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Growing middle-class leading consumption drive in rapid-growth markets
Growing middle-class leading consumption drive in rapid-growth markets
Across the rapid-growth markets there will be nearly 200 million middle-class households by 2022 up from 94 million in 2012, according to EY’s latest Rapid-growth markets forecast (RGMF) released today [6 March 2014]. With the growing middle class buying a wider range of consumer products and services rapid-growth markets (RGMs) will increasingly look to their own markets to drive demand. Over the medium-term, RGMs still hold many winning cards.
As the number of middle class households increases, demand for health and education services is likely to expand significantly, also adding to the skills of the workforce. Spending on services such as communications, culture and recreation will grow at almost twice the pace of spending on food.
As a whole, RGMs are set to recover over the course of this year with 4.7% growth expected for 2014 and over 5% in 2015 but the risk of capital flight and a sharp slowdown has increased. According to the forecast renewed capital flight could lead to RGM growth falling closer to 3% by 2015, with global repercussions.
While growth is expected to remain steady, over the course of the next two years, more divergences are expected in terms of growth among the RGMs. Those in the Americas are struggling to regain momentum, while steady growth in China boosts Asia’s RGMs. With industrial production surprisingly strong in Poland and the Czech Republic, emerging Europe is gaining strength, looking to the West, particularly as Germany leads the Eurozone out of recession.
Looking at South Africa in the longer term
In the South Africa (SA) context, GDP growth rates remain below the global RGM trend at an expected growth rate of 2.7% for 2014 and 3.2 % in 2015. This does still mean, however, that SA will be growing faster than most advanced economies as well as several prominent RGM’s, notably Brazil and Russia.
Michael Lalor, Africa Business Center Leader at EY Africa says, “The consistent message coming through from the South African government as a whole is focus on implementing the National Development Plan (NDP). The emphasis that was given by Minister Pravin Gordhan in his annual Budget Speech around the focus of the NDP is therefore very encouraging. The extent to which government is able to make this shift successfully, with active support from the private sector and civil society, will determine which of the diverging RGM growth paths South Africa follows.”
Risks to the forecast
As jitters return to financial markets, some RGMs are still vulnerable. Heightened political risks or weak economic growth could trigger a wave of risk aversion, leading to changes in portfolio allocations away from rapid-growth markets’ assets. This could lead to capital flight which would impact several RGM’s are dependent on portfolio flows to fund their current account deficit. In this capital flight scenario, higher inflation, interest rates and debt payments would amplify the downturn. Along with falls in share and house prices, this would lower potential growth across most RGMs.
In this scenario, GDP growth in rapid-growth markets would fall to 3.7% and 2.8% in 2014 and 2015 respectively. This would in turn have a significant impact on growth in the advanced economies.
Indeed, a new term – the ‘Fragile Five’ – has been coined to describe the five economies supposedly most vulnerable to this scenario: India, Brazil, Turkey, Indonesia and SA.
However, the heatmap contained in the report provides a broader perspective on financial vulnerability, comparing RGMs across seven relevant factors. As may be expected, SA ranks lower on the current account deficit and currency volatility. However, on other factors, including government debt levels, the rankings are more moderate. In terms of average growth of credit markets as a share of GDP, SA is ranked the best in the world, reflecting the relative maturity of our financial system and credit markets. Overall, SA ranks ahead of ten of the other twenty four RGM’s we analyse, including India, Brazil, Turkey, and Indonesia, as well as the likes of Argentina, Vietnam and Poland.
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The continent of opportunities
Healthy ties and improved infrastructure make the African continent ripe and right for Indian industry
The African continent today represents new horizons and opportunities for Indian industry, in light of rising per capita incomes, new infrastructure and connectivity networks, and the expanding reach of technology.
The economy is expected to expand from a GDP of $2 trillion to $2.6 trillion by 2020, with a consumer base amounting to $1.4 trillion. The pace of growth is forecast at around 6 per cent annually for the next decade, bolstered by young demographics. Sub-Saharan Africa is projected to be home to one-fourth of the world’s population under the age of 25 by the end of this decade.
The IMF expects GDP growth to accelerate to 6.5 in 2014, driven by robust commodity prices, inflow of foreign capital, and domestic consumption and infrastructure spending. The continent has also benefited from a strong commitment by African governments to structural reforms and prudent macroeconomic policies. Roads, bridges, airports and other facilities are being built through pan-African institutions with a strategic vision for integration.
Strong links
India is fortunate to have a strong and close friendship with countries of the African continent based on shared historical experiences. India has always demonstrated strong optimism regarding the potential of the African continent and has seen itself as a significant stakeholder in its progress.
The Indian government has taken several initiatives over the recent past to strengthen the bilateral engagement, instituting platforms for dialogue and cooperation such as the Pan-African e-Network, the Focus Africa programme, and the India-Brazil-South Africa process. The India-Africa forum summits have imparted further impetus to this endeavour. The CII-Exim Bank India-Africa partnership conclave series, started in 2005, has facilitated project cooperation through its nine editions, the last of which brought together almost 900 delegates to discuss project proposals worth close to $70 billion.
India’s economic engagement with Africa goes beyond trade and investment to extend to innovative domains such as alternative energy, organic farming, medical expertise, skill development and technology partnerships. Africa’s natural and human resources resonate well with India’s capacities to convert them into productive assets.
Indian companies in Africa have earned goodwill for their long-term strategic engagement to work with communities and people. ‘Affordable, adaptable and accessible’ goods and services have been considered the road to successful ventures in Africa.
Burgeoning trade
As a result, trade has skyrocketed from less than $5 billion in 2000-2001 to over $70 billion in 2012-13. India’s exports to Africa have almost trebled from $10.3 billion in 2006-07 to $29.1 billion in 2012-13, and reached 10 per cent of aggregate exports in April-December 2013-14. The export profile is well-diversified and top export items include petroleum products, transport equipment, pharmaceuticals and fine chemicals, and machinery. The export destinations too are wide-based, with eight countries accounting for over a billion dollars worth of exports each.
India’s imports from Africa too are growing robustly, crossing $44 billion in 2011-12.
The country is Africa’s fourth largest trading partner, and accounts for over 5 per cent of Africa’s trade. Given India’s dependence on crude oil and gold, Nigeria and South Africa accounted for about half of total imports. Coal, metals and inorganic chemicals are among the top five import items.
The most encouraging feature of the economic partnership is the strong pipeline of investments that Indian companies have undertaken in Africa, across sectors such as FMCG, mining and minerals, telecommunications, construction and projects, among others. It is estimated that acquisitions by Indian companies accounted for a third of the total value of acquisitions in Sub-Saharan Africa in 2010. India’s approved cumulative investments from April 1996 to March 2013 are estimated to be $37.8 billion.
Upping the ante
While bilateral trade has been increasing, it is concentrated on a few products at the low end of the value chain. Africa enjoys a trade surplus of close to $12 billion vis-à-vis India, but this is due to primary commodity exports, including fuel and precious items. We need to take measures to expand the trade basket to include more value-added products. The Exim Bank has 129 lines of credit in operation as of December 2013, amounting to $6 billion for projects in 45 African countries. These LoCs facilitate imports of project equipment and services from India in infrastructure and manufacturing.
Two, trade needs to be regionally diversified. India’s four largest trade partners in Africa account for close to 70 per cent of India-Africa trade, primarily due to fuel and gold. In particular, Central and southern Africa deserve special attention for investments and sourcing. Three, investment-led trade is the way forward for expanding and diversifying the trade basket. Indian companies need to explore mining opportunities in particular and expand their stakes.
Four, economic cooperation must embrace the services sector. Sectors such as tourism, financial services, transport and logistics, and knowledge areas would benefit from institutional mechanisms for greater connectivity. Healthcare too has high potential.
Five, human resource development continues to be high on the agenda. The Indian government offers scholarships to 22,000 African students, tele-education and capacity building through 100 institutions. CII organises the industrial services training programmes for capacity building of African chambers of commerce, and the India Africa technology partnership programme for better technology absorption capacities.
Eye on the target
India and Africa have set a trade target of $90 billion by 2015, which may be difficult to achieve given the current global scenario. India would need to enhance its trade agreements with the different regional economic blocs in Africa to integrate into local supply chains. We should also target participation in Africa’s North-south corridor, the upcoming integrated transport infrastructure system.
Two other areas that governments of both sides should examine are the enhanced participation of Indian consultants in African development projects and the greater presence of Indian financial institutions in Africa’s capital markets.
Chandrajit Banerjee is the Director General of the Confederation of Indian Industry (CII).
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Africa’s push to add value to minerals now a riskier gamble
African government efforts to force mining companies to process minerals before export may backfire as they come up against weakening commodity prices and investor demands that firms reduce risky investments.
In the last year alone, Zimbabwe, Zambia, Democratic Republic of Congo (DRC), Namibia, South Africa and others have hinted at, announced or put in place measures aimed at adding value to minerals exports, which would boost tax revenue, encourage formation of new businesses and add jobs.
But with falling metal prices and a drastic reduction in the capital available for the mining industry, wary companies are increasingly shying away from investment in countries where the rules of the game can change quickly.
“Investment sentiment in the last year has moved against the mining sector, but the governments tend to have a lagging view of how this is going to affect investment in their countries,” said Mike Elliott, global mining and metals leader at Ernst & Young.
“They continue to argue that mining needs to make a bigger contribution to their economies, but you’ll have to see investment severely tail off to make them think they need to attract investment rather that scare it away.”
Consultants say governments could find more targeted and effective ways of adding value to local economies.
For example, they could push local companies that provide services for the mining industry such as logistics, security, catering and construction to become more competitive and then tighten regulation around the procurement of such services, consultant Tom Wilson at Africa Practice suggested.
“Ultimately you can’t turn market forces on their head. You have to figure out where the country has the capacity to fill the need for goods and services and provide some structures that actually help indigenize some businesses,” Wilson said.
The top five mining companies are slashing total capital spending from a peak of about $70 billion in 2012 to an expected $46 billion in 2015, according to Reuters I/B/E/S.
Mining firms have been taking costly writedowns following years of risky bets to pursue growth, and they now need to prove to shareholders they can use their cash more wisely.
“Companies need to decide whether they wish to continue mining in these countries and face what the governments want to do in terms of beneficiation or pull out. And in some cases it will be a pull-out strategy,” said Kevin Goodrem, vice president of beneficiation for De Beers Group.
THE HARD LINE
Zimbabwe, which holds the world’s second-largest platinum reserves after South Africa, has taken a hard line. President Robert Mugabe late last year threatened to stop exports of raw platinum in a bid to force mining firms to process the metal domestically.
