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Five questions answered on Africa’s rising economic growth
There has been a lot of talk about Africa’s rising economic prosperity and whether it is sustainable and deeply rooted in reducing extreme poverty across the continent. So, I sat down to answer some basic fundamental questions that I often get asked about Africa’s growth and development.
Why does Africa show the highest growth prospects out of any continent in the world?
There is no doubt that favorable commodity prices have and will be a key driver of growth for sub-Sahara Africa. The so-called commodity super-cycle has benefited traditional oil exporters, such as Nigeria and Angola, and new ones, like Ghana. Demand for natural resources from emerging markets, especially China, has increased in the last decade and remains important. As noted in the BP Energy Outlook 2035, Africa will remain an important producer of oil and natural gas, accounting for 10 percent of global oil and 9 percent of natural gas production in 2035.
In addition, the continuation of good medium-term policies and structural reforms bodes well for future growth in the region. Africa has “democratized” to some extent, and violence and armed conflicts have decreased in spite of a few hot spots. Half of the world’s future population growth will be driven by Africa (not because of higher fertility, which is declining, but because of longer life expectancy). This trend could lead to a “demographic dividend” of an adult population of 800 million by 2030 (compared to 460 million in 2010). Africa’s rapid urbanization and burgeoning middle class could generate hundreds of millions of consumers.
To sustain its growth, however, Africa will need to continue reducing poverty and inequality, and step up the transformation of its economy. As noted by Dani Rodrik, African countries, unlike East Asian countries, have not yet been able to turn their farmers into manufacturing workers, diversify their economies, and export a range of increasingly sophisticated goods. Moreover, many African countries are joining the resource-rich country club and with it come not only opportunities but also challenges. Good governance will be needed to enable future generations of Africans to benefit from this new wealth. Low global interest rates and high commodity prices have opened a window of opportunity for African countries to reform. This window will not always remain opened, and reform is needed now.
What role does China play in Africa’s economic development?
China’s economic performance shows that a transformational agenda can succeed and lift a large segment of the population out of poverty. Beyond being a benchmark, China has become the largest single trading partner for sub-Saharan Africa, with a 17 percent share of total trade. In comparison, India has a 6 percent share and Brazil, a 3 percent share. The so-called Group of Five (Indonesia, Malaysia, Saudi Arabia, Thailand and the United Arab Emirates) accounts for only 5 percent of sub-Saharan Africa’s total trade.
China also accounts for 16 percent of total foreign direct investment to sub-Saharan Africa and has become a key investor and provider of aid. There is no doubt that China is interested in Africa’s natural resources (such as copper in Zambia and oil in Nigeria and Sudan), but it is expanding its focus. Over 2,000 Chinese enterprises are investing and developing in more than 50 African countries, and South Africa is the leading recipient of Chinese foreign direct investment.
The key advantage of China in Africa is speed. Chinese firms are able to deliver quickly and work in close coordination with their financial and other national partners. Speed is a big comparative advantage in Africa. For instance, the continent has large infrastructure needs and African policymakers are under pressure to deliver. They are tempted to agree to an offer to build a coal-generated power plant in a couple of years when their population and businesses are getting increasingly disgruntled by sometimes daily power outages. They agree to this at the expense of adopting less polluting technologies.
What are the African countries to which we should being paying close attention?
South Africa has always been a key recipient of foreign investment given the sophistication of its economy.
In addition, natural resource-rich countries in Africa such as Angola and Nigeria will remain a key destination of foreign investment, especially given that the number of resource-rich countries will only increase with recent advancements in offshore oil exploration and extraction. In fact, Japanese Prime Minister Shinzo Abe recently visited Mozambique to secure natural gas contracts. Countries in the East African Community, such as Kenya, Uganda and Tanzania, are now discovering oil. Metal-exporting countries such as Burkina Faso, Ghana and Tanzania are also attractive.
As a non-natural resource-rich country, Ethiopia has a large population of more than 80 million people, high GDP growth, and a government-led strategy to attract foreign investment in some sectors. Rwanda is a smaller economy but it is growing rapidly and is trying to leverage its membership to the East African Community. In West Africa, Côte d’Ivoire is fast recovering from armed conflict, and Ghana remains a darling of foreign investors.
What are key areas of opportunity to capitalize on for Africa’s development?
Large infrastructure projects in Africa need foreign partners. Infrastructure spending in Africa is estimated to reach $93 billion per year, and tax revenues and other domestic resources will not be enough to fill the financing gap for infrastructure projects.
Information and communications technology (ICT) needs remain high in spite of the rapid growth in mobile phones and mobile banking. Major companies, including Google, Microsoft, Huawei and GE, are betting on the continent and investing in research and development.
The rising African middle class is also attracting investors in the retail sector. For instance, French supermarket chain Carrefour and American big box store Walmart have expanded their operations to Africa. Banking is also attractive given the low financial depth in Africa. Foreign investors are now innovating to focus on urban centers with a high potential for consumer spending. In 2020, the household spending of Alexandria, Cairo, Cape Town, Johannesburg and Lagos will total $25 billion dollars.
One untapped area is agriculture for major investment. Africa has about half of the planet’s arable land and there are potentially large expected returns from this sector, especially if its infrastructure gap is reduced.
Finally, portfolio investments in equity markets, domestic bond markets, and Eurobond markets are increasing and private equity firms are increasingly investing in the region. In 2013, the MSCI African Frontier Market (equity) index was up 28.5 percent and $10.7 billion of sovereign bonds were issued by capital markets in Africa. There are now five times more sovereign ratings in Africa than there were in 2000.
