business Plan will be presented at COP21, the global climate talks in Paris, on November 30. It lays out measures to boost the resilience of the continent’s assets – its people, land, water, and cities – as well as other moves including boosting renewable energy and strengthening early warning systems.
“Sub-Saharan Africa is highly vulnerable to climate shocks, and our research shows that could have far-ranging impact – on everything from child stunting and malaria to food price increases and droughts,” said World Bank Group President Jim Yong Kim.
“This plan identifies concrete steps that African governments can take to ensure that their countries will not lose hard-won gains in economic growth and poverty reduction, and they can offer some protection from climate change.”
According to the plan, climate-related factors will make harder for African countries to tackle extreme poverty in the future for three reasons:
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Warming is unavoidable as a result of past emissions of greenhouse gases, which will cause the loss of cropland, a decline in crop production, worsening undernourishment, higher drought risks and a decline in fish catches
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Further warming may materialize, which will have disastrous consequences for the region in the form of heat extremes, increased risk of severe drought, crop failures every two years, a 20% reduction in major food crop yields, and, by the end of the century, up to 18 million people affected by floods every year
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Considerable uncertainty on what the warming impact will be on local weather patterns and hydrological cycles, which pose formidable challenges for development planning, and for the design of projects related to water management such as irrigation and hydropower, and more generally climate-sensitive infrastructure such as roads or bridges
Current levels of funding for adaptation are about $3 billion per year, which is insufficient to finance current needs, and is not increasing at the necessary rate to meet future needs.
Per current estimates, the plan says that the region requires $5-10 billion per year to adapt to global warming of 2°C.
The World Bank and the United Nations Environment Programme estimate that the cost of managing climate resilience will continue to rise to $20-50 billion by mid-century, and closer to $100 billion in the event of a 4°C warming.
Of the $16.1 billion that the ambitious plan proposes for fast-tracking climate adaptation, some $5.7 billion is expected from the International Development Association (IDA), the arm of the World Bank Group that supports the poorest countries. About $2.2 billion is expected from various climate finance instruments, $2.0 billion from others in the development community, $3.5 billion from the private sector, and $0.7 billion from domestic sources, with an additional $2.0 billion needed to deliver on the plan.
“The Africa Climate Business Plan spells out a clear path to invest in the continent’s urgent climate needs and to fast-track the required climate finance to ensure millions of people are protected from sliding into extreme poverty,” explains Makhtar Diop, World Bank Group Vice President for Africa.
“While adapting to climate change and mobilizing the necessary resources remain an enormous challenge, the plan represents a critical opportunity to support a priority set of climate-resilient initiatives in Africa.”
The plan will boost the region’s ability to adapt to a changing climate while reducing greenhouse emissions, focusing on a number of concrete actions. It identifies a dozen priority areas for action that will enhance Africa’s capacity to adapt to the adverse consequences of climate variation and change.
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Strengthening resilience: The first area for action aims to boost the resilience of the continent’s assets. These comprise natural capital (landscapes, forests, agricultural land, inland water bodies, oceans); physical capital (cities, transport infrastructure, physical assets in coastal areas); and human and social capital (where efforts should include improving social protection for the people most vulnerable to climate shocks, and addressing climate-related drivers of migration).
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Powering resilience: The second area for action focuses on powering resilience, including opportunities for scaling up low-carbon energy sources. In addition to helping mitigate climate change, these activities offer considerable resilience benefits, as societies with inadequate access to energy are also more vulnerable to climate shocks.
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Enabling resilience: And the third area for action will enable resilience by providing essential data, information and decision-making tools for climate-resilient development across sectors. This includes strengthening hydro-met systems at the regional and country levels, and building capacity to plan and design climate-resilient investments.
“The plan is a ‘win-win’ for all especially the people in Africa who have to adapt to climate change and work to mitigate its impacts,” said Jamal Saghir, the World Bank’s Senior Regional Adviser for Africa. “We look forward to working with African governments and development partners, including the private sector, to move this plan forward and deliver climate smart development.”
