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A boost for struggling African regional trade: Seychelles signs up for Tripartite Free Trade Agreement
Leaders from 26 African countries on 10 June 2015 signed an ambitious declaration in Sharm El Sheikh, Egypt to establish a wide-reaching free-trade zone across almost the entire eastern half of the African continent.
The smallest member state of all, the 115-island archipelago of Seychelles, which lies off the eastern coastline of Africa and has a population of just 90,000 people, is upbeat about the possibilities the agreement could bring for the remote island nation.
The Tripartite Free Trade Agreement (TFTA), which incorporates member countries from the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC), will stretch from the southernmost tip of the continent to the northernmost country of Egypt.
The fast-growing region, which encompasses over 600 million people and a combined Gross Domestic Product of $1.2 trillion will be able to trade with each other more cheaply through the agreement, which will effectively remove tariffs and customs duties for domestically-produced goods traded between their borders.
Opportunities for Seychelles trade integration
Once isolated and hampered by restrictive import-export costs, the Seychelles archipelago is currently in a transition phase with regards to trade, having recently acceded to the World Trade OrganisationTrade Organisation after a negotiation process lasting around 20 years.
The island nation is a net importer of goods, with its main exports being tuna and other fresh and frozen fish and fish products. According to the Seychelles National Statistics Bureau (NBS)’s most recent publication, ‘Seychelles in Figures 2013’, in 2012, Seychelles exported some 6.8 billion Seychelles rupees ($522 million) worth of products, while its imports amounted to around 14.7 billion Seychelles rupees ($1.1 billion) – amounting to a trade deficit of around 7.9 billion Seychelles rupees ($606 million).
According to a press statement from the Seychelles Ministry of Foreign Affairs and Transport, the Seychelles Vice President, Danny Faure, who was representing President James Michel at the summit, called the creation of the free trade zone a “historic milestone” towards Africa’s regional integration.
External trade
“This also shows Seychelles' continuing engagement in the African economic community's vision for a deeper economic integration," he said.
“Apart from being able to have access to a larger single regional market for both its exports and imports, Seychelles will also stand to benefit from this agreement as it is expected to streamline the import-export process for traders to the region,” reads the statement. “This in turn is expected to improve the ease of doing business and, generally, contribute to economic growth.”
The Seychelles’ biggest trading partner is France, with trade figures amounting to just under a billion Seychelles rupees ($76 million) of imports and SCR 1.6 billion ($127 million) of exports in 2012.
Although the archipelago’s regional imports to COMESA, SADC and the Indian Ocean Commission (IOC) totalled a substantial 2.8 billion Seychelles rupees ($214 million) in 2014, this was offset by weak reciprocal exports of only SCR50.2 million ($3.8 million) with Seychelles’ regional neighbours in 2012, indicating that much more can still be done to promote the exportation of Seychelles’ goods to other African countries.
On track for 2017 implementation
Signatories to the declaration must now go back to their respective national assemblies which will have to ratify the agreement and submit their instruments of accession, and a simple majority of 14 member countries will have to achieve this before the Free Trade Area will come into effect, which will probably be only in 2017.
According to an interview with South African news website Independent Online (IOL), the trade and industry commissioner at the African Union, Fatima Haram Acyl said there was no “magic wand” to get continental free trade area in place all at once.
“The European Union’s 28 countries did not wake up one day and come together as we see it today. It took them years to get where they are,” she said.
Currently, cross-border trade between African countries only amounts to around 17 percent of the continent’s total trade, and prohibitive visa rules and air links often impede African businessmen from establishing ties in other African states.
Acyl said that African migrants often drowned at sea while seeking a better life in Europe took these risks because their home countries had nothing to offer them, and added that better human resource management was necessary to entice skilled workers to stay in Africa.
For the moment, the TFTA will be limited to goods during the first phase of the negotiations, while other issues such as rules of origin, trade remedies and dispute settlement will be negotiated under the ‘built-in agenda’. The second phase of the agreement will be negotiated from July this year and will cover issues such as services, investment, intellectual property rights and competition policy.
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tralac’s Daily News selection: 12 June 2015
The selection: Friday, 12 June
Mozambique postpones signing up Tripartite FTA (StarAfrica)
“There are questions that have to be studied and about the origin of imported products, and their selection, about which areas should be liberalized, and where liberalization could be gradual. This entire exercise has to be done in such a way that the growth of our industry is not damaged by membership of the TFTA,” said Do Rosario who represented President Filipe Nyusi at the summit.
“Mozambique has a Five-Year Government Programme, which concerns the creation of better living standards for Mozambicans, and this means creating more jobs, more income, and getting industry to work, so it is important to check whether or not the agreement benefits Mozambique’s exports to the entire region, and whether imports under the agreement will not create difficulties for the rebirth of national industry”, the Prime Minister added.
Phyllis Wakiagas: 'Significance of Tripartite Free Trade Area launch' (Business Daily)
Legal scrubbing of the document is expected to be complete by July 2015. Despite this roadmap, it will not take no less than one year to finalise everything. Though the main text agreement is finished, the negotiations are by no means over and done with. Certain critical elements remain unnegotiated such as the rules of origin, trade remedies and tariff offers. [The author is CEO-designate of Kenya Association of Manufacturers]
Tripartite leadership changes hands (COMESA)
Zimbabwe President Robert Mugabe has handed over the chairmanship of the COMESA-EAC-SADC tripartite arrangement to his counterpart, Hailemariam Desalegn, Prime Minister of the Federal Democratic Republic of Ethiopia, and Chairman of the COMESA Authority a term of one year. Likewise, the Chairmanship of the Tripartite Task Force Mr Sindiso Ngwenya who is also the Secretary General of COMESA, handed over the mantle to his counterpart in the SADC Dr. Stergomena Tax.
Q&A: The AU Trade Commissioner on the New Cape-to-Cairo Common Market (Daily Maverick)
For once, the African Union Summit is going to have something to show for all its talk of regional integration. The Tripartite Free Trade Area, signed in Egypt on Wednesday, creates a common market across 26 countries, and has the potential to revolutionise trade on the continent. Simon Allison spoke to the AU trade commissioner about why the deal is so important – and why the rest of Africa will have to catch up quickly.
Aid FTA formation, State urges AFREXIM Bank (Zambia Daily Mail)
African free trade pact long overdue (editorial comment, Business Day)
Swaziland: TFTA could salvage threatened sugar (Times of Swaziland)
Doing Business in South Africa 2015 (Doing Business)
Doing Business in South Africa 2015 - the first World Bank Group sub-national study on the ease of doing business in South Africa - compares business regulations in 9 South African cities: Buffalo City, Cape Town, Ekurhuleni, eThekwini, Johannesburg, Mangaung, Msunduzi, Nelson Mandela Bay and Tshwane. The report measures regulations relevant to 6 stages in the life of a small to medium-size domestic firm: starting a business, dealing with construction permits, getting electricity, registering property, enforcing contracts, and trading across borders. The report measures cross-border trade through 4 maritime ports: Cape Town, Durban, Ngqura, and Port Elizabeth.
AGOA review could be chance for SA to make good with US (Business Day)
Whether the out-of-cycle review clause will survive consideration of the bill by the House of Representatives remains to be seen, but SA is clearly not impressed by the prospect of having its trade and investment climate subject to scrutiny by the US. This is likely to be a challenging process that will raise some uncomfortable issues for the government. However, approaching the issue defensively and negatively will probably make it much worse. The truth is that the economic relationship between the two countries has been tense for a number of years and there was a degree of inevitability that it would reach a tipping point sooner rather than later. Both parties need to embrace the review as an opportunity to clear the air and to reassess their interactions on trade and investment issues. [The author: Catherine Grant Makokera]
East Africa's Budget day: selected updates
Security, debt and infrastructure dominate budget of regional states (New Times)
Four of East Africa’s five economies, Rwanda, Uganda, Tanzania and Kenya unveiled ambitious expenditure plans for Financial Year 2015/16, with security, debt repayment and infrastructure dominating the region’s sector allocations. The new financial year starts July 1.
Rwanda: 2015/16 Budget: Civil society laud reduction in aid dependency (New Times)
Foreign sugar cost increased to protect Kenya millers (Business Daily)
Struggling cane millers received a boost after duty on imported sugar was increased 130% to protect local production from cheaper imports. Treasury secretary Henry Rotich noted that most local millers are on the verge of collapse due to the influx of cheap sugar from regional countries, mismanagement and ageing equipment. [Kenya’s budget documentation can be accessed here]
Uganda: Why the Budget hit Shs24 trillion (Daily Monitor)
Uganda: Budget speech for financial year 2015/16
Tanzania: Mkuya to fund 22trn/- budget from internal sources (IPPMedia)
Finance minister Saada Salum Mkuya yesterday tabled the 22trn/- government budget for the 2015/16 fiscal year unveiling plans to slash tax exemptions and charges on agricultural inputs, capital and medical supplies. The government budget was tabled in the National Assembly alongside with other East African Community (EAC) nations of Burundi, Kenya, Rwanda and Uganda.
Tanzania: Govt eyes ‘super investors’ as it clamps down on tax exemptions (The Citizen)
The importance of coal (Statistics SA)
Calls to decrease the world’s dependence on coal as an energy source are well intentioned. Lower use would reduce greenhouse gas emissions, and less demand would lower the environmental risk of coal mining. However, as the world moves away from coal, South Africa will need to consider the implications. The country depends heavily on the mineral as a source of economic value, employment and energy. It might come as a surprise to many that coal is now more important to the South African economy than gold. The coal mining industry contributed approximately R37 billion to the economy in 1993, with gold contributing R115 billion (value added at constant 2010 prices). In 2013, coal contributed R51 billion to South Africa’s economy, compared with gold’s R31 billion.
Mozambique’s Five Year Plan: implications for the business environment (SPEED)
On the 14th of April 2015 the Mozambican government’s five year plan was passed into law under Resolution 12/2015. The five year plan is based on the manifesto of the party elected to lead the country, in this case FRELIMO, and also incorporates actions which will guide the government during its mandate. It is intended to be a high-level vision statement rather than a specific action plan, specifics being found in the strategy documents and work plans of the individual ministries.The plan (Plano Quinquenal do Governo) is therefore designed to orient the government and other stakeholders.
There is no specific section on trade or regional integration in the PQG. Relevant issues are spread throughout the document, but mainly found under priorities 3 and 4. There is no clear vision as regards regional trade and integration.
IFC explores Zim business environment (NewsDay)
The International Finance Corporation (IFC) seeks to help the private sector and is on an exploratory mission after cutting ties with Zimbabwe country over a decade ago, an executive said yesterday. IFC director for East and Southern Africa Cheikh Oumar Seydi said the trip was an exploratory one and the team was in Zimbabwe after some constructive meetings over the years.
RBZ buries Zimdollar (NewsDay)
Central Africa still burdened by multidimensional crisis, Security Council told (UN News Centre)
The Central Africa region is still facing many challenges, including an economic crisis aggravated by the drop in oil prices, rising youth unemployment, and terrorist activities, as well as the cross-border impact of crises in Central African Republic (CAR) and Burundi, the Special Representative of the United Nations Secretary-General for the sub-region warned today. “The crisis in the CAR continued to have regional and multidimensional consequences with almost half a million refugees; ongoing gross violations of human rights; growing gang-related criminality; and environmental degradation in refugee areas,” Abdoulaye Bathily said, briefing the Security Council about the situation for the first time since November 2014. [Presidential Statement]
Visa confusion hinders trade, travel in central Africa (Reuters)
A month after six central African nations scrapped visa requirements for their citizens, the long lines at the Kye-Ossi border crossing in southern Cameroon show the challenges facing efforts to boost trade on the continent. The town of 45,000 people lives on trade in contraband goods with neighbouring Gabon and Equatorial Guinea. Cameroon, the region's breadbasket, exports food while wine and spirits come back across the border from Equatorial Guinea, almost none of it paying duty, a customs source said.
ECOWAS: member states endorse policy for gender mainstreaming in energy access (AfDB)
Toure noted that the ECOWAS Policy for Gender Mainstreaming in Energy Access must take priority in Member States’ plans to bring development, adding that in order to achieve universal access to sustainable energy by 2030 gender considerations must feature significantly in the implementation of SE4All initiative. According to Odera, “Lives can be transformed when gender dimensions are integrated in development policies”. The ECOWAS Policy for Gender Mainstreaming in Energy Access is being developed in a context of severe energy crises - with countries in the region having some of the lowest modern energy consumption rates in the world - and gender inequalities that hinder Member States from harnessing and utilizing, fully, both its male and female human capital to address its energy challenges.
Jacob Zuma: 'Infrastructure is the key to Africa’s sustainable development' (The Presidency)
Donald Kaberuka: 'I was furious when they called it a Chinese-built highway' (Mail and Guardian Africa)
Trade, global value chains and wage-income inequality (OECD)
The objective of this paper is to contribute to a better understanding of the relationship between inequality and trade by revisiting the links between one important component of income inequality—wage inequality—and the proliferation of global value chains. This is, to our knowledge, the first empirical attempt at linking these two phenomena since the emergence of measures of GVC activity based on inter-country input-output tables and trade in value added data in recent years. The data suggests that whilst some emerging countries have experienced reductions in wage inequality, most developed countries have seen their wage inequality rise. Where the links between GVC participation and wage inequality are concerned, the findings show that:
Cecilia Malmström: 'An integrated EU trade and foreign policy' (European Commission)
Trade-led growth strategies have been at the heart of the success we have seen across the developing world in recent decades. A country like Vietnam is an excellent example. Since the 1980s its exports are up more than 50-fold. In parallel, the number of its people living in absolute poverty dropped by 42 million; and the share of the population that had completed secondary school tripled. Europe's trade policy supports this kind of development in different ways:
SA, UAE move to boost trade relationship (IOL)
South Africa: Satsa wants visa laws put on ice, not reviewed (Business Day)
Capacity – the critical enabler for Agenda 2063 (ACBF)
Peace in an age of terrorism: can the AU achieve Vision 2020? (ISS)
AU summit could repair SA’s role in xenophobia (Bloomberg)
This week in the news
Follow the links below to read tralac’s daily news selections for the past week:
The selection: Thursday, 11 June 2015
The selection: Wednesday, 10 June 2015
The selection: Tuesday, 9 June 2015
The selection: Monday, 8 June 2015
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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Capacity – the critical enabler for Agenda 2063
As the AUC prepares to implement the first phase of its Agenda 2063 through the 10-year strategic plan, capacity will be a critical enabler for the realization of Africa’s development blueprint, said the Executive Secretary of the African Capacity Building Foundation (ACBF), Prof. Emmanuel Nnadozie during a presentation on 9 June at the Executive Council Ministerial retereat held in Johannesburg, South Africa.
