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Make 2015 a year of world trade action
International trade creates wealth and opportunities around the world. But the richest countries must take care to foster, not weaken the poorest, writes Anabel Gonzalez.
Just months into 2015, the world is poised to reset the stage of international trade. A new negotiating agenda is gaining momentum. Leaders are striking up important conversations about trade openness and making progress in mega-regional trade deals. This is good news. But if 2015 is the year of action in trade, let’s make sure all are included.
The past 20 years has seen spectacular growth in world trade – new countries have joined the global marketplace, creating opportunities in places that otherwise might still be mired in poverty. The World Trade Organization (WTO) has helped to drive growth and poverty reduction in ways that would have been hard to imagine at its founding 20 years ago.
Yet today, world trade is fragile. Before the 2007-08 crisis, trade was growing at almost twice the level of real global GDP growth. Today, trade growth lags behind global GDP growth, hovering at 3 percent or below. The causes for this are complex. They go beyond the slowdown in global growth and are related to more fundamental, long-term changes. Trade growth increased in the 80s and 90s as tariffs were lowered and production fragmented into global supply chains. It decreased in the 2000s as the pace of this process slowed.
But 2015 could be a turning point. Disappointment at the slowing engine of trade may provide fertile ground for policy action. Indeed, there are signs of new energy already.
For one, there is the WTO Bali agreement, the most significant since the WTO was established 20 years ago and a strong endorsement of multilateralism. The cornerstone of this achievement – the Trade Facilitation Agreement – promises to reduce trade costs in countries around the world. It is also a call for international assistance to developing countries, a rallying cry to help the world’s poorest governments remove trade barriers, integrate into global value chains, and upgrade the value they bring to the global market.
There have also been significant signals recently that the United States, the world’s biggest economy, stands behind global trade. One such is the discussion around the Trade Promotion Authority (TPA), which would speed the country’s ability to approve trade deals.
Yet another sign is the growing energy around the Trans-Pacific Partnership (TPP), a landmark preferential trade agreement. The TPP would define trade rules for an area covering 40 percent of global output and set a new standard. Countries negotiating other preferential trade agreements would likely attempt to match the quality and depth of integration codified in the TPP. This dynamic would give new momentum to discussions between the US and European Union on the Transatlantic Trade and Investment Partnership (TTIP), and negotiations on the Regional Comprehensive Economic Partnership (RCEP), a trade agreement involving 16 countries in the Asia-Pacific, including China.
In this new context, the international community must ensure the preservation of an inclusive system that gives voice to poor countries and maximises their gains from trade.
Three priorities would help make this happen: First, we need to bolster the strength of the WTO, where low-income countries are guaranteed a voice. The best guarantee of an inclusive trade system is progress in multilateral trade negotiations. This means taking concrete steps toward closing the Doha Round: the G20 Trade Ministers meeting next October will be an important milestone, as will the December Nairobi Ministerial Conference of the WTO.
Second, preferential trade agreements should be as open as possible, maximising gains for outsiders and minimising discrimination against them. Some changes through the mega-regionals will benefit all – improving transparency, streamlining regulation and opening the services sector, for example. But to maximise the long-term gains, membership should ultimately be available to all countries willing to meet the standards. International organisations should collect and analyse information on the terms of these deals. We must help countries identify policies that have harmful side-effects for countries not party to them, or policies that reduce the efficiency of the global trading system.
Finally, we should continue to provide development assistance. To build a strong and inclusive multilateral trading system, we must help poor countries meet the standards set in mega-regional deals. These agreements must provide an opportunity for faster, deeper international integration, while still preserving a sense of unity in the broader trade regime.
None of this will fall into place automatically. Leadership from key players is essential to make it happen. The World Bank Group is ready to play its part.
Anabel Gonzalez is the World Bank Group’s Senior Director for Trade and Competitiveness and the former Trade Minister of Costa Rica. All opinions in this column reflect the views of the author, not of EurActiv.com PLC.
» Read The global trade slowdown: cyclical or structural? (World Bank Policy Research Working Paper, January 2015)
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African think tanks relevant despite challenges
Think tanks play a powerful and influencing role in Europe and North America but in Africa they struggle not only for acquiring funding but also for finding and defining their role in a changing and challenging continent.
“The enormous economic growth Africa has had or continues to have, has made little dent on poverty. Think tanks can interrogate this African rising narrative and suggest ways in which this growth can be shared,” suggested Abdalla Hamdok, the ECA’s Deputy Executive Secretary, to think tanks, policy makers, governments and academia at the opening of the 2nd Africa Think tank Summit currently taking place in Addis Ababa.
With “The Rise of Africa’s Think Tanks” as the Summit’s theme, participants will share experiences in how best to make think tanks relevant. As Mr. John Omiti, the Executive director of Kenya Institute for Public Policy Research and Analysis said, “help us to determine how we demonstrate impact and relevance and how we can strengthen the means of networking.”
Think tanks have a potential to close the gap between governments and the public by providing space for discussion, and developing new concepts. Through rigorous research, think thanks produce ideas. Africa right now, needs a lot of practical ideas but one of the challenges of think tanks lies in their inability to communicate, either to their audience or to the public in explaining research results and impact thereof, participants heard.
Mr James McGann, Director of Think Tanks and Civil Societies Programme at the University of Pennsylvania pointed out “policy makers don’t understand us and don’t know how to use us.” Despite several regional challenges, he urged think tanks to “seize the opportunity to develop a collective response to challenges.”
Mr. Hamdok proposed that think tanks could have a role in scenario development, in linking this development with the African Union’s Agenda 2063; and they could advance ideas on translating Agenda 2063 at the national level.
Africa has 7.06 % of the plus 5000 think tanks registered in the world with North America topping the list at 30% of the market. However, Mr. Roger Atindehou, Manager for Eastern and Southern Africa Operations Department at the Africa Capacity Building Foundation, predicts an “expansion in the number of think tanks,” but points to the “lack of diversity in funding as compared to think tanks in North America and Europe.”
After one delegate highlighted, “the continent (Africa) is full of written dreams,” participants suggested think tanks could also help start initiatives that can turn these recommendations into practice.
The participants hope to leave the Summit with concrete ideas on better communication of research results and ideas on how to work with governments to make ideas applicable to policy. African think tanks have to engage support from the continent, delegates stressed.
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Ethiopia eases towards COMESA Free Trade Area
The Ethiopian government is finalising instruments and expediting internal consultations for the accession of the Common Market for Eastern & Southern Africa (COMESA) Free Trade Area (FTA).
Industry areas in which the country is going to join the free trade area have been identified by the Ministry of Finance and Economic Development (MoFED) at the end of 2014. MoFED’s study conducted at the end of 2014 recommended a phase by phase approach to accede into the COMESA FTA and accordingly, categorised three trade areas based on their responsiveness to the FTA competition after accession. These are extremely competitive, upon capacity building and uncompetitive.
Trade areas categorised under ‘extremely competitive’ and ‘competitive upon capacity building’ will join the free trade area with a complete elimination of tariffs in the future. The remaining uncompetitive industries will join FTA gradually with 30pc reduction of tariffs every year.
The change of the tariff system has been accomplished based on the industries selected to join COMESA FTA and ready to submit to the Council of Ministers for final endorsement. MoFED is given an authorisation by the Inter-Ministerial Coordinative Committee to conduct internal consultations with different stakeholders such as the Ethiopian Revenue & Customs Authority (ERCA) and commercial associations, Semere Tesfaye, senior expert of United Nations Agencies of Regional Economic Cooperation at MoFED told Fortune. He added that following the consultation, the instruments for the selected trade areas to FTA will be made public and then deposited with the COMESA Secretariat, which will then distribute them to the member countries.
Ethiopia failed to join the COMESA FTA in 2000 because of reduced competitiveness of the local industries compared with the industries of other COMESA Member States. However, with the growing economy of the country, some industries are potentially recorded to be able to contend in the FTA area, Semere said, declining to name the trade areas selected for the COMESA FTA.
Having a disadvantage of keeping back the revenues the government would have obtained from tariffs in the short run, the accession of Ethiopia into the COMESA FTA results in more market opportunities for domestic industries, increased efficiency of local industries, access to less expensive and high quality products for the consumers, and prevention of domestic monopolies charging high prices, the study showed.
COMESA is the largest regional economic organisation in Africa having 19 Member States and a population of about 390 million. It is an organisation of states focusing on the formation of a large economic and trading unit capable of overcoming trade barriers. COMESA’s 18th summit was held in Addis Abeba between March 22 and March 31, 2015 with the theme of “Inclusive and Sustainable Industrialisation”. Prime Minister Hailemariam Dessalegn was elected as Chairperson of the COMESA authority by Heads of State and Government Summit.
The FTA was realised in October 2000 when nine Member States, namely, Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, Zambia and Zimbabwe eliminated their tariffs for the goods coming from COMESA Member States.
South Africa, U.S. chicken producers to meet over trade dispute
South African and U.S. poultry producers will meet this week in an effort to reach an agreement over American chicken exports.
The countries have been at loggerheads on whether South Africa should lift the 2000 anti-dumping duties imposed on the U.S. It may lose out on preferential access to the U.S. for poultry through the African Growth and Opportunity Act, or AGOA, if an agreement isn’t reached.
“What we are in the process of offering is a reasonable offer,” Kevin Lovell, the chief executive officer of the South African Poultry Association, said by phone on Tuesday from the U.K. Concessions “will need to be based on an understanding of what the Americans used to export to us.”
In 2000, the International Trade Administration Commission requested imposing provisional duties on U.S. frozen whole chickens, frozen bone-in chicken cuts such as drumsticks, leg quarters, breasts and thighs going to South Africa. Taxes were at 27 percent and 2.20 rand (19 U.S. cents) a kilogram then.
South Africa offered to raise the annual tonnage allowed free of anti-dumping duties by 50 percent for the U.S., Johannesburg-based Business Day newspaper reported March 11. It was rejected by American producers at a meeting in Washington.
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EAC drafts industry policy
Experts from the East African Community (EAC) partner states and the EAC Secretariat have been asked to dedicate their efforts towards strengthening institutional capacities in the management of trade and industrial policies.
Musa Uledi, the Permanent Secretary, Ministry of Trade and Industries Tanzania was officially opening the talks last week.
“More often than not, the EAC partner states would ask themselves, what went wrong with their industrial development policies that they pursued in the 1970s?” he said.
Participants came from the partner states, GIZ and EABC experts including experts from UNIDO Tanzania who are moderating and giving the technical backup to the programme.
According to Jennifer Gache, a senior industrial engineer, who represented the EAC, research findings show that capacity and performance of the public sector that deals with industry related matters in the partner states is low.
As a result, implementation of industry related policies and strategies, has in some case, been inadequate, constrained by several factors, poor governance and ineffective monitoring and evaluation frameworks.
The discussions are in line with the EAC Industrialization Policy and Strategy 2012 – 2032, which was approved by the EAC Summit in Bujumbura, Burundi by Heads of States on December 30, 2011. The strategy provides a roadmap in attaining industrialized economic status by 2032.
The project on ‘Strengthening Institutional Capacities for Industrial Policy Implementation in the EAC region’ underpins the importance of carrying forward industrial development through strengthening all the stakeholders along the chain as a main agenda to economic development.
The key objective is the ability and design and to redesign industrial development programmes to respond to emerging opportunities at regional and global level. Also mitigate pitfalls in the policy-making process which holds the key to unlocking the region’s development potential.
Once adopted the programme, aims to put in place mechanisms that will create awareness and enhance the technical and managerial capacities of national and regional public institutions responsible for industrial development.
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China gives Kenya wide berth in founding World Bank rival
China sidestepped Kenya in a deal that has seen almost 50 countries join its new development bank. The Beijing-led investment bank is expected to challenge the World Bank’s dominance in funding government projects.