The Africa Climate Business Plan reflects contributions and inputs from a wide variety of partners with whom the Bank is already collaborating on the ground, in a coordinated effort to increase Africa’s resilience to climate variability and change. The plan aims to help raise awareness and accelerate resource mobilization for the region’s critical climate-resilience and low-carbon initiatives.
The plan warns that unless decisive action is taken, climate variability and change could seriously jeopardize the region’s hard-won development gains and its aspirations for further growth and poverty reduction. And it comes in the wake of Bank analysis which indicates climate change could push up to 43 million more Africans into poverty by 2030.
» Download: The Africa Climate Business Plan (PDF, 15.01 MB)
Putting innovation in African logistics at the centre of regional economic growth
During recent years, the African story has been built around oil, mining and the sale of commodities; as well as foreign direct investment from global businesses, institutional and sovereign investors. Underpinning this has been a hidden but growing logistics sector, forming the backbone for industrial development and becoming a fast-growing industry in itself.
Economic growth in sub-Saharan Africa has been driving the demand for world-class transportation and logistics, which is fundamental to the success of businesses, particularly for African entrepreneurs and innovators seeking to ship products and expand their regional footprint. Conversely, the problems that are created by sub-standard logistics present innovators with additional business opportunities. In short, logistics are critical to economic success and a driver of innovation and enterprise.
The scale of opportunity for entrepreneurs is perhaps best understood by looking at some of the challenges created by a weak logistics infrastructure. Drone delivery can be a possible game changer in a challenging continent like Africa, especially in key sectors such as healthcare and agriculture. Drones are a truly interesting pieces of technology that are able to navigate current logistical challenges more efficiently, swiftly and cheaply provided that African governments can develop a proper regulatory framework to enable such innovation.
However, for long-term purposes, one cannot overlook the importance of traditional transport and logistics infrastructure, which are critical to the success of many businesses. In the retail space, according to a McKinsey & Company 2015 report, the growth of e-commerce is expected to soon account for 10% of African retail but is frustrated by poor road networks and inadequate postal services. So how can entrepreneurs work around the current barriers in African logistics to develop innovative solutions that work for Africa?
Necessity is the mother of all invention
The key is to understand what the African-specific challenges are and work around them to arrive at innovative solutions that work for the continent. For example, the Innovation Prize for Africa 2015 showcased hydrogen-fuelled cabs with adaptable, renewable body shells and a mobile application to book cab rides payable with cash or credit. The minicab service fills the gap for commuters who need organized, safe and affordable micro transport within a three mile radius. This environmentally friendly taxi service also eases traffic congestion in cities without causing pollution.
If such innovation can be applied to passenger transportation in Africa, the same can be expected in the broader logistics sector. This is especially true if African countries can take advantage of opportunities to fully electrify the continent. Much of the region’s natural gas, which can be used to generate electricity, is lost in gas flares due to over-capacity. Gas-generated electricity would present an affordable and more environmentally friendly way of building a region-wide electricity grid, with the outcome of connecting businesses far and wide. Electrification will also bring the continent closer to developing an electrified rail network; helping to move away from diesel.
In East Africa, the Logistics Innovation for Trade (LIFT), which was launched in February 2015, matches funding for organisations that are developing innovative logistics and transport solutions; particularly those that commercial lenders might consider too risky. The goal is to help develop solutions that reduce the cost of transport and logistics and help to simplify the supply chain.
Three potentially strong African regions held back by inefficient logistics
Currently, regional logistics infrastructure paints a disparate picture. Central African markets are particularly difficult and expensive for companies to penetrate, in comparison to East Africa, which has benefitted from the East African Community intra-regional trade links and diverse domestic markets. West Africa (reliant on extractives) is lagging behind.