Prof. Nnadozie was presenting the preliminary findings of a study that the AUC had mandated ACBF to undertake on the capacity imperatives, division of roles and risks and opportunities for Agenda 2063. “Capacity in all its forms and dimensions has often been the mother of all missing links in the continent’s development efforts. The ACBF’s role is to ensure that the continent has the capacity to implement the 2063 ten year plan,” said Prof. Nnadozie. “We have looked at the capacity dimensions as well as the risks that could inhibit the implementation of the ten-year plan.”
The preliminary findings of ACBF’s study show that enhanced capacity is needed for the 3 key dimensions of Agenda 2063, namely: delivering on flagship projects – mainly infrastructure – and special development initiatives and activities; a transformative agenda involving changing mindset and rebuilding self-confidence and the capacity to anticipate exigencies and build scenario for the future.
Professor Nnadozie added, “African has made significant effort in building human, institutional and organisational capacity but there is room for further improvements. The continent needs to step up capacities in science and technology, engineering and technical skills which are essential for the industrialization of the continent. The continent also needs to develop and enforce policies to retain trained professionals thus preventing the brain drain and ensuring retention of technical skills.”
ACBF’s study also recommended that the AUC’s current institutional architecture be urgently reviewed to better align it to the content and spirit of Agenda 2063. The Commission’s working systems and approaches also need to be improved and streamlined, with greater emphasis on decentralization of responsibilities for speedy actions and results.
Although there are many benefits related to Agenda 2063 risks also exist. Risk management strategies must be employed to curb threats from overshadowing successes. Among the risks and threats identified by ACBF’s study are: rising levels of poverty and unemployment, rising levels of urbanization, growing population of unskilled youth, persistence of disease pandemics, weak and fragile states, resurgence of insecurity and new conflicts, externally-defined conditionalities and declining terms of trade.
ACBF has been working closely with the AUC and was mandated by its Chairperson to undertake the study on the capacity imperatives for the implementation of Agenda 2063.
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Q&A: The AU Trade Commissioner on the New Cape-to-Cairo Common Market
For once, the African Union Summit is going to have something to show for all its talk of regional integration. The Tripartite Free Trade Area, signed in Egypt on Wednesday, creates a common market across 26 countries, and has the potential to revolutionise trade on the continent. Simon Allison spoke to the AU trade commissioner about why the deal is so important – and why the rest of Africa will have to catch up quickly.
While most of Africa’s political elite were arriving in Johannesburg for the 25th African Union Summit, another continental gathering – one likely to have more visible and more immediate consequences – was happening in the sunny seaside resort of Sharm el-Sheikh in Egypt.
It is here that the leaders of three Africa trade blocs – the Southern African Development Community (SADC), the East African Community (EAC), and the Common Market for Eastern and Southern Africa (Comesa) – put pen to paper on an agreement that could revolutionise trade in Africa.
The agreement joins the three blocs to create the Tripartite Free Trade Area (TFTA), effectively creating a common market that encompasses 26 African countries and 625 million Africans. “Africa has made it clear that it is open for business,” said World Bank President Jim Yong Kim about the new deal.
African Union trade commissioner Fatima Haram Acyl was even more effusive in her praise when the Daily Maverick caught up with her on the sidelines of the 25th African Union Summit in Johannesburg – although she was quick to point out that the TFTA is only halfway towards the continental body’s even more ambitious goal: the creation of a Continental Free Trade Area.
Daily Maverick: The Tripartite Free Trade Area sounds like a good idea. What’s your reaction?
Fatima Haram Acyl: I’m very happy to hear that finally we are signing it. We’re very excited. It is 26 countries in Africa, so it’s big news. It’s also perfect timing. We’re going to be launching the negotiations on the Continental Free Trade Area at the AU Summit on the 15th. For some of the people that are asking is the Continental Free Trade Area ambitious, is it doable by the 2017 deadline, I’m saying the Tripartite is happening, the signatures are done. So it’s doable.
Do you really think that 2017 deadline is realistic?
As long as you have the will it’s possible. If we know the benefits of the Continental Free Trade Area, if we know what it means for us, if we look around us, around the world and we see this mega trade going on, and where is Africa? We’re going to be left behind… [but] if we know all the importance of this Continental Free Trade Area to our Agenda 2063 [the AU’s long-term development plan], we will prevail. It will be difficult negotiations, it will require sacrifices and a lot of disagreements, but I think we will prevail. One of the thing we need to think about seriously, especially at the beginning, is a compensation mechanism to alleviate the fear of countries that are fearing they’re going to lose too much. The other positive news is that not everybody has to be ready at the same time. The ones that are ready, they can just move. We know everybody is willing but we’re not at the same stage. Later on the others can join. Based on all these parameters I think that 2017 is doable.
Why is the Tripartite Free Trade Area such a big deal?
It’s going to bring a common market, a common customs union. This is 26 countries with common legislations, common customs, etc. It will help the movement of people within that zone because goods don’t move by themselves. Yes, they negotiated only goods but the people have to follow so of course it will help address that issue. The other issue it will help address is the concept of value chain. How do you make sure the value chain is from one country to the other, how do we produce in that region? The other things are the trade facilitation, the bigger market, the attraction of investment in that region. The benefits range wide. It also brings infrastructure investment. I think that as a bloc they attract huge amounts of investment and they can justify it because it’s a bigger market.
In the short term, some countries in the Tripartite Free Trade Area will be left behind. The same applies to the Continental Free Trade Area. How are you going to keep the stragglers happy?
The ministers of trade are debating already what to do. When you look at Ecowas, the West African community’s 15 countries they do have a compensation mechanism, they say ok, because we’re going to have an free trade area in that zone, country X will be losing that much, but country B will gaining that much. It’s fact analysis. Figures don’t lie. So you will find a way to compensate. So there is funding that must come from the countries that win big time.
Do you think that better peace and security on the continent will follow on from closer trade links?
When you talk about peace and security on this continent, and the development of trade, you’re talking about an egg and chicken situation. In order to trade you need security. In order to develop you need peace on this continent. But on the other side, some of the root causes of instability are under-development, poverty, corruption. I think that it’s very important that when we talk about the issue of peace and security, or about trade and development, it’s important to talk about them on a more holistic way.
Will the 28 countries that aren’t in the Tripartite Free Trade Area be left out of a trade boom? Will the deal negatively impact them?
Actually it’s good if this happens, it will just encourage countries, will make them see the benefits of having a Continental Free Trade Area. Of course people will go to the Tripartite Free Trade Area because it’s a bigger market, it’s no longer fragmented market. We want to have this effect so that we’ll see practically what the benefits are of having a free trade area. There is no better example than seeing or living something, rather than just the analysis.
Negotiations around the Continental Free Trade Area won’t be easy. What are the main challenges?
Some of the main challenges are protectionism. You know, I’m going to be losing, going to be a market for everyone else. Movement of people – other people will come at take my jobs. These are legitimate questions and concerns. What we need to do, as a commission, is really to do a lot of fact analysis. Yes, for those countries it will be a loss in the short term, but in the longer term you will gain; maybe it will bring investment, or maybe our people will die less in the sea. I think it’s really important that we do a really clear analysis. One of my roles, and one of my boss Dr Dlamini-Zuma’s roles, is to do political engagement. And to do this you have to have figures, to talk the language of that country, of that region, you have to address their concerns. And to address their concerns we need data, figures, analysis, and to ensure we can ease up their fears, to give them factual findings, not just to say regional integration is important.
Does your department have the capacity to provide this kind of analysis?
No, we don’t. Let me give you an example. If you look at the European Union, their trade and industry department has more than 500 people. Today as I sit I can tell you we have about 20 people, and then we’re going to have about 10 more people for the Continental Free Trade Area negotiations. So no, we don’t, even with 30 people it’s not possible. However we are using the United Nations Economic Commission for Africa to give us some of this technical analysis because they’re a technical partner. We’re also working with the African Development Bank, and the United Nations Conference on Trade and Development. We’re also working with other partners such as the United Kingdom’s department for international development, and the Technical Assistance Fund, to give us some analysis. We’re looking for other technical partners to give us information and consultants to give us analysis that we require in order for us to move forward.
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Infrastructure is the key to Africa’s sustainable development
South African Presidency on infrastructure development in Africa
President Jacob Zuma looks forward to a fruitful discussion of the good progress made in implementing the African infrastructure development programme during the meeting of the 33rd NEPAD Heads of State and Government Orientation Committee (HSGOC), on Saturday, 13 June 2015.
President Jacob Zuma chairs the Presidential Infrastructure Championing Initiative (PICI) which reports to the HSGOC. The PICI aims to facilitate continuous dialogue and work to boost infrastructure development. South Africa was given the task of coordinating the North-South corridor, focusing on road and rail. The initiative has served to link Heads of State and Government to specific infrastructure corridors to ensure strategic political leadership in the championing of cross-border infrastructure projects. The PICI is primarily tasked with bringing visibility to the infrastructure projects, facilitate the unblocking of bottlenecks and any political impasse, provide leadership in resource mobilisation and subsequently ensure speedy implementation.
“Infrastructure investment spending has quadrupled, exports have increased and Africa is receiving a growing share of foreign direct investment. It is not surprising therefore that infrastructure development took centre stage at the World Economic Forum on Africa meeting in Cape Town on 3-5 June 2015. These positive trends come on the back of improved governance and a much sounder approach to macroeconomic management in our continent. We need to sustain these trends and deepen them,” said President Zuma.
Infrastructure development is taken seriously in South Africa and work in all provinces and municipal metros is coordinated through the Presidential Infrastructure Coordinating Commission (PICC) led by the President. “Infrastructure development is one of our key job drivers together with tourism, manufacturing, mining and beneficiation, the green and blue economies and agriculture. We are refurbishing and building new schools, clinics and hospitals, we are building three universities and 12 training and vocational education colleges, we are constructing and improving rail, roads, ports, broadband, roads, dams and power stations. What we are doing in the country dovetails with the continental infrastructure programme,” said the President.
Regional integration is the key and infrastructure development is a catalyst for economic development on the continent. Many of the regional economic communities (RECs) have developed regional infrastructure plans to facilitate regional trade and investments. However, it is important to also invest in national infrastructure, in addition to regional infrastructure. These are projects that should ultimately unlock the economic potential of the continent and provide development opportunities for communities, cities and regions.
The North-South Corridor championed by South Africa is a multimodal and multidimensional infrastructure corridor that includes road, rail, border posts, bridges, ports, energy and other related infrastructure. The corridor passes through 12 countries – Tanzania, Congo, Malawi, Zimbabwe, South Africa, Zambia, Botswana, Mozambique, Kenya, Ethiopia, Sudan and Egypt.
These projects form the nucleus of the implementation of the broader Programme for Infrastructure Development in Africa (PIDA).
Progress has been made by the championing countries in bringing these projects to a reality.
With regard to the Missing Link of the Trans-Sahara Highway-Algeria, it is expected that the entire construction of this highway will be completed by 2016/17.
The roll out of the works on the Optic Fibre from Algeria via Niger to Nigeria, has already been set.
Plans for the Dakar-Ndjamena-Djibouti Road/Rail-Senegal is also in the pipeline. It is expected that the project implementation phase will start before 2018.
The execution of contracts for the early gas phase on the Nigeria-Algeria Gas Pipeline, known as the Trans-Saharan Gas Pipeline, is in progress.
With respect to the Kinshasa-Brazzaville Bridge Road/Rail, it is envisaged that the construction of this road/rail bridge will be completed by 2025.
His Excellency President Paul Kagame of Rwanda has been providing strategic leadership and advocacy for information and communications technology (ICT) on the African continent and is playing a similar role globally, through the Broadband Commission for Digital Development. This important intervention contributes to the project of Unblocking Political Bottlenecks for ICT Broadband and Fibre Optic Projects in the neighbouring states.
The objective to connect five capital cities was completed in 2013. All five countries are now interconnected and linked to the submarine cables at Mombasa and Dar es Salaam.
This will bring this particular PICI project to successful completion within three years as planned. Thus this is a flagship successful project for the PICI.
Significant progress continues to be made with the North-South Road, Rail and related Infrastructure Corridor, managed by South Africa.
A number of hard and soft infrastructure issues and projects are in progress and are being addressed. To date, there are various projects in various stages of the project life cycle, consisting of road, rail, bridge, border posts and energy projects.
To alleviate pressures at Beit Bridge, South Africa and Zimbabwe committed to improving operations at the border post.
This year, the PICI Ministerial Working Group led by Minister Jeff Radebe also recommended the inclusion of the following energy projects: the Strategic North-South Transmission Line; the Sahel Desert Tech Solar Project; and the Central Power Transmission Line.
The Ministerial Committee also recommended that South Africa champions the manufacturing and production of locomotives and wagons as part of a deepened industrialization drive.
“With solid and efficient infrastructure, Africa can without doubt reach the much sought after and almost magical 7% growth rate per annum – a good starting point for Africa. Infrastructure is the way to go towards sustainable development. Africa is on the right track,” said President Zuma.
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Mozambique postpones signing up Tripartite FTA
Mozambican Prime Minister Carlos Agostinho do Rosario has refused to sign on behalf of his country the agreement setting up a tripartite free trade area (FTA) involving African three economic blocs, saying the government still needed to check the impact which the agreement could have on the economy.
The Tripartite FTA involving the Southern African Development Community (SADC), the Common Market of Eastern and Southern Africa (COMESA) and the East African Community (EAC), was launched in Egypt on Wednesday.
Some heads of state representing the 26 member countries of the three regional blocs, held in the Egyptian Red Sea resort of Sharm El Sheikh have signed up to the initiative.
“There are questions that have to be studied and about the origin of imported products, and their selection, about which areas should be liberalized, and where liberalization could be gradual. This entire exercise has to be done in such a way that the growth of our industry is not damaged by membership of the TFTA,” said Do Rosario who represented President Filipe Nyusi at the summit.
“Mozambique has a Five-Year Government Programme, which concerns the creation of better living standards for Mozambicans, and this means creating more jobs, more income, and getting industry to work, so it is important to check whether or not the agreement benefits Mozambique’s exports to the entire region, and whether imports under the agreement will not create difficulties for the rebirth of national industry”, the Prime Minister added.
However, Mozambique did sign the Sharm El Sheikh Declaration which directs the signatories “to finalise outstanding issues on the COMESA-EAC-SADC Tripartite Free Trade Area Agreement”.
Rosario said that, by signing the declaration, Mozambique was expressing a determination to sign the free trade agreement as soon as conditions were ripe.
“We think that every effort must be made, but all of us together can make a difference in promoting trade in the tripartite region,” he said.
The Tripartite FTA will cover a total population of 632 million, which is 57 percent of the entire population of the continent, with a gross domestic product of about U$1.3 trillion.