The government said last month it had short-listed two companies to build a refinery by 2016, but industry players expect the project will take much longer than two years.
A source at a mining company operating in southern Africa said the volumes mined in Zimbabwe are not enough to make construction of a $2-$3 billion refinery economically viable, and he was sceptical that the energy supply would be sufficient to run it.
But companies operating in Zimbabwe, which include top world platinum producers Anglo American Platinum and Impala Platinum Holdings, have to remain engaged with the government to avoid losing assets.
“For the platinum miners who operate in Zimbabwe, it is a very concerning time. And it is a bit of a tragedy for Zimbabwe, because they are a very significant producer, but no global capital is going to go there today with that policy uncertainty,” Elliott said.
The DRC and Zambia, Africa’s largest copper producers, are also trying to boost downstream investment.
Kinshasa is trying to implement a ban on exports of copper and cobalt concentrates but has so far encountered the resistance of the powerful governor of Congo’s copper-producing Katanga province.
Many in the industry say the ban is unrealistic as acute electricity shortages hamper processing activities in Congo.
In Zambia, President Michael Sata in October revoked a law that had suspended a 10 percent duty on exports of unprocessed minerals including copper, iron, cobalt and nickel.
Miners say that although some plants are being built, Zambia does not have enough smelting capacity to process all its copper, so they are accumulating high stocks of concentrate.
“Some of these countries are trying to run before they can walk,” Deutsche Bank analyst Robert Clifford said.
“I understand why they want to do it, but they have to provide some assurance to companies that they are not going to pull the rug out from under their feet and change the rules once they have spent billions of dollars.”
Also new smelters and plants may not make sense if their products are expensive and uncompetitive in global markets.
Mining experts say governments should avoid blanket policies and instead target parts of the industry that will actually benefit from downstream investment.
They cite Indonesia’s controversial ban on exports of unprocessed mineral exports as an example.
The ban is expected to boost downstream processing investment in the next few years in nickel, where the country is competitive. But in copper, it is expected to achieve little besides souring the relationship between the government and producers.
Wary of the risks, Namibia seems to have taken a softer approach so far. The government has commissioned a study to identify the commodities it would be more beneficial to process.
“You have to be careful with value-addition policy, because the risk is that it could be value disruptive,” said Magnus Ericsson, founder of the Raw Materials Group, a consultancy that advices governments and companies on mining issues.
“One policy doesn’t fit all. That’s a recipe for disaster.”
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Improved trade policies in fish sectors could address gender inequalities
New UNCTAD-EIF study of the fisheries sector in The Gambia shows trade policies have to be inclusive if they are to reduce poverty.
The expansion of the fisheries sector could help lift Gambians from poverty, in particular women, a new UNCTAD-EIF report has found, concluding that the inclusion of gender considerations in trade policy is a useful way to achieve greater prosperity for all. The case study warns that without built-in gender perspectives, the promotion of fish exports in The Gambia could in some cases actually worsen inequality between men and women.
The report, The Fisheries Sector in the Gambia: Trade, Value Addition and Social Inclusiveness, with a Focus on Women, is co-published by UNCTAD and the Enhanced Integrated Framework (EIF) Executive Secretariat on 6 March.
The Gambian fisheries sector has significant potential to make a major contribution to national socio-economic development: it is a source of food and protein for the population; a source of revenue and foreign exchange earnings; and has significant potential to generate jobs, particularly for low-income women.
The Gambia, Africa’s smallest mainland country with access to both banks of the River Gambia and 80 kilometers of the Atlantic coast of West Africa, has a special relationship to its waters and the fish that swim there.
Sardinellas, shad and other types of fish are sold fresh or smoked in the country’s colourful markets. But while Gambians consume such locally-caught fish, they also export, among other seafood products, high-value sole, shrimp and lobsters to the European Union and other global markets.
The UNCTAD-EIF report, written against the background of efforts to achieve the third Millennium Development Goal to promote gender equality and empower women, shows that the structure of Gambia’s fishing and fish processing sector offers insight into the way that women for whom fish provides a livelihood often lose out to men working in the same sector.
In the sector, men and women tend to produce distinct products, operate on different scales, and serve different markets. The result is specific gender-based trade patterns throughout the value chain.
Women are the predominant dealers and marketers of fresh and cured fish to domestic urban markets near landing sites, while long-distance trade involving relatively capital-intensive techniques and higher profit margins, including the export of frozen and smoked/dried fish products, is carried out mainly by men.
This division of labour reflects deeply entrenched social roles that restrict women’s mobility and access to productive resources in the fish value chain. Women tend to receive “diminished” assets and the parts of the fisheries sector that attract export-oriented investment do so at the expense of women working in the domestic market.
Because men already largely control the export trade, the selective upgrading of this segment risks magnifying the existing split between large-scale male traders and small-scale women traders.
However, this need not be the case – export-oriented investment may lead to greater employment opportunities for women downstream, for example in processing factories, if the appropriate measures are in place. Women’s access to resources, including credit, and support services such as training in marketing and financial literacy, would greatly enhance their ability to benefit from new export opportunities. It is also important to explore niche markets for high-value products that can generate income for women, the study recommends.
More broadly, UNCTAD and EIF call for domestic, sub-regional and international perspectives to be carefully assessed in the light of food security, poverty alleviation and social inclusiveness.
“One challenge is that social issues are addressed in a different framework than economic issues and no sufficient synergies are established between the two,” Dr. Mukhisa Kituyi, Secretary-General of UNCTAD said.
“For example, strategies for social protection should be closely linked to policies on employment, education and training. Due consideration should be given to changes in employment and welfare brought about by international trade. While there are ‘winners’ from trade liberalization, there are also ‘losers’, and their needs must also be addressed,” Dr. Kituyi added.
As the target date of the Millennium Development Goals in 2015 draws closer, it is clear that a lot more remains to be done to achieve them, and it has been suggested that the post-2015 agenda should address all kinds of inequalities in a more substantive way.
“In The Gambia, 80 per cent of fish processors and 50 per cent of small-scale fish traders are women. Through its Diagnostic Trade Integration Study Update, The Gambia has prioritized the need to build skills of women in income-generating activities,” Dr. Ratnakar Adhikari, Executive Director of the Executive Secretariat for the EIF, said.
“Together with the Government, we are strongly supporting a gender balanced Trade Facilitation project which aims to facilitate air cargo export of fresh horticulture and fishery products. We are also supporting the Government to leverage resources from development partners to build a sustainable and inclusive eco-friendly fishing model that puts focus on sharpening women’s skills and women empowerment,” Dr. Adhikari added.
As the study of The Gambia’s fisheries shows, putting in place coherent trade, infrastructure and social policies may be instrumental to achieving inclusive development and to reducing inequalities, including those based on gender. The gender perspective is key to bringing issues of sustainability and inclusion to the forefront of analysis, the study concludes.
The report forms part of the support that UNCTAD provided to The Gambia for the update of its Diagnostic Trade Integration Study and was carried out under the auspices of the Enhanced Integrated Framework for Trade-Related Assistance for Least Developed Countries.
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SACU: The inconvenient institution?
The article aptly titled “SACU Dead Man Walking” giving a SACU Perspective by Professor Roman Grynberg needs further reflection and critical insight.
There is no denying the fact that the region’s oldest trade agreement, the Southern African Customs Union (SACU) – made up of Botswana, Lesotho, Namibia, South Africa and Swaziland – has gone into paralysis mode in terms of advancing the regional integration and common policy development and implementation agenda.
This does not mean SACU is about to be finally killed off by South Africa or that member states are ready to dump SACU for a better alternative.
It is, however, plausible given the current contemporary developments on trade and regional integration that SACU has become an inconvenient institution. South Africa argues that the revenues apportioned to BLNS states (Botswana, Lesotho, Namibia and Swaziland), the smaller economies of SACU, is increasingly a burden on its state coffers representing 55 percent of the total SACU pool of revenues. While it can be acknowledged that revenues to BLNS did increase as a redistributive transfer to BLNS, the reality is that the 55 percent only represents less than 5 percent of total South African revenues.
Given the historical fact that SACU has a polarised trade and commercial pattern where industrial activity was concentrated and biased towards South Africa, such revenues accorded to the BLNS is a small feat considering the trade expansionist role and industrial concentration of South African firms in the region.
It would be in the best interest of SACU member states, however, that the regional grouping should stay but needs to be transformed to suit current financial, trade, industrial and tariff setting realities.
In terms of financial considerations, one should regard that South Africa is not looking only at SACU as a gateway of making its financial imprints in Africa. It is looking at SADC and the COMESA EAC SADC Tripartite arrangement and ultimately the African continent as a whole.
But South Africa’s priority now primarily lies in the global arena through BRICS where it wants to establish a Development Bank of R100 billion to fund infrastructure projects.
The Revenue Sharing Formulae (RSF) of SACU seem to be in the way of South Africa wanting to foster and establish, through fully fledged development co-operation mechanisms, a Development Fund to finance regional infrastructure projects which may be commensurate with its trade expansion plans through better road, rail, air transport linkages and sufficient energy and telecommunications supply networks. SACU needs to heed that call and realise that it will not be in all member states to stick with the current RSF but to transform it to suit the targeted and well-focused financing, which would benefit the whole region as well. Given that South Africa is in a position to finance such a fund, it may be well advised that member states consider such a fund but with clear provisions that set out terms and conditions. There is no way that South Africa can use the Development Fund to leverage itself due to its bargaining strength to enforce conditions that would remind BLNS of “Structural Adjustment Programmes” of the IMF and the World Bank.
The proposed or considered Development Fund should be transparent, predictable and fair to all and it should allow room for all member states to have a say on how it is managed. It should also not make any member state worse off than under the current revenue sharing arrangement.
In fact, SACU can acclimatise and accommodate the Development Fund under its consensual decision making structures while it serves its objective to afford targeted funding streams for infrastructure and project financing opportunities. SACU is historically indebted to ensure that funds are availed largely from its member states, as it is not only politically expedient to do so but is also motivated on economic necessity for trade diversion, polarised industrial development effects and agglomeration accumulation of commercial, industrial and financial growth in the South African economic hub versus the “spokes” of the BLNS.
In terms of trade, SACU needs to be more realistic in order for trade integration to take root. It needs to sit down politically and agree on “growth points” of sectors, industries and products among its member states. There is no way that regional integration can grow in SACU, as a region, if all countries aim to do the same thing, such as to grow same products, sectors or industries. SACU member states should agree who takes what products, sectors and industry based on comparative endowment or competitive basis, and then assist each other to deepen and stimulate such sectors, products and industry.