Naturally the most important element is transport, particularly rail and ports, which is crucial for intra-regional and global trade. In these two areas, East Africa is arguably leading the way. TradeMark East Africa (TMEA), an organization that works closely with the East African Community (EAC) institutions, national governments, the private sector and civil society organisations to increase trade aims, by 2016, is set to see a 30% reduction in time for trucks crossing select borders, a 10% increase in value of exports from the EAC region, a 25% increase in intra-regional exports compared with total exports from the region and a 15% reduction in average time to import or export a container from Mombasa or Dar to Burundi or Rwanda.
This is highly achievable as significant progress is already being made on a regional level, with Kenya’s LAPSSET corridor development creating new connections between Lamu Port, Southern Sudan and Ethiopia. These include highways, an oil pipeline, airports and railways. Some of these are being built through bilateral agreements. The Lamu – Moyale – Addis Ababa Railway line for example is the result of a Memorandum of Understanding (MoU) between Ethiopia and Kenya. An MoU has also been signed between Kenya and South Sudan to facilitate the implementation of the Lamu – Juba Oil Pipeline and Fibre Optic Project.
In West Africa projects are underway, although these tend to be national projects connecting countries, as opposed to bilateral or regional arrangements across borders. In Angola, the Benguela Railway (currently under construction) links the Atlantic port of Lobito to the eastern border town of Luau. This will connect it to rail networks in the Democratic Republic of Congo and Zambia. Angola is also constructing its first Public Private Partnership (PPP) deep sea port in the northern province of Cabinda. The Port of Caio will provide Angola with its largest port – over 100 hectares – which will include marine structures, special economic zones, terminal facilities and industrial storage and logistical facilities. It will also create opportunities for entrepreneurship and jobs as well.
Creating efficient inter-regional trading ecosystems
Sound logistics is critical to global and regional trade but also in driving domestic innovation, especially in the growth industries of agribusiness, technology and retail. In retail, the ability to ship products to retail outlets and directly to consumers is crucial in creating customer value and loyalty. Multinational companies such as Wal-Mart, Coca Cola and Nike attribute a great deal of their success to global logistics systems. These companies employ logistics managers who focus on managing the supply of raw materials and the flow of products across borders.
Increasing regional trade, and making it more efficient, leads to natural business development opportunities and for entrepreneurs to trade with each other, across borders. Physical logistics aid this, but governments continue to stymie regional trade by imposing import and export duties. This is an administrative and financial barrier aggravated by trading across multiple currencies.
If the regional supply chain of goods and services is to be liberated, national taxes and tariffs need to be simplified or eradicated. Opportunities exist for African entrepreneurs to help find solutions while governments are building infrastructure. However, to enable this process, regional governments must work together to remove fiscal and bureaucratic obstacles to regional trade, whilst coordinating their logistics infrastructure development projects and creating opportunities for entrepreneurs and innovators to play a keener role in developing solutions. In tandem, the focus must continue to be on the full electrification of the continent as this will transform the way in which consumers interact with businesses and add greater efficiencies to the business supply chain and logistics sector.
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EALA Plenary commences in Kigali
Rwanda’s President Paul Kagame is calling on the region to concert its integration efforts and to address challenging issues notably insecurity, bad governance and corruption as it garners to realise the regional economic bloc’s Vision 2050.
The President’s remarks were delivered by the President of the Senate, Rt. Hon. Bernard Makuza, at the commencement of the 3rd Meeting of the 4th Session of the 3rd Assembly at the Parliament of Rwanda, Kigali, Rwanda, on Tuesday afternoon.
He reiterated that all East Africans must eradicate the “business as usual” mindset and strive towards progress of strengthening integration. “As legislators, we must ask questions and keep searching for solutions for and on behalf of our people. We must identify and address whatever may divert the progress of the Community, and ensure that there are no obstacles to our co-operation for integration. And to start with, procedures and processes governing Organs of the Community should not be themselves an obstacle to the growth of the Community,” Rt. Hon. Makuza said.
Rt. Hon. Makuza tasked the EAC to involve all the people in the integration process for the tangible benefits to be realized.