Is the whole continent progressing or are only a few countries?
The extent to which overall growth is shared by the 54 countries in Africa is quite impressive. This being said, some trouble spots remain. While some fragile countries like Liberia, Sierra Leone and especially Rwanda have been able to move forward from unfortunate legacies of violence and in some cases even genocide, the situation in other countries is worsening, particularly in the Central African Republic and South Sudan (which is oil-rich). In spite of recent progress, the situation also remains fragile in the east of the Democratic Republic of the Congo and in Mali, and press reports often remind us of the piracy situation in Somalia’s Gulf of Aden and terrorist acts by al-Shabab. Even in the north of Nigeria there is violence attributed to Boko Haram as well as piracy in the Gulf of Guinea. There is a need to build an African-owned framework and response mechanism to prevent and resolve violent conflict and crises in the continent.
African efforts to increase economic integration are helping to strengthen regional growth as well. Economic and trade integration across Africa will help foreign investors access larger markets and reduce transaction costs, including costs associated with regional infrastructure projects. African countries are trying to strengthen regional integration through regional economic communities and are negotiating free trade agreements and customs unions with the goal of ultimately having common currencies. We are far from one common African currency for the continent but we are beginning to some steps forward in this area. The East African Community – which includes Burundi, Kenya, Rwanda, Tanzania and Uganda – is a market of 150 million people and is set to become a monetary union soon. The former French colonies in Africa all use the same currency, which is pegged to the euro and have common institutions.
What is striking is that there is a consensus in African policy circles that we are witnessing Africa’s moment. The challenge will be in implementing the policy roadmap quickly as there is little time left for transformation. The World Bank notes that half of the region’s population is under 25 years of age. Each year between 2015 and 2035, there will be 500,000 more 15-year-olds than the year before. The challenge will be to transform this youth bulge into an opportunity.
Amadou Sy is a senior fellow in the Africa Growth Initiative and currently serves as a member of the Editorial Board of the Global Credit Review. His research focuses on banking, capital markets, and macroeconomics in Africa and emerging markets.
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Technical officials discuss EAC-USA Trade and Investment Partnership in Bujumbura
Technical Officials from the East African Community (EAC) and the United States (U.S.) met 12 to 15 February 2014 in Bujumbura, Burundi to discuss Trade Africa and the EAC – U.S. Trade and Investment Partnership (TIP). In particular, the Technical Officials discussed among others, the Ministerial guidance provided in August 2013; AGOA; Regional Investment Treaty; Trade Facilitation; Trade Capacity Building, and Commercial Dialogue.
Both Parties reviewed a summary of the last EAC – U.S. Trade Ministerial Meeting held on the sidelines of the August 2013 AGOA Forum in Addis Ababa, Ethiopia. Both Parties also discussed the need to make substantial progress on all areas of Trade Africa and the Trade and Investment Partnership in advance of the first U.S.-Africa Leaders Summit in Washington, DC on August 5 and 6, 2014. The U.S. and EAC teams agreed to work as expeditiously as possible to create concrete actions and outcomes in all areas under discussion by the time of the Leaders’ Summit.
Both Parties also discussed the Obama Administration’s review of the African Growth and Opportunity Act (AGOA) in advance of its scheduled expiration in September 2015. The U.S. underscored the Obama Administration’s commitment to a seamless renewal of AGOA and described the process by which the U.S. Congress would have to develop and pass legislation in order for AGOA to be re-authorized.
The U.S. noted the review offers an opportunity to assess the future of the U.S.-Africa trade and investment relationship from a broad and holistic perspective, to include an assessment of mechanisms to make AGOA trade preferences more effective and identification of complementary, non-tariff focused efforts to support Africa’s integration into the global trading system.
The U.S. also noted the economic conditions in Africa are today substantially different from when AGOA was enacted in 2000. Africa’s evolving trading regimes with other global partners is also being considered as part of the U.S. AGOA review.
Both Parties also discussed the African countries’ recommendations for AGOA renewal that was presented during the 2013 AGOA Forum in Addis Ababa, and the U.S. affirmed these African views are being considered as part of the Administration’s comprehensive review. The U.S. and EAC also discussed strategies to increase the volume and number of products exported from EAC Partner States to the U.S. as well as to increase the presence and competitiveness of U.S. businesses in the EAC.
Both Parties continued exploratory discussions on a proposed Regional Investment Treaty, discussed the approach on Trade Facilitation, SPS and TBT, and agreed on a plan for the next steps to be undertaken in March and April 2014.
On Trade Capacity Building, the USAID presented a summary of their current program under the new USAID East Africa Trade and Investment Hub, highlighting four areas of activity: deepening regional integration through support to the EAC Secretariat; promoting regional food security through improved markets and market information; reducing the time and cost of trade across the region; and increasing exports under AGOA through increased linkages between U.S. and African businesses and trade associations.
Both Parties also discussed the recent and planned private sector engagement under the EAC-U.S. Commercial Dialogue.
The EAC noted the need for national and sectoral level private sector engagement under the Commercial Dialogue and the U.S. noted its regionally based Commercial Counselor plans upcoming travels to the EAC Partner States to discuss ways to deepen EAC and U.S. private sector cooperation.