By last week’s Tuesday deadline to seek founding membership of the $50 billion institution, Kenya had not applied to be part of the Asian Infrastructure Investment Bank (AIIB).
National Treasury Cabinet Secretary Henry Rotich said this was a result of China not extending an invitation.
“AIIB did not send us a letter stating the articles of agreement and inviting us to apply. Such letters of application are usually addressed to me or Foreign affairs; they formerly state what they have and ask if we have interest,” said Mr Rotich.
DEALING WITH KENYA
He said they were sent articles of association for membership in the case of IMF and World Bank, which are already dealing with Kenya.
The China-led Asian Bank, has an expected initial capital of over Sh4.6 trillion and focuses on funding infrastructure projects especially for founder members and is considered the next big thing after the World Bank and Asian Development Bank.
The bank’s signatories include countries closely allied to China such as Kazakhstan and Myanmar, but also some of Washington’s biggest friends – Germany, Britain, France, Italy and Australia.
China is one of Kenya’s most important international partners with connections as a diplomatic ally, donor and trade counterpart.
Kenya’s major infrastructure projects such as the standard gauge railway and Mombasa port expansion are financed by China and Japan respectively.
It, therefore, comes as a surprise that the country was not invited to be a founder of AIIB.
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Kenya in bid to retire tax breaks to foreign investors
Kenya’s National Treasury is considering a proposal to abolish tax incentives and exemptions to foreign investors as the country seeks ways of funding its expanding budget, estimated at $20 billion in the 2015/2016 fiscal year.
Kenya joins Uganda and Tanzania in reworking its tax systems. Tax exemptions are costing the region up to $3 billion in lost revenue that could be devoted to reducing poverty and dependence on foreign aid.
Tanzania, which loses about $1.4 billion annually, leads in the region, followed by Kenya, whose lost revenue stands at about $1.1 billion; Uganda’s is $272 million and Rwanda about $232 million.
Kenya’s Treasury Cabinet Secretary Henry Rotich said that the budget committee is reviewing the proposal by the Kenya Revenue Authority to abolish among other benefits, 10-year-tax holidays enjoyed by foreign investors at the Export Processing Zones.
Mr Rotich, however, cautioned that the proposal would only be considered if it has a major impact on the overall investment climate, and contributes to the attainment of the government’s long-term development objectives under Vision 2030.
“KRA is just submitting a proposal, which will be evaluated by the budget committee. If found suitable, the tax proposals will be included in the Finance Bill of the next budget, but we will still hold public consultations with stakeholders such as the Kenya Private Sector Alliance (Kepsa) and members of the EPZ before it is enforced,” Mr Rotich told The EastAfrican.
The Treasury is also working on robust and simplified excise and income tax laws through the Tax Procedures Bill, which will see the removal of exemptions and address distortions in the tax system.
As at December last year, the Treasury had tabled three proposed laws in parliament – the Excise Management Bill, the Extractive Industry Tax (Income Tax Amendments) Bill and the Tax Procedure Bill – with the latter expected to address the exemptions issue.
KRA Commissioner General John Njiraini said that the effect of such concessions and incentives on investor confidence remains minimal.
“The country needs an accelerated effort to retire existing incentives by revitalising and re-engineering the public sector through improved provision of service,” said Mr Njiraini. “We have also seen that across the East African region, there is a very low ranking for tax incentives as a foreign investment attraction.”
Kenya’s charm
According to Mr Njiraini, the main reasons foreign firms invest in Kenya are access to the local and regional market, political stability, security, infrastructure, market size, quality of labour, regulatory certainty and favourable bilateral trade agreements, with tax concessions being among the least of the attractions.
According to the government, the tax incentives granted to investors in the EPZs have not been beneficial to the country, with some investors accused of closing shop once the 10-year grace period ends.
Kenya Investment Authority chief executive Moses Ikiara said the plan to remove the many tax incentives Kenya has been offering investors is overdue, as the country is now focusing on cutting red tape and promoting ease of doing business as an alternative way to attract investors.
“We are seeing scenarios where these firms are making more than the country is gaining. These policies are not helping us any more, and we are removing them,” said Mr Ikiara.
According to the Kenya Association of Manufacturers, tax incentives are meant to encourage and compensate investors for the costs incurred while operating in Kenya. But this privilege has been subject to abuse by some investors.
“They enjoy the tax holidays, and then close down and repackage themselves into other companies after the grace period to continue enjoying the tax reprieve,” said Betty Maina, chief executive of KAM.
Hurting economy
Alvin Mosioma, the executive director of Tax Justice Network Africa, welcomed the proposals by Kenya to phase out these incentives, saying that they are hurting the economy.
“The costs of tax incentives in African economies are numerous and include budget revenue losses, administrative and compliance costs, rent seeking behaviours, corruption and economic distortions that favour some sectors against others,” said Mr Mosioma.
Last year, Kenya mooted plans to lure textiles manufacturers to set up shop in special zones, with tax breaks being the central part of the incentive package.
Last year, Uganda Revenue Authority Commissioner General Allen Kagina said that tax holidays have had a negative impact on revenue collections and that was why the government was reversing these policies.
“Although the exemptions were meant to enhance trade and investment, revenue collection became the victim in the process,” said Ms Kagina.
Uganda abolished most of these tax breaks in the 2014/15 financial year. The move was expected to net the country $74.3 million.
Previously, the country provided tax incentives in the construction, agriculture, health and education sectors, which were largely meant to attract investments and support productive sectors to take off, with the major exemptions being in the VAT and income tax regimes.
Tanzania is also banking on the new 2014 VAT Act, which will see it lift exemptions in a number of areas, and enable it to collect $500 million in additional revenue in the 2015/16 financial year.
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Targets set for increased EAC trade
By 2016, TMEA would like to see a 10% increase in the total value of exports from the EAC region.
TMEA which is funded by a range of development agencies with the aim of growing prosperity in East Africa, also wants to see a 25% increase in intra-region trade exports when compared to total exports in the region.
Other targets include a 15% reduction in average time to export and import a container from Mombasa or Dar es salaam to Burundi and Rwanda, and a 30% decrease in the average time a truck takes to cross selected borders.
While there exits clear lines of sight from the results of TMEA’s programs, it is becoming more urgent to establish links between the impacts of the TMEA-supported programmes to the general improvement of the welfare of the East African citizens, particularly the poor.
TMEA’s methodology quantifies how pre-poor the TMEA interventions are, and measures the attributes their outcomes towards poverty alleviation in East Africa.
This in turn identifies the gap in the programmes. The intention is not only to prove that TMEA-supported programmes are pro-poor, but where necessary to improve the programmes to ensure that they are becoming increasingly pro poor as much as possible.
A three-pronged approach has been adopted to address the pro-poor issues
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A concept note has been developed to guide TME’s approach on specific and urgent research questions applicable across the TMEA portfolio. The initial pieces arising from the two studies focusing on the issue of one stop border posts on the poor and on the women cross border traders. Also, a methodological approach towards main streaming the poverty issue is being developed from the concept note, with the first step being a proposed toolkit already used to enrich a number of terms of references and baseline studies.
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An internal desk review was undertaken by TMEA staff validating the organization’s theory of change against the poverty issue. Other studies are planned as part of the external joint evaluation plan.
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An annual symposium is planned, with a call for papers to gather external knowledge on the poverty issue, based loosely around the research question in the above concept note.
The analytical framework for the poverty is loosely based on confirming that programmes benefits eventually trickle down on the poorest of the poor and that all short term and medium term risks to the poor mitigated within the program acuities to the greatest extent. TMEA is focusing on becoming increasingly pro-poor in its project activities.
TMEA leading investors are the Belgian Development Cooperation; Foreign Affairs, trade and Development Canada, DANIDA, the Finland Ministry of Foreign Affairs, the Netherland Ministry of Foreign Affairs, Swedish Development Assistance, UKaid and USAID.
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“Social Protection for Inclusive Development”: First Session of the Specialized Technical Committee on Social Development, Labour and Employment
The 1st Session of the Specialized Technical Committee on Social Development, Labour and Employment (STC-SDLE-1) is scheduled to take place in Addis Ababa, Ethiopia, from 20 to 24 April 2015.
The purpose of the STC-SDLE-1 will be to consider social inclusion challenges for vulnerable groups in Member States, including the expansion of social protection systems to combat poverty and exclusion, as well as to establish synergies among the social development, labour and employment sectors to enable the joint operationalization of the Specialized Technical Committee.
Social development and social security as central concern and key developmental goal for the African Union
The Constitutive Act of the African Union identifies as one of the objectives of the African Union, (to) “promote and protect human and peoples’ rights in accordance with the African Charter on Human and Peoples’ Rights and other relevant human rights instruments”. The Constitutive Act furthermore contains the principle of “promotion of social justice to ensure balanced economic development”. Consequently, constitutional provision exits, as a defining imperative, to safeguard human security and social security in which enhanced social protection and social development policies and programmes would play a vital role.
After two decades of registering steady high levels of economic growth, Africa is still facing unacceptable high levels of poverty and inequality usually upheld or sustained by less inclusive development processes.
Social development and social protection are instrumental in achieving inclusive development and will be vital for achieving the goals of the AU Agenda 2063, especially with regard to the outcomes, namely: (i) A Prosperous Africa based on Inclusive Growth and Sustainable Development; (ii) An Integrated Continent, Politically United, based on the ideals of Pan Africanism, (iii) An Africa where Development is People-driven, relying particularly on the potential of Women and Youth, and (iv) A Peaceful and Secure Africa.
The AU Agenda 2063 states the value of social development as follows: “To guarantee the high standard of living as a right, An Africa of 2063 will be characterized by the fact that all its citizens would have affordable social security and where social protection is extended to all vulnerable sections of society. All its citizens shall be free from fear and want, and all public facilities and services will have provisions for people with disabilities. The Africa of 2063 will be a compassionate and caring society.”
Social development is anchored in the Social Policy Framework for Africa (Windhoek, Namibia, 2008) which also builds on employment and social protection as key strategic areas aiming at achieving well-being of people in Africa. Over the next decade, the vision for the employment and labour sectors have been framed by the AU Assembly’s adoption of the Declaration and Plan of Action on Employment, Poverty Eradication and Inclusive Development.
Political developments in North Africa over the past three years have exposed the unacceptable situation of inequality, social and economic exclusion, poverty and huge unemployment as well as underemployment in Africa. Income inequality in Africa is high and reaches 60% in some countries. Social and economic inequality is a major source of political, social and economic risk. In developed economies, inequality also leads to protests and interrogation of the social system. With regard to social protection from risks and the resulting insecurities, and investment in human infrastructure, Africa is lagging behind other regions as measured by public expenditure on social protection floors, as a percentage of GDP, in 2010-2011. The measures in Africa are 0.2% for children representing 42% of the population, 0.5% for social protection of women and men of working age, 1.3% for older women and men, and 24.7% for universal health coverage, as compared to 0.2% for children representing 26.5% of the population, 1.5% on social protection for women and men of working age, 2% on older women and men, and 58% on universal health coverage in the Asian region.
The Ebola crises has furthermore exposed, not only the weak health systems in the affected countries, but also the need for integrated social protection interventions in the aftermath of natural disasters, especially with regard to the care for children affected by the death of caregivers. Social consequences of the Ebola crises include orphans, destitute youths and adults where need for cash transfers, feeding schemes, interim housing and care arrangements, family life education and reintegration into the education system have been amplified. Consequently, the need for acceleration of training of health care workers and social workers to follow up on family life education and guarantors for health and social wellbeing, such as vaccination, nutrition and education.