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EA infrastructure sectors biggest winners in budget allocations every year
A review of budgetary spend across East Africa countries from previous years shows that the infrastructure sector continues to be accorded priority due to its contribution to economic growth.
In the financial year 2014/15, an aggregate budget spend of over $7 billion (Sh678 billion) was allocated to infrastructure across East Africa (Kenya, Rwanda, Tanzania and Uganda).
Over the years, the countries have increased spend on key infrastructure with the bulk of the cash going to transport and energy sectors. ICT, education, health, water and sanitation infrastructure receive a discretionary allocation, depending on individual country programmes.
One would expect to see further increases in spend allocation to infrastructure in 2015/16 budget, to enable member states achieve development programmes. Allocation to infrastructure spend in the years 2011-2014 has been in the range of 19-25 per cent of expenditure for the East African member states.
Financing for infrastructure spend appears to be a combination of domestic revenues from tax collections and external financing.
However, non-traditional approaches are being used to supplement the more traditional methods of financing infrastructure, this has included concessional borrowing and use of external and domestic debt markets.
In addition, public private partnerships (PPPs) are increasingly being appreciated as a means of financing infrastructure projects across the region and countries are in the process of formalising laws and setting up units to manage such deals.
However, the region continues to experience slow pace in implementation of key projects due to bureaucratic hurdles in procurement, legal battles from losing bidders and non-aligned interests of regional governments.
Transport infrastructure
Transport represents the bulk of spending on infrastructure in the region at over 50 per cent of allocation. The spending on transport infrastructure has mainly been in the road and rail sectors.
Spending in the roads sector has been targeted to enable construction and upgrade of key national and intraregional roads, bridges and routine maintenance of road networks. The move is aimed at enabling trade in the country and within the region, and to ensure that key links are maintained.
Under the railway sector, there is collaboration among partner States within the East African region looking to revitalise the railway transport system.
For example, works are ongoing to upgrade the standard gauge rail to link Kenya, Uganda and Rwanda as part of the Northern Corridor, development of inland container depots and the upgrading of port and pier facilities.
Railway sector spend has largely been financed by development financing.
Energy infrastructure
Spend on energy infrastructure has been targeted towards addressing limited capacity during peak demand, system losses and weaknesses, increasing coverage to rural areas, increasing security and diversity (types) of supply within the grid.
To tackle these problems, over 25 per cent of allocation to infrastructure in country budgets has been to the energy sector in the period representing $1.5 billion-$1.8 billion (Sh145 billion-Sh174 billion) per year.
The region’s main challenge is the population’s reliance on wood fuel because it is cheaper, but comes along with the environmental degradation.
Innovative solutions are going to be required to change attitudes and drive adoption of energy options away from biomass degradation.
Other
Infrastructure spend in the other sectors has totalled 25 per cent of budgetary allocation over the years, representing $1 billion-$1.5 billion (Sh 96 billion to Sh145 billion) in spend.
The spend on other infrastructure has mostly been towards the education, health, water and sanitation and ICT sectors. Spending on infrastructure in the education sector has been targeted towards increasing access with emphasis on skills development.
This is related to construction of additional schools (primary education) and training institutions (vocational institutes and teachers’ colleges).
Spending on infrastructure in the health sector over the years has been with the aim of improving the productivity of human resource across the region with constructing of additional staff houses in lower level health facilities to minimise absenteeism and expanding health facility infrastructure at both local government and referral levels.
With a target to improve the access to safe water and sanitation, governments in East Africa have continued to allocate spend to infrastructure in the water and sanitation sectors towards these goals.
This has been through combined urban and rural expansion projects on the current water and sanitation infrastructure and allowing for new infrastructure.
There has been targeted financial support to the water and sanitation sector from development partners especially the World Bank.
Spend on ICT infrastructure has included efforts to develop and or upgrade national Internet infrastructure systems to reduce costs which should drive savings in ministries, departments and agencies across countries, while providing technology to improve the business climate, competitiveness and promote job creation, for example, through business process outsourcing centres.
Mr Legesi is a manager at Deloitte East Africa
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Developing countries face tough transition in 2015 with higher borrowing costs and lower prices for oil & other commodities
Developing countries face a series of tough challenges in 2015, including the looming prospect of higher borrowing costs as they adapt to a new era of low prices for oil and other key commodities, resulting in a fourth consecutive year of disappointing economic growth this year, says the World Bank Group’s latest Global Economic Prospects (GEP) report, released on 10 June 2015.
As a result, developing countries are now projected to grow by 4.4 percent this year, with a likely rise to 5.2 percent in 2016, and 5.4 percent in 2017.
“Developing countries were an engine of global growth following the financial crisis, but now they face a more difficult economic environment,” said World Bank Group President Jim Yong Kim. “We’ll do all we can to help low- and middle-income countries become more resilient so that they can manage this transition as securely as possible. We believe that countries that invest in people’s education and health, improve the business environment, and create jobs through upgrades in infrastructure will emerge much stronger in the years ahead. These kinds of investments will help hundreds of millions of people lift themselves out of poverty.”
With an expected liftoff in U.S. interest rates, borrowing will become more expensive for emerging and developing economies over the coming months. This process is expected to unfold relatively smoothly since the U.S. economic recovery is continuing and interest rates remain low in other major global economies.
However, there are considerable risks around this expectation, the report argues. Just as the initial announcement of U.S. policy normalization caused turmoil in financial markets in 2013 – now referred to as the “taper tantrum” – the U.S. Federal Reserve’s first interest rate increase, or liftoff, since the global financial crisis could ignite market volatility and reduce capital flows to emerging markets by up to 1.8 percentage points of GDP, the report says.
“Slowly but surely the ground beneath the global economy is shifting. China has avoided the potholes skillfully for now and is easing to a growth rate of 7.1 percent; Brazil, with its corruption scandal making news, has been less lucky, dipping into negative growth. With an expected growth of 7.5 percent this year, India is, for the first time, leading the World Bank’s growth chart of major economies. The main shadow over this moving landscape is of the eventual U.S. liftoff,” said Kaushik Basu, World Bank Chief Economist and Senior Vice President. “This could dampen capital flows and raise borrowing costs. This GEP provides a comprehensive analysis of what the liftoff may mean for the developing world.”
This would especially hurt emerging markets with greater vulnerabilities and weakening growth prospects. For commodity-exporting emerging markets that are already struggling to adjust to persistently low commodity prices, or for countries experiencing policy uncertainty, a slowdown in capital flows would add to their policy challenges.
“Unless emerging markets have taken the prudent policy steps to be fiscally and externally resilient, they may face significant challenges dealing with the turbulence and other fallout that could be associated with a Fed tightening,” said Ayhan Kose, the World Bank’s Director of Development Prospects.
Lower prices for oil and other strategic commodities have intensified the slowdown in developing countries, many of which depend heavily on commodity exports. While commodity importers are benefiting from lower inflation, fiscal spending pressures, and import costs, low oil prices have so far been slow to spur more economic activity because many countries face persistent shortages of electricity, transport, irrigation, and other key infrastructure services; political uncertainty; and severe flooding and drought caused by adverse climate.
Growth in Brazil, held back by weak confidence and higher inflation, is expected to contract by 1.3 percent in 2015, a 2.3 percentage point swing from January, while Russia’s economy, hit by oil price declines and sanctions, is forecast to contract by 2.7 percent. Mexico’s GDP is projected to advance by a more moderate 2.6 percent, as a soft patch in U.S. activity and falling oil prices weigh on growth. In China, the carefully managed slowdown continues, with growth likely to moderate to a still robust 7.1 percent this year. In India, which is an oil-importer, reforms have buoyed confidence and falling oil prices have reduced vulnerabilities, paving the way for the economy to grow by a robust 7.5 percent rate in 2015.
A special analysis in the report finds that low-income countries, many of which depend on commodity exports and investment, are vulnerable in the current environment. During the commodity price boom of the mid-2000s, their economies strengthened considerably with new discoveries of key metals and minerals, resource investment, and expanding commodity exports. The prospect, therefore, of persistently low commodity prices may persuade policy makers to steer their resources away from metals and minerals and into other national economic priorities that will drive growth instead. This puts a premium on policies to build buffers that can ease the transition and reforms that support growth in the non-resource sector.
“After four years of disappointing performance, growth in developing countries is still struggling to gain momentum,” said Franziska Ohnsorge, Lead Author of the report. “Despite auspicious financing conditions, a protracted slowdown has been underway in many developing countries, driven by shortages in agriculture, power, transport, infrastructure, and other vital economic services. This makes the case for structural reforms all the more urgent.”
In high-income countries, in contrast, recovery is gaining momentum, as growth in the Euro Area and Japan picks up and the United States continues to expand, despite a weak start to the year. High-income countries are on course to grow by 2.0 percent this year, 2.4 percent in 2016 and 2.2 percent in 2017. The global economy is likely to expand by 2.8 percent this year, 3.3 percent in 2016 and 3.2 percent in 2017.
Risks to the outlook for emerging and developing economies continue to weigh on growth. As some risks, such as the possibility of persistent stagnation in the Euro Area and Japan, have receded, new ones have emerged. Coinciding with the expected rise in U.S. interest rates, positive credit ratings for emerging markets are fading, especially in oil exporting countries, risks of financial market volatility are increasing, and capital flows are declining. An excessive appreciation of the U.S. dollar could curtail the recovery in the world’s largest economy, with adverse side-effects for U.S. trading partners around the world.
Regional Outlook: Sub-Saharan Africa
In Sub-Saharan Africa, low oil prices have considerably reduced growth in commodity-exporting countries (Angola, Nigeria), where softening oil sectors have also slowed activity in non-oil sectors, according to the June 2015 issue of Global Economics Prospects. Although South Africa is expected to be one of the main beneficiaries of low oil prices, growth is being held back by energy shortages, weak investor confidence amid policy uncertainty, and by the anticipated gradual tightening of monetary and fiscal policy. Growth in the region is forecast to slow to 4.2 percent, slower than previously expected. This mainly reflects a reassessment of prospects in Nigeria and Angola following the sharp drop in oil prices, and in South Africa, because of ongoing difficulties in electricity supply. For 2016-17, growth is expected to be only marginally higher as these challenges partially offset stronger trading partner growth and the continued expansion in the region’s low-income countries.
Special Focus: Linkages between China and Sub-Saharan Africa
China’s economic ties with Sub-Saharan Africa (SSA) have expanded greatly over the past decade. Trade increased from negligible levels in 2000 to more than $170 billion in 2013. Chinese direct investment in SSA has grown more than six-fold. China’s official development assistance to SSA expanded from $0.5 billion in 2000 to $3.2 billion in 2013.
The relationship is a complex one, involving multiple and diverse state actors in China, often (but not always) coordinating with state-owned and private corporations in a range of sectors across countries in SSA. Although commodities and associated infrastructure projects have tended to dominate the relationship, Chinese investment in other sectors is also increasing, notably in manufacturing. In recent years, the Chinese government has increasingly provided assistance for social development projects, and has engaged in peacekeeping and security operations.
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tralac’s Daily News selection: 11 June 2015
The selection: Thursday, 11 June
@Francismangeni: 15 countries have just signed the Agreement establishing the Tripartite Free Trade Area, and 23 have signed the Declaration
Text of the Agreement establishing a Tripartite Free Trade Area among COMESA, EAC, SADC
COMESA-EAC-SADC Tripartite Free Trade Area: Sharm El Sheikh Declaration
Namibia to sign TFTA declaration (New Era)
Namibia arrived in Sharm El Sheikh with an understanding to in the meantime sign the declaration only, while allowing for the continuation of negotiations on outstanding issues before stakeholders arrive at a final TFTA draft agreement. “We cleared everything and the declaration is prepared for signing,” Namibia’s Attorney General Sackey Shanghala responded yesterday to New Era regarding last week’s cabinet decision not to sign the TFTA agreement during the summit in Egypt.
Notwithstanding some of the challenges that have been experienced, the Tripartite Framework of integration has and continues to provide valuable lessons, which include but are not limited to the following:
The third lesson is that the whole Tripartite process of program formulation and design should include the private sector and other stakeholders as at the end of the day they are the ones to deliver jobs and economic growth.
The fourth lesson is that there is need to invite private sector companies that stand to benefit from the Tripartite Free Trade Area to come to the table, open their wallets and fund regional integration programs.
dti's Rob Davies: 'Africa a step closer to free trade area' (Business Report)
The TFTA if properly utilised, can be a springboard that catalyses a wave of growth in the manufacturing sector. The challenge for the member states is to ensure that they take advantage of the opportunities and proximity to fast growing African markets. For South Africa, the Tripartite area already absorbs a significant share of South Africa’s exports. Over the past three years, South Africa has exported on average, annually, goods to the value of $16.8 billion to this region. This constitutes 18.3 percent of the country’s global exports. Hence, the importance of this initiative to South Africa’s industrial and employment objectives.
Tripartite Summit: speech by WB's Jim Yong Kim (World Bank)
All of us know that the private sector has an important role in development – it creates the jobs that build prosperity. Today, Africa, more than ever, it is open for business, but countries must continue to reduce transaction costs. Now, it takes an average of 37 days to import and 31 days to export goods in Sub Saharan Africa, compared to less than 20 days to import and export in North Africa, Latin America and South East Asia. The difference is even greater for landlocked countries, where the averages are 50 days to import and 40 days to export.
Regional integration is more than trade. Greater regional integration has a vital role to play in helping countries move beyond conflict. In the Great Lakes Region, the Sahel, and the Horn of Africa, we’re designing programs that will help entire regions, including support for multi-country sustainable energy projects and improvements to cross-border trading, which promote peace and stability. These efforts, in partnership with the United Nations and institutions such as the Islamic Development Bank, are accompanied by strategic dialogue and development diplomacy. We’re also looking to expand this regional approach to countries in the Middle East.
The take-aways from four dozen papers on conflict and fragility in Africa in under 2,000 words (World Bank Blogs)
Three pointers on Trade:
With cross-country data, Calì & Mulabdic suggest that a rise in exported commodity prices is associated with more (and longer) conflict, but that intense trade with neighbors is associated with less.
Food prices can simultaneously increase and decrease violence: rising consumer prices increase armed conflict in food-deficit areas, while higher producer prices reduce civil conflict in food-surplus areas, using global food price shifts (McGuirk & Burke).
In case you doubted that informal is normal, as much as 97% of trade between Algeria and Mali is informal, argue Benassi et al. as they seek to measure the difficult-to-measure.