They should explore this through identifying regional value chains and ensure through market access and production technologies that such agreed growth centres are stimulated on a complementary and growth valued shared basis. Such shared growth, value-added regional focus strategy can assist greatly in terms of industrialisation for broad-based development in SACU and not just for South Africa as is the case.
SACU needs to be commended for doing well on its institutional strength to getting the Common Negotiating Mechanisms (CNM) going, especially in terms of the EU-SADC-EPA. It has to be pointed out that SACU needs to go as a firm collective to advance its EPA agenda and to solidify gains and opportunities from the EU. It is encouraging that SACU is moving towards that direction although painstaking and slow. It needs to stay resilient and resolute to achieve the common agenda not only with the EU but also with all other negotiating forums on trade as it is with India, Mercosur and China. SACU must be commended for trying to put in place the SACU Tariff Board but must at the same time realise that it is necessary to go first with establishing domestic national bodies on trade that would be capacitated to handle competently first the domestic trade distortions and then only regional trade distortions at SACU Tariff Board level. This noble objective can transform SACU from been not being only a reactive institution on trade but also a proactive institution to influence trade and industrial policy at regional level.
In order to do this, SACU needs to be viably transformed to developed common policies on agriculture, industry, and competition policies in line with the full implementation of the SACU 2002 Agreement.
The drawback to the unrealistic expectation of agreeing on common policy development is that it is increasingly difficult for member states, who are at varying levels of economic development, to agree on what is common. It is better if SACU emphasizes “variable geometry” where flexibility can be allowed for those member states to explore commonality of these policies and to cement even on a bilateral basis those policies, which are intertwined with an objective of gravitating towards the common ground on those policies. For SACU member states to chase a pipe dream of having agreed common policies one day would be too high and unrealistic.
It is important that member states be allowed to explore common basis even bilaterally on these policies and such critical mass be explored to the common goal, whenever such goals are agreed upon only on principal basis but acknowledging variations and diversity of commonality between and among the member states.
In conclusion, SACU should not be allowed to die. It should not be killed off either. It is not a dead woman walking nor is it the last kick of a dying horse. It just needs to be clear on its limitations and ambitions. It has to be transformed, as it is simply inconvenient for all member states. All member states can agree that the current revenue sharing formula needs a radical overhaul, as it is neither trade-enhancing nor conducive for regional integration. SACU member states must realise that regional institutional structures of SACU can be extremely beneficial for regional financing mechanisms. But such funding arrangements should be conducive to all and not felt imposed. It should aim for regional infrastructure projects on an agreed modality basis.
SACU needs to jealousy safeguard its common negotiating agenda. It is not easy to put in place such negotiation forums nor easy to maintain it on a uniformly engaged basis. SACU has to move towards that by concluding international obligations. It should be done similarly for the EU EPA.
SACU must protect its cohesive approach at the EU EPA level and make sure that it speaks with one agreed voice on safeguarding its trade and economic interests taking full advantage of opportunities.
SACU must allow diversity of common policy development at the initial stages and allow for such semblance and commonality to develop even on a bilateral basis between and among member states. That can pave a development of critical mass on cross border regional policy linkages, which can serve as a basis for a principled common policy development at a later stage.
Mihe Gaomab II is the President of the Namibian Economic Society
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Tanzania most active in removing NTBs
EAC launches Common Market Score Card 2014 in Dar es Salaam
The East African Common Market Score Card has revealed that the United Republic of Tanzania is the most active in removing Non-Tariff Barriers (NTBs) once identified, a fact that records a potential source of peer learning for other Partner States. This was revealed yesterday during the dissemination Workshop to launch the East African Common Market Score Card at New Africa Hotel in Dar es Salaam, Tanzania.
While addressing participants, the Lead Economist and Sector Leader Finance and Private Sector Development Africa Region of the World Bank, Mr. Andrea Dall’Olio said that in the area of goods, although Tanzania and Kenya has the highest number of NTBs being reported by other Partner States, the East African Common Market Score Card notes that Tanzania is most active in removing them once identified.
He said that the value of trade between the Partner States has more than doubled after the Customs Union became fully fledged in 2010, adding that as Partner States continue to remove barriers between the economies, there is the need to put in place good rules that are transparent and accessible to all.
“Domestic laws and regulations that restrict enjoyment of the rights and freedoms under the Protocol require reforms” he stressed.
The East African Common Market Score Card to measures commitment by EAC Partner States to enable free cross-border movement of capital, services and goods provides the analysis basing on the review of 683 laws and regulations relevant to the Common Market along with key legal notices, reports and trade statistics.
Presenting to the delegates on the Common Market Score Card, the Coordinator for EAC Common Market Diagnostics at the World Bank Group, Mr. Alfred Ombudo K, Ombudo said that the score card has identified a number of laws that are in conformity to the Community laws and showed differing scores in areas of the free movement of goods, services and capital that are pillars of the Common Market Protocol.
He has stressed that regarding on the free movement of services, the general observation is that each Partner State has laws that contradicts Common Market Protocol rules and regulations in order to serve the interests of their citizens.
The Score Card only measures the compliance of national laws to commitments under the Protocol and it does not measure compliance of bi-lateral agreements entered into by the Partner States to the Protocol.
On behalf of the Permanent Secretary for the Ministry of East African Cooperation, Dr. Abdulla Makame urged the Partner States to focus on the implementation of the EAC Railway Master Plan that will come up as solution for most emerging Non-Tariff Barriers as revealed by the score card especially on Free Movement of Goods under the Common Market.
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EU proposes responsible trading strategy for minerals from conflict zones
High Representative (HR) of the EU for Foreign Affairs and Security Policy Catherine Ashton and EU Trade Commissioner Karel De Gucht today [5 March, 2014] proposed an integrated EU approach to stop profits from trading minerals being used to fund armed conflicts. The package of measures will make it more difficult for armed groups in conflict-affected and high-risk areas to finance their activities through the mining of and trade in minerals. The focus of the approach is to make it easier for companies to source tin, tantalum, tungsten and gold responsibly and to encourage legitimate trading channels.
“We are committed to preventing international trade in minerals from intensifying or perpetuating conflict,” said HR/VP Catherine Ashton and EU Trade Commissioner Karel De Gucht. ”Today’s initiative on ‘conflict minerals’ will help trade to work for peace, for communities and for prosperity in areas around the globe affected by armed conflict. It is a first and timely contribution from the EU to support a consensus reached by business, civil society and governments in OECD countries to help communities benefit from their natural resources.”
The Commission proposes a draft Regulation setting up an EU system of self-certification for importers of tin, tantalum, tungsten and gold who choose to import responsibly into the Union. Self-certification requires EU importers of these metals and their ores to exercise ‘due diligence’ – i.e. to avoid causing harm on the ground – by monitoring and administering their purchases and sales in line with the five steps of the Organisation for Economic Cooperation and Development (OECD) Due Diligence Guidance. The aim is to act at the most effective level of the EU supply chain for these minerals and to facilitate the flow of due diligence information down to end users. The Regulation gives EU importers an opportunity to deepen ongoing efforts to ensure clean supply chains when trading legitimately with operators in conflict-affected countries.
To increase public accountability of smelters and refiners, enhance supply chain transparency and facilitate responsible mineral sourcing, the EU aims to publish an annual list of EU and global ‘responsible smelters and refiners’. With more than 400 importers of such ores and metals, the EU is among the largest markets for tin, tantalum, tungsten and gold.
The proposed Regulation is accompanied by a ”Communication” (a proposal), a paper that presents the overall comprehensive foreign policy approach on how to tackle the link between conflict and the trade of minerals extracted in affected areas. It sets out the EU’s further engagement in support of the OECD due diligence guidance and the EU’s foreign policy outreach and support in this regard. With the Communication, the Commission and the HR/VP confirm that ‘conflict minerals’ are part of the EU’s foreign policy agenda and that the EU will take concrete action at country and international level – ranging from support to policy dialogues and diplomatic outreach to smelter countries. The Communication supports the commitment by the Commission and the High Representative to promote a strong and coherent EU raw materials diplomacy, addressing the security-development nexus in a joined-up and strategic manner.
Today’s initiative also proposes a number of incentives supporting the Regulation to encourage supply chain due diligence by EU companies, such as:
- Public procurement incentives for companies selling products such as mobile phones, printers and computers containing tin, tantalum, tungsten and gold;
- Financial support for Small and Medium sized Enterprises (SMEs) to carry out due diligence and for the OECD for capacity building and outreach activities;
- Visible recognition for the efforts of EU companies who source responsibly from conflict-affected countries or areas;
- Policy dialogues and diplomatic outreach with governments in extraction, processing and consuming countries to encourage a broader use of due diligence;
- Raw materials diplomacy including in the context of multi-stakeholder due diligence initiatives;
- Development cooperation with the countries concerned;
- Support by EU Member States through their own policies and instruments.
Background
The proposal for a Regulation is based on a public consultation, an impact assessment and extensive consultations with the OECD, business, civil society, as well as with institutions in producer countries.
It responds to the European Parliament’s call in 2010 for the EU to legislate along the same lines as the US which requires its companies using ‘conflict minerals’ to declare their origin and exercise due diligence.
The public consultation and impact assessment highlighted the difficult market situation in the Great Lakes Region which has prompted the Commission to develop an alternative but targeted and complementary model. The Commission also announced in the specialised publication Commodity markets and raw materials and its Trade, growth and development Communication its intention to look at ways of making the supply chain more transparent.
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UNCTAD-ITC Partnership on Trade faciliation
The United Nations Conference on Trade and Development (UNCTAD) and the International Trade Centre (ITC) have joined forces to assist developing countries in the implementation of the recent WTO Trade Facilitation Agreement reached in Bali, Indonesia. The two agencies signed a Memorandum of Understanding 4 March reaffirming this collaboration.
“The Trade Facilitation Agreement is a real opportunity for developing countries, but only if they can put its provisions into practice,” said Arancha González, ITC’s Executive Director.
“The two agencies complement each other very well and can offer meaningful support to developing countries together,” said UNCTAD Secretary-General Mukhisa Kituyi. UNCTAD already has a successful programme in building institutional capacity around effective trade facilitation, while ITC has experience in building the capacity of the private sector and increasing their export competitiveness”, he added.
The programme which the agencies will develop will focus particularly on Least Developed Countries.
Initially, the cooperation will concentrate on helping countries to identify and categorise the commitments under the Agreement in categories A, B and C and ensuring support for implementing the transparency provisions of the Agreement. These include ensuring better and easier access to information for traders; helping to develop advance rulings and rights of appeal legislation; facilitating greater predictability and reliability of procedures through simplified formalities and documentation and the use of international standards; and the adoption of single windows for traders.