Under normal circumstances, the key challenges of social protection systems evolve around the issues of financial, fiscal and economic affordability and their sustainability, in particular in developing countries, such as in Africa. Other specific challenges relate to legal and financial social security coverage of rural and informal workers engaged in occupational or sectorial groups with specific vulnerabilities. Traditional social protection schemes are still operational besides the systems implemented by governments, international partners and NGOs.
The situation of limited contribution to social security systems is aggravated by other social development challenges such as the harsh status of vulnerable groups such as children, orphans, persons with disabilities, persons living with HIV-AIDS, migrant workers, child labour particularly in domestic work, etc. The African family, which is the basis for social integration, has been weakened by the negative impact of socio-economic crises which precipitate the continuous dislocation of family members and of the family as a unit. Subsequently, interventions should be rolled out that will support the family as the primary provider of social protection to its members in the African context. In the same vein, support should be mainstreamed in the form of social protection measures for children, older persons, persons with disabilities and the girl-child, also protecting her from early marriage with all its consequences. The STC-SDLE-1 will consider policy indicators and guidelines in all the mentioned respects.
Social Development and social protection in the global agenda for human development
Social development and social protection for the realization of human, social and economic rights are recognized in the Declaration of Philadelphia, the Universal Declaration of Human Rights, the International Covenant on Economic, Social and Cultural Rights and also in the Social Security Standards of the International Labour Organisation (ILO) and its Declaration on Social Justice for a Fair Globalization. In April 2009, as one of its joint Crisis Initiatives, the UN System Chief Executives Board for Coordination adopted the Social Protection Floor Initiative. In June 2012, the International Labour Conference adopted Recommendation R202 on Social Protection Floors as a strong normative guideline for building comprehensive nationally defined social protection systems, which was also endorsed by the G20 in the same month. Social Protection Floors is defined as sets of basic social security guarantees which secure protection aimed at preventing or alleviating poverty, vulnerability and social exclusion. In addition to the Social Protection Inter Agency Coordination Board (SPIAC-B) co-chaired by the ILO and the World Bank, the One-UN Social Protection Floors Country Teams were set up in March 2014.
The European Union has subsequently adopted the “Agenda for Change” as pivotal instrument of cooperation in the area of social protection while the World Bank is implementing its Social Protection Strategy for Africa (2012-2017). Bilateral partners are also pursuing cooperation with developing countries in the areas of social development and social protection. This diversity of interventions offers a series of opportunities but it also points to the challenge of fragmentation which requires effective coordination mechanisms.
The Post-2015 Development Agenda contains 12 Social Protection Targets to change people’s lives by 2030, focusing on pension, employment, benefits for persons with disabilities, social support to mothers and families with children, universal health coverage, and social protection for all during the life cycle. However, social protection is not included as a stand-alone goal towards inclusive development.
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Preliminary results of Africa Regional Integration Index presented to Ministers
The African Development Bank the African Union Commission (AUC) and Economic Commission for Africa (ECA) presented preliminary data on the Africa Regional Integration Index to the 8th AU-ECA Conference of Ministers. The three institutions have collected data on 28 indicators for almost the entire continent. Data on almost 50 indicators have also been collected for the seven pilot countries whose national statistical focal points received training in November 2014.
H.E. Nkosazana Dlamini-Zuma, AUC Chairperson, H.E. Carlos Lopes, Executive Secretary of ECA, and Ms. Geraldine Fraser-Moleketi, AfDB Vice-President and Special Envoy on Gender attended the presentation and welcomed the progress that the three institutions are making towards finalizing the index. Among the emerging results, there appeared to be a strong performance by Southern Africa in the area of trade integration; however, since the data is not comprehensive, this result could change.
Meanwhile, the three institutions continue to work on improving the data through training and statistical capacity-building. To this end, AfDB, AUC and ECA held a joint training from 23 to 27 March in Addis Ababa, Ethiopia for 18 national statistical focal points from countries in Eastern and Southern Africa. The training equipped the focal points with a common understanding on the precise meaning of each indicator and possible data sources. The focal points also provided inputs for refining the metadata and questionnaires to be used in data collection. In all, the joint project team for the index has now trained 25 national statistical focal points on data collection for the index.
The Africa Regional Integration Index is the boldest attempt to date to collect data on the impacts of regional integration in Africa. It is funded by the AfDB’s Africa Trade Fund, ECA’s African Trade Policy Centre and African Centre for Statistics and the AUC.
The next training workshop is scheduled for April 2015 in Tanzania and will bring together 10 focal points from RECs in Eastern and Southern Africa and Corridor Agencies.
The three institutions will provide a further update on the progress of the index and additional emerging results at the AU Summit of Heads of State and Government in South Africa in June 2015.
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UN post-2015 talks focus on draft sustainable development goals
Divisions on how best to finalise a set of sustainable development goals (SDGs) moved to the fore last week during a New York meeting of delegates charged with hammering out a post-2015 development agenda. Countries reportedly raised questions around possible technical revisions to a list of proposed goals and targets – put forward by a UN group last July – as well as how to craft relevant indicators to measure success.
Following a 2012 UN mandate, the SDGs are slated to form a core part of the post-2015 development agenda and will replace the current Millennium Development Goals (MDGs) when they expire at the end of this year. The new agenda will be adopted by world leaders at a high-level summit at UN headquarters in September.
Delegates also agreed last week to hold a joint session in April with their counterparts negotiating the outcome document for the Third International Conference on Financing for Development (FfD3).
The ongoing FfD talks – which also convene in New York – aim to outline development financing commitments at a high-level conference scheduled for July in Addis Ababa, Ethiopia. However, while UN members have indicated a preference for mutually supportive outcomes in the two negotiations, differences reportedly remain on the nature of the relationship between these frameworks.
Trade and trade-related tools to help foster sustainable development feature in both the proposed SDGs and in the zero draft released earlier this month for the FfD3 outcome. According to experts, FfD zero draft usefully expands the scope of the trade-related SDG targets by underlining the importance of trade facilitation and regional trade and investment agreements, but does not clearly establish an ambitious agenda commensurate with the ambition of the SDG targets.
Technical proofing?
Last week’s discussions drew on an unofficial document circulated shortly ahead of the meeting by its co-facilitators – David Donoghue, Permanent Representative of Ireland and Macharia Kamau, Permanent Representative of Kenya – presenting 19 possible revisions to the targets from the July SDG proposals.
Kamau said on Monday that while the complexity of further negotiation on the proposed SDGs was “difficult,” some targets would require “tweaking,” in order to ensure measurability and to avoid inconsistency with other international commitments. The 19 proposed revisions were geared towards technical clarification, Kamau added.
In some instances, the SDGs agreed to by the Open Working Group on Sustainable Development Goals (OWG) – as the dedicated UN group was formally known – listed “x%” instead of numbers for some proposed targets.
The co-facilitators’ document includes one suggested revision relevant to the proposed trade-related targets. The OWG’s health goal mentions the flexibilities provided under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), in relation to providing access to affordable essential medicines in developing countries.
The co-facilitators pointed out that the 2001 Doha Declaration on TRIPS and Public Health does not limit the use of available TRIPS Agreement flexibilities to just “essential” medicines and therefore proposes dropping this word from the target.
According to Earth Negotiations Bulletin, a clear division emerged last week between countries not willing to revisit the OWG effort, while other players supported adjusting the language of targets as a result of their “technical proofing.”
Those against any revisions argue that doing so would re-open the carefully constructed political balance of OWG’s proposal, which was secured after nearly 18 months of talks. Some also questioned why those 19 targets had been selected and not others from the overall list of 169.
An intervention from the US, meanwhile, said that some 68 percent of the indicators in the OWG document were in need of further work in order to be actionable.
While a compromise between these positions was not reached by Friday, Donoghue proposed circulating an updated list of proposed target revisions to member states, with more detail on the rationale for each suggested amendment.
Some member states in the closing session continued to push for more information on the modalities for “filling in the xs.” Donoghue reportedly said that it was too early to decide on criteria for these but that the new document would reflect the week’s discussions.
Measuring success
A proposed timeframe and process for developing a set of indicators for the SDGs was also in the spotlight during last week’s negotiations. The UN Statistical Commission (UNSC), which brings together chief statisticians from member states, presented the outcome of its latest meeting to delegates at the start of the week.
The UNSC on that occasion endorsed a roadmap suggesting that an SDG indicator framework should be adopted by next March and a refined indicator framework will be put forward by a new interagency expert group in July. The UNSC also endorsed the creation of a high-level group to provide strategic guidance for SDG implementation.
Post-2015 negotiators were also presented with a technical report from the UNSC bureau outlining 304 indicators for the current proposed SDG targets and rating these from “A-C” according to their feasibility, suitability, and relevance. Some 16 percent were given an A – the best ranking – across each of the three criteria while 31 percent were considered difficult to implement even with strong effort.
The UNSC technical report includes several suggestions for indicators to measure progress towards the proposed SDG trade-related targets. However, none of these are awarded the “AAA” ranking of feasibility, suitability, and relevance, and only some are considered easier to implement than others.
For example, an indicator for the target of significantly increasing developing country exports and doubling poor countries’ share of world exports by 2020 is deemed feasible with strong effort. The suggested indicator would monitor the evolution of developing countries’ exports of high-technology content, labour-intensive exports, and export diversification.
On the other hand, two indicators to measure efforts to promote a universal, rules-based, and non-discriminatory multilateral trade system under the WTO, including the conclusion of the current Doha Round trade talks, is deemed difficult to implement. The two suggested indicators would measure the number of potentially trade-restrictive measures adopted by WTO members and worldwide weighted tariff averages.
Proposed indicators for targets geared towards correcting trade restrictions and distortions in world agricultural markets, prohibiting certain forms of fisheries subsidies that contribute to overcapacity and overfishing, and increasing aid for trade support for developing countries are also labelled difficult.
While the UNSC indicated that it planned to finish its work on indicators by next March, some delegates urged it to so work more quickly, to deliver a set of indicators for the post-2015 summit scheduled for September. Opinion was also divided on how much control member states should have over the final list of indicators. Donoghue said on Friday that UNSC will brief post-2015 negotiators again in May on the progress made on the indicator framework.
Next steps
Four remaining sessions are on the calendar for UN members to reach agreement on the technical details discussed last week. Delegates will meet again from 21-24 April in a joint session with FfD negotiators.
That session will focus on any outstanding issues on the means of implementation, or the means to achieve the goals and targets, not covered under the FfD track. Delegates will look at how to build coherence between the two processes and discuss a possible technology facilitation mechanism.
Meetings with representatives from the Bretton Woods institutions is also on the docket for the April post-2015 session. A second drafting session for the FfD3 outcome document is scheduled for 13-17 April.
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Important questions about the Private Security Industry Regulation Amendment Bill and the GATS
Much has been written in the media lately on the South African Minister of Police’s recent comments that the country wants to modify or withdraw its current commitments under the World Trade Organisation’s (WTOs) General Agreement on Trade in Services (GATS). This does not mean the country is on the brink of terminating its WTO Membership.
In terms of South Africa’s current commitments under GATS it undertook to not impose any terms, limitations and conditions on the participation of foreign capital in private security companies in South Africa. However, this is exactly what the Private Security Industry Regulation Amendment Bill proposes to do by limiting foreign ownership and control of private security companies to a maximum of 49%. The Bill also gives the Minister discretionary power to determine diverse ownership and control percentages for different market segments.
These proposed provisions are in direct conflict with the country’s GATS commitments. South Africa is legally bound by its GATS commitments under international law. Failure on the side of South Africa to implement its commitments will have legal consequences under WTO law. This restricts the President from signing the Bill into law. The Minister’s willingness to undertake the modification exercise in terms of the requirements and procedures provided under Article XXI of that Agreement sends a positive signal that the country will abide by its international law obligations created under WTO Agreements. It is possible to modify commitments undertaken, but this has to be done in accordance with the provisions of the GATS.