The Revised SADC RISDP and plans for market integration and industrial development going forward (tralac)
The plans to shelve and reassess the linear integration model is a welcome development as it will help to ascertain the viability of continuing on this track that SADC has been on, given its position in a dynamically evolving world of regional integration frameworks. In this regard, the launch of the TFTA and also of negotiations towards the CFTA this week and next week, respectively, will be instructive for plans for the region in its quest to effectively integrate into these arrangements. [The author: William Mwanza]
Today is 'Budget Day' in East Africa: selected previews
Kenya: Treasury has achieved some targets but it has more to go (Daily Nation)
Kenya: Treasury’s Sh2.2 trillion budget signals tax pain (Business Daily)
Tanzania: Mkuya’s balancing act (The Citizen)
Uganda: Is the economy big enough to bankroll Shs24 trillion Budget? (Daily Monitor)
Uganda: Museveni launches National Development Plan today (New Vision)
AGOA: African textile exports may reach $4 billion under US trade deal (AJOT)
“Ten years is a game-changer,” said Gail Strickler, assistant United States trade representative for textiles and apparel, adding the extension could be passed “imminently”. “Africa should be able to quadruple its exports, literally without a lot of trouble, creating another 500,000 new jobs.” Last year, U.S. clothing imports from sub-Saharan countries reached $986 million, up nearly six percent from 2013, as countries such as Lesotho, Kenya, Ethiopia and Tanzania participated in the program.
Developing countries face tough transition in 2015 (World Bank)
Developing countries face a series of tough challenges in 2015, including the looming prospect of higher borrowing costs as they adapt to a new era of low prices for oil and other key commodities, resulting in a fourth consecutive year of disappointing economic growth this year, says the World Bank Group’s latest Global Economic Prospects (GEP) report.
In Sub-Saharan Africa, low oil prices have considerably reduced growth in commodity-exporting countries (Angola, Nigeria), and have also slowed activity in non-oil sectors. Although South Africa is expected to be one of the main beneficiaries of low oil prices, growth is being held back by energy shortages, weak investor confidence amid policy uncertainty, and by the anticipated gradual tightening of monetary and fiscal policy. Growth in the region is forecast to slow to 4.2 percent, slower than previously expected. This mainly reflects a reassessment of prospects in Nigeria and Angola following the sharp drop in oil prices, and in South Africa, because of ongoing difficulties in electricity supply. For 2016-17, growth is expected to be only marginally higher as these challenges partially offset stronger trading partner growth and the continued expansion in the region’s low-income countries. [Economy and region specific forecasts and data]
Understanding South Africa’s current account deficit: the role of foreign direct investment income (AfDB)
This article unpacks the contribution of the investment income balance to South Africa’s current account deficit post-1994 and places it within the context of South Africa’s balance of payments and FDI history. It highlights the prominence of net investment income payments made to foreign direct investors in driving South Africa’s current account deficit (37% between 2004-2013). During the same period net payments to all other investors accounted for 14.5% of the deficit. [The author: Ilan Strauss]
@WorldBank: On 6/12 find out which South African cities are easiest for SMEs to do business
India prepares for World Bank’s Doing Business test (LiveMint)
Will India succeed in improving its ranking in the next edition of the Doing Business report published by the World Bank? The National Democratic Alliance (NDA) believes it has done enough in the past one year to move the country up in the rankings, but not enough to make it to the desired Top 50 countries in the world in terms of doing business. The Union government made its case before a mission from the World Bank on Monday.
Private participation in infrastructure: 2014 figures (World Bank)
Total infrastructure investments in 139 emerging economies – for projects with private participation in the energy, transport and water sectors – rose to US$107.5 billion in 2014, driven largely by increasing activity in Brazil, according to an update released today to the World Bank Group’s “Private Participation in Infrastructure” database. The data, covering the period from 1990 to 2014, reviews more than 6,000 projects across 139 low- and middle-income economies, providing a rich source of data on private infrastructure investment in emerging markets.
“Our update reveals that the top five countries with the highest investment commitments in 2014 are Brazil, Turkey, Peru, Colombia and India,” said Clive Harris, Practice Manager, Public-Private Partnerships, World Bank Group. “These five countries together attracted US$78 billion, representing 73 percent of the investment commitments in the developing world in 2014.”
This report provides an overview of the maritime transport situation in SIDS and presents data on relevant aspects, including shipping connectivity levels, direct and indirect shipping services, port issues, as well as trade structure and patterns. Relevant cross-cutting concerns such as SIDS high dependency on fossil fuel energy imports, exposure to climate change impacts and natural disasters as well as financial and human capacity constraints are also addressed.
International policy coordination for development: the forgotten legacy of Bretton Woods (author: Eric Helleiner, UNCTAD)
SADC holds counter-terrorism strategy workshop (StarAfrica)
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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Africa a step closer to free trade area
The Tripartite initiative between the Common Market for Eastern and Southern Africa (Comesa), the East African Community (EAC) and SADC is rooted in the AU’s Lagos Plan of Action and the Abuja Treaty, which aim to establish an African Economic Community. The three Tripartite communities have reached an important milestone in integrating their markets and economies by agreeing on the legal text to underpin the Tripartite Free Trade Area (TFTA).
The underlying rationale for African economic integration is that domestic markets are small by global standards, certainly too small to support economic diversification and industrialisation. The establishment of the TFTA is not only a political vision but makes business sense.
By establishing a larger free trade area, regional trade will be enhanced. Creating larger markets with greater critical mass will enhance the African investment proposition; it is also the only way Africa will be able to decisively move-up the value-chain and become a more effective player in the global economy. Regional integration is therefore critical to accelerated, inclusive and sustainable growth in Africa.
In the context of increased competition for access to the African market, it is not surprising that African countries are striving for greater regional integration. Despite geographic proximity and cultural affinity, African countries’ trade is still low by global standards and accounts for only 16 percent of Africa’s total trade. The TFTA therefore represents an important effort to enhance regional co-operation.
Agreements
Trade agreements between developing countries have historically been less successful in promoting intra-community trade, than in the case of blocs of developed countries.
The trade potential among countries that produce and export the same, mostly primary products, while importing most manufactured goods they consume, is very limited.
Well developed and diversified manufacturing capacity is largely lacking in many member states of the Tripartite. Clearly therefore, we have to address this if this integration initiative is to foster economic development.
It is for this reason that the Tripartite initiative, which is structured not merely to focus on market integration but informed by the perspective of development integration, has two additional pillars: co-operation to promote industrial development; and co-ordinated infrastructure development.
This is essential to enhance productive capacity and the development of regional value-chains. On infrastructure, the main aim is to promote connectivity and reduce the costs of doing business in eastern and southern Africa.
The interventions sought include policy and regulatory harmonisation, development of physical infrastructure and facilitation.
Furthermore, the market integration pillar has been structured in two distinct phases: focusing on the conclusion of a free trade area covering trade in goods; while a second phase will extend this to the liberalisation of trade in services, as well as enhance co-operation in certain trade related areas such as intellectual property and investment.
Free trade area
The negotiations towards the TFTA were launched on June 11, 2011 in Johannesburg.
Four years later, the heads of state and government of the 26 participating countries met in Egypt yesterday to launch the free trade area, which signifies the conclusion of negotiations on the free trade agreement.
The launch will be followed by the finalisation of negotiations on tariff reduction schedules and rules of origin. Progress has been achieved in these areas with negotiations advanced between some Tripartite states, while a number of rules of origin have been agreed on. This signals that we are on track to create a market of over 625 million people with a combined gross domestic product of approximately $1.6 trillion (R19.9 trillion).
This is sending a powerful message that Africa is committed to its economic integration agenda and in creating a conducive environment for trade and investment.
The TFTA will therefore increase Africa’s prospects of stimulating industrialisation, employment, income generation and poverty reduction.
Importantly, by providing a larger market, it offers the opportunity to improve economies of scale and efficiency, thereby improving Africa’s competitiveness both in its own markets and globally.
The TFTA if properly utilised, can be a springboard that catalyses a wave of growth in the manufacturing sector.
The challenge for the member states is to ensure that they take advantage of the opportunities and proximity to fast growing African markets.
For South Africa, the Tripartite area already absorbs a significant share of South Africa’s exports.
Over the past three years, South Africa has exported on average, annually, goods to the value of $16.8 billion to this region. This constitutes 18.3 percent of the country’s global exports. Hence, the importance of this initiative to South Africa’s industrial and employment objectives.
Rob Davies is the South African Minister of Trade and Industry.
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Sharm El Sheikh Declaration Launching the COMESA-EAC-SADC Tripartite Free Trade Area
PREAMBLE
WE, the Heads of State and Government or duly Authorised Representatives of, the Member States of the Common Market for Eastern and Southern Africa (COMESA), the Partner States of the East African Community (EAC) and the Member States of the Southern African Development Community (SADC), having met in Sharm El Sheikh, the Arab Republic of Egypt on 10 June 2015;
RECALLING the Kampala Communiqué of the First Tripartite Summit of 22 October 2008 and the Memorandum of Understanding on Inter-regional Cooperation and Integration amongst COMESA, EAC and SADC;
FURTHER RECALLING the Johannesburg Communiqué of the Second Tripartite Summit of 12 June 2011 and the Declaration Launching Negotiations for the Establishment of the Tripartite Free Trade Area that was signed at that Summit;
REITERATING our solemn resolve to deepen our integration through the COMESA-EAC-SADC Tripartite Free Trade Area;
RECOGNISING that there are still some outstanding issues on the Tripartite Free Trade Area Agreement in relation to Annex I on Elimination of Import Duties, Annex II on Trade Remedies and Annex IV on Rules of Origin which will form part of the Built-in Agenda;
COGNISANT of the critical importance of development integration that combines market integration, infrastructure development and industrial development as the three key pillars for sustainable development;
DETERMINED to contribute to the continental integration process under the Treaty Establishing the African Economic Community;
REAFFIRMING the developmental integration approach built on the three pillars of industrial development, infrastructure development and market integration that was adopted at the Second Tripartite Summit; and
NOTING and appreciating the progress that has been made in Phase I of the negotiations which were launched at the Second Tripartite Summit and the outcomes of which are enshrined in the COMESA-EAC-SADC Tripartite Free Trade Area Agreement;
NOW THEREFORE:
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Launch the COMESA-EAC-SADC Tripartite Free Trade Area;
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Direct Member/Partner States to expedite the process towards the operationalisation of the COMESA-EAC-SADC Tripartite Free Trade Area;
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Direct Member/Partner States to finalise outstanding issues on the COMESA-EAC-SADC Tripartite Free Trade Area Agreement in relation to Annex 1 on Elimination of Import Duties, Annex 2 on Trade Remedies and Annex 4 on Rules of Origin, which will form part of the COMESA-EAC-SADC TFTA Agreement and legal scrubbing;
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Direct the commencement of Phase II negotiations covering trade in services, cooperation in trade and development, competition policy, intellectual property rights and cross border investments;
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Direct that all negotiations, including outstanding work be carried out in accordance with principles, processes and institutional structures as approved by Summit;
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Direct the Tripartite Sectoral Ministerial Committee on Trade, Finance, Customs, Economic Matters and Home/Internal Affairs to develop a Roadmap on Phase II negotiations, providing timelines for key activities relating to the negotiations, their conclusion and the implementation of the outcomes thereof;
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Direct that work on the Industrial and Infrastructure Pillars which are complementary to the COMESA-EAC-SADC TFTA is expedited; and
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Further direct that work on negotiations on Movement of Business Persons continues on a separate track.
IN WITNESS WHEREOF, WE the Heads of State and Government or duly Authorised Representatives have signed this Sharm El Sheikh Declaration Launching the COMESA-EAC-SADC Tripartite Free Trade Area in four original texts in the Arabic, English, French and Portuguese languages, each of the texts being equally authentic.
DONE at Sharm El Sheikh, in the Arab Republic of Egypt, on this 10th day of June in the year Two Thousand and Fifteen.
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Communiqué of the Third COMESA-EAC-SADC Tripartite Summit
Vision: TOWARDS A SINGLE MARKET
1. The Heads of State and Government of the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and Southern African Development Community (SADC) Tripartite met on 10 June, 2015 in Sharm El Sheikh, Egypt and:
(a) LAUNCHED the COMESA-EAC-SADC Tripartite Free Trade Area (Tripartite FTA);
(b) RECOGNISED that the Tripartite FTA represents an integrated market of 26 countries with a combined population of 632 million people which is 57% of Africa’s population; and with a total Gross Domestic Product (GDP) of USD$ 1.3 Trillion (2014) contributes 58% of Africa’s GDP;
(c) FURTHER RECOGNISED that the establishment of a Tripartite FTA will bolster intra-regional trade by creating a wider market, increase investment flows, enhance competitiveness and encourage regional infrastructure development as well as pioneer the integration of the African continent;
(d) REITERATED that the tripartite integration process is based on a developmental approach anchored on three (3) pillars namely: Market Integration symbolized by the Tripartite FTA; Infrastructure Development to facilitate and enhance connectivity, communication and movement of goods and persons and reduce the cost of doing business; and Industrial Development which will enhance competitiveness and address supply and productive capacity constraints; and
(e) FURTHER REITERATED that the tripartite initiative is a decisive step to achieve the African vision of establishing the African Economic Community envisioned in the Lagos Plan of Action and the Final Act of Lagos of 1980, Abuja Treaty of 1991 as well as the Resolution of the African Union Summit held in Banjul, the Gambia in 2006 that directed the African Union Commission and the Regional Economic Communities (RECs) to harmonize and coordinate policies and programmes of RECs as important strategies for rationalization, increasing intra-Africa trade and investment, integration of tripartite economies in the global economy.
2. The Third Tripartite Summit:
(a) SIGNED the Sharm El Sheikh Declaration Launching the COMESA-EAC-SADC Tripartite Free Trade Area;
(b) SIGNED and opened for signature the Agreement establishing the COMESA-EAC-SADC Tripartite FTA;
(c) ADOPTED the Post-signature Implementation Plan detailing activities that will be implemented at national and regional levels in fulfilment of provisions of the Tripartite FTA Agreement;
(d) DIRECTED that negotiations on outstanding issues from Phase I to operationalise the Tripartite FTA be concluded expeditiously;
(e) DIRECTED the commencement of Phase II negotiations covering trade in services, cooperation in trade and development, competition policy, intellectual property rights and cross border investment; and
(f) DIRECTED that programmes of work and roadmaps developed on the Industrialization and Infrastructure Pillars be well resourced and prioritized.
3. The Tripartite Summit was attended by the following Heads of State and Government:
(a) His Excellency Abdel Fattah El-Sisi, President of the Arab Republic of Egypt;
(b) His Excellency Hailemariam Desalegn, Prime Minister of the Federal Democratic Republic of Ethiopia;
(c) His Excellency Prof. Peter Mutharika, President of the Republic of Malawi
(d) His Excellency Dr. Hage Geingob, President of the Republic of Namibia;
(e) His Excellency Omar Hassan Ahmed Al -Bashir, President of the Republic of Sudan;
(f) His Excellency Robert Gabriel Mugabe, President of the Republic of Zimbabwe.