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Azevêdo’s health-check on global trade: Growth recovering but restrictions on the rise
Director-General Roberto Azevêdo, in presenting his first global trade-monitoring report to WTO members on 17 February 2014, said that trade growth projections for this year are “much improved, hovering somewhere between 4.0% and 4.5%.” However, he said “407 new restrictive measures were reported during the review period,” affecting 1.3 % of world merchandise imports – valued at $240 billion. This is what he said:
Good afternoon everyone.
The Bali Package was an historic achievement, representing a significant boost for trade, growth and development around the world. But its true significance lies in what it allows us to do next – to conclude the Doha Development Agenda.
As we prepare to seize this opportunity in 2014, it is timely to look back on the challenges which emerged in the international trading environment in 2013 and to consider how members might respond.
You have all received my report on developments in the international trading environment which was circulated on 31 January. It was posted on the WTO website on the same date, according to approved procedures concerning unrestricted documents.
The report aims to provide Members with an assessment of a range of trade and trade-related issues and trends during the period from mid-October 2012 to mid-November 2013.
Put simply, it is a health-check on global trade – and I think the diagnosis is cautiously positive although there are still reasons to be concerned about trade restrictive measures. We were not in great shape last year – and we have picked up a few bad habits which we need to shake off. But overall trade growth is beginning to recover and we have a healthier outlook for 2014.
Before I go into detail on the findings of the report, I’d just like to give you some background on its preparation.
Preparing the Report
As in the past, the information on the measures included in this Report has been collected from inputs submitted by Members and Observers, as well as from other official and public sources.
56 Members replied to the initial request for information on measures taken during the period under review.
All country-specific information reflected in the annexes was then sent for verification to the delegation concerned. And if it was not possible to verify the information then this has been noted in the annexes.
I would like to thank those delegations who have participated in this important exercise.
Unfortunately, however, the number of Members that responded to the request for information on their new trade measures still remains small. In fact it slightly declined from 38% of the membership in 2012 to 35% in 2013.
Although many were also very helpful in responding to the request for verification of the accuracy of the information contained in the annexes, the reply rate was still only around 50% – which again is slightly down from last year’s report.
The lack of sufficient information has sometimes been a criticism of the monitoring reports – particularly when it comes to behind-the-border measures, including general economic support measures.
As a first step towards improved transparency, and following the proposal made by several members at last year’s meeting which was welcomed by all delegations, the Report includes a comprehensive overview of WTO notification obligations and the status of their implementation by members.
We should now consider what more we can do to improve the transparency of general economic support measures and the overall participation in the monitoring of such measures.
Findings of the Report
Let me now turn to some of the substantive findings of the Report.
The context is all important here. The backdrop to the review period was one of slow and uneven growth in the global economy. We should bear this in mind when considering our findings.
First, in terms of trade in goods, its volume expanded by less than 2.5% in 2013.
Growth projections for 2014 are much improved, hovering somewhere between 4.0% and 4.5% – but this is still below the historical average since 1990 of 5.5%.
We are, of course, keeping a close eye on recent developments in the global economy and their impact on these projections.
The WTO will be releasing its preliminary trade statistics for 2013 and updated forecasts for both 2014 and 2015 in early April.
Regarding developments in trade measures, there are two specific categories: trade remedy actions; and other trade measures.
Counting both categories together the Report shows that overall 407 new restrictive measures were reported during the review period.
This is compared to 308 in the same period a year earlier.
These new restrictive measures affect about 1.3% of world merchandise imports – valued at 240 billion dollars.
Moreover, they add to the existing stock of restrictions and other impediments to the flow of international trade.
Looking specifically at trade remedy actions – which were mostly anti-dumping and safeguard measures – we saw 217 initiations of new trade remedy investigations. This covers around 0.2% of world imports, and compares to 138 terminations of either investigations or existing duties covering around 0.1% of world imports.
As was the case in 2012, therefore, more trade remedy actions were initiated than were terminated in 2013.
Trade remedy activity is therefore clearly on the rise, and Members should reflect on what the causes of that might be.
The number of new other trade measures also increased from 164 in the previous year to 190 during the review period.
The majority of such new measures were applied to imports mostly in the form of import tariff increases and customs procedures, covering around 1.1% of world goods imports.
Compared to the trend in new restrictive measures, the number of new trade-facilitating measures reported by Members fell to 107 in 2013, well down from 162 a year earlier. These measures cover the equivalent of 1.4% of world merchandise imports – which is approximately 258 billion dollars.
These measures, plus the number of terminations of trade remedy actions, represent little more than one-third of the total measures covered in the Report.
This paints a rather unflattering picture of the ratio of trade restrictive measures to facilitation measures.
The Individual Trade Policy Reviews undertaken in 2013 show that some WTO Members are making genuine efforts to resist domestic pressures to erect trade barriers.
But we must acknowledge that the stock of current trade restrictions and distortions continues to accumulate.
I strongly believe we have a collective responsibility to attend to the risk posed by the cumulative effect of new and existing trade restrictions.
The Trade Facilitation Agreement passed in Bali takes on even greater significance against this backdrop – and it reinforces the importance of implementing that Agreement in a timely and efficient way.
Let me also draw your attention to the issues of regional trade agreements.
During the period covered by this Report, Members notified 23 new RTAs to the WTO, bringing the total number in force today to 250.
Negotiations on new RTAs are also continuing, in some cases between parties that collectively account for very substantial shares of world trade and GDP.