The particular provision in the Bill raises a number of questions that have not featured prominently in the current debate.
What is the rationale for introducing the provision? Is the policy response appropriate to address the concern?
The Minister said the private security industry poses a potential threat to national security because “we are aware that this industry increasingly gathers intelligence which sometimes can compromise national security. Some of these companies have strong links outside the country and it would really be unrealistic not to guard against these potential dangers”. He also said “South Africa intends on entrenching its national security as a development state. We cannot be apologetic about this. In as much as we appreciate that the private security industry is an important player in the economy, we are all too aware that on the flip side, it can become a security threat and compromise the national security interests.”
This “potential threat to national security” is ostensibly the reason for the controversial provision in the Bill. A good starting point is to ask what ‘national security’ means. Burger and Newham (2014) describe national security “as freedom from external and internal threats, which may manifest as military, political, economic, societal and environmental threats, crime and violence and the threat of anarchy”. If this definition is shared by the Minister, he is in actual fact making a serious accusation against private security businesses and, if substantiated with evidence, should be a matter of grave concern for the South African public.
An evidence based explanation should provide details of the type of information private security companies are collecting that could compromise national security. Are they using this information for ulterior and illicit purposes? If so, what are law enforcement agencies doing about this? With whom do private security companies have “strong links outside the country” that could pose “potential dangers” to the South African state? Are these “links” with foreign states or foreign private companies?
It is important to differentiate between the private investment interests of foreign companies in South Africa and the political interests of their home states. It is not one and the same thing. Furthermore, all persons performing managing and executive functions in a private security business must be registered as a security service provider. All security service providers must be, amongst other requirements, South African citizens or permanent residents. In the absence of a rational argument for the introduction of the controversial provision, it is difficult to understand how foreign owned and controlled private security companies could pose a threat.
Many companies operating in South Africa are owned and controlled by foreigners. Why are businesses operating in other industries, such as information technology that could pose a threat, not subjected to similar treatment? Should the government decide to persist with the Bill in its current format and notify the WTO of its intention to implement it, questions on the type of compensatory adjustments South Africa might be required to make must arise.
What compensation will South Africa ‘pay’ for modifying existing GATS commitments?
The GATS Article XXI requirement to negotiate compensatory adjustments with all affected WTO Member States does not refer to monetary compensation. If requested, South Africa will be required to undertake further liberalisation commitments in terms of improved market access and/or national treatment or the removal of most-favoured-national treatment exemptions in other services sectors. The agreed compensatory adjustments must maintain a general level of mutually advantageous commitments not less favourable to trade than that provided for in the Schedules of specific commitments of South Africa prior to the negotiations. South Africa already had undertaken extensive liberalisation commitments under the GATS.
Further commitments may have to be made in other services sectors such as telecommunication, tourism, transport, finance etc. that have until hereto been protected from foreign competition. In other words, South African services sectors unrelated to the private security industry may eventually have to ‘pay’ for the controversial statutory limitation on foreign capital participation in the private security sector.
The outcome of the negotiation process is uncertain. In the end, compensatory adjustments may not compensate the affected private security companies at all. This will create various implications for these private companies that will have to decide on their continued participation in the South African economy, including relocation and divestment decisions.
Source:
Burger, J. and Newham, G. 2014. Are foreign-owned private security companies a threat to South Africa’s national security? [Online] Available from: http://www.issafrica.org/iss-today/are-foreign-owned-private-security-companies-a-threat-to-south-africas-national-security
Previous tralac discussion notes on this topic:
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Private sector pushes for greater SADC role
The private sector in the Southern Africa Development Community (SADC) is having limited impact on the development of regional economic dynamics, an official has said.
SADC is currently in the process of devising the Regional Indicative Strategic Development Plan 2005-2020 (RISDP), whose key objective is to deepen regional integration as a means to achieve a number of economic goals for the bloc.
Yet some observers say the private sector is not having adequate opportunities to shape such significant broad polices that affect them.
Business Council of Southern Africa (BCSA) chairman Mr Oswell Binha however said private economic players in the region were committed to play a greater role in the economic affairs of the region.
“Private sector has not fully exploited opportunities to input, engage and influence regional development dynamics. It is thus committed to ensure that the SADC leaders develop a road map that identifies priority actions required to improve productivity and competitiveness.
This is not only commensurate with the new dream and thrust on regional value chains and resource beneficiation, but also enhances industrial production and intra-regional business that emphasises comparative advantage,” said Mr Binha.
With the SADC Extraordinary Summit set to be held at the end of this month in Harare, it is largely expected that economic issues will be at the forefront of debate during the meeting.
This is in view of the common agenda of SADC as defined in Article 5 of the SADC Treaty (1992), which, among other things highlights that the regional bloc focuses on promoting sustainable and equitable economic growth and socio-economic development.
Mr Binha, a past president of the Zimbabwe National Chamber of Commerce, said the BCSA in partnership with the Association of SADC Chambers of Commerce and Industry (ASCCI) and NEPAD Business Foundation will host a regional business conference that will run concurrently as a strategy to enhance the input of the private sector to discussions during the SADC Extraordinary Summit.
“The conference intends to amplify supply-side issues and constraints that have constrained and impeded growth of SADC economies…. Our role transcends an agenda that focuses exclusively on border measures, nevertheless an issue the private sector has relentlessly championed,” he said.
The RISDP, which was approved by the SADC Summit in August 2003, contains detailed milestones, target outputs and responsibilities for the 15-year plan.
The plan also has specific outputs in the area of private sector involvement including: policy on public-private sector partnership; an institutionalised public-private dialogue; incorporation of private sector representatives in SADC national committees, and establishment of a private sector unit within the SADC Secretariat.
It also allows for the creation of a regional competitiveness and business climate survey; a SADC bi-annual business forum, and facilitation of a regional private sector organisation.
“These outputs for the RISDP provide the framework within which the BCSA can engage with SADC and related organs and institutions,” said Mr Binha.
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Encouraging signs on AGOA renewal in Washington, but poultry debate presents a hurdle to be overcome
With just months to go before the expiration of the African Growth and Opportunity Act (AGOA), discussions have been heating up in Washington, DC on how to proceed with a renewal. Policymakers in Africa and the US have indicated for years the importance of extending the legislation well before its September 2015 expiration, noting that orders of African goods in certain sectors, like textiles and apparel, must be made nine months in advance. Failing this, exporters could face both job losses and declining exports in the absence of having surety that the legislation would continue to exist. These timelines mean that ideally a vote on AGOA should have taken place before the December 2014 recess of Congress. However, the US mid-term election season prevented this from occurring. The next few weeks present a critical period during which billions of dollars of exports and hundreds of thousands of jobs hinge on Congress acting quickly. In this article we try to synthesize some of the recent developments and the key drivers that will shape the renewal process going forward.
Momentum gathering around AGOA
Recent events and discussions with African delegations in Washington DC demonstrate the extent to which the importance of AGOA’s timely renewal is on the radar of African countries and key players on Capitol Hill. In January, this blog reported that a high-level delegation of three African Ministers of Trade visited Washington accompanied by multiple African Ambassadors. The delegation met with 16 different members of Congress, the White House, US Trade Representative and the State Department to discuss AGOA’s renewal. Later that month, Representative Karen Bass hosted an event bringing together individuals from the Brookings Institution, the African Ambassadors Group, the US Chamber of Commerce – representing the US private sector, and a representative of AGOA exporting businesses to discuss the importance of renewal to an audience of over 200 people on Capitol Hill. In February, the African Union Deputy Commissioner, Erastus Mwencha and Fatima Haram Acyl, the African Union Commissioner for Trade and Industry, each visited Washington to discuss the importance of a renewal for regional development priorities. Commissioner Haram Acyl also used the opportunity of her visit to indicate new support to encourage better utilization of AGOA preferences on the part of African countries and continental organizations. The South African Embassy in Washington DC also recently hosted a high-level delegation from its Department of Trade and Industry, led by the country’s newly-appointed “AGOA special envoy” Faizel Ismail, focused on resolving trade issues, discussed below, related to AGOA.
The various delegations have been effective in driving home the urgency of securing AGOA’s timely renewal. Congressman Paul Ryan, Chairman of the House Committee on Ways and Means, commented at the beginning of the Committee’s hearing on the 2015 Trade Agenda that AGOA’s expeditious renewal was important, and has since noted his desire to move the legislation quickly and his recognition of the time sensitive nature of the bill and the large effects that Congress’ decisions will have on jobs in Africa and on US suppliers. Other Members of Congress have also indicated their interest in seeing legislation move forward, with strong advocates for the AGOA continuing to express support in bicameral and bipartisan fashion from multiple key committees.
Challenges and questions still remain
Despite clear interest to move forward, several key issues related to AGOA renewal remain unresolved and subject to ongoing deliberation and debate. For example, the means to best pass a renewal bill seems particularly unclear. The trade agenda at the US Congress has perhaps never been fuller. AGOA renewal is being discussed at the same time as the renewal of the Trade Promotion Authority (TPA), the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), and the Generalized Systems of Preferences (GSP). Given this congested schedule, some analysts have pondered whether different trade programs might be folded into a more unified or omnibus bill, with specific speculation centered on whether AGOA might be combined with efforts to pass the Trade Promotion Authority.
This proposal is controversial, because many believe that AGOA should be evaluated on its own merits. Others contend that it could be an effective approach to combine issues given that the Obama Administration and key members of the Congressional leadership support TPA. However, there are other Members of Congress who oppose TPA and a new movement on the part of a bipartisan group of legislators has also cast serious doubt on the utility of this strategy for AGOA renewal. High-profile members of the US Congress – including Senators Carl Levin (D-MI) and Chuck Schumer (D-NY), among others – have indicated an ardent desire to leverage passage of the TPA as a means to force the US Government to toughen its stance against alleged international currency manipulators. Supporters of a more robust strategy against the perceived trend of currency manipulation have now seemingly pinned their hopes on the TPA, announcing last month concerted efforts to force such provisions into a potential bill. This eventuality will only add to the controversy surrounding the TPA and does not bode well for related efforts to pass AGOA.
Another unresolved issue related to AGOA renewal is whether the legislation will include provisions – as desired by some of the AGOA beneficiaries – to address obstacles to increased trade, including lack of capacity, import restrictions, and the eligibility process for receiving AGOA preferences. A plethora of ideas have been proposed over the years, but it remains to be seen which will resonate at the US Congress. Some have even argued that AGOA should be passed in its original form to avoid controversy and other potential complications. This concern, however, has not stopped analysis on how to improve things. Last month, the release of the Government Accountability Office report on the effectiveness of eligibility provisions for the program, sparked a debate on whether and how inclusion in AGOA should be used to encourage the economic policy reforms that could lead to greater growth. Senior Fellow at the Center for Global Development Ben Leo criticized the GAO report and proposed options to enhance AGOA efforts to incentivize “market-friendly reforms”. Leo’s analysis prompted Brookings scholars Josh Meltzer and Witney Schneidman to publish a piece, arguing that Leo’s recommendations “would have a minimal effect of improving the business environment in Sub-Saharan countries and would reduce the opportunity that AGOA provides countries to grow their economies through trade”. Adding to the dialogue on AGOA enhancements, Josh Meltzer also published a new piece at the end of February focused on how to increase agricultural exports as a part of a renewed AGOA by addressing product eligibility and tariff rate quotas, and tasking the “Department of Agriculture with a specific role in helping AGOA-eligible countries meet US SPS standards”. Brookings Senior Fellow, Mwangi Kimenyi also wrote an article recently that promotes utilization of country export strategies, calls on the US Government to support productivity increases in AGOA-eligible countries and pushes for a different paradigm based on value-added exports in determining the success of AGOA.