4. The following Plenipotentiaries represented their Heads of State and Government:
(a) His Excellency Prosper Bazombanza, First Vice President of the Republic of Burundi
(b) His Excellency Mohamed Ali Soilihi , Vice President of the Republic of the Union of the Comoros
(c) His Excellency William S. Ruto, the Deputy President of the Republic of Kenya
(d) His Excellency Mr. Danny Faure, Vice President of the Republic of Seychelles
(e) His Excellency Dr. Mohamed Gharib Bilal, Vice President of the United Republic of Tanzania
(f) His Excellency, Agostinho do Rosário, Prime Minister of the Republic of Mozambique
(g) The Right Honourable, Anastase Murekezi, Prime Minister of the Republic of Rwanda
(h) Honourable Dr. Job Graça, Minister of Planning, Republic of Angola
(i) Honourable Mr. Vincent T. Seretse, Minister of Trade and Industry, Republic of Botswana
(j) Honourable Raymond Tshibanda N’tungamulongo, Minister of Foreign Affairs and International Cooperation, Democratic Republic of Congo
(k) Honourable Ilyas Moussa Dawaleh, Ministre de l’Economie et Finances Charge de l’Industrie, Republic of Djibouti
(l) Honourable Mr. Joshua Setipa, Minister of Trade and Industry, Kingdom of Lesotho
(m) Ambassador Fassil Ghebresallassie Tekle, State of Eritrea
(n) Honourable Mr. Rabesahala Hemi, Minister of Consumer Affairs, Republic of Madagascar
(o) Honourable Etienne Sinatambou, Minister of Foreign Affairs, Regional Integration and International Trade, Republic of Mauritius
(p) Honourable Dr. Robert H. Davies, Minister for Trade and Industry, Republic of South Africa
(q) His Royal Highness, Prince Hlangusemphi, Kingdom of Swaziland
(r) Honourable Amelia Anne Kyambadde (MP), Minister of Trade, Industry and Cooperatives, Republic of Uganda
(s) Honourable Margaret D. Mwanakatwe, MP Minister of Commerce, Trade and Industry, Republic of Zambia
5. H.E. Mr. Sindiso Ngwenya, Secretary General of COMESA and Chairperson of the Tripartite Task Force, H.E. Ambassador Dr. Richard Sezibera, Secretary General of the EAC and H.E Dr. Stergomena Lawrence Tax, Executive Secretary of SADC were also in attendance.
6. The Following Organizations attended the Third Tripartite Summit as observers: the African Union Commission, African Development Bank, World Bank, United Nations Economic Commission for Africa, United Nations Conference on Trade and Development, United Nations Development Programme, Global Rights Network for Development, United Nations Industrial Development Organisation and the Trade and Development Bank of Eastern and Southern Africa (PTA Bank).
7. His Excellency, Abdel Fattah El-Sisi, President of the Arab Republic of Egypt, in his official opening remarks, welcomed all the Heads of State and Government, all dignitaries and delegates to the Third Tripartite Summit. He commended the Tripartite for the progress made in implementation of programmes in the three key pillars of market integration, infrastructure and industrialisation; in particular the finalisation of the negotiations leading to the launch of the Tripartite Free Trade Area which is a step towards the establishment of the Continental Free Trade Area. He underscored the importance of the Member/Partner States in working together to continue to deliver on the objectives of the Tripartite in light of the fact that the region is endowed with abundant resources required for development.
8. The Secretary General of COMESA, on behalf of the COMESA-EAC-SADC Tripartite Task Force, in his opening remarks provided a progress report on the Implementation of Decisions of the First and Second Tripartite Summits in Market Integration, Industrial Development and Infrastructure Development Pillars of the tripartite.
9. In his remarks, His Excellency Jim Yong Kim the President of the World Bank commended the Tripartite for the progress made with the establishment of the Tripartite FTA and underscored the importance of reducing transactional costs. He emphasised that in order to reduce poverty, the Tripartite FTA must be complemented by measures to improve education, access to finance and infrastructure. He reaffirmed that this was Africa’s moment and that the World Bank Group remained committed to mobilisation of the necessary resources for the effective implementation of development programmes through the participation of both the private and public sectors.
10. In his remarks, His Excellency Mukhisa Kituyi, Secretary General of UNCTAD underscored the need for Africa to enhance its competitiveness in international markets. He emphasised the pivotal importance of deployment of infrastructure as an enabler to efficient productivity and trade. He called upon the leaders to focus on action and expedite implementation of the Tripartite FTA building on the long term vision of building the African Economic Community.
11. His Excellency Hailemariam Desalegn, Prime Minister of the Federal Democratic Republic of Ethiopia in his remarks thanked the outgoing Chairman of the Tripartite Summit, His Excellency Robert Gabriel Mugabe, President of the Republic of Zimbabwe, for providing leadership during his tenure, and welcomed the conclusion of the negotiations. He stressed the importance of infrastructure and industrial development as drivers of economic and structural transformation across the Tripartite region.
12. His Excellency Dr. Mohamed Gharib Bilal, Vice President of the United Republic of Tanzania, in his remarks emphasised that any country that did not adapt to the increasingly globalised world would fail to benefit from trade. He welcomed the launch of the Tripartite FTA which is a milestone and paves the way for continental integration.
13. His Excellency Robert Gabriel Mugabe, President of the Republic of Zimbabwe, in his remarks, called for the expeditious conclusion of negotiations on outstanding issues and for due prioritisation of industrial and infrastructure development to support trade. He handed over the Chairmanship of the Tripartite Summit to His Excellency Hailemariam Desalegn, Chairperson of the Authority of the Common Market for Eastern and Southern Africa.
14. The Third Tripartite Summit was officially opened by His Excellency Robert Gabriel Mugabe the outgoing Chairperson of the Tripartite and chaired by His Excellency Hailemariam Desalegn Chairperson of the Authority of the Common Market for Eastern and Southern Africa. The Chairperson was assisted by the Chairpersons of the Summits of the Southern African Development Community and the East African Community, as well as the Tripartite Task Force of the three Secretariats.
15. The Tripartite Summit EXPRESSED its appreciation to the COMESA-EAC-SADC Tripartite Task Force for the preparatory work undertaken in preparing for the Third Tripartite Summit.
16. The Tripartite Summit WELCOMED His Excellency Dr. Hage Geingob, President of the Republic of Namibia and His Excellency Prof. Peter Mutharika, President of the Republic of Malawi who recently took office.
17. The Tripartite Summit WELCOMED the offer by the Republic of Rwanda on behalf of the East African Community to host the Fourth Tripartite Summit.
18. The Tripartite Summit, in a Vote of Thanks moved by His Excellency William S. Ruto, the Deputy President of the Republic of Kenya, EXPRESSED appreciation to His Excellency Abdel Fattah El-Sisi, President of the Arab Republic of Egypt, the Government and people of Egypt, for the warm and fraternal hospitality extended to all the delegations. He assured the Summit that Kenya would deploy the required resources to operationalize the Secretariat for the Tripartite FTA. He welcomed all delegations to the Fourth Tripartite Summit to be hosted by the Republic of Rwanda.
19. In his closing remarks, His Excellency Hailemariam Desalegn, Prime Minister of the Federal Democratic Republic of Ethiopia thanked all Heads of State and Government and plenipotentiaries present for their participation. He especially thanked His Excellency, Abdel Fattah El-Sisi, and President of the Arab Republic of Egypt for having hosted a successful Third Tripartite Summit.
20. His Excellency, Abdel Fattah El-Sisi, President of the Arab Republic of Egypt, in his closing statement CONGRATULATED all his colleagues for the historic Tripartite Summit which launched the Tripartite FTA, a key milestone in the integration of Africa. He thanked them for their attendance and looked forward to the continuation of the rationalization and deepening of the integration process in Africa.
21. The Tripartite Summit ADOPTED its Communiqué as read by Ambassador Dr. Richard Sezibera, Secretary General of the EAC.
DONE at Sharm El Sheikh, Arab Republic of Egypt on the 10 June 2015, in Arabic, English, French and Portuguese languages, all texts being equally authentic.
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Statement by Mr Sindiso Ngwenya to the Third COMESA-EAC-SADC Tripartite Summit
Statement by Mr Sindiso Ngwenya, Secretary General of COMESA and Chairman of the Tripartite Task Force to the 3rd COMESA-EAC-SADC Tripartite Summit in Sharma el Sheikh, Egypt which launched the Tripartite Free Trade Area
On behalf of my Colleagues and Staff in the Secretariats of COMESA, EAC and SADC and indeed on my own behalf, I would like to take this opportunity to sincerely thank His Excellency Mr Abdel Fattah el Sisi, the President of the Arab Republic of Egypt, the Government and the people of Egypt for the warm reception and excellent facilities put at the disposal of the Summit and the meetings that preceded the Summit. There could not have been a better venue than Sharma el Sheik the peaceful holiday resort for this historic Summit which will change the political and economic geography of the Tripartite region in particular and the African continent in general. Indeed, the Vision of this Summit “Towards a Single Market” and Theme: “Deepening COMESA, EAC and SADC Integration” is testimony of the visionary leadership and inspiration that, Your Excellencies, have and continue to provide to Honourable Ministers and all Officials and indeed the Tripartite Secretariat.
The decisions you will be making at this Summit will further confirm in a practical way the narrative of the Africa Rising story, that the African Cheetah is on the move, which is otherwise overshadowed by the pockets of conflict within the region that continue to cause unimaginable human suffering, loss of lives and destruction of property and infrastructure.
It is almost seven years since you directed that a single market be established through the merger of the Free Trade Areas of the three regional economic communities of COMESA, EAC and SADC. At your second Summit held on 12 June 2011, you adopted a developmental approach to integration that is anchored on the following three pillars:
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The first pillar is market integration based on the Tripartite Free Trade Area;
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The second pillar is infrastructure development aimed at improving physical connectivity in the region to reduce the cost of doing business and facilitate the movement of goods, people and services; and
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The third pillar is industrial development to address the productive constraints with the objective of realizing the structural transformation of the economies from low productivity economies that relay on export of unprocessed primary commodities with either little or no value addition to high dynamic competitive economies that produce and export value added products.
You also decided that there should be a parallel track on the free movement of business persons and that after the launching of the Tripartite Free Trade Area there would be negotiations on trade in services, intellectual property rights, cross border investments and other trade related issues.
My task this morning is to briefly highlight where the Tripartite region is with respect to the three pillars on the basis of what Tripartite Member/Partner States have achieved on the basis of the programs that each Regional Economic Community has been implementing which further strengthens the case for the expeditious establishment of the single market which this Summit will be doing today.
On the establishment of a single market, the following statistics and comparisons make a compelling case for the Tripartite integration arrangement that will change the political and economic geography of the region. The twenty six Tripartite Member/Partner States have a combined population of 625 million people and a combined gross domestic product of United States Dollars 1.3 Trillion and accounts for almost half the membership of the African Union and sixty two percent of the continents gross domestic product .In addition, the total land mass of the countries that make up the Tripartite region is 17.3 million square kilometers which is twice the size of China with a population that twice that of the Tripartite Member/Partner States.
Excellencies, if the twenty six Tripartite Member/Partner States were one country they would rank number twelve in the World with respect to GDP. Another way of looking at the Tripartite region is to draw comparisons with Brazil which has twenty six States but is one country with a GDP of United States Dollars 2.2 Trillion. One can imagine, a Brazil that has twenty six different sovereign States each with its own trade policies and border controls to mention but a few. This would make the economy inefficient as that fragmentation would create land locked States with high costs of doing business and make it difficult to integrate in the global economy.
Your vision of creating a single market is precisely to address the challenges that arise from the fragmentation of countries in the region by creating a borderless economy that is sine quo non for structural transformation, inclusive and sustainable development. The potential for the Tripartite integration arrangement is further supported by the following statistics. In 2008, when you directed on the expeditious establishment of the Tripartite Free Trade Area, trade between and among the Tripartite Member/Partner States was United States Dollars 62 billion and by 2013 this trade had increased to United States Dollars 98 billion. During the same period trade with the rest of world marginally increased from United States Dollars 531 Billion to United States Dollars 545 billion. An interesting feature of the intra Tripartite trade is that it is dominated by trade in intermediate products and manufactured goods thus further confirming available evidence that the Tripartite Free Trade Area can serve as a basis for industrialization anchored on value addition.
Within the COMESA, EAC and SADC regions we are witnessing increased cross border investment in manufacturing, trade in services including logistics and financial services by companies that are emerging as regional champions. The regional trade and industrial policies through the Tripartite are likely to further stimulate and enhance these investments. An interesting feature of the domestic companies that have decided to make cross border investments within the region is that their market expansion strategies support regional integration. This is not the case with multinational companies whose strategies within Free Trade Areas result in rationalization and closure of production plants in different countries as they can supply the single market from one production facility within the FTA. This has the potential of creating resistance to FTA’s as these strategies result in factory closures with loss of employment, a situation that runs counter to public policy of job creation.
It would, therefore, be advisable as had been the case in Asia and South East Asia that Tripartite trade and industrial policies give preferential treatment to emerging regional firms
This is not the case with respect to trade between the Tripartite countries and the rest of the world which is dominated by exports of unprocessed primary commodities and imports of manufactured products.
This brings me to the pillar of industrial development. Although the program for Tripartite industrialization pillar is still under development substantial progress has been made by COMESA, EAC and SADC in coming up with regional industrial policies and strategies which are under implementation. It is against this background that the Tripartite Sectoral Council of Ministers have directed that the Tripartite industrial program should take into account the best practices and policies of the three organizations.
The launching of this Tripartite Free Trade Area is taking place at a time when there is no longer a debate on the role of government in guiding and facilitating structural transformation and modernization through macro-economic policies and appropriate institutions. After the demise of the Washington consensus whose bankrupt ideological policies were exposed by the global financial crises of 2008, it now universally acknowledged that, for the invisible hand of the market to deliver meaningful development it must be complemented by the visible hand of government to provide guidance
Allow me to make the case for the Tripartite Industrial pillar to quote two eminent experts. The first was Rosentein Rodan, who, in 1943, stated that and I quote “If left to markets industrialization would not come up because other divergence between private and social net product: the cost of training a peasant to become an industrialist is too big for any one firm to bear”. All I can say is how right Rodan was and how right he still is as this contemporary world the Tripartite economies have not emerged from peasant farming and are still to embrace applied modern technologies.
The second quotation is from Justin Li, former Vice President and Chief Economist at the World Bank who stated and I quote “mistakes are inevitable when you have a government trying to guide development of industry, but the costs of non intervention far outweigh the benefits ... For a government to coordinate economic activities, failure is of course the likely result, but without government coordination it could be a worse failure. Economists should help the Government to figure out a better course of action”.