My view is that these initiatives are positive and are to be welcomed – but they can only ever be one part of the wider picture. Agreements such as these cannot be sufficient on their own to ensure gains which can be realised on a global scale. In fact, the proliferation of regulations and standards could multiply costs rather than reduce them.
As we all know, the multilateral trading system was never the only option for international trade negotiations. It has always co‑existed with, and benefitted from, other initiatives. They are not mutually exclusive alternatives.
As the RTAs progress and result in deeper liberalization and rules-making, the WTO must follow with an update of its own disciplines, so as to ensure a sound foundation for a level playing field to all Members.
We must think about how the two processes can move forward together to reduce costs effectively and to curb protectionism.
Issues and challenges
As I have said before, 2014 is a pivotal year for the WTO. It is the year that we will implement our first negotiated outcomes – and the year that the Doha Round is put back on track.
So, in closing, I would like to highlight some of the key issues and challenges that we face in moving forward with our work in 2014.
First, I have already made reference to the continued accumulation of trade restrictions and the new and significant developments in the area of RTAs. Both areas have significant ramifications for the evolution of the multilateral trading system and they merit priority attention by policymakers.
Second, I think transparency is another area where we should have a frank discussion. Clearly, better transparency of trade and trade-related measures is a key factor affecting all aspects of the WTO’s core functions.
This Report shows that there is considerable scope to improve the compliance with the many obligatory transparency mechanisms that exist and that underpin the effectiveness of WTO rules generally.
The sharing of information among Members is not just essential for the WTO’s surveillance activities through the Trade Policy Review Mechanism and the trade monitoring exercise. It is also essential for: the proper implementation of WTO agreements; avoiding unnecessary trade disputes; and completing successful negotiations.
Improving this aspect of the functioning of the WTO requires no new mandate; we simply have to be better at applying the existing rules. In this sense the Report is a call to action.
Third, the positive outcome of Bali creates an opportunity for you, the members, to take steps to reinvigorate the multilateral trading system.
Building on the commitment to multilateralism which Ministers showed in Bali, we should now consider how to create a better understanding of, and support for, the benefits of multilateral trade cooperation.
And in doing so we must always bear in mind the many remaining traditional trade barriers and distortions that persist in the trading system, and the need to address them.
So, Mr Chairman, that concludes the health-check.
Thank you all for listening. I look forward to our discussion.
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China and Africa must redefine new terms of engagement
In Africa, exports are booming and export markets have become more diversified.
Foreign direct investments have increased by a factor of six over the past decade. Private entrepreneurs have emerged as a dynamic force for change, driving innovation and transforming outdated business models. There is an emergent middle class, although its size is often exaggerated. For the first time in over a generation, the number of people living in poverty have fallen; fewer children are dying before their fifth birthday and more are getting into school.
Africa and the West
Africa has had 50 years of development partnership with the West and even though still continues to, but really, there is not much change experienced on the continent. This has sent a lot of frustration shared by people not only on the African continent but by people in the West as well. Questions are been thrown at the West as to why after several years and several billions poured into Africa, there has not been a significant change on the continent. This and other questions are very legitimate to be tabled before both the donor west and recipient Africa.
The most intriguing aspect is that, Africans themselves are up on their toes and asking questions as to whether they are better off without the West/traditional donors or are there alternatives to this model. Can we as Africans form a different development partnership which can bring us the change that we so seek?
The coming of China
For the past decade, there has been a new friend of Africa in town – that whom the whole people are pointing at, saying, – ‘I like that’; ‘I want that’. I am talking about China in Africa. For many Africa’s, China is now the number trading partner.
The country has emerged as Africa’s largest trading partner. Two-way trade has increased dramatically to an all-time high of $166.3 billion, triple the figure for 2006. Both imports and exports have registered impressive growth rates. According to estimates, there are around 800 Chinese firms in Africa, investing in the infrastructure, energy and banking sectors.
This enthusiasm has led Africa to sit at the same table with China, the new development partner. The China-Africa relation started dating back to the 1960s and 1970s. But the relationship came to the fore in 2006 when 48 African leaders attended a joint forum in Beijing. The Forum on China-Africa Cooperation (FOCAC) is the name of the joint meeting between the People’s Republic of China and the states of Africa. There have been five summits held to date, with the most recent meeting having occurred from July 19-20, 2012 in Beijing, China.
The Forum on China-Africa Co-operation (FOCAC) which was held historically on November 2006, marked the beginning of a new chapter of China-Africa relations. This forum held in Beijing saw in an enthusiastic attendance of about 43 African heads of states.
This however has created some form of schism especially between the West-Europe and China’s share of trade on the continent. Without doubt, China for the past decade has made a significant share of trade with the African continent. In 2014 and beyond, a lot more China would be seen as governments are seeking to sign new deals and enter into great deals – infrastructure deals with China.
The Critics
In an August 30, 2012 article published by the Express Tribune, it stated that “It is indeed ironic, that the very nations that divided up Africa and its peoples in the last quarter of the 19th century are accusing the Chinese of being neocolonialists. The original scramble for Africa took place between 1884 and 1885 following a conference in Berlin. As in other parts of the globe, the colonial powers left deep imprints on the continent. Some of the main problems that continue to plague Africa were perpetuated, nee fostered, by the colonial powers to further their own ends. The frequent outbreak of violence between Hutus and the Tutsis in Rwanda is one such example where Belgian policy favoured the minority Tutsis much to the chagrin of the majority Hutus. Post-independence, this historical sense of deprivation has often led to acts of ethnic cleansing carried out by the majority. Economic exploitation and policies favouring firms from the metropole were also promoted by the colonial powers”.