“These are just some of the areas where the ITC and UNCTAD have identified clear needs in developing countries based on UNCTAD”s needs assessment programmes and the surveys undertaken by the ITC of its SME clients,” Mr. Kituyi said.
“In some cases we will need to ensure better cooperation between the public and private sector,” Ms. González said. “This is the ITC”s bread and butter: supporting a trade dialogue between business and policy makers.”
The collaboration between the two agencies is in response to a critical issue identified by developing countries in the lead-up to December’s WTO conference: whether there was enough financing and to support the necessary reforms, particularly in LDCs. This partnership will provide an opportunity to donors and other development partners to demonstrate their commitment to the implementation of global trade facilitation reform by working with UNCTAD and ITC. The agencies will collaborate with other organisations and the private sector to advance implementation of the WTO Trade Facilitation Agreement.
“The hope is that donors will see this collaborative venture between the ITC and UNCTAD, as an effective and efficient platform for helping developing countries, especially LDCs, to take advantage of the benefits an effective facilitating architecture can bring,” Mr. Kituyi said.
The private sector is also urged to explore ways that they can partner with the ITC and UNCTAD to provide their expertise to SMEs in developing countries. “Making the process of trade easier in developing countries is a plus for the global trade reality,” concluded Ms. Gonzalez, “It is a win-win situation”.
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Top African court ‘powerless’ to reinstate SADC Tribunal
The African Commission on Human and People’s Rights has said it has no authority in the fight to fully reinstate the Southern African human rights Tribunal, which was suspended after ruling against Robert Mugabe.
The Commission decided last year to reject a landmark challenge filed by Zimbabwean farmers and victims of the Mugabe led land grab campaign, who cited all 14 Southern African Development Community (SADC) leaders in its application to have the Tribunal restored. It was the first time in legal history that a group of heads of state was cited by individuals as the respondent in an application to an international body.
The Tribunal was suspended in 2011 by SADC leaders, who chose to hobble the work of the court rather than take action against Mugabe. This was after the Tribunal ruled against Mugabe in 2008 in an historic case that pitted dispossessed Zim commercial farmers against the now 90 year old despot. The human rights court ruled that Mugabe’s land grab was unlawful and inherently racist, a ruling that ZANU PF and its leader actively ignored.
SADC leaders then went on to suspend the court and have since deliberately hamstrung the Tribunal’s future, with SADC deciding that the court will only be allowed to continue its work if individual access to it is stopped. This means that the court cannot fulfil its chief mandate, which is to uphold the human rights of all 250 million SADC citizens.
But despite this grave threat to the human rights of African citizens, the African Commission has said it is powerless to do anything and has rejected the challenge filed by Zimbabwean farmers Ben Freeth and Luke Tembani. The Commission, whose decision was only communicated over the weekend, criticised SADC for its handling of the Tribunal situation, but maintained that it cannot do anything further.
Lawyer Willie Spies, who submitted the application on behalf of Freeth and Tembani, told SW Radio Africa on Wednesday that the Commission’s decision is based on a ‘technicality’. He explained that the original complaint was based on two articles within the African Human Rights Charter, the guiding text of the Commission, “which state that African Union member states are not allowed to prevent individuals within their countries to having access to courts within their territories.”
“We said that in 2011, when SADC leaders got together and Robert Mugabe managed to convince them to suspend the operations of the Tribunal, those 14 heads of state contravened the African Human Rights charter,” Spies said.
He continued: “But after a process drawn out for over two and a half years, the Commission has now said that the articles (which the complaint was based on) say nothing about regional courts. And since the Tribunal is a regional human rights court, it is not covered by the (charter).”
Former Chegutu farmer Freeth, who is also the spokesperson of the SADC Tribunal Rights Watch group, said in a statement that the Commission’s “reasoning that the African Charter does not include within its protection courts not known at the time the African Union was formed, cannot be accepted.”
“When we are barred by Zimbabwe law to access the Zimbabwe courts or the Zimbabwe courts fail us, is it not guaranteed by the African Charter that we should have access to justice? We have to question the role and purpose of the African Charter and the African Commission on Human and People’s Rights if this fundamental human right is not guaranteed,” said Freeth.
His co-complainant Tembani meanwhile also said in a statement that the decision by the Commission is “a great injustice for Africans.”
“We ask the world and anyone who cares about human rights, justice, the rule of law and property rights in Africa, to help protect Africans from this injustice which threatens the development of the region. The African Union through the African Commission has made me despair that justice will come – so that Africans can take their rightful place in our world and stop us from being beggars on our resource-rich continent,” Tembani said.
Spies meanwhile said the Commission’s decision is a major blow to the efforts to reinstate the Tribunal, a legal fight he said has now reached the end of the road.
“The problem was created by politicians and the problem will need to be solved by politicians. It’s only a political interference by SADC leaders, a political change in Zimbabwe and a political solution to this situation that can resolve the issue. Legally we have come to the end of the road,” Spies said.
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EU Trade Ministers pledge TTIP support as talks enter next stage
EU trade ministers meeting in Athens last week pledged their full support to the ongoing trade talks with the US, as part of a broader push on both sides to allay concerns from public interest groups over the proposed Transatlantic Trade and Investment Partnership (T-TIP). With the fourth round of negotiations set to begin in less than one week, the planned agreement has received amped-up attacks from a diverse collection of critics on both sides of the Atlantic.
Following last week’s meeting of trade ministers, EU Trade Commissioner De Gucht warned that recent public discourse has featured too much “speculation” and “fear-mongering,” rather than focusing on the facts of the proposed deal.
“I welcome again the full support of all ministers and all our member states for the on-going T-TIP negotiation process,” the EU trade chief told reporters last Friday. “That said, I took the opportunity today to underline the need for the full engagement of their respective governments to explain the benefits of the T-TIP project to their respective publics.”
At the same meeting, Finnish trade minister Alexander Stubb reportedly told fellow officials from the bloc’s member states, along with business leaders from both sides, that many T-TIP opponents tend to generally be against globalisation, free trade, and multinationals.
“We have an uphill battle to make the argument that this EU-US free trade agreement is a good one,” he said, in comments reported by Reuters.
With both the EU and US working their way out of a prolonged financial crisis, advocates for T-TIP have said that the deal could provide a much-needed boost to their economies. For instance, figures cited by the EU place the increase in the bloc’s GDP at an additional 0.5 percent each year, netting an additional €275 billion in total trade per annum.
With stakes set so high, “we will have to prove that this is not a race to the bottom, but a race to the top,” BusinessEurope director general Markus Behyrer told EU officials.
Transparency, investor protections
One of the main complaints from various advocacy groups has been regarding the level of transparency in the talks. On Monday, 42 businesses and advocacy associations joined a petition by the US’ largest labour federation, the AFL-CIO, to the US Trade Representative (USTR) requesting greater transparency and the establishment of a public consultation process.
In an accompanying press release, the organisation, which represents over 12 million constituents, demanded that the US government act “at least as democratic, participatory and transparent as any other in the world.”
US government officials, for their part, have said on several occasions that there are already various opportunities for the public to provide their input into the talks, and have promised to release additional information about Washington’s negotiating objectives before next week’s round of negotiations.
US Trade Representative Michael Froman also announced last month a new initiative – the Public Interest Trade Advisory Committee – that would provide expert input into the negotiations on areas such as public health, development, and consumer safety.
Substantively, the US labour organisation is particularly opposed to investor-state dispute settlement systems, an issue that has also sparked concern in the EU. Brussels, for instance, has already pledged to publish its negotiating objectives for the investment part of the deal this month, which will be followed by a three-month public comment period.
Such investor protections, groups on both sides have warned, could give foreign corporations too much room to challenge domestic policies that are in the public interest.
At a roundtable discussion held on Monday in Westminster, British Cabinet Minister Kenneth Clarke was quick to dismiss concerns over policies such as investor-state dispute settlement mechanisms. “Contrary to what is often reported, the dispute resolution element of the proposed treaty is not a means for giant companies to get governments to lower standards,” Clarke said. The British official noted that the UK is party to 94 agreements with such provisions, but that it has yet to lose a case before an arbitration panel.
Regulatory differences
Less than a month ago, Froman met with EU Trade Commissioner Karel De Gucht to conduct a political stocktaking of the negotiations to date. After identifying key differences between their sides’ positions, they urged negotiators to “step up a gear” as they kick off the next phase of the talks.
Despite the expected difficulties ahead, particularly as the two sides dig into the thorny subject of regulations and standards, De Gucht told reporters at the time that overall “things are on track.”
The regulatory portion of the talks – for instance, harmonising health and safety policies – is widely expected to be the toughest area to resolve. The EU official has repeatedly said that there would be “no ‘give and take’” on consumer protection, the environment, or food, in response to concerns that have been raised by NGOs and the EU public.
However, that stance has sparked concern among members of the US farm lobby, given that American agricultural producers had hoped that T-TIP negotiations would lead the EU to revise its ban on genetically modified organisms (GMOs) and beef treated with hormones.
“Unless the EU is truly willing to negotiate, no deal is better than a half-baked deal,” said Steve Censky, CEO of the American Soybean Association, in comments reported last week by the Financial Times. In a speech last month, Froman said that “this is a comprehensive negotiation,” in comments apparently geared at allaying these concerns.
“We are going to have to work through this and come up with a balanced outcome,” he added.
Ratification hurdles?
With the talks still in their early stages, the end-date for negotiations has been pushed back, after previously being set for late 2014. While a new target date has not been set, officials have said that they hope to advance the talks quickly, in order to finish “on one tank of gas.”
Even if a pact is completed in the near-term, however, questions also linger over whether a final agreement would receive the necessary approval by lawmakers to enter into force. In Europe, the upcoming elections this spring are expected to significantly change the make-up of the European Parliament, with some warning that it could lead to an increase in members who are sceptical of the pact.
On the other side of the Atlantic, efforts to renew Trade Promotion Authority – a controversial provision that is essential for ratifying T-TIP once it is completed – are moving at a sluggish pace in Washington, as lawmakers spar over the merits of mega-regional trade deals and how involved Congress should be in actual trade negotiations.
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EAC, EU sign 4.5m Euro agreement to support regional integration agenda
The East African Community Secretariat and European Union Delegation to the United Republic of Tanzania and to the EAC today signed a Financing Agreement totaling 4.45 Million Euros to support Regional Integration Support Programme (RISP 3) at the EAC Headquarters in Arusha, Tanzania.