You also decided that without the infrastructure development pillar the Tripartite regional integration will remain a pipe dream and rightly so because without physical infrastructure connectivity and energy which is an enabler to development our countries will remain under developed. I would like to quote the famous Chinese saying that “if you want to be prosperous build roads”.
As your Tripartite Secretariat we are the first to admit that the Tripartite infrastructure program has made modest contribution to realizing the shared vision that you have articulated as our leaders. This is because for decades in the Tripartite region, in particular, and Africa in general, investment in infrastructure has been dependent on the prevailing wisdom of financial institutions. Allow me, Your Excellencies, again to paraphrase a World Bank appraisal Report on Nigeria Railways in the 1960’s which concluded that rail transport was inefficient compared to road transport and resulted in the neglect of investment in railways as donors moved away from supporting investments in flip ways with all the negative consequences that we all know. Another opposition to railway investment is the case of the famous Tanzania-Zambia Railways by the Governments of Tanzania and Zambia with the support of the Government of the People’s Republic of China by the Brookings Institute of Washington who published a book on transport investments in Africa in the 1960’s and described TAZARA as a politically motivated project which was not supported by rate of return considerations. Again those who profess to what I have described as masters of the universe on Africa have been proved wrong. In any case, Your Excellencies, it is a historical fact that is conveniently ignored, that the infrastructure that was build in developed countries was not subjected to cost benefit analysis, otherwise the American frontier would not have been opened, to mention only one example.
The good news is that thanks to your resolute and visionary leadership and support from multilateral and regional development Banks, mega investments mare taking place in infrastructure and energy within the region. In addition, several Tripartite Member/Partner States have, through innovative means of financing, been able to issue infrastructure bonds in domestic and global markets to finance infrastructure and energy projects. In this regard, two examples will suffice.
Allow me Excellencies, since we are in Egypt to draw your attention to the financing of the second Suez Canal which is currently under construction. The Nine Billion United States Dollars for the project, which was raised from the domestic market in Egypt, was closed in a record nine days after being oversubscribed.
The second is the Ethiopian Grand Renaissance Dam which when complete in 2017 with 6000 megawatts of power will be the biggest hydropower project in Africa. This mega hydro power dam is funded by Ethiopia and a Diaspora bond to the tune of United States Dollars 4.4 Billion.
We have the standard railway gauges being constructed for the first time in the region. This will replace antiquated railway lines that were built at the turn of the twentieth century. All these projects contribute to physical interconnectivity of the Tripartite region and should be reported and celebrated as such. It is regrettable that we continue as a region and continent underselling our individual and collective achievements.
At your last Summit you also directed that a parallel program on the free movement of business persons should be developed and implemented. On this program very little progress has been achieved as the proposed framework for facilitating the free movement of business persons is worse than current arrangements. It is important to note that at the country level, some Member/Partner States have completely liberalized travel with Visas being issued on entry. These countries that are leading by example include: Kenya, Rwanda, Mauritius and Seychelles. It would appear to us that the free movement of business persons would require the “visible hand” of Government at the highest level as those who are used to the status quo and think of borders as “fortresses” to control people and not facilitate movement, will continue to make the Tripartite region a region with not only thick borders, but opaque borders.
Notwithstanding some of the challenges that have been experienced, the Tripartite Framework of integration has and continues to provide valuable lessons, which include but are not limited to the following:
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The first lesson, is the need to move away from processes and focus on results, otherwise we run the risk of being slaves of processes which will consign the region to the third tier in the League of Nations.
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The second lesson is that the Tripartite integration arrangement will have to build on the best practices of COMESA, EAC and SADC. For example, the Single Customs Territory of the EAC has reduced transit from an average of 22 days to 3 days with substantial savings to economies.
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The third lesson is that the whole Tripartite process of program formulation and design should include the private sector and other stakeholders as at the end of the day they are the ones to deliver jobs and economic growth.
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The fourth lesson is that there is need to invite private sector companies that stand to benefit from the Tripartite Free Trade Area to come to the table, open their wallets and fund regional integration programs.
In closing my remarks I wish on behalf of my colleagues, Dr Stergomena Lawrence Tax, Executive Secretary of SADC and Ambassador Dr Richard Sezibera, Secretary General of the EAC and all staff in the three organizations to thank you for the privilege you have given us to serve you individually and collectively in facilitating the implementation of the Tripartite FTA and associated programs that are game changer and marks the beginning of a renaissance and golden age in regional integration, in the Tripartite region and Africa in general.
The time for Africa is now for one people, one continent and one destiny.
I thank you for your attention.
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tralac’s Daily News selection: 10 June 2015
The selection: Wednesday, 10 June
I hope you can understand Africa’s fundamental commitment to trade multilateralism; for Africa, for us, it is multilateralism first and last. We shall seek to use the Nairobi preparatory process to strengthen and advance multilateralism and strengthen the WTO as the engine of the rules-based multilateral trading system. We want to see the WTO more relevant, stronger and the first point of reference in writing non-discriminatory multilateral trade rules and for trade opening for recovery and growth in the global economy. More specifically, on the outcome document since Bali to now, we have a clear understanding of where we should be headed. We must not seek to do everything. If we try to do everything, we will end up doing nothing. So, the outcome from Nairobi should reflect several core elements namely:
The obscure legal system that lets corporations sue countries (The Guardian)
Other countries have already decided to cut their losses, and tried to get out of these trade treaties. Shortly after settling the lawsuit with foreign mining companies over its new post-apartheid mining rules, South Africa began to terminate many of its own investment agreements.
“What was concerning for us was that you could have an international arbitration – three individuals, making a decision – on what was in effect a legislative programme in South Africa that had been arrived at democratically, and that somehow this arbitration panel could potentially call this into question,” said Xavier Carim, a former deputy director-general in South Africa’s Department of Trade and Industry. “It was very, very clear that these treaties are open to such wide interpretations by panels, or by investors looking to challenge any government measure, with the possibility of a significant payout at the end of the day,” said Carim, who is now South Africa’s representative to the World Trade Organisation in Geneva. “The simple fact is that these treaties give you very little benefit and they just pose risk.”
All set for Free Trade Area launch (The Herald)
The private sector should lead the way in ensuring that the Tripartite Free Trade Area, to be launched here today is successful, [Zimbabwean] Industry and Commerce Minister Mike Bimha has said. Minister Bimha told journalists yesterday that the world over governments did not grow economies, rather, they created a conducive environment and facilitated bilateral agreements with other countries. “We want to see the private sector taking the lead. At the end of the day, it’s in their interests to see that the TFTA is successful as they produce the goods and services that are needed for trade. Government is there to facilitate and come up with a conducive agreement.”
COMESA-SADC-EAC Tripartite Free Trade Area: implications for Zimbabwe (ZEPARU)
While TFTA negotiations are on-going, this study aims to inform the crafting of the country’s negotiating position in the forthcoming COMESA-SADC-EAC TFTA. Zimbabwe’s National Trade Policy aims to create a diversified and competitive industry both regionally and internationally. The purpose of the study is to undertake both quantitative and qualitative analyses to identify trade positions that address the objectives of the National Trade Policy. Further, the study sought to investigate the revenue changes, impact on existing industries, consumer prices (important for poverty), and incentives for new investment. Above all, the study focused on analyzing beyond the market access issues that include non-tariff measures such as trade remedies, SPS measures, rules of origin, technical barriers to trade and trade facilitation. An analysis of capacity needs of both the private sector and government was done in the context of an effective implementation of the TFTA.
Zambia and the TFTA: ‘Address raw material dependency’ (Zambia Daily Mail)
Trade experts have cautioned that Zambia may not get meaningful benefits from a tripartite free trade agreement (TFTA) unless the country addresses challenges of over-dependence on raw material exports. In an interview yesterday in Lusaka, Consumer Unity Trust Society (CUTS) Zambia coordinator Simon Ngona said for Zambia to take advantage of this opportunity, the country needs to produce and export more value-added products.
COMESA to address trade barriers in agro commodities (Zambia Daily Mail)
In a quest to increase intra-regional trade, Common Market for Eastern and Southern Africa, through the Sanitary and Phyto-Sanitary Unit, has embarked on a project to address trade barriers in agricultural commodities. The project will be piloted in Zambia, Egypt, Kenya, Malawi, Sudan, Uganda and Zimbabwe with selected border posts between member states.
Fatima Acyl, Commissioner of Trade and Industry: Gender Is My Agenda Pre-Summit Conference (AU)
As we know, women make up the majority of cross border trades (up to 85%), we must therefore look at ways to ensure that the voices and issues of women traders feature prominently in the CFTA negotiations.
AGOA: US-South Africa trade deal threatens UK poultry exports (Farmers Weekly)
The resumption of trade could have serious implications for the UK poultry sector, which has been building market share in South Africa. This has provided an essential outlet for chicken legs, wings and quarters, which are less in demand in the domestic market. “The South African market has been a growing market for us,” said Maire Burnett from the British Poultry Council. “In 2011 we shipped 20,000t and by 2014 this had grown to 43,000t with a value of £36m.”
Here is how Uganda can benefit from AGOA other trade opportunities (Daily Monitor)
'Servicification' of international trade takes centre stage at UNCTAD expert meeting (UNCTAD)
National economies and international trade are increasingly relying on services - a phenomenon dubbed "servicification" - and debates at the third session of the Multi-year Expert Meeting on Trade, Services and Development, hosted by UNCTAD in May, recognized the importance of this phenomenon. The key role of the services sector in the post-2015 development agenda has also been acknowledged in the proposed sustainable development goals (SDGs) to be adopted in New York in September: many of the goals and targets refer to the crucial role of infrastructure, universal access to basic services, access to financial services, energy, health, education, telecommunications, and transport. Moreover, several cross-cutting goals are predicated on the efficient, environmentally friendly and equitable functioning of services. The services sector development will therefore have a crucial role as means of implementation of SDGs.
Lesotho: Services policy review (UNCTAD)
Why ACP countries matter for the EU post-2015 development agenda (Inter Press Service)
We are witnessing a shift in the original rationale behind the unique relationship between the European Union and the African, Caribbean and Pacific countries of the ACP group, which goes beyond the logic of “unilateral aid transfer”, “donor-recipient approach” and “North-South dialogue”. At ACP level, there is a growing awareness among members that “the Group will have to transform itself if it wants to realise its ambition of becoming a player of global importance, beyond its longstanding partnership with the EU,” said ACP Secretary General, Dr Patrick I. Gomes.
G20 Turkish Presidency keen to benefit the global community (Inter Press Service)
Our work on energy access in Sub Saharan Africa is another important element of our agenda. We are working in partnership with various African institutions. Almost one-fifth of the global population still does not have access to electricity. Nearly 2.6 billion people lack access to modern cooking facilities. In Sub-Saharan Africa the problem is most acute. More than 620 million people, out of the region’s total population of 915 million, have no access to electricity. A high-level conference with the participation of African leaders, investors, private sector and relevant international organisations back to back with the G20 Energy Ministers meeting is also planned. The G20 Energy Ministers Meeting on Oct. 2 will be a first in G20 history. [Ambassador Selim Yenel is Permanent Delegate of Turkey to the EU]
Do capital inflows boost growth in developing countries? evidence from Sub-Saharan Africa (World Bank)
This paper examines whether domestic output growth helps attract capital inflows and, in turn, capital inflows help boost output growth in a set of 38 Sub-Saharan African countries. Using a two-step approach to address reverse causality and omitted variable issues, the paper finds that output growth in countries in Sub-Saharan Africa does not attract capital inflows. However, aid and foreign direct investment inflows enhance growth, while sovereign debt inflows do not. A 1 percent increase in the level of real aid inflows raises growth of real output per capita by 0.022 percentage point. For foreign direct investment inflows, the figure is 0.002 percentage point.
Aid procurement and the development of local industry: a question for Africa (Brookings)
Using data from 1995 to 2013 for World Bank-financed civil works and goods contracts, we consider the theory that international competition in developing-world procurement has become a key instrument through which local industry has advanced in some countries and regions and a main indicator of where it has lagged in others. Notably, we find evidence of a “civil works lag” in sub-Saharan Africa, whereby local competitiveness in the construction industry has developed more slowly there than in other regions.
Promoting ethical business and public-private partnership for development (OECD)
The China-DAC Study Group held a symposium on “Promoting Ethical Business and Public-Private Partnership for Development” in Beijing on 14 November 2014. The symposium attracted over 80 officials, experts, scholars and representatives from business and trade unions from China, Bangladesh, Vietnam and members/observers of the OECD Development Assistance Committee (DAC). Participants discussed and shared experiences on forming strategic alliances between development agencies and the private sector to promote sustainable development in developing countries and on encouraging firms operating abroad to embrace ethical business practices.
Ethiopia presents $11 billion budget (The EastAfrican)
Ethiopia's Ministry of Finance has presented close to $11 billion national budget for the 2015/16 fiscal year. The budget period runs from July 8, 2015 to July 7, 2016. The proposed budget is nearly 20% higher than the previous year's. Out of the total amount, $586 million is planned to be invested in Sustainable Development Goals, which are expected to replace the eight Millennium Development Goals. Some $4.1 billion will go into capital expenditure and around $2.5 billion will be allocated to recurrent expenditure, according to Finance Minister Sufian Ahmed who presented the proposed budget in the Ethiopian parliament Tuesday.
Ethiopia: Forging the link between inclusion and integrity (World Bank Blogs)
How can financial inclusion and financial integrity policies complement each other? That question was addressed in a report recently released looking at the state of Ethiopia’s anti-money laundering/combating the financing of terrorism (AML/CFT) framework. The assessment was conducted by a World Bank Group team of experts and published by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). This is the first assessment of a developing country to be published that uses the revised 2012 Financial Action Task Force standards.
Financial inclusion, regulation and stability: Kenyan experience and perspective (UNCTAD)
Tension as DRC is accused of encroaching on Ugandan border (Daily Monitor)
Zambia seeks to reclaim shipping yards in Kenya, Tanzania (Business Daily)
Stop strange goings-on in port deal before scandal blows up in our face (Daily Nation)
Kenya: Higher import costs dent growth in manufacturing (Business Daily)
Tanzania: Govt, Bunge team face off ahead of Budget Day (The Citizen)
Mozambique: Sweden announces 448 million euro aid over the next 5-years (Club of Mozambique)
ECB paper finds that weaker currency does not boost exports (Reuters)
Nigeria’s e-commerce sector to be worth N2.5trn by 2018 (ThisDay)
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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Informal Meeting of WTO Trade Ministers, Paris: Speech by Amb. Amina C. Mohamed
Speech by Amb. Amina C. Mohamed, Cabinet Secretary, Kenya Ministry of Foreign Affairs and International Trade, during the Informal Meeting of WTO Trade Ministers on the Margins of the Organization for Economic Cooperation and Development (OECD) Ministerial Council: Paris, 4 June 2015
Thank you Hon. Stephen Ciobo for providing this opportunity and for inviting me to co-chair with you this informal meeting of colleague Ministers responsible for the World Trade Organization (WTO), and which is also being attended by Roberto Azevêdo, Director-General, Fernando de Mateo, Chairman of the General Council and friends. Thank you all for coming. I am pleased to be here.