On the other hand, Chinese investment in the region is not based on extracting monopoly contracts for its firms. Similarly, in terms of development lending, as opposed to conditional lending by multilateral agencies (such as the World Bank) controlled by developed countries, Chinese aid to the region is unconditional and usually spent on infrastructure projects that have a greater impact on people’s lives. Sinopec, one of the leading Chinese state-owned oil companies, acquired oil concessions in Angola on the back of an oil-backed credit of $2 billion from China’s Eximbank to rebuild the country’s railways, state buildings, hospitals and roads. Far from being seen as neocolonialist, the “Beijing consensus” between African countries and China – to borrow a term coined by Joshua Cooper Ramo of the UK-based Foreign Policy Centre – is viewed as a much more attractive alternative economic development model in the continent, compared to the Washington consensus.
The Chinese Strategy
The Chinese strategy is hinged on a very simple economic principle – “we are here for development”. On government to government level- the Chinese approach has been non-interference, no political strings attached and mutual benefits. Of course, one would be very naïve to ignore the Chinese interest. Whichever way, their involvement with Africa has saved the continent on many fronts. It has helped Africa to diversify and hence helped to escape the hard consequences of the recent past global economic and financial crises as was felt heavily in other parts of the world.
In 2006, the Chinese government adopted Africa-China policy detailing how their engagement with Africa is going to be mutually beneficial. The policy was characterized on sincerity, friendship and equality, mutual benefit, reciprocity and common prosperity; mutual support and close coordination as well as learning from each other and seeking common development.
African countries was able to weather the global economic crisis fairly well due in large part to a shift away from their traditional trading partners – primarily the United States and the European Union – toward China, India and other emerging markets.
Globally, there is been the debate of whose system is working and going forward, would continue to work to spur economic growth and development. Is it the West’s private capitalism or China’s state capitalism; liberal democracy or the de-emphasis on democracy; West’s political rights over economic rights or China’s economic rights over political rights.
Again, there are a lot of issues that have been raised internationally and diplomatically, as to the ethics of China’s involvement in Africa. Also, there is the question as to whether China is really an emerging market or should they be classified as a fully developed economy together with the fact that they are also a member of the UN Security Council? And based on that, should they be playing a greater role in terms of conflict resolutions in Africa?
The point is that, Africa wants to develop-grow and transform its economies. In 2014 and beyond, African countries would continue to cultivate and build on these new and promising economic relationships with China, obviously with a new approach that would be mutually beneficial. Whiles Europe continuous to be Africa’s trading partner, China, in particular, has emerged as an important and dynamic export destination for Africa. China’s share of exports from Africa has increased significantly over the last decade from 3 percent in 1998 to 15 percent in 2008. In 2009, China overtook the United States to become Africa’s largest trading partner. China again is by far the fastest growing external source of infrastructure financing for the continent-the roads, dams, rails etc.
At the level of attitude, China sees its interest in development as directly linked with Africa. Of course, that is what has necessitated for the constant engagement between African countries and China. China has a huge population to feed; talk of domestic demand for potable water, arable land, oils, minerals etc. China therefore sees Africa as the best destination to meet the increasing demand domestically.
The Africa strategy
A wind of policy swing began blowing in 2013 and would continue in 2014 and beyond to position Africa well in this relationship. Over the last decade, the China-Africa relationship has been dictated by China’s interest in Africa’s natural resources. Therefore, for African countries to maximize the potential benefits from this partnership, in 2014 and beyond, African governments must articulate their own comprehensive China policy, which should include strategies for engagement beyond natural resources.
Moreover, African government should take the advantage of increasing trade ties with China to gain access to other Asian markets more broadly and to diversify the African region’s export products.
China will continue to remain an important trading partner for Africa over the next decade. Therefore Africa should look at means to maximize on this relationship to spur economic growth and development, reduce poverty and reduce youth unemployment.
Paul Frimpong, a Chartered Economist (ACCE-Global), writes on the macro-economy and global affairs. He is also an African Affairs Analyst and Emerging Markets Strategist.
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India to develop people-centred technology with BRICS partners
India will collaborate with the four other BRICS countries in science and technology to generate new knowledge and develop innovative products, services and processes, critical to its and the grouping’s growing economies.
Science and technology ministers of Brazil, Russia, India, China and South Africa (BRICS) met at Kleinmond, southeast of Cape Town, South Africa, last week and agreed to promote partnerships also with other strategic actors in the developing world.
They zeroed in on five sectors of climate change and mitigation of natural disasters; water resources and pollution treatment; geospatial technology and its applications; alternative and renewable energy; and astronomy to share experiences and complementarities.
India would thus drive geospatial technology and its application, while Brazil will lead climate change and natural disasters. Russia would head water resources and pollution treatment.
New and renewable energy and energy efficiency would be led by China while South Africa would steer astronomy.
Thirumalachari Ramasami, secretary, department of science and technology, represented India at the first ministerial on “A Strategic Partnership for Equitable Growth and Sustainable Development”.
The ministers reached a Memorandum of Understanding (MoU) to stimulate joint investment in the development of high technologies, create common technology platforms and set up centres of applied research and innovation laboratories.
The MOU, officials said, will serve as the “strategic inter-governmental framework” that would be signed by the heads of state and government at the 6th BRICS Summit scheduled for July in Fortaleza, Brazil.