The programme aims at increasing the capacities of the Partner States to implement the EAC Treaty provisions and Protocols in the areas of Custom Union, Common Market and improve the effectiveness and efficiency of the EAC Organs. The objective of this programme is to support the EAC region, the Secretariat and its 5 Partner States in their efforts to deepen integration agenda and increase competitiveness.
The 3rd generation Regional Integration Support Programme (RISP 3) aims at enhancing regional integration processes in the whole of Eastern and Southern Africa, as well as the Indian Ocean. It also builds on the lessons learnt during the implementation of previous similar projects. RISP 3 specifically addresses the challenges of the East African Community and provides concerted, tailor-made support to the EAC Organs and the 5 Partner States.
The Programme is part of a 20M euros package designed for COMESA, EAC, IGAD and IOC. As far as the EAC is concerned, the priorities focus on implementing the Customs Union, Common Market, Monetary Union and Sensitization programmes.
Speaking during the signing ceremony, the EAC Deputy Secretary General in charge of Finance and Administration Mr. Jean Claude Nsengiyumva expressed the Community’s appreciation for the continuous support from the European Union to the EAC.
He said the continued support from the European Union and other Development Partners had been a key factor in assisting the EAC to move closer to attaining its goal of regional integration and that commitment and effective management had led to more confidence from all the stakeholders.
On his part, the EU Head of Cooperation and Minister Counsellor, Mr. Eric Beaume, affirmed that “in the increasingly globalised world, regional blocks have the potential to foster the wellbeing of their citizens.
“The EU and the EAC want to jointly promote social and economic development. They go hand in hand to extend it to all countries of the region and to make it sustainable. With this support, we hope to achieve the objective to deepen integration and increase competitiveness of the EAC, thereby contributing to reducing poverty and enhancing economic growth” added Eric Beaume
RISP3 will concentrate on one hand on accelerating the implementation of regional commitments at national level. On the other hand, it will reinforce the EAC Secretariat and other statutory organs, such as the East African Legislative Assembly and East African Court of Justice, in their role to steer regional integration.
Coordination efforts between the three regional organisations – the EAC, SADC and COMESA – will also be supported, with the ultimate goal of the reaching a Tripartite Free Trade Area.
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Exciting times for SADC
Namibia is among eight African countries in the Southern African region that have been recognised among the top 20 “most exciting African mineral jurisdictions”.
An investment guide released during the just ended 20th Mining Indaba in Cape Town, South Africa, from February 3-6 recognises South Africa, Zimbabwe, Namibia, Botswana, Mozambique, Zambia, Madagascar and Malawi.
The guide titled “Mining in Africa Country Investment Guide” and specifically produced for the African Mining Indaba and compiled by Singapore-based Global Business Reports, in partnership with Mining Indaba, examines five regions on the continent – Central Africa, East Africa, North Africa, Southern Africa and West Africa – encompassing 53 countries in total.
The guide splits the eight Southern Africa countries into two groups – those that offer a low-risk environment with proven geological potential and those that offer greater risk yet less exploited mineral resources.
“In the former, fall South Africa, Botswana, Namibia and Zambia. Zimbabwe sits in the latter, with Mozambique and Malawi just crossing the line.”
On Namibia, the report does not highlight much apart from stating that the country remains one of the few African states that have formulated an official strategy for engaging with emerging economies – a sensible step given the influx of Chinese investment into Africa.
On South Africa, it states that despite the country having had “a tough couple of years”, with labour unrest and falling production, it continues to dominate African mineral production “to an extent that is impossible to ignore”.
It further suggests that increased mechanisation of the local mining sector in that country could be beneficial if policies are well nurtured.
“The country still holds geological potential, and increased mechanisation of its mines – which tend to be labour intensive compared to other mining jurisdictions – could create a revival of the industry.”
It more or so recognizes the increased role the Johannesburg Stock Exchange (JSE) has played as a centre of African mining finance.
“Roughly 50 percent of JSE-listed mining issuers have either their primary or secondary projects abroad, predominantly in Africa…” the guide notes.
On Botswana, the investment guide noted that the country’s traditional strength in diamonds is arguably not as exciting as its other mining potential.
Botswana contained the second-largest amount of coal in Africa, but had to develop its infrastructure to fully exploit this resource.
On Zimbabwe, the guide finds the country remains the most risky jurisdiction for investors of any type, although certain points stood in its favour, including last year’s “peaceful” elections and the country’s undeniable mineral potential.
Zimbabwe holds an estimated 30 percent of the world’s diamond reserves, as well as substantial deposits of gold, platinum group metals and coal.
The guide labels Mozambique and Malawi as slightly higher risk investment destinations due to the relative immaturity of their mining sectors.
The report, however, highlights the potential of Mozambique’s coal sector, as well as Malawi’s burgeoning production of uranium and other strategic minerals noting that, “The emergence of both countries on to the mining scene has been substantial.”
On government intervention in Zambia’s mining sector, the guide says revoked tax incentives, an increase in mining royalties and more stringent laws regarding financial reporting have not been sufficient to substantially stall investment in Africa’s richest copper producer.
However, on efforts to increase beneficiation in Southern Africa, the guide warns on countries trying to compel mining companies to engage in downstream processing. Beneficiation has sparked fierce debate in South Africa between government, keen to promote this, and the Chamber of Mines, which represents the sector.
The guide in pointing to what it calls a very simple reality – “The mining sector deals in mineral extraction, while mineral beneficiation crosses into the realm of the manufacturing sector”.
On South Africa, the guide suggests that if South Africa and its neighbours seek to obtain greater value from their extracted minerals through industrial processes, their priority must be to make such an industry economically viable.
“If they attempt to force mining companies to engage in downstream processing (for example, through the full use of export bans) without making this profitable, the effect will be to hamper mining investment rather than to encourage beneficiation,” it warns.
The other 12 African countries to soon earn a position in the guide’s “top spot” investment category are the Democratic Republic of Congo, Kenya, Rwanda, Tanzania, Uganda, Burkina Faso, Cote d’Ivoire, Ghana, Guinea, Niger, Nigeria, and Senegal.
The mining indaba, dubbed “Investing in African Mining” attracted more than 1 800 delegates from various specialised fields from African and beyond representing 2100 international companies and 110 countries.
Download: The Official Mining In Africa Country Investment Guide 2014 (160 pages, 49.4 MB)
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Economists wary of BRICS initiatives, transparency snags
Experts have cautioned the government to be careful in handling foreign investors coming to the country offering contracts without transparency.
Participating in a debate organized by Policy Forum over the weekend in Dar es Salaam to evaluate investments from Brazil, Russia, India, China and South Africa (BRICS) in Tanzania as an alternative to western predominance in accelerating development, stakeholders said that most investors coming to invest in Tanzania have contracts employing complicated terms with a lot of conditions that do not benefits locals.
Mzumbe University Lecturer Dr Darlene Mutalemwa said that BRICS are important investors and trading partners, project contractors for Tanzania.
BRICS were expanding and deepening ties with Tanzania as at present the country has a significant opportunity for growth and economic transformation, she stated.
“BRICS states need to be more active and transparent in dialogue with Tanzania and in the multilateral system in presenting how they want to contribute to Tanzania’s development and reduction of poverty clearly articulated in MKUKUTA,” the lecturer underlined.
“Brics may have to clarify more on how their vision for increased South-South co-operation will translate into better opportunities for Tanzania and a reduction in poverty,” she said.
It is important for the government of Tanzania to engage with Brics in consideration of development cooperation policies, as well as the need for the newly emerging major economies to pay attention to implications positions on governance issues and nature of foreign direct investments (FDIs),” she said.
“Engagement with BRICS states is becoming more important but their presence has not been felt in dialogue mechanisms.
Given that BRICS have local offices in the country, they should be engaged at country-level annual discussion for such as annual policy week, MKUKUTA and MKUZA working groups or associated informally as much as is possible in the development partners group framework,” she stated, apparently equating BRICS with traditional donor countries.
Tanzania Private Sector Foundation (TPSF) director of membership services Louis Accaro said that BRICS block can not claim to speak for the emerging world, and Tanzania does not see anything in common between us and them.
“They have come from a similar social-economic environment, but developed at a faster rate than us,” he said.
In 1961 we were nearly at the same level of development with China, but today is a superpower while some parts of rural China are similar to our rural Tanzania,” he ventured to suggest.
Yulli Jeremia, an assistant lecturer in political science at the Dar es Salaam University College of Education said the problem with the BRICS group is that they are not open as to what they are investing in the country, so they is a need to have a framework for monitoring initiatives from these countries.
“If BRICS countries are really in need of cooperating with mutual benefit then they need to be transparent,” he said.
Gilead Teri, a policy and budget analyst coordinator from the Agricultural Non State Actors Forum (ANSAF) suggested that the government should focus on regional economic integration since shares a lot with neighboring countries.
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Europe, America and the Transatlantic Partnership
The United States and Europe are poised to create the world’s largest Free Trade Area under the proposed Transatlantic Trade and Investment Partnership (TTIP).
The negotiations have been underway since July 2013 after the November 2011 US-EU Summit. In February 2014, the EU Trade Commissioner Karel De Gucht and the United States Trade Representative Michael Froman met in Washington D.C. to review progress before launching the fourth round of talks in Brussels this month.
De Gucht informed the media that “things are on track,” though the next phase of negotiations would be challenging in view of the bilateral differences in standards on labor and environment issues.
Already the world’s largest bilateral trading partners accounting for 40 percent of the world’s GDP, the US and the EU expect to benefit substantively from enhanced trade and investment opportunities by reducing non-tariff barriers and fostering regulatory cooperation. As such, the acid test of the TTIP will lie in the fulfillment of these expectations, especially from the perspective of the Obama administration that has attempted to renew friendly ties with the EU.
As is known, the US-EU relations were strained under the Bush administration in the aftermath of the latter’s unilateral approach to the “war on terror” in disregard of “transatlantic unity.” Moreover, then US Secretary Donald Rumsfeld’s use of the words “problems” and “old Europe” for France and Germany, on account of their opposition to the war in Iraq, had added fuel to the fire.
New era of US-EU relations
Of course, President Bush sought to bring ties back on track through his tour of Europe in May 2005. On his part, as a US presidential candidate, Obama addressed a vast crowd in Berlin in July 2008 to highlight his distinctively warm and friendly approach to Europe. Obama averred:
“True partnership and true progress requires..allies who will listen to each other, learn from each other and, most of all, trust each other..America has no better partner than Europe. Now is the time to build new bridges across the globe as strong as the one that bound us across the Atlantic.”