“It is indeed common sense that our people must be consulted and involved in each step of integration programs as much as possible. The fact of the matter is that, the cost of failing to involve people widely enough, ultimately is much higher than what is required to invest, for people’s participation in the decision-making processes,” Rt. Hon. Makuza told the House.
He called on the EAC Partner States to speedily implement the Common Market Protocol saying the delay had caused citizens a number of opportunities.
Rt. Hon. Makuza further hailed EALA for the attention it is paying to issues of natural resources, environment management, food security and rural development. He said that Rwanda had after the 1994 Genocide Against the Tutsi, learnt vital lessons that essentially enabled the country to transform itself.
The country, Rt. Hon. Makuza, added, understood that unity, security and good governance were key for survival and sustainability as a nation and that Rwanda had remained committed to the EAC.
He said Parliament of Rwanda had listened carefully to the will of the people regarding the country’s Constitutional Amendment.
“As legislators, there is no other voice to hear, other than our people’s will, both in decision-making and in accountability. People’s aspirations are the only argument against intimidations and prejudices. National sovereignty belongs to our people. We cannot afford to apologize for the very things that work for our people, and which make us stronger. This is the real expression of democracy,” Rt. Hon. Makuza said.
The President of the Rwanda Senate further urged the Assembly to articulate the Sustainable Development Goals (SDGs) adopted by the UN in September this year, while placing people and the environment at the centre of the priorities.
In his remarks, the Speaker of the EALA, Rt. Hon. Daniel F. Kidega noted that East Africans were interested in seeing more tangible benefits of integration through the various integration pillars.
“With regards to the Customs Union, we are glad the Summit is pushing for the operationalization of the Single Customs Territory to streamline and enhance clearance of goods. The improvement at the Dar es Salaam and Mombasa ports will make both the Central and Northern Corridors attractive in terms of facilitation of trade,” Rt. Hon. Kidega said.
The Speaker said the Assembly, was concerned about what is taking place in the neighbouring Republic of Burundi.
“Many lives have been lost, others maimed, peace disrupted, property damaged and the economy destabilized following the rapid escalation of violence and the instability over the last few months. The situation is worrying and could be dire and grave,” Rt. Hon. Kidega said.
“I have recently had the opportunity of meeting with the President of the Senate of Burundi and called upon him to rally the country’s legislators to go above and beyond the call of duty in restoring stability,” Speaker Kidega added.
“As an Assembly, we have also debated on and passed the Report of the Goodwill Mission of EALA to the Burundi Refugees in Eastern Province of Rwanda and in Kigoma in the United Republic of Tanzania. Last week, the Assembly also received a petition from concerned East Africans keen to see the impasse resolved,” he remarked.
Rt. Hon. Kidega added that EALA was further keen to buttress the mode of assent of Bills.
“We are of the view that the region takes advantage of the Summit sittings which can create opportune moment for the Summit Members to exercise their mandate as stipulated under Article 63,” Speaker Kidega said.
The Speaker further rooted for sustained funding for the Community saying it was time for the EAC Partner States to seek alternative mechanisms for funding.
At the EALA Session, the following matters form notable business:
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The EAC Forest Management and Protection Bill, 2015 - 2nd and 3rd Reading
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The EAC Disaster Risk Reduction and Management Bill, 2015 - 2nd and 3rd Reading
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Debate and adopt Reports of various Committees of the House.
A number of Reports are also expected to be debated and adopted.
In her remarks, the Speaker of the Rwanda Chamber of Deputies, Rt. Hon. Donatile Mukabalisa, hailed the existing relations between the Parliament of Rwanda and EALA. She said Parliament of Rwanda had focused on the speedy harmonization of the country’s laws with those passed by EALA.
She mentioned that Parliament of Rwanda was also readying itself for the Inter-Parliamentary Games’ Tournament on December 4-11th, 2015, which brings together EALA and National Assemblies.
Moving the vote of thanks, Hon. Dora Byamukama said the Assembly would deliberate on the message of H.E. Paul Kagame and to find the mechanisms to implement the directives.