The Feb 10-11 meeting, held as per the “eThekwini declaration and Action Plan” adopted at the Durban Summit last year, also ensured complementarities vis-à-vis cooperation with Africa, notably regarding increased access to technology as well as the launch of the BRICS Business Council and the BRICS Think Tanks Council.
The ministers suggested the establishment of mechanisms to transfer technology and knowledge and the creation of a student exchange programme within the group to address their human capital challenges.
“The meeting is a clear demonstration of our commitment to intensify cooperation in science, technology and innovation (STI) within the BRICS framework”, said Derek Hanekom, South African minister of science and technology.
Hanekom said the University of Cape Town has discovered a novel chemical compound which has “exciting potential” to both control and eradication of malaria.
India and South Africa are hosting components of the International Centre for Genetic Engineering and Biotechnology, promoted by the United Nations.
The participants declared their intention to face the common global and regional socio-economic challenges, and emphasised that the basis for cooperation in STI among the bloc’s countries should be centred on people and the public assets in order to support equitable growth and sustainable development.
“We agree that people centred and public good driven science, technology and innovation, supporting equitable growth and sustainable development, shall form the basis of our cooperation within the framework of BRICS,” they said.
The Kleinmond meeting took place in the context of the First BRICS Summit held in 2009 in Yekaterinburg, Russia, where the leaders at that time envisaged cooperation in the field of science, technology and innovation with the aim to engage in fundamental research and development of advanced technologies.
There is already broad agreement amongst the BRICS partners on possible priority areas for cooperation. These include exchange of information on science, technology and innovation policies and programmes and promotion of innovation; food security and sustainable agriculture; nanotechnology; biotechnology and technology incubators.
The 3rd BRICS Summit in Sanya, China, in 2011 resulted in member-countries setting up working mechanisms that include a BRICS Science, Technology and Innovation senior officials meeting and the STI Working Group.
The BRICS ministers visited the Square Kilometer Array (SKA) site in Carnarvon, where the world’s biggest and most sensitive radio telescope, will be jointly built by South Africa in collaboration with Australia and New Zealand.
The telescope is a combination of thousands of dishes and antennas, whose total collecting area will be approximately one square km, giving 50 times the sensitivity and 10,000 times the survey speed of the best current-day telescopes.
It will address unanswered fundamental questions about our universe, including how the first stars and galaxies formed after the big bang, how dark energy is accelerating the expansion of the universe, the role of magnetism in the cosmos, the nature of gravity, and the search for life beyond the earth.
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11th Regional Meeting of the ACP-EU Joint Parliamentary Assembly concludes in Mauritius
The 11th Regional Meeting of the African Caribbean Pacific-European Union (ACP-EU) Joint Parliamentary Assembly has ended with delegates rallying for the harmonization and rationalization of regional integration in the face of multiple memberships.
The Communiqué released at the end of the three-day meeting in Port Louis, notes the need to rationalize the processes of integration given overlapping memberships in order to strengthen integration. It further underscores the importance of embracing regional integration as a means to creating an enabling environment for economic growth, development and poverty reduction.
The delegates at the meeting further maintained that Economic Partnership Agreements (EPAs) must support regional integration. In addition, the ACP Members expressed concerns on the elimination of sugar quotas scheduled for 2017 and called for additional time to complete their adjustment processes. This results from the fact that abolition of sugar quotas could lead to loss of competitiveness, revenues and adversely affect living conditions.
On regional infrastructure development, Members stated the need to catalyse and harness development within the sector. The Communique acknowledges that more attention needs to be paid to the needs of island nations for marine and air transport as well as digital connectivity.
On peace and security, delegates called for enhanced resources to boost early warning systems in a bid to address armed conflicts and terrorism.
In his presentation yesterday, Mbalambala constituency (Kenya) MP, Hon Abdikadir Aden noted that Kenya and the EAC region were victim of attacks of terrorism originating largely from Somalia. He noted that more efforts were needed to offer alternatives targeting the youth.
“Youth suffer from unemployment and often turn to terrorism. We need to have their skills built through investments in the age group to be given sustainable form of livelihood to integrate in the society”, the legislator added.
On his part, the Deputy Speaker of the Parliament of Uganda, Hon Jacob Oulanyah, said that the ACP-EU needed to interrogate on the supply of arms and the effects of war on women and children.
“Nothing justifies war in any form. Even when in conflict, there need not necessarily be combat, but let us focus on solutions”, he said.
On piracy and maritime security, the conference called for an urgent need to strengthen institutions to combat piracy, enhance judicial co-operation efforts to bring pirates to justice and to trace ransom moneys.
“The international community needs to keep focus and maintain momentum in the fight against piracy”, the Secretary General of the Indian Ocean Commission, Jean Claude de l’Estrac said in his presentation to the meeting yesterday. “We must deal with the failed State of Somalia”, he added.
On urbanization challenges and waste management, the Members emphasized the need for political will, decentralization challenges and appropriate legislative frameworks to encourage sorting, recycling and sustainable management of household, industrial and electronic waste.
The delegates in attendance commended Mauritius as a model of democracy and accountability, characterized by effective separation of powers, independent judiciary, free and fair elections and the respect for human rights.
In his presentation today, Justice Ashraf Caunhye of the Supreme Court of Mauritius said it was vital for citizens to demand for effective, transparent, responsive and accountable institutions.