Interestingly, since Obama assumed the presidency on January 20, 2009, America has not filed a single case against the EU at the World Trade Organization (WTO), while bringing up as many as 14 cases–the bulk against China–against developing countries. On the other hand, the EU filed a case against the US in April 2011 in connection with the latter’s anti-dumping duties on imports of stainless steel sheet and strip in coils from Italy, which are stated to have been in place since 1999.
The matter is in the consultation stage. Barring this case, however, the EU has not filed any case against the US during the Obama administration. As a matter of fact, the post-financial crisis scenario is a significant factor propelling the Obama administration to bolster trade and economic cooperation with the EU in a spirit of mutuality of interests.
Hence, through the proposed TTIP, America hopes to boost its international competitiveness, jobs and growth, while the EU seeks a “long-term recovery” by gaining enhanced access to the US market for its agricultural and industrial goods as well as public contracts for its firms, among other benefits. Importantly, it will be critical for the US to correct its trade deficit in goods with the EU that amounted to $107 billion in 2012.
There is, however, skepticism in certain quarters regarding TTIP’s concrete benefits for the US. As pinpointed by the American Federation of Labor and Congress of Industrial Organizations, the “rosy predictions” by the International Trade Commission and free trade advocates about export and job growth have been belied in several cases.
For instance, America’s grant of Permanent Trade Relations (PNTR) status to China, which paved the way for the latter’s entry into the WTO, came to exhibit pitfalls. In 1999, the year before PNTR conferment, America’s trade deficit with China amounted to $68 billion. In 2013, it was as high as $471.5 billion, though witnessing an improvement over the preceding year’s deficit of $534.7 billion.
Furthermore, the story of US trade deficit has replicated in the cases of the US-Korea FTA and the North American Free Trade Agreement. In this context, Robert E. Scott, an economist at the Washington D.C.-based Economic Policy Institute, suggests: “This is not the time for massive trade deals that cost jobs and depress wages. The United States should stop negotiating new trade deals such as the [Trans-Pacific Partnership] TPP, and fix the ones we have.”
The US leadership owns a critical responsibility to ensure that the country gets a fair share in the fruits resulting from the TTIP, which requires an adequate assessment of the deal under consideration and inclusive participation of a wide variety of stakeholders beyond the business lobbies. It is apt to quote de Gucht’s statement on one of the EU stances:
“We need to make absolutely sure that transatlantic trade and investment supports, rather than undermines, our high standards on these [labor and environment] sustainable development issues. We will not sacrifice them for commercial gain.”
In a similar vein, the US will need to carefully articulate what is most integral to its expectations and acceptable to its negotiation compass.
Romi Jain is a published poet, novelist, and Vice President of the Indian Journal of Asian Affairs.
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EU sets EPA deadline signing for October
Uganda seems not yet prepared to conclude the on- going EAC- EU Economic Partnership Agreement (EPA) trade, analysts have observed.
The Africa Caribbean Pacific (ACP) European Union EPA negotiations were launched in 2002 under the Cotonou Partnership Agreement (CPA) where parties agreed to conclude new World Trade Organisation (WTO) compatible trading arrangement, remove progressively barriers to trade between them and enhance cooperation in all areas relevant to CPA.
Despite negotiations spanning over 12 years with remaining contentious issues unresolved, the European Union has put 1 October 2014 for concluding the negotiations. This means countries that have not signed or ratified EPAs by October 1 2014 will be removed from the list of beneficiaries of the duty Free Quota free market access.
Jane Nalunga the SEATINI- Uganda country director noted that much as the five partner EAC states- Kenya, Uganda, Rwanda, Burundi and Tanzania- decided in 2007 to strengthen their regional integration agenda and negotiate EPA as a bloc under the initial Framework Economic Partnership Agreement (FEPA) nothing much seems to be effective as a bloc.
“The stated objective of EPA was to ensure sustainable development of ACP countries and to ensure smooth and gradual integration into the global economy and eradicate poverty but so far the negotiations have not addressed these objectives,” said Nalunga at the EAC-EU EPA review workshop in Kampala.
Nalunga said there were still contentious issues which are critical for the EAC future development and make EPA a tool for the EAC’s sustainable development.
She notes that during the January 30 2014 ministerial meeting in Brussels the EAC ministers and EU commissioner for Trade failed to agree on the three most important matters such as Duties and Taxes on Exports, article 16 the Most Favored Nation (MFN) clause and regarding the issue of Rules of origin and agriculture.
“The EAC states wont access European markets if we don’t sign EPA by October 1 but how prepared are we when some clauses are still not agreed upon?” she asked.
Ambassador Nathan Irumba a lead negotiator and former Ugandan envoy to Geneva said the preferences have not helped the EAC partner states to up their production. “Is the framework development friendly? I don’t think this EPA is helping regional integration. They are just about getting market for their products and get us out of business,” said Irumba.
Moses Ogwal the Private Sector Foundation policy and advocacy nanager said Uganda would lose out if it doesn’t sig the EPAs. “To us from the private sector, October is very near and something must be done before we lose out,” said Ogwal.
However, Emmanuel Mutahunga the senior principal commercial officer in the Ministry of Trade who has been at the forefront of the negotiations said some progress had been made.
“Our focus was to strengthen regional integration which is successful. The EAC and EU both agreed to create market access for their products. Some products had tariffs on them but are now zero rated,” he said.
He said signing of EPAs is geared towards avoiding trade disruption between ACP and the EU after the expiry of the Cotonou agreement. “The EAC market access offer constitutes 82.6 percent liberalization of imports from the EU over a 25 year period while raw material and capital goods attract zero tax rates under the EAC customs protocol,” he said.
Mutahunga said intermediate input attracts 10 percent import duty. He observed that 17.4 percent of the imports from the EU are not included under the liberalized regime.
He said areas that had so far been discussed include the economic development, agriculture, Rules of Origin, and Export taxes. He said areas still under contention include the Most Favored Nations clause, and the dispute settlement.
“We all agreed that further work is needed to conclude the issue of Rules of Origin and the Most favored Nation clause,” he said.
Mutahunga noted that the EU still remains an important market for the EAC. “The EU is the second major destination of Uganda’s products and one of the leading inflows of imports and investment,” he said. He acknowledged that the negotiations have taken long to conclude but is worth the wait.
Source: http://www.newvision.co.ug/news/653120-eu-sets-epa-deadline-signing-for-october.html
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Can Africa make it?
Without strong industries to create jobs and add value to raw materials, African countries risk remaining shackled by joblessness and poverty.
Côte d’Ivoire and Ghana produce 53% of the world’s cocoa. But the supermarket shelves in Abidjan and Accra, their respective capitals, are stacked with chocolates imported from Switzerland and the UK, countries that do not farm cocoa.
This scenario is repeated throughout the continent in different contexts. For example Nigeria, the world’s sixth-largest producer of crude oil, exports more than 80% of its oil but cannot refine enough for local consumption. In 2013 it spent about $6 billion subsidising fuel imports, estimated Finance Minister Ngozi Okonjo-Iweala late last year.
In such apparently baffling scenarios lies one of Africa’s greatest challenges – and opportunities. The continent possesses 12% of the world’s oil reserves, 40% of its gold and between 80% and 90% of its chromium and platinum, according to a 2013 report from the UN Conference on Trade and Development (UNCTAD). It is also home to 60% of the world’s underutilised arable land and has vast timber resources. Yet together, African countries account for just 1% of global manufacturing, according to the report.
This dismal state of affairs creates a cycle of perpetual dependency, leaving African countries reliant on the export of raw products and exposed to exogenous shocks, such as falling European demand. Without strong industries in Africa to add value to raw materials, foreign buyers can dictate and manipulate the prices of these materials to the great disadvantage of Africa’s economies and people.
“Industrialisation cannot be considered a luxury, but a necessity for the continent’s development,” said South Africa’s Nkosazana Dlamini-Zuma shortly after she became chair of the African Union in 2013.
This economic transformation can happen by addressing certain priority areas across the continent.
First, African governments, individually and collectively, must develop supportive policy and investment guidelines. Clearly-defined rules and regulations in the legal and tax domains, contract transparency, sound communication, predictable policy environments, and currency and macroeconomic stability are essential to attract long-term investors.
Moreover, incentives – such as tax rebates to multinational companies that provide skills training alongside their commercial investments – will help local economies grow and diversify. In addition, each industrial policy should be tailored to maximise a country’s comparative sector-specific advantages.
Mauritius, one of Africa’s most prosperous and stable countries, provides important lessons for other African countries. In 1961 this Indian Ocean island nation was reliant on a single crop, sugar, which was subject to weather and price fluctuations. Few job opportunities and yawning income inequality divided the nation. This led to conflict between the Creole and Indian communities, which clashed often at election time, when the rising fortunes of the latter became most apparent.
Then from 1979 on the Mauritian government took practical steps to invest in its people. Realising that it was not blessed with a diversity of natural resources, it prioritised education. Schooling became the critical factor in raising skills and smoothing the lingering religious, ethnic and political fractures remaining since independence from Britain in 1968. Strong governance, a sound legal system, low levels of bureaucracy and regulation, and investor-friendly policies reinforced the country’s institutions.
Under a series of coalition governments, the nation moved from agriculture to manufacturing. It implemented trade policies that boosted exports. When outside shocks hit – such as loss of trade preferences in 2005, and overwhelming competition from Chinese textiles in the last 15 years – it was able to adapt with business-friendly policies.
From being a mono-economy reliant on sugar, the island nation is now diversified through tourism, textiles, financial services and high-end technology, averaging growth rates in excess of 5% per year for three decades. Its per capita income also rose from $1,920 to $6,496 between 1976 and 2012, according to the World Bank.
While much responsibility lies with African governments, the continent’s private sectors must play their part in improving co-ordination between farmers, growers, processors and exporters to increase competitiveness in the value chain and ensure the price, quality and standards that world markets demand.
Tony Elumelu, chairman of Nigerian-based investment company Heirs Holdings, and Carlos Lopes, the executive secretary of the United Nations Economic Commission for Africa, advocate what they call “Africapitalism”, a private sector-led partnership focused on the continent’s development. “Private-sector business leaders must also do more to tackle poverty and drive social progress by ensuring that long-term value addition – as well as short-term gain – is built into their business model,” they wrote in a joint article for CNN in November 2013.
Next, African countries must pursue beneficial economic strategies with their neighbours. Regional integration would help reduce the regulatory burden facing African industries by harmonising policies and restraining unfavourable domestic programmes. It would boost inter- and intra-African trade and accelerate industrialisation.