Hon. Byamukama said the EAC was yearning for accelerated pace of implementation of laws to speed up integration in the EAC region. She hailed the Secretary-General of the EAC, Amb. Dr Richard Sezibera for introducing the scorecard on Non-Tariff Barriers.
Hon. Byamukama maintained that issues concerning human rights needed to be addressed as a matter of priority.
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EU notifies preferential treatment to services exports from LDCs
On 18 November, the EU notified the WTO Council of Trade in Services of the preferential treatment which it intends to make available to services and service suppliers of the global trade body’s poorest members. In doing so, the EU joins other WTO members who have responded to the commitments made at the 2013 WTO Ministerial Conference in Bali related to the LDC services waiver.
To date 18 WTO members – Canada, Australia, Norway, Korea, China, Hong Kong, Chinese Taipei, Singapore, New Zealand, Switzerland, Japan, Mexico, Turkey, the US, India, Chile, Iceland and Brazil – have submitted notifications. The notification from South Africa is reported to be underway and is likely to be submitted soon.
Concretising the “signals”
“The EU attaches great importance to helping the least developed countries better integrate into the world trading system,” said Cecilia Malmström, EU Commissioner for Trade.
“I hope this will encourage all developed and developing WTO members, who have not yet given preferential treatment to these countries, to do so without delay,” she added.
In July 2014, the group submitted a collective request regarding the preferential treatment it wanted to see for LDC services exports. At a high-level meeting in February, 22 WTO members responded to the collective request made by the LDC Group for preferential treatment for the services sector by indicating sectors and modes where they were considering providing preferences as well as support for projects on technical cooperation.
Earlier this year, the EU signalled various areas in which it could provide LDCs with preferential access to their services markets.
Since then, the LDC Group has been encouraging WTO members to formally notify the CTS of their actual preferences, including detailed information regarding the sectors or sub-sectors concerned and the period of time during which the member plans to maintain those preferences.
Nature of the commitments
The EU notification contains, among other elements, various commitments related to commercial presence (Mode 3) and cross border supply of services (Mode 1).
Some obligations concerning the temporary presence of natural persons for business purposes are also described including provisions regarding business visitors for establishment purposes, intra-corporate transferees, and services sellers.
For example, the EU commitment would allow LDCs to transfer management trainees to affiliated companies in the EU in about 30 sectors or sub-sectors for a maximum duration of one year of experience.
Companies from LDCs with a contract to provide services in the EU will be able to send skilled professionals to Europe to provide these services.
As per the terms of the notification, 37 sectors of interest for contractual service suppliers and independent professionals from LDCs are liberalised. The sectors referred to in the “schedule”, a term used in this context to refer to the listing of preferences as contained in the notification, cover a wide range of professional activities including legal advisory services, accounting and bookkeeping services, architectural services, engineering services, medical and dental services, midwifery services, educational services, travel agencies and tour operators’ services, and technological services, to name a few.
In all cases, a certificate of higher education or qualification of an equivalent level is required for the supply of the service which is expected to take place on a “temporary basis.”
A number of country-specific reservations are detailed in the document regarding most commitments.
The “schedule” indicates that it does not contain any commitment on audio visual services.
Additionally, according to some specialists, the document contains strict language with regard to the movement of natural person (Mode 4) specifying that the schedule “does not apply to measures affecting natural persons seeking access to the employment market of the EU, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis.”
One developed country delegate indicated that the challenge for LDCs is to now build capacity to be able to export in these sectors and effectively make use of these preferences.
Duration of the preferences
According to the EU, the preferences tabled by the EU will last for the duration of the waiver and until a country is no longer on the UN list of least-developed countries.
The timing of the operationalisation of the waiver has often been referred to as crucial in past discussions and has received more attention lately in the run-up to Nairobi. LDCs now seek a modification of the duration of the services waiver – potentially through a ministerial decision in Nairobi – so that notified preferences can apply for 15 years from the date that a member submits its notification.