I must tell you that on our preparations for this Tenth WTO Ministerial meeting, I am being micro-managed by President Kenyatta! At every stage, he asks me to provide him with precise reports on the state of play, description of problems and of probable solutions.
This is not just because he was former trade Minister, but because he has taken the public position that the first WTO Ministerial Conference to be held in Africa shall neither fail, nor be subject to a low ambition exercise, nor be subject to endgame dramatic episodes that have characterized some other ministerial meetings. So to be clear, however we do it, Nairobi shall be a successful WTO Ministerial meeting.
The Nairobi Ministerial meeting is six months away. Not much time is left. We must, therefore, maximize every opportunity to consult, precisely on the principal issues before us and address, specifically, the key questions that we face, collectively.
A few points to get our meeting started. At this stage, I believe that we require focus, specifically on the consultative process and envisaged substantive ingredients for the inputs to and outputs from MC10.
On the process
First, what are the mechanics and steering mechanism that we should put in place now with the direct involvement of myself, the Director-General and the Chairman of General Council. We cannot afford a process that slip slides all over. I believe that we need to structure and organize now, with focus and direction.
Having chaired the General Council, I know and I am convinced that we must get the business of the WTO done by working in workable, different, but complimentary formats and configurations linked to transparency exercises in plenary meetings at appropriate moments. Uniform, undifferentiated consultative and negotiating formats can undermine confidence and negotiations. I would welcome your views and guidance.
Second, for transparency purposes, I should let you know what I have been up to and will sustain and upscale. I have been meeting with African trade ministers and the African Union Commissioner for Trade in different formats; seeking their advice, guidance and reaffirming with them that the first African Ministerial Conference must be ambitious in favour of trade multilateralism and must be successful. Africa must accept and share the responsibility of multilateralism and own MC10. They must not find themselves on the outside looking in.
Third, I will be using the policy dialogue in the China accession Round Table process to underscore the vital importance of domestic reforms, strengthening trade multilateralism and the benefits of a stable, predictable, rules-based inter-dependent global economy. The fourth WTO China Round Table, also the first to be held in Africa, will take place in Nairobi from 12th to 13th December, 2015 for all LDCs and African countries.
It is sponsored by the Government of China, organized by the WTO Secretariat and will be hosted by Kenya. I will open it with my counterparts and participate. It is an important exercise for confidence building. Successful trade negotiations require confidentiality (away from the public eye), tact and discretion but at appropriate moments, they must be squared with openness and transparency to ensure buy-in and avoid blow-back.
I would welcome your understanding of the goings-on in your different constituencies. One question that I am being asked which I understand, but I find somewhat puzzling is whether Kenya can deliver Africa. I am not sure it is so much a question of whether we, as individual WTO members, can deliver our regions.
I think that is far-fetched. I think that the real and legitimate expectation is whether we are able, collectively, to establish a process that inspires confidence with the clear understanding that the outcome must reflect pragmatism and realism and not anyone’s wish list.
Finally, from past experience, I believe that we must not leave huge unresolved problems for the Ministerial proper. President Kenyatta is determined to ensure that the African Ministerial Conference succeeds and that in doing so, we shall not engage another WTO MC attendant with drama in the final moments.
On substance
I hope you can understand Africa’s fundamental commitment to trade multilateralism; for Africa, for us, it is multilateralism first and last. We shall seek to use the Nairobi preparatory process to strengthen and advance multilateralism and strengthen the WTO as the engine of the rules-based multilateral trading system. We want to see the WTO more relevant, stronger and the first point of reference in writing non-discriminatory multilateral trade rules and for trade opening for recovery and growth in the global economy. More specifically, on the outcome document since Bali to now, we have a clear understanding of where we should be headed. We must not seek to do everything. If we try to do everything, we will end up doing nothing. So, the outcome from Nairobi should reflect several core elements namely;
First, a post-Bali/Nairobi work programme that is realistic, balanced and which modernizes and updates the WTO negotiating agenda and puts the WTO back in centre field.
The work programme should be substantively robust, reflect the fundamentals in the Doha agenda and issues that will ensure that the WTO is relevant and adaptable. Yet, it must not be a wish list. It must not divide the membership. It must contain benefits for the membership. Doha never died. The work programme should facilitate closure on Doha.
We shall have to find closure on Doha. We can and should, through the work programme to be agreed. It would need to include agriculture, including an outcome on cotton and an understanding on food security; services; NAMA; trade and environment; fishery subsidies; an expanded information technology agreement and a package for LDCs. Through the work programme we need to renew WTO. And we can.
Second, between now and end of November, we must find the 2/3 requirement to ratify the Trade Facilitation Agreement. On my part I have written to all African trade ministers and will have the Trade Facilitation Agreement discussed at the African Union Summit in South Africa as we did during our trade ministers meeting in Addis in May. We all need to push on this. In the same vein, we should do all that we can to ensure the ratification and entry into force of the amendment to the TRIPS Agreement.
Third, by Nairobi, we should also work to enlarge the WTO through accessions. On queue are the accessions of Afghanistan, Kazakhstan and Liberia. I would like to thank Roberto specifically for his outstanding “delivery” on WTO accessions, with his Secretariat team. This is one of the areas of the WTO that is working exceptionally well. We all know that the only real market access that has been achieved in WTO has been through accessions.
I have been a bit long, but I am aware of the questions and concerns that are being raised. The reports reach me in Nairobi. On security, let me assure you that the Government of Kenya will ensure the safety and the well-being of participants. We will do everything-everything possible to ensure success at the Ministerial.
‘Servicification’ of international trade takes centre stage at UNCTAD expert meeting
Ambassadors, trade negotiators, policymakers, and national and international services regulators and experts concluded the third session of the Multi-year Expert Meeting on Trade, Services and Development, on May 13, 2015.
National economies and international trade are increasingly relying on services – a phenomenon dubbed “servicification” – and debates at the third session of the Multi-year Expert Meeting on Trade, Services and Development, hosted by UNCTAD in May, recognized the importance of this phenomenon.
Ambassadors, trade negotiators, policymakers, and national and international services regulators and experts discussed experiences and lessons learned from services sectors, particularly infrastructure services such as energy, telecommunication, transport and financial services. The objective was to help UNCTAD’s member States to design and implement regulatory and institutional frameworks to strengthen their services economy and trade flows.
The key role of the services sector in the post-2015 development agenda has also been acknowledged in the proposed sustainable development goals (SDGs) to be adopted in New York in September: many of the goals and targets refer to the crucial role of infrastructure, universal access to basic services, access to financial services, energy, health, education, telecommunications, and transport. Moreover, several cross-cutting goals are predicated on the efficient, environmentally friendly and equitable functioning of services. The services sector development will therefore have a crucial role as means of implementation of SDGs.
Several components of UNCTAD’s “services toolkit” were highlighted in the discussion, most notably, UNCTAD’s Services Policy Reviews (SPRs). These are conducted under an innovative, participative and multi-stakeholder methodology and provide a systematic review of the policy and the regulatory and institutional framework of a country’s services sector in order to make recommendations that can help promote coherent and comprehensive national and sectoral development plans and strategies.
Improving the services sector contributes to a fundamental sustainable development aim – namely alleviating poverty. This is because services can have wide-spread positive spill-over effects on other sectors. But this interconnectedness also makes it more difficult, and at times sensitive, to reform than other parts of the economy.
“Getting policies, regulations and institutions right sounds good, but it is easier said than done,” UNCTAD Deputy Secretary-General Joakim Reiter said. ”The challenge is even bigger in developing countries, where, in some cases, the services sector is still nascent and underdeveloped, and so are the national regulatory frameworks. The challenge is big, but the task is not impossible; UNCTAD can help. And one of the ways in which we can do it is through our SPRs. The reviews have served as a tool for assessing the robustness of services policies, regulations and institutions and the potential of services and trade for development.”
The meeting brought together senior representatives from those countries that have benefited from UNCTAD’s SPRs and similar support, including Bangladesh, Colombia, Ecuador, Indonesia, Jamaica, Lesotho, Nepal, Paraguay, Peru, Rwanda and Uganda, as well as Southern African Development Community and Andean Community countries. They shared their experiences and lessons learned in identifying policies and regulations that fit their specific national contexts best. They expressed their appreciation to UNCTAD for the support provided through SPRs and other exercises.
His Excellency Ambassador Shameem Ahsan, Permanent Representative of Bangladesh, expressed his government’s appreciation to UNCTAD for having conducted the first ever SPR of Bangladesh. ”The observations and recommendations made in the SPR would not only help Bangladesh formulating pragmatic policies in our emerging services sectors, but also enable us to effectively participate, as an LDC, in the negotiations in the World Trade Organization on Services Waiver,” he said. “It will also help in the ongoing process of formulating an integrated national policy on Trade in Services in order to fine-tune our objectives at the national level and also in regional and international trade negotiation regimes.” He concluded by saying “UNCTAD’s initiative is a commendable beginning” and “this SPR hopefully would remain an essential tool for us to further build upon in future”.
Several country representatives, including a representative of the Pacific Islands Forum, expressed their interest in receiving UNCTAD’s support in conducting SPRs. States recognize that it is crucial to ensure that trade gains are fairly shared among countries and within the countries. In the past decades, rising inequalities have been observed in many part of the world. Research from the International Labour Organization indicates that trade in general and trade in services do not automatically lead to better jobs and rising incomes without a public policy of economic and inclusive development.
Trade liberalization and national regulatory efforts should go hand in hand. The more countries liberalize the more they need sound regulations and stronger institutions. Although liberalization could be a component of services policy reforms, coherence of such reform with other complementary policies are needed to harness the services potential. These include policies aimed at labour skill enhancement, innovation and technologies upgrading. Policies are also needed to facilitate transition from informality to formality as many services are found in the informal sector. While much policy attention has been given to market access issues, addressing regulatory divergence and regulatory barriers could be more amenable to facilitating trade in services. International standards on services, and international regulatory cooperation (for example labour mobility, infrastructure development), can play a major role in this regard.
On the financial services side, speakers pointed to the need of a combined approach to regulation with micro and macro regulatory tools. The paradigm shift pertaining to the increased convergence of information and communication technology and financial services is increasing the need for greater regulatory competences and coordination between different regulatory bodies in order not to hamper the development of new technologies and services. As countries seek to strengthen their services sectors, UNCTAD stands ready to support them through its comprehensive work on services and the several components of its toolkit, in harnessing the potential of services economy and trade for post-2015 sustainable development goals.
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Gamechanger Djibouti-Ethiopia railway ready, will cut goods travel time from two days to 10 hours
99% of imports from fast-growing Ethiopia pass through its neighbour, while Djibouti is nursing geopolitical ambitions.
The leaders of Djibouti and Ethiopia will oversee the completion of a railway linking their two capitals on Thursday, with the ambition that the link might eventually extend across the continent to West Africa.
Djibouti’s President Ismail Omar Guelleh and Ethiopia’s Prime Minister Hailemariam Desalegn will attend the ceremonial laying of the last track in the 752-kilometre (481-mile) railway, financed and built by China, linking the port capital of Djibouti with landlocked Ethiopia’s capital Addis Ababa.
The first scheduled train is expected to use the desert line in October, reducing transport time between the capitals to less than 10 hours, rather than the two days it currently takes for heavy goods vehicles using a congested mountain road.
“Some 1,500 trucks use the road every day between Djibouti and Ethiopia. In five years, this figure will rise to 8,000,” said Abubaker Hadi, chairman of Djibouti’s Port Authority. “This is not possible, this is why we need the railway.”
With a capacity of 3,500 tonnes – seven times the capacity of the old line at its peak – the new electrified line will mainly be used for transporting goods to Africa’s second-most populous nation.
Ethiopia’s economy is growing fast, with almost 90% of its imports going through Djibouti. Both countries benefit from economic integration, with Ethiopia gaining access to the sea and Djibouti gaining access to Ethiopia’s emerging market of 95 million people.
“Ethiopia is an important country for us,” said Djibouti’s Transport Minister Ahmed Moussa Hassan. “It is the main customer for our logistics facilities and this new railway line will strengthen trade.”
The new line is in fact the resurrection of an old one, built in 1917 by the Franco-Ethiopian Railway Company, but decades later it fell into disrepair and only worked erratically. Trains would regularly derail and it could take as long as five days to make the journey between the two capital cities.
Some abandoned parts of the old line are still visible in Addis Ababa and in central Djibouti.
Djibouti’s ambitions
Another new line linking Djibouti and the northern Ethiopian town of Mekele is also due to be built, but this is not the extent of the project’s ambition.
Hadi says the railway is a step towards a trans-continental line reaching all the way to the Gulf of Guinea, in West Africa.
“We are already the gateway to Ethiopia. We intend to continue this railway line to South Sudan, the Central African Republic (CAR) and Cameroon to connect the Red Sea to the Atlantic Ocean,” said Hadi.
Djibouti, the smallest state in the Horn of Africa, is embarking on large infrastructure projects, building six new ports and two airports in the hope of becoming the commercial hub of East Africa.
Late infrastructure
“Infrastructure is coming very late to Africa. It is impossible for a truck to cross the continent. To transport goods from the east coast to the west coast of Africa, it is necessary to circle the continent by boat,” Hadi said of a sea voyage that can take more than three weeks.
A trans-Africa railway is feasible “in seven or eight years,” he said, as long as conflicts in South Sudan and CAR come to an end.
Liu Xiaoyan, commercial director of the China Civil Engineering Construction Corporation, who is in charge of the Djibouti-Addis line, said his company is ready to continue the work.
“We want to show off Chinese technology to everyone, especially to Africa,” he said, adding that it was also an opportunity to strengthen China’s trade ties with Africa and its presence on the continent.
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Gender is my Agenda Pre-Summit Conference: Statement of the Chairperson of the AU Commission
Statement of the Chairperson of the AU Commission, delivered by HE Mrs Fatima Acyl, Commissioner of Trade and Industry, to the Gender Is My Agenda Pre-Summit Conference: 8-9 June 2015, Sandton, Johannesburg
It is truly an honour for me to address this meeting of GIMAC, on behalf of Her Excellency, Dr. Nkosazana Dlamini Zuma, who unfortunately cannot make this meeting due to other continental duties she is undertaking.