Related to the above issues, there continues to be confusion about the resolution of the 15-year long dispute over US poultry exports to South Africa. US exporters contend that US exports of chicken to South Africa have been unable to access the South African market for more than a decade due to anti-dumping measures and health restrictions, while beef exports had been blocked for 12 years and pork exports for two years. South Africa imports almost US $500 million worth of these products from other countries. Meanwhile South Africa has concerns with the US over its own exports of citrus and avocados. Earlier this month a delegation comprising South African Government and poultry industry representatives travelled to Washington in a bid to resolve the impasse. Discussions are ongoing, and it is hoped that a solution will be found in the coming weeks.
In the meantime, Senators Chris Coons (D-DE) and Johnnie Isakson (R-GA) – who represent the USA’s largest chicken-producing states – and have long and passionately advocated for AGOA. However, the poultry issue has complicated their stance. The latest evidence of this unexpected dynamic is the reported position that Isakson and Coons are advocating for a shorter renewal period for AGOA. On February 20, Inside U.S. Trade’s World Trade Report recounted that these Senators are pushing hard for a 5-year renewal, opposing efforts on the part of the Obama Administration to re-authorize the bill for a full 15 years, which would allow for the certainty and stability needed for long-term investment. Repercussions for AGOA apart from a shortened renewal period could also include delaying the introduction of an AGOA bill or eliminating South Africa’s AGOA preferences.
All eyes on Washington
The upcoming weeks will be critical. African countries, civil society and private sector stakeholders from the US and Africa are continuing their strong advocacy for expeditious renewal and working closely together to achieve this. While decisions on enhancements to the legislation continue to be a question and item of discussion, the poultry issue has suddenly become the most urgent item in terms of the renewal timeline because it is unlikely that Members of Congress will allow this point of leverage to be waived without some form of resolution. The progress of the bilateral negotiations between the relevant governments and private sectors on the poultry issue are very much in the spotlight, and it is hoped that this sticking point won’t delay or negatively impact this important trade preference for the continent.
Andrew Westbury is the associate director of the Africa Growth Initiative at Brookings. He has worked for more than 10 years on economic development in Sub-Saharan Africa, serving with small grassroots organizations, large international charities, the US private sector, and the United Nations.
Zenia A. Lewis is a US-Africa Trade and Investment Specialist working with the AfDB in Washington, DC. She has worked extensively on African trade and economic development issues with the AfDB, the Brookings Institution and within the private sector.
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EAC launches programme on Strengthening Institutional Capacities for Industrial Policy Management, Monitoring and Evaluation
The East African Community Secretariat in collaboration with United Nations Industrial Development Organization (UNIDO), on 1 April 2015 launched a programme on Strengthening Institutional Capacities for Industrial Policy Management, Monitoring and Evaluation at Mt. Meru Hotel, in Arusha, Tanzania.
The overall objective of the programme is to contribute to the strengthening of industrial capacities in EAC Partner States by addressing challenges that have constrained effective industrial policy development/generation, policy performance, monitoring and logic of policy hierarchies, at both national and regional level.
The programme is expected to enhanced industrial competitiveness of the region through the evidence-based design and effective implementation of industrial policies and programmes as well as an increased transparency of information on industrial market opportunities for the private sector.
Addressing the participants during the launching ceremony, the Permanent Secretary, Ministry of Industry and Trade, the United Republic of Tanzania, Mr. Eledi Mussa noted that the launching of the programme was timely because all EAC Partner States had adopted some form of a vision which entails the transformation of their economies into middle income and industrialized status.
The Permanent Secretary commended the very good work done by the EAC Secretariat which has culminated into the launching of the programme.
“Your tirelessness efforts are highly appreciated by the EAC Partner States’’
Mr Uledi noted that the region had limited choices and focusing on industrial development was the only optimal option for poverty alleviation and solving the rampant unemployment facing the youth in the region.
He said that the importance of the industrial sector and especially manufacturing in the region as well as in individual Partner States was the ability to increase productivity, generate income, reduce poverty and provide opportunities for social inclusion.
Mr Uledi disclosed that in the EAC Region, the capacity and performance of the public sector that deals with industry related matters is generally low, and as a results, implementation of industry related policies and strategies had in some case been inadequate, constrained by a number of factors, including poor governance and ineffective monitoring and evaluation framework.
Given the complex nature of an industrial development policy implementation process, the capacities of both, the EAC Secretariat as well as the key stakeholders in the Partner States require substantial enhancement and upgrading, remarked the Permanent Secretary.
On her part, the EAC Deputy Secretary General in charge of Productive and Social Sector Hon Jesca Eriyo, said although the region had demonstrated progress in its integration efforts, it still faces immense challenges to upscale growth and therefore achieve middle income status.
She disclosed that in the Common Market Scorecard 2014, published in February 2014, the main challenges include; inadequate institutional, national and regional level capacity to domesticate regional policies; inappropriate legal and regulatory frameworks; low technical standards and capacity; a weak private sector; differences in economic development; weak capacity of implementing agencies; inadequate safeguard measures and dispute settlement mechanisms; and disparities in intra-regional trade.
In her speech read by the EAC Senior Industrial Engineer, Ms Jennifer Gache, she noted that inadequate institutional, national and regional level capacity to domesticate regional policies, was especially notable in the public sector that deals with industry related matters leading to inadequate implementation of industry related policies and strategies.
The EAC Deputy Secretary General noted that the programme will among others equip government and private sector officials with skills and knowledge that will allow for the efficient design, implementation and monitoring of industrial policies and programmes.
The programme will also foster regional integration in the framework of the EAC-Regional Industrial Development Strategy and will take a multi-disciplinary approach involving EAC Secretariat, EAC Partner States and private sector by constituting a Steering Committee which will oversee the implementation of the programme, noted the DSG.
Mr Gerald Runyoro, who represented UNIDO, said the launch of the EAC-UNIDO Programme for Strengthening Institutional Capacities for Industrial Policy in the EAC was meant to mark a fundamental milestone on the path towards the achievement of the main objectives of the EAC Industrialization Policy and Strategy 2012-2032, approved by the East African Community Summit of Heads of State on 30th December 2011.
He said enhancing capacities for industrial policy formulation and implementation, built on solid analytical evidence, was a vital preliminary condition for the achievement of all targets of the EAC Industrialization Policy and Strategy.
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African leaders call for increased ownership and continental integration at the Conference of Ministers in Addis Ababa
Financing transformation, common Africa position, data revolution and private sector funding take centre stage
Prime Minister of Ethiopia, Hailemariam Desalegn and Paul Kagame, President of Rwanda joined Carlos Lopes, Executive Secretary, UN Economic Commission for Africa (ECA), Dr Nkosazana Dlamini-Zuma, Chairperson, AUC, and Mr El Moctar Djay, Minister of Finance, Mauritania in the opening of the Conference of Ministers 2015 at the UN conference centre in Addis Ababa.
There was a strong call for action to the ministers of finance present for policy makers to do more to push for industrialisation. For this they called for more integration, less dependent on others and more ownership of our project. This was in line with the AU’s Agenda 2063 vision and action plan, and a need for a common African position leading up to the third Financing for Development conference, COP21 and the Post-2015 social development goals.
A unified Africa requires urgent collaboration towards regional integration and the political will to make it happen, announced, President Kagame in his keynote address. Highlighting the importance of self reliance and better use of domestic resources, he said, “This gathering is a good starting point if we use it wisely to determine where Africa goes next. There is value in once more reviewing the plans to see why we are not there yet in achieving the consistent results we want. Building new momentum requires that we stop thinking about development as something we do with external resources. We must focus on making better use of what we already have, domestically, in terms of our national and regional markets.” Reiterating the sentiment, P.M Dessalegn said that financing transformative development agenda will require substantial levels of resource. “To do so, it is imperative that available resources are used more effectively and strategically to catalyze additional financing from official and private sectors.”
“Agenda 2063 will require substantial financial resources and we must look into domestic sources to fund this. I am sure that Africa has untapped public and private resources that should be sufficient to meet the needs. If we want to sustain the remarkable economic growth recorded in the Continent over the past decade, increased reliance on domestic resource is absolutely necessary and domestic resource mobilization (DRM) should get the first priority and greater attention in our discussions here and then after.”
Dr Nkosazana Dlamini-Zuma, Chairperson, AUC, called for a skills revolution to make the Agenda 2063 work. She said, “A lot of people say that Agenda 2063 is too ambitious, however, a childhood friend of mine once said that ‘a person who is not ambitious is a danger to society’. Our people are the ones that will drive the agenda, so we need to invest in our people. Africa is rich, but the Africans are poor. We have abundant human, mineral and natural resources and arable land – so why are we poor? We need to shift our focus to STEM areas (e.g. Ethiopia) where the skills revolution has been critical – it is critical to Agenda 2063.”
Meanwhile, Mr. Lopes, Executive Secretary of the ECA, highlighted the need to link industrialization to trade to meet the needs of Agenda 2063: “While the last 15 years have seen relatively high levels of growth driven by a commodity supercycle and strong internal demand from a growing middle class, Africa is still dependent on commodities for most of its export earnings. There is now broad consensus that, without diversified economies, Africa will remain prone to exogenous shocks and trapped in the paradox of high growth rates, coexisting with high levels of unemployment and extreme poverty.”
He revealed, “The key factors constraining trade and industrialization in Africa are related to Africa’s narrow production and export base, which is dominated by lowvalue products such as raw materials and primary commodities. This is compounded by very high trade costs, tariffs and non-tariff barriers to intra-African trade and Africa’s access to international markets. We have no alternative but to increase our share of global exports. While in the 1970s, Africa accounted for 4.99 per cent of world trade and East Asia 2.25 per cent, by 2010, we had regressed to 3.33 per cent, while East Asia had soared to 17.8 per cent. Limited by poor infrastructure and inefficient logistics, lack of adequate skills and quality inputs, insufficient provision of credit and financial services, ours has become a story of lost opportunity. The time has come for us to awake. Africa’s current trade policy plays a major role in our inability to excel.”
The session concluded with a rallying call from President Kagame, where he urged the room to develop a sense of urgency. He said, “We have decided where we want to be on 50 years time. We seem to have everything we need to achieve a Agenda 2063, except a sense of urgency.”
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Curtains down for the 18th COMESA Summit
The 18th Summit of the Authority of the Common Market for Eastern and Southern Africa (COMESA) was held at the African Union Complex, in Addis Ababa, Ethiopia from 30 to 31 March 2015 under the theme “Inclusive and Sustainable Industrialization”.
The new Chairman of the COMESA Authority Prime Minister Hailemariam Desalegn of Ethiopia officially closed the Summit on Tuesday with a call to Member States to rededicate their commitments to regional integration.
The highlight of the closing ceremony was the Final Communiqué issued by the leaders.
The next COMESA Summit will take place in Madagascar in 2016.
Extracts from the Final Communiqué of the Eighteenth Summit of the COMESA Authority of Heads of State and Government
WELCOME STATEMENT
In his welcome address, His Excellency Hailemariam Desalegn, the Prime Minister of the Federal Democratic Republic of Ethiopia welcomed their Excellencies and distinguished delegates to the Federal Democratic Republic of Ethiopia. He reminded them that the city of Addis Ababa had recently hosted the dignitaries who attended the 24th AU Summit that had adopted Agenda 2063; and in that same spirit of Pan-Africanism, they were meeting under the COMESA umbrella to advance regional and continental integration. He invited the guests to explore the various tourist attractions that Ethiopia has to offer, such as the Danakil Depression, Lake Tana; the Blue Nile Falls, Simien Mountains National Park, among others.