The right recipe for regional integration requires countries to concentrate on commodities in which they have a competitive advantage. For example, Benin and Egypt could concentrate on cotton, Togo on cocoa, Zambia on sugar – each country trading in bigger regional markets.
Agriculture, which employs over 65% of the continent’s population, according to the World Bank, could become a springboard towards industrialisation. It can provide raw materials for other industries, as well as promote what economists call backward integration, in which a company connects with a supplier further back in the process, such as a food manufacturer merging with a farm.
This is already under way in Nigeria. The diversified BUA Group “will process 10m tonnes of cane to produce 1m tonnes of refined sugar annually”, according to Chimaobi Madukwe, the company’s chief operating officer.
Sustained investment and improvements in infrastructure are also needed throughout the continent. Countries everywhere, not just in Africa, cannot establish competitive industrial sectors and promote stronger trade ties if saddled with substandard, damaged or non-existent infrastructure.
“Developing industries require sustained electricity supply, smooth transportation and other very basic infrastructure facilities, which at present are still not enough to ensure operations,” said Xue Xiaoming, vice-chairman of the Nigerian Chinese Chamber of Commerce and Industry.
Africa’s poor roads, railways and other transport networks, faulty communications, and unreliable and insufficient energy result in high production and transaction costs. It takes 28 days to move a 40-foot container from the port of Shanghai, China to Mombasa, Kenya at a cost of $600, while it takes 40 days for the same container to reach Bujumbura, Burundi, from Mombasa at a cost of $8,000, explained Rosemary Mburu, a consultant at the Institute of Trade Development in Nairobi. “This represents double the time at 13 times the cost,” she said.
Public-private partnerships (PPPs) should be developed to stimulate massive investments in infrastructure, which could have a multiplier effect on economic growth. Finally, without education the continent cannot succeed in its drive towards industrialisation. PPPs should be pursued in this arena too, because governments often lack the skills and finances to carry out technical training. Private sector companies would benefit from a skilled and competent workforce.
The country would benefit from a stronger economy blessed with less unemployment and higher incomes. Historically, countries have succeeded by focusing on education in science and technology and promoting research. For example, in the 1960s and 1970s South Korea – like Singapore, Taiwan and Hong Kong – reformed its education system and made elementary and high school compulsory. From an adult literacy rate of less than 30% in the late 1930s, South Korea now boasts a literacy rate of nearly 100% and has one of the highest levels of education anywhere in the world, according to UNESCO, the UN’s education agency. Its highly- skilled population has helped South Korea to become one of the world’s foremost exporters of high-tech goods.
Africa, the world’s youngest continent, is currently undergoing a powerful demographic transition. Its working-age population, which is currently 54% of the continent’s total, will climb to 62% by 2050. In contrast, Europe’s 15-64 year-olds will shrink from 63% in 2010 to 58%. During this time, Africa’s labour force will surpass China’s and will potentially play a huge role in global consumption and production. Unlike other regions, Africa will neither face a shortage in domestic labour nor worry about the economic burden of an increasingly ageing population for most of the 21st century.
This “demographic dividend” can be cashed in to stimulate industrial production. An influx of new workers from rural areas into the cities, if harnessed correctly and complemented with the appropriate educational and institutional structures and reforms, could lead to a major productivity boom. This would then increase savings and investment rates, spike per capita GDP, and prompt skills transfers. Reduced dependency levels would then free up resources for economic development and investment.
Without effective policies, however, African countries risk high youth unemployment, which may spark rising crime rates, riots and political instability. Rather than stimulating a virtuous cycle of growth, the continent could remain trapped in a vicious circle of violence and poverty.
The continent’s youth represent a huge potential comparative advantage and a chance to enjoy sustained catch-up growth. Or they could remain shackled in joblessness and become a major liability.
Africa is ripe for industrialisation. A strong and positive growth trajectory, rapid urbanisation, stable and improving economic and political environments have opened a window of opportunity for Africa to achieve economic transformation.
Ronak Gopaldas works as a sovereign risk analyst at Rand Merchant Bank in Johannesburg, South Africa.
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UN Group Chairs outline priorities for Sustainable Development Goals
The co-chairs of a UN group tasked with drafting a blueprint for sustainable development goals (SDGs) released a list of 19 focus areas on Friday, following a year of discussions. The effort is part of a broader process to develop a post-2015 development agenda that would replace the current Millennium Development Goals, which are soon set to expire.
The plan to develop a set of SDGs – stemming from an initiative originally tabled by Colombia and Guatemala – was a key result of the UN Conference on Sustainable Development (Rio+20), held in June 2012 in Rio de Janeiro, Brazil. Discussions in this area have since been held under the Open Working Group (OWG) on Sustainable Development Goals, which was established in January 2013 by the UN General Assembly.
For the working group, UN member states decided to use a constituency-based system of representation, meaning that most of the seats in the group are shared. In order to remain inclusive, the group was instructed to develop modalities to engage stakeholders, civil society, and the scientific community.
An accompanying letter penned by OWG Co-chairs Macharia Kamau, Permanent Representative of Kenya, and Csaba Kőrösi, Permanent Representative of Hungary, indicates that these 19 focus areas represent a summary of input provided by member states and stakeholders during the group’s eight thematic discussion sessions.
The duo also suggests that poverty eradication, inequitable international development, and environmental protection “were among the most pressing sustainable development challenges facing humankind this century.”
“It is our view that the international community could realise greater impacts of the much sought transformative change if further actions are taken in these focus areas of sustainable development. This is necessary to build prosperous, peaceful and resilient societies that also protect the planet,” their letter read.
Not a zero draft
Each of the 19 focus areas in Friday’s report highlights the inter-linkages to other issues, in accordance with the internationally agreed-upon objective to create a set of universal development goals that integrate and balance environmental, social, and economic concerns.
The co-chairs’ letter emphasises that these focus areas do not constitute a “zero draft” or a first working version, indicating that the topics included were not “exhaustive.” Given the international community’s intention to have a limited set of goals, experts suggest the 19 areas will presumably need to be whittled down. One option, for instance, would be to assimilate complementary topics.
Friday’s release also included a progress report outlining in detail the substance of the thematic discussions. The text reveals that, initially, the group sought to formulate a vision and narrative to frame the selection of proposed goals, but later moved to pin these down directly, including identifying associated targets.
Commenting on the process, Saskia Hollander, a research editor for NGO The Broker, suggests that international divisions remain on targets and associated finance. “While the North opts for a clear and negotiable list of goals and targets, the G-77 is reluctant to already commit itself to goals and targets and stresses that the issue of finance needs to be solved first,” she wrote.
Hollander also speculates as to whether the emerging economies will continue with this rhetoric or instead move away from the conventional development model towards alternative finance paradigms – such as South-South cooperation to harness trade and investment.
Trade as an enabler of sustainable development
Among the topics and targets listed for consideration, the focus areas document mentions the broad role of an open rule-based trading system in fostering sustainable growth, and as a means of implementation. More specifically, this includes references to addressing damaging subsidies, although ideas are also put forward around the need for policy space to support industrial development, as well as promoting new industries.
The section on marine resources, oceans, and seas, for example, suggests eliminating all harmful fisheries subsidies, as well as combatting unreported and unregulated (IUU) fishing. The energy area includes the phasing out of “inefficient fossil fuel subsidies that encourage wasteful consumption,” while the food security and nutrition headline puts forward addressing “harmful agricultural subsidies.”
The progress report, however, for its part notes that OWG members discussed the fact that trade-related issues – such as agricultural and fisheries subsidies – are also being addressed within the framework of the WTO.
The body will now continue with the second phase of its work in five negotiation sessions scheduled from early March to mid-July, and stakeholders have been solicited for input through various liaison platforms. The stated deliverable will be a report containing SDG proposals, to be presented for debate at the 68th session of the UN General Assembly in September 2014.
Click here for more information on the Open Working Group on Sustainable Development Goals
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The great China ‘takeover’ of Africa is greatly exaggerated
Investors from South Korea to Brazil and from India to South Africa are the new kids on the African block. Nor have old investors like the US, UK, France and Australia pulled out.
Thatch covers the wooden roof of The Clubhouse in Abuja and the tables are decorated with animal-print cloths. The casual restaurant in Nigeria’s capital looks archetypally African, but it is also distinctly Lebanese, serving dishes such as hummus and shish kebabs.
Early on a Saturday night, a young man in traditional clothes taps on his smart phone while manager Assaad Abi Antoun sips Lebanese coffee at a nearby table. “Lebanese can do hospitality at the top level,” says Mr. Antoun, who has been here for four years.
The Lebanese are well known in West Africa for owning posh hotels, restaurants, and grocery stores. But, like other immigrant groups working on the continent, the Lebanese are not nearly as famous worldwide for investment in Africa as the Chinese, who are popularly believed to be “taking over Africa.”
The great China takeover, however, may be something of a myth, according to Bright Simons, an honorary fellow at the Ghana-based IMANI Center for Policy & Education. China is Africa’s biggest trading partner – it took the top spot from the United States in 2009 – and a large source of capital. Trade between Africa and China, which totaled $10.5 billion in 2000, ran $166 million in 2011.
But Canadians, Americans, Britons, the French, and Australians still represent a heavy footprint in Africa. And a plethora of investors from other emerging economies are becoming more integrated into Africa’s social and political life, Mr. Simons says. While not eclipsing China, these new kids on the Africa block are showing a dynamism previously hidden by China’s shadow.
African trade with South Korea and Brazil has moved from single-digit billions in 2000 to more than $25 billion each in 2011. (Korean giant Samsung peppered the continent with $150 million in shops, technology, and employment between 2010 and 2012, the company says.) India‘s footprint is small, but growing at 400 percent a year, according to Páidrag Carmody at Trinity College Dublin in his 2013 study “The Rise of the BRICS in Africa.”
Investment by the emerging economic powerhouses of Brazil, Russia, India, China, and South Africa (BRICS) has doubled since 2007 in Africa, though numbers are notoriously poor. A 2013 United Nations study shows African foreign direct investment grew 5 percent, to $50 billion, while shrinking in nearly every other region.
Africa’s ‘rise of the rest’
Africa auctions off mining and oil exploration to a “broad array of companies from around the world that you did not see before,” says Todd Moss, a former senior State Department official dealing with Africa who is now at the Center for Global Development in Washington, D.C.
The push is being called a “rise of the rest” for Africa, or a new “South-South” partnership. Partly the story is of high rates of growth. New “greenfield investments” – business start-ups – from South Africa and the United Arab Emirates have eclipsed those of China, according to a new Ernst & Young study.