For those of you who know my boss, Dr. Dlamini Zuma takes the issues of African structural transformation very seriously. She always reminds our heads of state and leadership, if they are serious about development and shared prosperity, they cannot ignore more than 50% of our population, the women. If we don’t empower women, we will function at halve capacity, and it will be a huge missed opportunity. When talking to and about women, there is no big or small gathering for the Chairperson and she would have loved to be here today.
She also most definitely shares your commitment to move from solemn declaration to solemn action.
Let me start by congratulating GIMAC for once again providing this critical platform for civil society and women’s organisations, to meet, to reflect on progress and jointly strategize on how we should push forward our Pan African agenda.
In January this year, on the margins of the Summit in Addis Ababa, we discussed the theme for the Year: Women’s Empowerment and Gender Equality for the realisation of Agenda 2063.
We agreed that we must use this year to make decisive progress on key areas, and identified the six priority areas: health and reproductive rights; financial inclusion and women’s empowerment; peace and security; representation and education and skills with a focus on STEM and women in agriculture.
Since then, we have focused on the practical issues to take each of these priority areas forum.
I am sure that this GIMAC forum will take stock of where we are and the practical issues needed as we finalise the first ten-year plan for Agenda 2063.
Let me highlight a few of these issues, which we want to address at this Summit.
Firstly, during the Malabo Summit on Agriculture, and in the Agenda 2063 consultations, women farmers appealed to us to relegate the handheld hoe to the museum. We have listened and at this Summit we will launch the campaign to replace this relic with more modern technology, and to achieve this in the next ten years.
Secondly, the Summit will also launch the start of negotiations on the Continental Free Trade Area, and on 10 June 2015 tripartite of SADC, Comesa and EAC composed of 23 countries concluded an agreement in Shamal Sheik as an important step in this direction.
As we know, women make up the majority of cross border trades (up to 85%), we must therefore look at ways to ensure that the voices and issues of women traders feature prominently in the CFTA negotiations.
Thirdly, as indicated in January, we will be launching at this Summit the inaugural African Gender Scorecard, as an instrument to monitor progress and share best practice, so that we hold each other and our governments accountable for the implementation of our gender instruments such as the Protocol and the Solemn Declaration.
In addition to these issues, we will at this Summit and for the remainder of the Year also continue to pay attention to the issue of financial inclusion and economic empowerment, as well as health, reproductive rights and the focus on skills, science, technology and innovation.
On financial inclusion, the Ministers of Finance and Planning at the March meeting discussed the issue of women’s access to credit in the content of the first 10 year plan on Agenda 2063, as well as domestication of Agenda 2063. The Chairperson of the AUC wants to also involve Central bankers as well as the private sector in addressing this issue of access to credit for women.
Dr. Dlamini Zuma on this occasion said:
“We must move away from always talking about micro credit and micro enterprises when we talk about women. There is nothing micro about us. There is nothing micro about women.”
The voices and actions of civil society remain critical to taking our struggle for gender equality and women’s empowerment forward. We therefore wish this GIMAC forum all success, and look forward to the outcomes of your deliberations.
I thank you.
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Global trade costs could drop dramatically if countries implement WTO Trade Facilitation Agreement, OECD says
Implementing the World Trade Organisation (WTO) Trade Facilitation Agreement (TFA) could reduce worldwide trade costs by anywhere from 12.5% to 17.5%, according to new OECD analysis, with the greatest benefits accruing in developing countries.
The 2015 OECD Trade Facilitation Indicators (TFIs) find that countries which implement the TFA in full will reduce their trade costs by anywhere from 1.4 to 3.9 percentage points more than those that only implement the minimum requirements. The greatest opportunities for reductions in trade costs are in low and lower middle income countries.
Trade costs include all tariff and non-tariff costs including transport, border-related and local distribution costs from foreign producer to final user in the domestic country.
The Trade Facilitation Agreement was the most substantive outcome of the WTO’s first multilateral agreement, concluded in December 2013 during the 9th WTO Ministerial Conference in Bali, Indonesia. The TFA creates a significant opportunity to improve the speed and efficiency of border procedures, thereby reducing trade costs and enhancing participation in the global value chains that characterise international trade. The WTO General Council formally adopted the Bali Package measures in November 2014, and the TFA will enter into force once two-thirds of WTO members have completed domestic ratification processes.
The updated OECD Trade Facilitation Indicators (TFIs) provide the most current assessment of the impact of the WTO TFA. The OECD TFIs are designed to inform governments on potential measures to improve border procedures, reduce trade costs, boost trade flows and reap greater benefits from international trade. The Indicators identify areas for action and enable the potential impact of reforms to be assessed post-implementation.
“As G20 economies seek to achieve an additional 2% of GDP growth by 2018, facilitating a more open flow of goods and services across international borders should be a key contributor to this target,” OECD Secretary-General Angel Gurría said. “The new Trade Facilitation Indicators will help countries benchmark their performance and identify areas of priority action where great rewards can be reaped with little effort.”
The case for fully implementing the Trade Facilitation Agreement is compelling – for producers of goods and services, full implementation will lift export performance and lower the costs of imports. These lower costs will eventually be passed onto consumers, especially those in countries that can afford these imports the least.
Significant financial assistance is available to help countries implement reforms. Nearly USD 1.9 billion has been disbursed in aid for trade facilitation since 2005, with annual commitments up eightfold between 2005 and 2013. An even more compelling argument is the fact that most of the TFA measures with the highest cost reduction effect are easy and cheap to put in place.
The 2015 OECD Trade Facilitation Indicators were presented in the context of the OECD’s annual Ministerial Council Meeting, which devoted one of its sessions to discussing the cross-linkages between trade, investment and development, including efforts to combat protectionism and further strengthen the multilateral trading system.
For further information on the Trade Facilitation Indicators, an interactive website allows users to review and compare trade facilitation indicators across 152 countries. Once a given countries’ trade facilitation performance is identified, a policy simulator allows users to test the effects of policy changes.
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tralac’s Daily News selection: 9 June 2015
The selection: Tuesday, 9 June
The President of Dangote Group, Aliko Dangote's decision to inject a fresh $16 billion into Africa's industrialisation in the next three years, leaves even the daring entrepreneurs perplexed over the point at which a man would agree that his has done enough business in one life time. For Dangote however, this is no longer just setting up businesses for profit, it is setting examples for other investors, both African and foreign, to assure them that Africa indeed is the new frontier for thriving investment.
AGOA and South Africa: selected commentaries
AGOA compromise mixed blessing for SA (Business Day)
Malcolm Ferguson: 'Poultry deal a day late and a dollar short' (Business Report)
Siyabonga Mkhwanazi: 'SA needs to cushion sector from US chicken deal' (Business Report)
Catherine Grant Makokera: 'AGOA - a look at the US-SA relationship' (Tutwa Consulting)
TFTA: Council of Ministers finalize Tripartite launching instruments (COMESA)
The COMESA-EAC-SADC Council of Ministers has finalized the preparation of the instruments to launch of the Tripartite Free Trade Area on Wednesday June 10. These include the COMESA-EAC-SADC Tripartite Free Trade Area Agreement which will be signed by the Heads of State and Government and the Sharm El Sheikh Declaration launching the Tripartite FTA. The others are Post Signature Implementation Roadmap, the Indicative Schedule of Negotiations on Outstanding Issues in Phase I and Phase II negotiations, and the Programme of Work on Movement of Business Persons and the Industrial Development Pillar.
17 African states join COMESA-EAC-SADC's pre-launch meeting
Egypt's exports to Africa in 1st quarter of 2015 totals $810 million (Egypt Independent)
Malawi companies to benefit from Africa trade deal: Mutharika to sign accord in Egypt (Nyasa Times)
EAC, WB and partners discuss integrated solutions to the development of key trading corridors (World Bank)
The Integrated Corridor Development convention, held at the UNESCO headquarters, brought together representatives from major bilateral and multi-lateral donor organizations, to discuss solutions to facilitate the funding of corridor development in land-locked countries, such as Burundi, Rwanda and Uganda. During the convention, development partners and country representatives presented their institutional priorities, and discussed potential collaboration in accelerating the implementation of development corridor projects such as the Lake Victoria and the Lake Tanganyika transport programs. The two programs will require a total investment of US$1.8 billion, of which the World Bank has committed US$850 million to date.
China asks for business plan to fund EAC railway project (New Times)
The Chinese request follows a joint visit to Beijing by ministers for foreign affairs and infrastructure from April 26 to May 1, to promote various infrastructure projects that are being implemented, with SGR taking centre stage. In China, the delegation from East Africa met with top executives of the Chinese Export and Import Bank (Exim), which is expected to fund the project. The bank is state-owned. “The Chinese government expressed a positive feedback and recommended to finalise feasibility studies for further discussion,” the ministers told the presidents.
Tazara: Buggered, but can be fixed (Daily Maverick)
Tazara railway can be turned around, though it will require dollops of political will to do so. At first, it will necessitate a recognition that its current state is not ‘fixed’, even though it suits several key actors to keep it down and out. Turning the political economy of protecting privilege, plunder and survival into one of prosperity will lie at the heart of the railway’s transformation, as with any infrastructure in Africa. [The author: Greg Mills]
Port of Lüderitz set to diversify exports (The Namibian)
There is huge interest from mining companies at the Northern Cape in South Africa to export manganese via the port of Lüderitz. The manager at the port of Lüderitz, Max Kooper, alluded to this during a recent visit by The Namibian. According to Kooper, Lüderitz has a shallow port with a draught of 8,15 metres. Until recently, Lüderitz port was without a railway link. But that will soon be a thing of the past as Namport has embarked on rail infrastructure within the port, which is at the final stage of implementation.
Construction of key Djibouti-Ethiopia rail line to finish (AFP)
The leaders of Djibouti and Ethiopia will oversee the completion of a railway linking their two capitals on Thursday, with the ambition that the link might eventually extend across the continent to West Africa. Djibouti’s President Ismail Omar Guelleh and Ethiopia’s Prime Minister Hailemariam Desalegn will attend the ceremonial laying of the last track in the 752-kilometre (481-mile) railway, financed and built by China, linking the port capital of Djibouti with landlocked Ethiopia’s capital Addis Ababa.
The first scheduled train is expected to use the desert line in October, reducing transport time between the capitals to less than 10 hours, rather than the two days it currently takes for heavy goods vehicles using a congested mountain road. “Some 1,500 trucks use the road every day between Djibouti and Ethiopia. In five years, this figure will rise to 8,000,” said Abubaker Hadi, chairman of Djibouti’s Port Authority. “This is not possible, this is why we need the railway.”
Regional integration takes center stage at 2015 AfCoP Annual Meeting (AfDB)
Over 150 representatives of member states of COMESA and the West African Economic and Monetary Union will convene in Abidjan, Côte d’Ivoire from June 8-10, 2015 to take stock of the two blocs’ efforts towards economic integration and regional development results in Africa. These delegates will attend the second Africa for Results (AfriK4R) Forum and seventh Annual Meeting of the African Community of Practice on Managing for Development Results (AfCoP-MfDR), which will examine the landscape of challenges, opportunities and trends, related to Africa’s regional integration agenda. Initial insights from country and regional assessments and activities under AfCoP’s flagship AfriK4R initiative will also be presented. [www.afrik4r.org]
G7 Summit Leadersʼ Declaration: trade, global economy issues
We are committed to strengthening the rules-based multilateral trading system, including by contributing to full and swift implementation of the WTO Bali package. The focus in 2015 should in particular be on the entry into force of the WTO Trade Facilitation Agreement (TFA). To that end, G7 members commit to making every effort to complete their domestic ratification procedures in advance of the Tenth WTO Ministerial Conference (MC 10) in Nairobi this December. We also call for swift agreement by July of a WTO post-Bali work programme that secures a prompt conclusion and balanced outcome of the Doha Round and we fully support ongoing efforts in the WTO to this end. Both the implementation of the TFA and agreement on a post-Bali work programme should lay the ground for a successful MC 10, the first WTO Ministerial to be held in Africa. [Download]
Oxfam: G7 emissions have 'savage impact' on African crops (Deutsche Welle)
Duty-free under duress: Kenya’s trade with the EU (Deutsche Welle)
Tanzania lifts gas resources estimate to 55 trillion cubic feet (The EastAfrican)
"As a result of ongoing exploration activity, natural gas resources discovered in the country rose from 46.5 tcf in June 2014 to 55.08 tcf in April 2015, equivalent to an increase of 18 per cent," George Simbachawene, Tanzania's energy and minerals minister, said in a presentation to parliament on Saturday. Mr Simbachawene said a pipeline connecting offshore natural gas fields to Tanzania's commercial capital Dar es Salaam would be commissioned in September, ahead of the energy ministry's previous estimates of November. The government said the pipeline would enable the country to switch to gas-fired power plants and reduce oil imports, hence leading to annual savings of over $1 billion.
Tanzania: Milk production ‘too low’ (The Citizen)
Milk production and marketing puzzle continues to haunt the country as only 30 per cent of potentials are being utilised, while per capita milk consumption is a mere quarter of global standard of milk consumption. “We really need to go up to nine billion litres per year in order to catch up with FAO standards. Milk production and marketing face chronic problems of low output, compromised quality and dominance of informal market,” a senior lecturer of animal science at Sokoine University of Agriculture, Dr George Msalya, said.
Zimbabwe: Capacity utilisation reaches 39% (NewsDay)
The manufacturing sector has recorded a 1,9 percentage increase in capacity utilisation to 39% driven by activities in the beverages and construction sectors, the Confederation of Zimbabwe Industries (CZI) has said. In the same period in 2014, capacity utilisation was 37,1%.
Tracing the value-added in global value chains: product-level case studies in China (UNCTAD)
The rise of the global value chains (GVCs) is reshaping the whole structure of worldwide trade flows. It is no longer true that all, or even the bulk of the value of a country’s exports can be assumed to be domestically produced. Three product-level case studies were conducted to identify where China is placed within the GVCs and to find out what and to what extent value is added in China. The three case studies relate to rubber tyres, light-emitting diodes (LEDs) and fasteners. They reveal that the selected industries are based mostly on mid-level technologies, and that China is generally in the midstream of the GVC with its comparative advantage in labour cost vis-à-vis its developed trading partners.
Ethiopia seeks to protect migrant workers from abuse in Middle East (The EastAfrican)
Call for proposals of African Financial Markets Initiative (AfDB)
Uganda: We are no longer a colony, government tells EU envoys (Daily Monitor)
Multimedia: Attracting FDI investments critical to Mauritius' economy (CNBC Africa)
Effective governance central to unlocking the potential of the Blue Economy (SAIIA)
SA, China sign ICT plan of action (SAnews.gov.za)
SA delegation explores opportunities in Mozambique (CAJ News)
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)