He said that the Summit theme of: “Inclusive and Sustainable industrialization” could not have come at a better time because inclusive industrialization is the pillar to sustained economic growth, food security and poverty eradication in Africa. He added that inclusivity prioritizes shared prosperity, increased employment opportunities, particularly in the industrial and agro-industrial sectors, and social cohesion. He emphasised the need for COMESA to promote the use of clean technologies in industrial production; greater resource and energy efficiency. He reiterated the need for the speedy implementation of COMESA’s regional integration programmes, particularly the establishment of a Common Market for Eastern and Southern Africa. He concluded by welcoming the business community to the Summit deliberations; and thanked their Excellencies for choosing Ethiopia as the host for the 18th COMESA Summit of Heads of State and Government.
KEYNOTE ADDRESS
The outgoing Chairperson, His Excellency Joseph Kabila Kabange, President of the Democratic Republic of Congo and outgoing Chairman of the COMESA Authority said that the Summit theme: “Sustainable and Inclusive Industrialization” is timely and appropriate. He said that there should be structural diversification of the economies, to enable the production and export of high value commodities. He said that COMESA provides a vehicle for the region’s collective might to bring about structural changes and make the region an equal partner in the global economy. He said that the slowdown in the growth of emerging economies affected the performance of African economies in general and COMESA economies; and so the average GDP growth for 2014 in COMESA was 5.5 percent which is still below the 7 percent growth that is required to make a dent on poverty.
He noted however, that intra-COMESA trade rose from US $19.2 billion in 2013 to US $22 billion in 2014. With the participation of D R Congo, Ethiopia and Uganda in the COMESA FTA, the region will likely see intra-COMESA trade increase to US $25 billion in 2016. The COMESA-EAC-SADC Tripartite Free Trade Area, supported by the infrastructure and industrial pillars will further mark a turning point in the region’s collective quest to structurally transform its economies through the beneficiation of minerals, and industrialization.
He said that during his term of office COMESA has been able to reduce the cost of doing business through the Regional Payment System, and the harmonization of transport regulations and standards which has facilitated the movement of goods and services. The implementation of the COMESA Virtual Trade Facilitation System (CVFTS), the Yellow Card insurance scheme and the Regional Customs Bond Guarantee System also made it possible for goods and means of transport to move seamlessly among Member States. Further, 14 Member States have so far signed the National CAADAP Compacts and six have accessed funding from the Global Food Security Programme (GFSP) amounting to US $254 million for improved agriculture production. He paid tribute to the COMESA institutions for their continued support to both governments and the private sector. He concluded by saying that in 2014, COMESA Member States issued infrastructure bonds with a total value of US $12.4 billion and this was the right step forward in facilitating the critically needed infrastructure in the region. He extended best wished to His Excellency Ato Hailemariam Desalgn, Prime Minister of the Federal Democratic Republic of Ethiopia and pledged his full country’s support to the Chairmanship of Ethiopia.
AFTER THE FORMAL OPENING OF THE SUMMIT, THE AUTHORITY:
ON THE COMESA FREE TRADE AREA (FTA)
NOTED WITH SATISFACTION that intra-COMESA trade had increased to US $ 22.4 billion by the end of 2014, signifying a recovery from 2009 when intra-COMESA trade was US $12.7 billion due to the global financial crisis and economic recession;
COMMENDED Uganda for beginning to implement the COMESA FTA and depositing its Accession Instrument to the COMESA Secretariat and URGED Uganda to prepare and present its proposed schedule for the phasing out of the sensitive products;
COMMENDED the Democratic Republic of Congo on the Commitment to join the COMESA FTA and NOTED with appreciation the progress being made in the ongoing legislative process to pass the necessary legal instruments for accession to the COMESA FTA;
URGED the Democratic Republic of Congo (DRC) to finalize the ongoing legislative process on accession to the COMESA FTA and deposit accession instruments with the COMESA Secretariat;
COMMENDED the Federal Democratic Republic of Ethiopia on its commitment to join the COMESA Free Trade Area and URGED the Federal Democratic Republic of Ethiopia to expedite ongoing internal consultations and finalize instruments of accession to the COMESA Free Trade Area and deposit them with the COMESA Secretariat;
NOTED with appreciation the State of Eritrea’s commitment to joining the COMESA Free Trade Area and URGED the State of Eritrea to expedite its process of joining the COMESA Free Trade Area
NOTED with appreciation progress in the application of the Tripartite online reporting and monitoring mechanism in the elimination of all Non-Tariff Barriers constraining intra-regional trade and CALLED upon COMESA Member States to continue using the online mechanism in the expeditious elimination of outstanding Non-Tariff Barriers;
URGED COMESA Member States to continue Consolidating the COMESA Free Trade Area by removing all Non-Tariff Barriers (NTBs) using the Tripartite Online Reporting and Monitoring Mechanism.
ON THE APPLICATION OF SAFEGUARDS FOR THE KENYA SUGAR INDUSTRY
ENDORSED the Council decision for the Kenya sugar sector to be given a one year extension of the existing safeguard subject to review and renewal for another one year;
Further ENDORSED the Council decision on establishing an Ad Hoc Technical Working Committee to be convened not later than 30 June 2015 to consider the draft formula for proposed allocation of export sugar quotas into the Kenya sugar market; and the draft criteria for determining that an industry to be infant in COMESA.
ON THE COMESA CUSTOMS UNION
RE-AFFIRMED the application of the principle of variable geometry to the implementation of the Customs Union in line with previous decisions; and
NOTED with appreciation the inauguration of the Heads of Customs Sub-committee to address issues in relation to the implementation of the Customs Union.
ON THE TRIPARTITE FREE TRADE AREA (FTA)
WELCOMED with appreciation the progress made towards the finalization and launching of the COMESA-EAC-SADC-Tripartite Free Trade Area Agreement;
COMMENDED the Arab Republic of Egypt for accepting to host the Tripartite Summit on 10 June 2015.
ON TRADE IN SERVICES
URGED Member States that have not submitted their revised schedules of specific commitments in the four priority sectors of transport, communications, financial and tourism should do so by 30 June 2015; and ensure that the commitments add value and are therefore WTO plus;
URGED the Secretariat should circulate the submitted finalised Schedules to all Member States by 30 April 2015.
ON MICRO SMALL AND MEDIUM ENTERPRISES
RECOGNISED the progress made under the 2013/14 theme of: “Consolidating Intra-COMESA trade through MSME development”, and CALLED upon the Secretariat to facilitate Small and Medium Enterprises from the region to access existing regional and continental financial arrangements;
URGED COMESA Member States that do not have updated Medium and Small Enterprises (MSME) policies and strategies to domesticate the COMESA MSME Policy.
ON INDUSTRIALIZATION OF THE COMESA REGION
RECOGNISED the importance of the 2015 theme of “Inclusive and Sustainable Industrialisation,” and UNDERSCORED the importance of the COMESA Industrialization Policy for the economic transformation and sustainable development of the region;
ENDORSED the Council Decision on the adoption of the COMESA Industrialization Policy and urged Member States to domesticate the Policy;
DIRECTED the Secretariat to prepare the implementation strategic plan of the COMESA Industrialization Policy for consideration by Member states by 30 September 2015;
WELCOMED the offer by UNIDO to work with COMESA in the implementation of the COMESA Industrialisation Policy.
ON AGRICULTURE DEVELOPMENT
NOTED that agriculture is the mainstay of the region’s industrial development, and DIRECTED the Secretariat to implement the CAADP Regional Compact and related investment Framework, and to complete the design of the Regional Livestock Policy;
URGED Member States to mainstream the Malabo Declaration (2014) Implementation Strategy and Roadmap in their existing National Agriculture Policies, Strategies and Programmes;
DIRECTED the Secretariat through its specialized institution ACTESA, to speed up the implementation of the Fertilizer Marketing and Distribution Programme in the Member States;
FURTHER DIRECTED the Secretariat to mobilize resources to support the establishment of the Centre of Excellence for Dry Lands by 2016, in Djibouti.
ON CO-OPERATION WITH OTHER REGIONAL ECONOMIC COMMUNITIES
NOTED WITH APPRECIATION the continued collaboration between COMESA and the other regional economic communities in Africa, particularly, within the frameworks of the ESA-IOC made up of COMESA, EAC, IGAD, IOC and SADC and the COMESA-EAC-SADC Tripartite arrangement;
URGED for the strengthening of this co-operation with a focus on harmonization and coordination of programmes for the mutual benefit of Member States.
ON MULTILATERAL AND OTHER TRADE NEGOTIATIONS
NOTED the importance of co-operation among Member States in the manufacturing of essential drugs as well as the entry of force on the Amendment of TRIPS Agreement on compulsory licencing for medicine;
FURTHER noted with concern the low number of COMESA Member States that have accepted the Protocol amending the WTO TRIPS Agreement and notified the same to the WTO;
URGED COMESA Member States that have not yet accepted the Protocol amending the WTO TRIPS Agreement to do so as soon as possible and notify the WTO Secretariat by December 2015 after which date the acceptance shall be invalid;
CALLED UPON COMESA Member States to promote and invest in strategic programmes aimed at improving access, manufacture and distribution of anti-retroviral and other drugs and medical commodities as a sustainable step towards ending major epidemics (AIDS, TB and Malaria) and as an untapped economic opportunity in the region and continent.
ON ECONOMIC PARTNERSHIP AGREEMENT NEGOTIATIONS BETWEEN ESA-EPA GROUP AND EU
REITERATED the commitment of ESA-EPA Group of countries to conclude a development friendly and inclusive EPA with EU that enhances their competitiveness, economic transformation and supports regional integration;
EXPRESSED concern over the lack of progress made in the full ESA-EU EPA negotiations over the past four years and specifically the conditions set by the EU Party for resumption of the full EPA negotiations;
URGED all ESA-EPA countries to prepare market access offers based on their collective national and regional development objectives and directed the ESA Council to engage the EU to revive full and inclusive EPA negotiations that adequately respond to key development and regional integration needs of ESA countries.
ON COMESA AID FOR TRADE
APPRECIATED the substantial support from the European Union for the COMESA Adjustment Facility (CAF) of the COMESA Fund; and
DIRECTED the Secretariat to finalize the CAF sustainability strategy and present it to the next meeting of the COMESA Fund Ministerial Committee for consideration.
ON INFRASTRUCTURE DEVELOPMENT
APPRECIATED the US $15 million contribution by the PTA Bank towards the capitalisation of the COMESA Infrastructure Fund;
COMMENDED Member States that have used innovative means of financing infrastructure and energy projects, among others through infrastructure bonds and Diaspora bonds;
COMMENDED the European Union and the German Development Bank (KFW) for the financial support towards the development of cross-border infrastructure projects;
NOTED with appreciation the implementation of the cross border infrastructure projects along the corridors and ENDORSED the Council decisions on establishing the Djibouti Corridor Authority and the implementation of One Stop Border Post along the corridor;
URGED Member States to implement the transport transit instruments such as axle loads, carrier license and harmonized road user charges;
UNDERSCORED the importance of having safe and secure cyber space and URGED Member States to implement the cyber security policy and legal framework, and participate in the COMESA High Level Cyber Security Forum;
ENDORSED the adoption of the renewable energy guidelines on Feed-in-Tariffs, Power Purchase Agreement, Public-Private Partnership and project joint developments to stimulate investment and increase power generation;
COMMENDED the Central Banks of Burundi, Egypt and Sudan for scheduling to start live operations by 30 June 2015;
URGED Central Banks that have not yet signed the various agreements pertaining to REPSS and its operations and met the prerequisites for joining the system to do so by December 2015;
URGED Member States and their respective Central Banks to sensitise their stakeholders on the utilisation of the Regional Payment and Settlement System for the benefit of the entire region, particularly through their respective Commercial Banks Associations/Unions, Chambers of Commerce and Industry, Exporters & Importers Associations;
URGED Member States, pursuant to Article 73 of the Treaty, to use the COMESA Clearing House in order to generate resources for the COMESA Fund which will be used to leverage funding from cooperating partners for the sustainable funding of COMESA programmes.