“People have said China is bolstering its ‘soft power’ through the use of charitable projects, Confucius Institutes, donations of medicines, etc.,” Simons says. “But the truth is that most of these projects are lackluster.”
To be sure, China’s role in Africa will never be insignificant. Large-scale symbolic projects such as the highway across Nigeria or the new African Union headquarters in Addis Ababa, built by China at a cost of $200 million and the tallest structure in Ethiopia’s capital, are hard to miss. With trillions in cash reserves and few legal restrictions on public-private partnerships, China’s presence in Africa grows daily.
But the idea that China and the West are the only competitors in a battle for Africa’s resources and markets is outdated, says Ben Payton, an Africa analyst at Maplecroft, a Britain-based global risk analysis company. “In addition to Africa’s traditional partners in the West, there is growing interest in Africa’s resource wealth from companies in countries such as Brazil, India, Singapore, and South Korea,” Mr. Payton says. “By some measures, Malaysia provided more foreign investment in Africa than China last year.”
Nations like Malaysia appeal to African states, says Mr. Moss, the former US-Africa trade official, as an “Asian model” that emphasizes strong political control and wealth. “Americans want both political openness and open markets, but Asians stick to a commercial relationship,” he says.
With only Asia growing faster as a region than Africa, foreign investment can be successful on the continent despite troubles such as constant power outages and muddled trade laws, according to Thomas Hansen, a senior Africa analyst at Control Risks, a security assessment firm. “It’s one of the few places in the world now where you can get a relatively high return on your capital,” he says.
South Africa understands
In Nigeria, Africa’s most populous country, with more than 160 million people, Indians own many of the supermarkets and computer shops. South Koreans are well known for making affordable electronics available. Brazil and Russia are growing players in Nigeria’s gas and its 2.2 million-barrel-a-day oil export industry, the largest in Africa.
South Africa, the largest economy in Africa, stands out as one of the most successful investors, leading the telecommunications industry on the continent and building shopping malls and supermarkets, according to Simons of IMANI. South African investment tends to be visible in terms of social impact, he adds.
“South Africa has the exceptional capacity to understand Africa,” he says. “South African investments tend to be savvy.”
At a cafe in Abuja on a Sunday afternoon, waitress Becky Utase flips her BlackBerry in her hand. Despite rapid economic growth, the African continent is still the poorest in the world. Ms. Utase says foreign investment only matters to her if it somehow helps Nigerians live better lives. Mobile phone networks, she adds, mean the world to her.
Before cellphones, much of Nigeria and the continent was not connected by land lines. Utase says she remembers when posted letters or physical visits were the only way to keep in touch. “Communication is easier,” she adds, sitting on a couch overlooking her dining customers on the patio. “Even work is easier. Back in the day all business needed to travel.”
South Africa’s MTN leads the telecommunications industry, and other major phone companies in Africa are based in the United Arab Emirates and India. Nigeria’s own Globacom Ltd. provides mobile phone service in three other West African countries.
All these non-Chinese telecom companies, however, sell equipment such as handsets, headphones, and chargers made in China. Among the many innovations in mobile technology especially suited for Third World customers are popular prepaid flash modems, almost exclusively produced by China’s behemoth Huawei Technologies.
Anti-China platforms
People in Africa often say they like China because the country’s investors build roads, the needed predecessor to development and economic growth. But that doesn’t necessarily translate into winning hearts and minds, according to Payton, the Africa analyst.
“Chinese companies are generally far less concerned with respecting internationally recognized labor standards than their Western counterparts,” he says. “As a result, workforces and local communities in countries such as Zambia have become increasingly hostile to Chinese employers.”
This hostility feeds on itself when African governments use it to distract the public from their shortcomings, according to John Campbell, former US ambassador to Nigeria now at the Council on Foreign Relations in New York.
Both Zambia and Malawi have elected presidents who ran on anti-China platforms.
“The tendency,” says Mr. Campbell, is “to blame the Chinese for certain domestic shortcomings, particularly about whatever government is in power.”
The main difference between Chinese investors and all the rest, according to Mathew Agabi, who works at a popular Indian-owned supermarket in Abuja, is that Chinese companies are known for importing their own workers, and that angers many Nigerians. Locals employed by Chinese companies also are expected to work what Nigerians call “slave hours.”
When Chinese companies don’t hire locals and teach them technical know-how, Mr. Agabi says, they leave behind a community of workers that can’t handle or maintain high-end operations. “South Korean companies don’t have those issues,” he says.
Chinese investors are not alone in angering Africans. Nigerians complain that most foreign companies may hire a majority of locals, but then give choice positions to expatriate workers. Nigerians particularly loathe Western clothing companies that prefer to open factories in Asia and overlook a massive pool of unemployed laborers in Africa. “They should build factories,” Agabi says.
Investment anxiety, however, targets China because it tends to be the least accessible culturally, according to Payton. Few Africans speak Mandarin, and many fear that Chinese investments allow African governments to evade Western demands for compliance with human rights standards.
“In the long term, there is a risk that anger at perceived Chinese exploitation could escalate into a perception that China’s political and economic clout enables it to exert a form of neocolonial domination over Africa,” he says.
On the other hand, he adds, China has championed poverty-alleviation programs at home and could serve as an example for policymakers in Africa.
“Chinese investment is not only providing Africa with new infrastructure and new sources of capital,” he says. “It is also altering the horizons of policymakers and driving a new confidence in the continent’s economic outlook.”
Back at The Clubhouse in Nigeria, manager Antoun says China may not be literally taking over Africa, but its presence is certainly palpable. A few years ago, Antoun says, he had one-fifth as many Chinese customers. Most of their work is in construction, he adds, and infrastructure draws other investors.
When his place opened about seven years ago, it had been a canteen for a construction company, without air conditioning, reliable electricity, or even a fan.
“There was nothing, from decoration to infrastructure,” he says.
Antoun is not concerned that Chinese investors will drive others out because the Chinese tend to keep to themselves and avoid businesses with a high public profile, he says. In Nigeria, he adds, foreign companies struggle more with dealing with the country’s chaotic business policies and poor infrastructure than competing with each other.
Hurdling those barriers, he says, is one thing Lebanese excel at. But he is sardonic about his reasons for working in Africa. The Nigerian economy is growing more than four times as fast as the Lebanese economy, according to the CIA World Factbook, and insecurity in the Middle East is making things worse. “We have to do something outside [Lebanon],” he says, lifting a single finger in the air, “because the chances in Lebanon are between zero and one.”
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African Ministers call for increased employment impact of infrastructure investments
Ministers gathered at the 15th Regional Seminar of Labour-based Practitioners in Yaoundé called for increased participation of local enterprises and people in infrastructure development in Africa as a key tool to tackle the un- and underemployment challenge.
Their Ministerial Declaration made in Yaoundé, the capital of Cameroon, on 25th February 2014 includes nine commitments in which they pledge to put in place adequate institutions with coordinating functions made possible through political support at the highest level to accommodate the multi-sectoral character and ensure efficient governance of labour-based programmes.
They will furthermore strive for innovative financial mechanisms fed by specific national funding to increase substantially the scale and impact as well as the sustainability of labour-based programmes.
They call on Regional Economic Communities (RECs) and the African Union to endorse the conclusions of the Ministerial Meeting and Seminar as an action that contributes to poverty reduction and job creation, and ask them to make a large dissemination during upcoming events including the follow-up to the Ouagadougou Summit on Employment, Poverty Eradication and Inclusive Growth, the OUAGA+10.
The Ministers acknowledged with satisfaction that increasingly more countries have made firm commitments to initiatives with employment creation potentials. They call on development partners, particularly the African Development Bank for less conditionality, to continue their commitment and increase their funding of job creation components in all infrastructure development programmes.
They call on the ILO, in close collaboration with regional and sub-regional economic communities, to put in place a monitoring and knowledge-sharing mechanism to document and disseminate all known initiatives in Africa and in the world to countries and development partners with a view to improve knowledge sharing and advocacy of labour-based approaches in development programmes.
The 15th Regional Seminar of Labour-based Practitioners started on 24 February under the theme of “Labour-Based Approaches to Infrastructure: From Policy to Action for Job Creation”. The ministerial delegations (Benin, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Congo, Democratic Republic of Congo, Ghana, Liberia, Senegal, South Africa, Tunisia and Uganda) and the 400 participants who were first reviewing the progress made on labour-based programmes since the Accra Declaration of 2011, continued to deliberate on the four themes of:
National Policies and Decentralisation
Capacity Building and SME Development
Application of Labour-Based Approaches in different fields
Innovations and Knowledge-Sharing; and
cross-cutting themes of gender issues and the challenges of HIV/AIDS.
Source: http://www.ilo.org/addisababa/media-centre/news/WCMS_236662/lang–en/index.htm
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Next IPAP version drafted, says Minister Davies
Trade and Industry Minister Dr Rob Davies says a draft of the next iteration of the Industrial Policy Action Plan (IPAP) has been prepared.
Minister Davies was addressing a post State of the Nation media briefing held on Tuesday by ministers of the Economic Sectors and Employment and Infrastructure Development cluster.
“IPAP has always been a three-year rolling action plan. It is not a vision document. What I can say is that inside the Department of Trade and Industry (dti), we’ve done our work.
“We’ve prepared a draft but IPAP is not a policy document or action plan of the dti – it’s of government as a whole, so we have to take it through government processes. We are ready to launch it at the appropriate time,” he said.
The dti launched the pdf fifth iteration of IPAP (2.38 MB) , which includes specific action plans to promote industrial growth and reduce unemployment, in April last year. Today’s briefing was an opportunity for government to give an overview of progress made by the cluster under the IPAP.
Investment incentives had spurred approximately R143 billion in private sector investments, creating around 144 000 jobs in the process.
In the past two years, substantial diversification of the auto industry – led by the recent establishment of two new minibus-taxi assembly plants – has been recorded.
“We note the appetite for investment in the auto sector,” said Economic Development Minister Ebrahim Patel.
New investments and developments in the automotive sector include BMW SA introducing a third shift at its Rosslyn plant, and Toyota SA opening a new Ses’fikile tax assembly line in Durban, as well as a R363-million investment in a parts distribution warehouse – the largest in Africa.
The South African labour market has continued to recover from the 2008 financial meltdown.
In 2013, employment climbed by 653 000 or 4.5%. Employment now totals 15.2 million the highest level ever. Since 2009, employment has risen by 1.3 million.
In the fourth quarter of 2013, the investment rate climbed to 19.2% of GDP compared to 18.9% a year earlier and 18.5% in the fourth quarter of 2010.