He remarked that for accountability to be realized there was need for effective anti-corruption bodies, national audit institutions and public procurement monitoring bodies. In addition, the political parties and national human rights institutions need to have the space and capacities to perform their roles.
EALA which has an Observer status at the ACP-EU Joint Parliamentary Assembly was represented by the Speaker, Rt. Hon Margaret Nantongo Zziwa. The Kenya National Assembly Deputy Speaker, Hon Dr. Joyce Laboso led her delegation to the three- day meeting. Hon Laboso is the former Co-President of the ACP-EU Joint Parliamentary Assembly. Parliament of Uganda was represented by its Deputy Speaker, Rt. Hon Jacob Oulanyah and Hon Rose Akol while Hon Job Ndugai, Deputy Speaker, led a delegation from the Parliament of Tanzania. Burundi was led by Hon Mo-Mamo Karerwa, Ist Vice President of the Burundi Senate. The Rwanda Chamber of Deputies on its part, had the Deputy Speaker, Hon Uwimanimpaye Jeanne d’ Arc and Senator Michel Rugema of the Senate in attendance.
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SMEs: Key players in regional integration
The push towards regional integration in eastern and southern Africa depends on a number of factors. One important factor is ensuring that small and medium enterprises (SMEs) are fully equipped to contribute towards socio-economic development.
This is because SMEs are a vital conduit through which the region can spur development, as the sector provides employment to the majority of the population, particularly youths and women.
SMEs also contribute immensely to poverty eradication and rural development by improving income distribution in the region.
According to a recent study by the Common Market for Eastern and Southern Africa (COMESA), SMEs contribute over 50 percent of employment in the region.
It is estimated that there are about six million SMEs in eastern and southern Africa operating in various sectors ranging from transport, tourism and mining to agriculture, manufacturing and retail.
However, SMEs continue to face various challenges in their operations and are usually not highly regarded in society
Some of the challenges faced by the enterprises include limited access to financial resources, cumbersome documentation required to set up or expand business and inefficient road and rail networks that cause time delays in moving goods from one place to another.
In this regard, the forthcoming COMESA Summit has once again chose SMEs development as the main theme for discussion.
The theme for the summit scheduled for Kinshasa, the Democratic Republic of Congo on February 26-27 is “Consolidating Intra-COMESA Trade through Micro, Small and Medium Enterprises Development”.
This is similar to the previous theme of “Enhancing Intra-COMESA Trade through Micro, Small, and Medium Enterprises Development”.
“The Council of Ministers agreed that micro, small, and medium enterprises are still a vital component to the development of the region’s economy,” COMESA spokesperson Mwangi Gakunga said.
“Thus the ministers felt that there is a need to further focus on them and continue to give them any support they may require to be a force for greater economic growth and regional integration.”
At the last summit held in Kampala, Uganda, in 2012, leaders from eastern and southern Africa proposed a number of measures aimed at capacitating SMEs so that there are fully equipped to compete with other well-established enterprises in an open market.
An open market in eastern and southern African has boosted intra-regional trade, increased investment flows, and enhanced competitiveness, but it has also seen more vibrant multi-national enterprises push and swallow less prepared SMEs.
This has resulted in millions of youths and women involved in SMEs lose their jobs, placing the whole regional integration agenda on the back foot since such a programme should benefit the majority and not hinder their growth.
As such, leaders from eastern and southern Africa are expected to recommit their efforts towards promoting SMEs development since small businesses are the backbones of most economies in the region. The commitment includes increasing access to financial and technical support for SMEs, and availing more land to women and youth, who make up the majority in the SMEs sector.
It is also critical to link SMEs with the big businesses so that the two could complement each other, as they are both key players in socio-economic development and regional integration.
Other interventions are infrastructure developments to improve road and rail network, as well as improving border posts across the region. Improved roads would allow SMEs to move smoothly within the region, while effective border posts are critical in making business easier.
For example, the establishment of a One-Stop-Border Post at Chirundu between Zambia and Zimbabwe has greatly reduced the time traders spend on transit.
Ultimately, the One-Stop-Border Post launched in 2009 has reduced the cost of transporting goods and services. In this regard, the future of intra-regional trade in eastern and southern Africa depends on strengthening SMEs since small businesses are heavily involved in trade.
The annual COMESA Summit set for DRC is being held later than planned. It was originally set for December 2013, but COMESA Secretary-General Sindiso Ngwenya said “unforeseen circumstances” led to the postponement of the summit.
Prior to the 17th COMESA Summit, there will be various ministerial meetings to review the socio-economic situation in the region. COMESA is made up of 19 members – eight of which belong to the Southern African Development Community (SADC).
These are the DRC, Seychelles, Swaziland, Madagascar, Malawi, Mauritius, Zambia and Zimbabwe. As host nation, DRC is expected to assume the COMESA chair from Uganda.
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Resource nationalisation ‘risks breaking global trade rules’
Governments of resource-rich countries have to take care in pursuing higher taxes and rents on mining companies as they risk flouting international trade rules, the Mining Indaba in Cape Town heard on Tuesday.
In South Africa, amendments to the Mineral and Petroleum Resources Development Act mean mining companies would have to supply a percentage of their production of minerals, if they were considered strategic, and discount the prices to the government. If a designated mineral was exported without meeting the domestic quota for local beneficiation, or without the written consent of the minister, it would be an offence that could result in imprisonment or a penalty of 10% of annual turnover.