ON INNOVATIVE MEANS OF FINANCING
URGED the Secretariat in collaboration with COMESA Institutions to come up with proposals for innovative means of financing for COMESA institutions and Member States.
DONE Addis Ababa, Ethiopia ON THE THIRTY FIRST DAY OF MARCH, 2015 in the Arabic, English and French languages, and all texts being equally authentic.
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Namibia: Budget Statement 2015
Extracts from the 2015 Budget for the Republic of Namibia, tabled by Finance Minister Calle Schlettwein on Tuesday, 31 March 2015.
ACCOUNTABLE GOVERNANCE – RESULTS-BASED MANAGEMENT
Barely a week ago, on the 21st of March 2015, our country and people celebrated twenty-five years of independence, borne out of decades of protracted struggle and selfless sacrifices for the liberty and prosperity for all Namibians.
Our country has been able to make notable progress and register key achievements, which include:
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The expansion of the economy by a factor of 15 since 1990, from N$8.3 billion to N$126.6 billion by 2013, with the corresponding income per capita having increased more than 10 times, from N$5,500 to N$58,300, thus propelling Namibia into the league of upper middle-income economies by global comparison;
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improved access to education, health facilities and basic amenities;
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reduction in relative poverty from 38 percent in 1993/94 to 20 percent by 2009/10 and pushing back extreme poverty from 9 percent to 2.0 percent over the same period;
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an impeccable record of democratic governance, peace and stability epitomized by our outgoing President, the indefatigable His Excellency Hifikepunye Pohamba, having been bestowed the 2015 Mo Ibrahim Award for excellence in African Leadership;
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upholding of macroeconomic stability and fiscal prudence, which enhanced the competitiveness of our economy and the capacity of the State to expand the provision of public services to all our people; and
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in spite of the difficult adjustment period stemming from the effects of the global financial crisis, Namibia was able to have its investment grade sovereign credit ratings by Moody’s and Fitch reaffirmed as stable.
WHAT DOES THIS BUDGET OFFER?
The budget and the Medium-term Expenditure Framework I am tabling today are aimed at tackling the structural challenges that affect the development potential of our economy, unlocking opportunities for jobs and wealth creation and improving the welfare of Namibians in an inclusive and sustainable manner. It is a pro-poor, pro-growth budget, with deliberate scaled-up resource allocations to the targeted programmes for broad-based economic growth, job creation and poverty eradication over time.
To bring about better results in these focal areas of social and economic transformation, we need to depart from a business as usual mindset by making measurable efforts to hold Offices, Ministries and Agencies entrusted with programme execution accountable for their action or inaction. We have to move in top gear in our journey to Vision 2030.
In particular, we need to make bold decisions and commence with targeted policies to transform and diversify the economy, alongside a package of strategic interventions to amplify the policy impacts in the targeted areas.
POLICY PRIORITIES FOR THE MTEF
His Excellency President Hage Geingob’s administration came into office on the basis of a strong foundation laid over the past twenty-five years. As a matter of policy priorities, this administration will seize the opportunity to address the socio-economic challenges expeditiously.
By and large, Namibia’s economic growth so far has been positive and moderately high, but it largely remained jobless, with unemployment perpetually high, and now standing at 28.1 percent. A key challenge that we face is the narrow production base with growth being concentrated largely on the production and export of raw materials and commodities on one hand, and a high import bill on the other hand. This state of affairs limits the job creation potential, continually drives our trade balance deeper into deficit, exerts pressure on the stock of international reserves and renders the economy highly vulnerable to external shocks.
Thus, the first priority in this budget and MTEF is to bring about an inclusive growth agenda for our country by:
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diversifying and industrializing the economy, through targeted budgetary allocations to the priority economic sectors with high economic growth and job creation potential,
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continuous development of functional and technical skills through increased access to tertiary education and vocational training,
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developing and supporting domestic and regional value chains in the areas of comparative and competitive advantage,
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crowding-in the much needed investment through private sector and SME support programmes as well as harnessing PPPs,
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enhancing greater access to development finance through the operations of domestic Development Finance Institutions and tailormade commercial credit offerings, and
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leveraging PPPs for infrastructure development and public service delivery.
Although we have, undoubtedly, made a remarkable dent in poverty, deep pockets of poverty and vulnerabilities still remain.
Thus, the second priority for this budget and MTEF is to reduce poverty and improve social welfare. A sustainable and long-term strategy to address poverty is the provision of opportunities for income generation as well as promoting the creation of decent jobs. This will be achieved through:
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strengthening social safety nets in coverage and quantum as the first line of defence against poverty for the vulnerable members of our society,
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supporting the creation of decent jobs and self-employment opportunities in the private sector,
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implementing policies that promote local access to, and ownership of the resources, and nurturing the capacity to exploit the resources profitably,
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developing social security networks that are sustainable and meaningful, and
-
designing and implementing redistributive tax policies that are pro-poor and pro-growth
The interconnectedness across the skills deficit, joblessness, poverty, income inequalities and skewed ownership levels, pose an unyielding barrier to wealth creation for the majority of Namibians. We need to recognize that there is no silver bullet to address these challenges. A package of policies and instruments is needed to break this barrier over time.
The third priority for the budget and MTEF is, therefore, the achievement of prosperity and wealth creation through:
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empowering Namibians in a manner that creates sustainable and broadbased wealth creation,
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promoting affordable and sustainable access to finance and means of production, while maintaining responsible lending,
-
developing facilities to support SME access to finance and mentorship programmes,
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increasing the share of local ownership and value share in the value chains across various industrial and service-oriented activities,
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encouraging wealth accumulation and prudent management, and
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expanding the provision of basic amenities to all Namibians.
Lastly, a performance-oriented and results-based work culture needs to be strengthened in the realm of public service delivery to ensure accelerated service delivery, accountability and value for money. Hence, the fourth priority is to:
-
improve service delivery by strengthening internal efficiency of the public service sector through performance measures and accountability;
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continuous skills development, and
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reform of public enterprises to ensure affordable, competitive, reliable and sustainable service delivery.
The extent to which we can address these priorities today depends on the multiplicity of internal and external factors impacting on our growth potential, the revenue generation capacity of our economy and the measures that we can deploy to address these constraints. Allow me, therefore, to highlight the economic context and constraints under which this budget and MTEF will be executed.
GLOBAL AND REGIONAL ECONOMIC AND FINANCIAL CONTEXT
The global economy is projected to grow, but at a weaker pace of 3.5 percent in 2015 and marginally improving to 3.6 percent in 2016. With the exception of the United States of America, the growth outlook is weaker for other major economies, such as the Euro zone, China and Japan.
The Sub-Saharan African region is also not spared, with growth projected to remain relatively flat at 5 percent over the MTEF.
Closer to home, the South African economy, which is closely linked to Namibia through strong trade and financial ties, is projected to remain subdued, having only registered an estimated 1.4 percent growth in 2014 and projected to grow by an average of 2.5 over the MTEF, mainly due to the effects of electricity supply shortages.
The prolonged low growth spell for the South African economy poses inescapable consequences for Namibia, particularly in regard to export growth and revenue accruing from the Southern African Customs Union (SACU).
DEVELOPMENTS IN THE DOMESTIC ECONOMY
With regard to developments in the domestic economy, growth is estimated at 6.2 percent in 2014, an acceleration from the growth rate of 5.1 percent recorded in 2013.
Growth in 2014 was anchored by the strong expansion of output in secondary industries, on the back of a booming construction activity and the recovery in the primary industry sector as well as associated increased investment in the mining sector, a strong surge in the retail sector and strong public consumption expenditure. Looking ahead, a stronger economic expansion could benefit from increased value chain developments in agriculture, agro processing, minerals beneficiation and stronger output from the services sector.
The Overall Balance of Payments recorded a deficit of N$1.8 billion, from a surplus of N$598 million in 2013, mainly as a result of a widening current account deficit. The current account continued to register a deficit as a result of strong inflows of imports over exports, which further puts pressure on the stock of foreign reserves, although the stock remains sufficient to support the currency peg. On the other hand, the capital and financial account recorded an increased surplus, primarily due to large net capital inflows from other long-term investment, albeit not enough to offset the deteriorated current account deficit. These inflows were due to increased borrowings by the private sector, especially in the mining sector.
Regional economic integration
In terms of the regional integration agenda, progress remains stalled regarding the current SACU revenue sharing and institutional arrangements.
Namibia believes in the relevance of SACU as the engine of regional integration and industrialization. We believe that SACU revenues are currently broadly shared in a manner that reflects the realities of the SACU economies and the proportional benefits accruing from the market share of the Member States in the Customs Union.
Regarding the drag on the SACU Revenue Sharing Formula and the perceived dependence on SACU receipts, our stance is that revenue matters cannot be seen in isolation. Associated trade and balance of payment benefits, rebates, duty drawdowns and industrial/agricultural development policies must be considered as well. A more balanced view on the revenue sharing formula through which all Member States of SACU can grow should, therefore, be our aim.
In regard to SADC, the Tripartite Free Trade Agreement between and among the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and the Southern African Development Community (SADC) is envisaged for launching in June this year. This promises for a larger market of some 625 million people and representing about 58 percent of the continent’s GDP. However, to optimise trading opportunities, Namibia needs to significantly improve her productive capacity and avoid the trap of becoming a captive market for those countries with an ability to trade in finished goods.
THE MEDIUM-TERM ECONOMIC OUTLOOK
Over the medium-term, our economy is projected to grow above global averages, but the growth rates are expected to be moderate in line with global trends. GDP is estimated to have grown by 6.2 percent in 2014 and it is projected to moderate to 5.7 percent in 2015 and average at slightly above 5.0 percent over the MTEF.
Revenue for the budget year is projected at N$58.44 billion, an increase of 8.7 percent over the previous year. For the MTEF, revenue is projected to increase at a moderate pace of about 9.0 percent, to reach N$69.18 billion by the end of the MTEF or about 35.0 percent of GDP.
The major drag and significant risk for revenue growth is the projected reduction of SACU revenues, on account of lower growth outlook for the South African economy and clouded by the uncertainty regarding the pending negotiations on SACU institutional and Revenue Sharing Formula arrangements. Going forward, Namibia remains open for dialogue and reiterates the need for constructive engagements on this matter, which should be seen in the wider context than mere revenue sharing.
The FY2015/16 Budget and Expenditure Outlook for the MTEF
The budget that I table before this house, proposes an expenditure outlay of N$67.08 billion for the 2015/16 financial year, equating to 40.8 percent of GDP. This represents 7.0 percent nominal increase over the past year, a much moderate expansion rate, compared to 27.7 percent over the previous year. For the MTEF, total expenditure is forecast to moderately increase to N$72.06 billion by 2017/18 and average 39.0 percent of GDP.
Total non-interest expenditure for 2015/16 will increase to N$63.23 billion, from N$57.69 billion in 2014/15, and average around N$65.56 billion over the MTEF.
Interest payments, which represents Government obligations to debt servicing is estimated at N$3.87 billion in FY2015/16 or some 6.6 percent of revenue, seen against the limit of 10 percent of revenue.
Non-interest operational expenditure for the budget year is set at N$52.12 billion or 31.7 percent of GDP, representing a 3.0 percent nominal increase over the previous financial year, due to expenditure commitments arising from public sector remuneration corrections as well as adjustments to the Government structure.
The development budget, which is key to infrastructure development and fiscal countercyclicality is proposed to increase at a much higher rate of 15.9 percent to N$11.10 billion in the budget year and average around N$12.05 billion over the MTEF. As a portion of GDP, the development budget allocation increases from 6.4 percent in 2014/15 to 6.7 percent in 2015/16 and averages around this level over the MTEF.
In addition to the development budget allocation, budgetary allocations are made under the operational budget for targeted transfers to State-owned Enterprises for investment in strategic infrastructure projects such as the Kudu
Gas-to-Power project, railway and road network rehabilitation, Walvis Bay Port expansion and the Mass Housing flagship projects.
Going forward, Government must seek a better alignment of the development budget to our economic priorities, industrialization policy and our Growth at Home Strategy. This alignment would further be optimized through leveraging local sourcing requirements, PPPs, improved Namibian ownership and the development of value chains across the development initiatives.
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South Africa trade gap narrows as oil imports decline
South Africa’s trade deficit narrowed in February as oil imports fell and gold and diamond exports increased.
The trade gap shrank to 8.5 billion rand ($700 million) from a record 24.2 billion rand in January, the Pretoria-based Revenue Service said in an e-mailed statement on Tuesday. The median estimate of 17 economists surveyed by Bloomberg was for a shortfall of 5.7 billion rand. The deficit for the first two months of the year was 32.7 billion rand compared with 15.5 billion rand in 2014.
The volume of oil imports fell 22 percent in February as the price of Brent crude started to recover from an almost six-year low on Jan. 13. Importers such as Eskom Holdings SOC Ltd. used the record-low oil costs to step up their purchases. The utility, which generates about 95 percent of South Africa’s power, is burning more diesel as it struggles to meet demand.
“For the rest of 2015 we expect exports to recover and that should help us to record a lower trade deficit,” Isaac Matshego, an economist at Nedbank Group Ltd., said by phone from Johannesburg. “All of this depends on the avoidance of major production disruptions.”
The gap on the current account, the broadest measure of trade in goods and services, averaged 5.4 percent of gross domestic product in 2014 and will narrow to 4.5 percent this year, according to the National Treasury. A current-account deficit of close to 5 percent of GDP puts pressure on the rand, Jeffrey Schultz, an economist at BNP Paribas Cadiz Securities in Johannesburg, said by phone.
The rand declined 0.4 percent and to 12.1979 per dollar as of 2:49 p.m. in Johannesburg. Yields on government rand bonds due December 2026 fell six basis points to 7.89 percent.
Exports Climb
Exports rose 15 percent to 76.9 billion rand in February as shipments of vehicles and transport equipment surged 74 percent and sales of precious metals and stones increased 30 percent. Shipments of mineral products, which include coal and iron ore, fell by 1.9 billion rand, or 11 percent.
Imports fell 6.5 percent to 85.3 billion rand as purchases of mineral products, which include oil, dropped 23 percent. Machinery and electronics purchases declined by 2.4 billion rand, or 11 percent.
The monthly trade figures are often volatile, reflecting the timing of shipments of commodities such as oil and diamonds.
SA Trade Statistics for February 2015 (SARS): Highlights
The R8.48 billion deficit for February 2015 is due to exports of R76.85 billion and imports of R85.33 billion. Exports increased from January 2015 to February 2015 by R9.78 billion (14.6%) and imports decreased from January 2015 to February 2015 by R5.96 billion (6.5%). The cumulative deficit for 2015 is R32.70 billion compared to R15.49 billion in 2014.
The trade data excluding BLNS for February 2015 recorded a trade deficit of R16.85 billion. This is a result of exports of R66.05 billion and imports of R82.90 billion. Exports increased from January 2015 to February 2015 by R8.33 billion (14.4%) and imports decreased from January 2015 to February 2015 by R6.13 billion (6.9%). The cumulative deficit for 2015 is R48.16 billion compared to R31.04 billion in 2014.
Trade statistics with the BLNS for February 2015 recorded a trade surplus of R8.37 billion. This is a result of exports of R10.79 billion and imports of R2.43 billion. Exports increased from January 2015 to February 2015 by R1.46 billion (15.6%) and imports increased from January 2015 to February 2015 by R0.17 billion (7.7%). The cumulative surplus for 2015 is R15.46 billion compared to R15.56 billion in 2014.
Trade highlights by category
The month-on-month export movements:
R’ million
|
|
|
Section:
|
Including BLNS:
|
|
Vehicle & Transport Equipment
|
+ R 4 634
|
+ 74.4%
|
Precious Metals & Stones
|
+ R 2 897
|
+ 30.4%
|
Machinery & Electronics
|
+ R 1 204
|
+ 19.4%
|
Base Metals
|
+ R 731
|
+ 7.9%
|
Mineral Products
|
- R 1 932
|
-10.6%
|
R’ million
|
|
|
Section:
|
Including BLNS:
|
|
Mineral Products
|
- R 4 236
|
- 22.5%
|
Machinery & Electronics
|
- R 2 417
|
- 11.1%
|
Vehicle & Transport Equipment
|
- R 1 252
|
- 12.5%
|
Plastics & Rubber
|
- R 875
|
- 21.5%
|
Vegetable Products
|
+ R 1 323
|
+ 98.8%
|
Trade highlights by world zone
The world zone results for February 2015 are given below.
Africa:
Exports: R23 121 million – this is an increase of R3 135 million from January 2015
Imports: R11 572 million – this is a decrease of R454 million from January 2015
Trade surplus: R11 549 million.
This is a 45.1% increase in comparison to the R7 960 million surplus recorded in January 2015
America:
Exports: R7 576 million – this is an increase of R744 million from January 2015
Imports: R9 438 million – this is a decrease of R394 million from January 2015
Trade deficit: R1 861 million
This is a 37.9% decrease in comparison to the R2 999 million deficit recorded in January 2015
Asia:
Exports: R22 828 million – this is an increase of R2 849 million from January 2015
Imports: R38 350 million – this is a decrease of R3 080 million from January 2015
Trade deficit: R15 522 million
This is a 27.6% decrease in comparison to the R21 451 million deficit recorded in January 2015
Europe:
Exports: R18 307 million – this is an increase of R2 002 million from January 2015
Imports: R24 083 million – this is a decrease of R2 403 million from January 2015
Trade deficit: R5 775 million
This is a 43.3% decrease in comparison to the R10 180 million deficit recorded in January 2015
Oceania:
Exports: R 803 million – this is a decrease of R 62 million from January 2015
Imports: R1 709 million – this is an increase of R 351 million from January 2015
Trade deficit: R 906 million
This is an 83.7% increase comparison to the R 493 million deficit recorded in January 2015
» For further information, visit the SARS website.
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Agoa: US lawmakers up the ante
The United States has ratcheted up its bid for South Africa to grant access to US poultry products, with 13 US Senators writing to Trade and Industry Minister Rob Davies this week to urge him to push for talks to resolve a dispute threatening Pretoria’s participation in a key trade scheme known as the African Growth and Opportunity Act (Agoa).
Agoa must be renewed ahead of its September expiration date. In a letter, also addressed to ambassador Faizel Ismail, South Africa’s special envoy for Agoa, the 13 US legislators said they were concerned that the SA Poultry Association (Sapa), which represents the local industry, was “drawing a hard line on its most recent offer to the US industry and may not be willing to continue negotiations in good faith”.
“We urge you to continue to work with Sapa and encourage its leaders to not shut the door on negotiations,” the Senators said to Davies.
While the letter from the Senators stopped short of saying that South Africa risked being left out of Agoa, it reiterated the course of action sought from South Africa.
“We share your optimism that a fair agreement can be reached,” they wrote to Davies.
Chickens or cars?
The signatories to the letter include US Senator Chris Coons of Delaware, a Democrat, and his Republican counterpart Johnny Isakson from Georgia. The letter echoes what Coons told Business Report in an interview about a week ago.
Coons and Isakson have been vocal in their push for wanting South Africa to scrap the duties on US poultry products or risk being kicked out of Agoa, a preferential trade scheme that allows duty-free access into the US of various South African exports, including cars, wine, citrus and textiles.
In the interview with Business Report Coons had warned that the opportunity to salvage South Africa’s participation in the trade scheme was fading fast, and called on Sapa and its US counterpart, the USA Poultry and Egg Export Council to urgently begin formal negotiations. The letter to Davies, dated March 30, also contains the same plea.
The 13 Senators said the work to resolve the dispute “needs to be done urgently”.
Through Agoa, South Africa has been able to derive preferential access to the US market for its products.
Barring the country from Agoa could cost Pretoria as much as $2.5 billion (R30bn) in Agoa benefits and put thousands of jobs in jeopardy.
While President Barack Obama’s administration supports Agoa’s renewal, the decision will be made by Congress. Some US business interests and legislators have demanded that South Africa be “graduated” because it is an upper middle-income country and because they say it is discriminating against US poultry imports.
Nearly three weeks ago, a delegation from South Africa, including representatives from the government and the South African poultry industry went to Washington as part of the efforts to try to resolve the impasse.
In the letter, the Senators said while preliminary offers were made between the two industries, there had been little progress to reach a solution and formal negotiations had yet to take place.
Efforts to get comment from Davies’s office were unsuccessful yesterday.
But Sapa, whose critics have accused it of holding South Africa hostage to the whims of the poultry barons by standing firm, said that the inclusion of a 15-year-old dispute in Agoa renewal was an attempt by the Americans to bypass the mechanism for resolving trade disputes, “in this case a dispute relating to the dumping of chicken, specifically bone-in portions, into the South African market”.
SA poultry
In a response to Business Report, Sapa chief executive Kevin Lovell said: “That the application of these duties has never been challenged by the US in the courts or at the World Trade Organisation – the correct forum for this kind of remedy – speaks for itself.”
Lovell said Sapa was mindful that Agoa offered opportunities for South Africa to develop new trade ties and deepen existing ones, and had supported the renewal process since early last year, “even though it is to our own detriment”.
“The Americans have a natural advantage over us as they source maize and soya at lower prices than we can. Now they want an unfair advantage as well,” said Lovell yesterday, referring to the two critical inputs for raising poultry.
Last week, Lovell had told Business Report that the US demands were tantamount to asking South Africa to shrink its economy. “For as long as the Americans dump we will defend our right to be protected from unfair trade.”
He said the US approach thus far was akin to asking South Africa to make a choice “as to how we would like to shrink our economy – chicken or cars”.
According to Lovell it was not true that US poultry products were shut off from the South African market.
“The anti-dumping duties apply to only one tariff line, so the rest of the poultry import market (about 250 000 tons per annum) is freely available to them and the part for which the anti-dumping duties apply (about 150 000 tons) is also available as the principle of an anti-dumping duty is that it is corrective, not punitive – for example, it levels the playing field so that the two parties can compete equally and fairly.”
Urgent summit
Even so, David Wolpert, the chief executive of Association of Meat Importers and Exporters of SA, said it was high time for Davies to call an urgent summit of all interested affected parties to resolve “this completely avoidable crisis”.
“We simply cannot have SA poultry magnates holding the tens of thousands of South African jobs that Agoa creates to ransom,” said Wolpert.
“The South African Poultry Association continues to use nonsensical arguments in defending anti-dumping duties on US chicken.
“Sapa contends that dropping anti-dumping measures would have devastating effects on the South African economy. This is simply not true. When dumping duties are dropped on US bone-in chicken, all that will change is the source of our imported chicken and not the quantity of chicken imported.
“The big loser in the maintenance of dumping duties is the consumer.”
South African poultry, Wolpert said, was acting in their own self-interest, with no regard for the consequences.
“Surely it is time for the Minister to do what is right for South Africa as a whole?”