Peter Leon, a partner at law firm Webber Wentzel, said a number of countries were implementing resource nationalism policies, but it was important to avoid flouting World Trade Organisation (WTO) rules, which could violate international trade law. He believes the supply requirement in the draft South African law amounts to export licensing and may be illegal in terms of WTO rules.
Sheila Khama, director of the African Development Bank’s African Natural Resources Centre, said the rise of resource nationalism within African countries was due to a change in what governments saw as fairness, heightened expectations from mining and the high visibility of the company brands themselves.
She said media headlines saying how a mining company’s share had surged on a foreign stock exchange because it was mining a mineral in a certain country also gave the impression that the mining company was “flush with cash”.
“However, the local communities do not realise that there is a major difference between the shares of the company, which may have been talked up so they can be traded, and the value of the asset on the ground,” she said.
Lord Peter Mandelson, chairman of the Global Counsel, said consumers of products in countries outside those that produced the mineral resources would also demand sustainable practices were used, “otherwise they won’t buy them”.
He said: “I believe that miners (including the governments of mineral-rich countries) see the profound sustainability attack which is coming their way. They will have to embrace rather than repel it as it is not ‘repellable’.”
Ms Khama said governments were under increasing pressure to improve the lives of their citizens.
World Bank senior manager Paulo de Sa said the term “resource nationalisation” implied a conflict of some kind between governments and the mining companies, but that “this was not necessarily the case”.
Ghana Chamber of Mines CEO Toni Aubynn said that country’s donor aid had dried up after it was reclassified as a lower-middle-income country, and this forced the government to impose higher taxes on mining companies.
See also: SA ‘could fall foul of World Trade Organisation’ (BDlive, 14 February 2014)
Source: http://www.bdlive.co.za/business/mining/2014/02/04/resource-nationalisation-risks-breaking-global-trade-rules
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AGOA: Free-trade deal on the line
US poultry producers are lobbying their government to withdraw South Africa’s duty-free access in retaliation for anti-dumping duties, which they say are unfair.
South Africa enjoys duty-and quota-free access to the US market for about 6,800 product lines, in part thanks to the Africa Growth and Opportunity Act (Agoa), which grants most African countries preferential market access without any reciprocity required for US goods.
Latest available figures show South Africa exports to the US under Agoa totalled $3.7bn (R40.8bn) in 2012.
Lobbyists in the US have been trying to get South Africa excluded from Agoa, which is vital for the local automotive industry.”
The National Chicken Council and the USA Poultry & Export Egg Council have made submissions to the US International Trade Commission (ITC), saying the US poultry industry will strongly oppose another extension of Agoa benefits to South Africa unless “fair trade” in their products is resumed.
The controversial anti-dumping duties on US poultry products, which were calculated using the weighted average cost of production method, were imposed in 2000. Last August, the World Trade Organisation ruled against similarly imposed tariffs by China against US chicken.
South Africa, as an upper middle-income country, is under fire for its inclusion under Agoa.
Critics say it is unfair to give South Africa duty-free access to the US while poor countries such as Bangladesh do not enjoy the same benefits.
David Wolpert, CEO of the Association of Meat Importers and Exporters (Amie), said there was concern that South Africa’s protectionist policies, such as the increase in import duties on chicken and restrictive regulations on pork imports, may lead to retaliatory trade practices, harming the economy.
“As we have said many times before, such restrictive trade practices are of great concern, are highly inflationary, and therefore negatively affect pricing to an entire population, especially the hard-pressed poorer segment of our people, and invite retaliatory measures, which themselves harm our fragile economy,” Mr Wolpert said.
The International Trade Administration Commission, which hiked import tariffs on a range of chicken products last year, is considering imposing anti-dumping duties on chicken from certain EU countries. The EU has a free-trade agreement with South Africa and normal import duties do not apply on their poultry products.
“The renewal of the special duty preferences applicable to many of our exports under Agoa is of huge value and importance to us, especially in times of poor economic growth and precarious negative trade account balances,” Mr Wolpert said.
Catherine Grant Makokera, head of the economic diplomacy programme at the South African Institute of International Affairs, said there was a high likelihood the country would continue to receive the Agoa preferences in the short term.
“I don’t think there is significant enough pressure from the agricultural lobbyists. In the long term, however, I think the US will really start putting the pressure on to get a reciprocal trade agreement in place … particularly if we sign an economic partnership agreement (EPA) with the EU,” Ms Grant Makokera said.
The long-running EPA negotiations were expected to be concluded this year, and would replace the existing free-trade agreement with a new deal covering a wider range of issues than trade in goods, such as intellectual property rights.
Negotiations for a free-trade deal with the US failed in 2006 as South Africa saw US demands to include issues such as government procurement, investment and intellectual property rights as too onerous.
Many of these issues would be covered by the EPA, leaving the US at a competitive disadvantage to the EU in the local market.
Business Leadership South Africa asked in its submission to the US ITC for a 15-year Agoa extension. This would give the US time to start negotiations for regional trade deals, such as the case with the EPAs, which could lead to reciprocal, permanent trade deals on the continent, it said.
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Private sector urged to buy local
Trade and Industry Minister, Dr Rob Davies, says the private sector should join government’s move towards buying locally produced goods to stimulate domestic economic growth.
Speaking at the third annual Proudly South African Buy Local Summit on Monday, Davies said creating jobs and addressing poverty required a structural change in the South African economy.
With the advent of the global economic meltdown in 2009, the Department of Trade and Industry (dti) has championed the cause of strengthening economic policy to reindustrialise the country.
Government has set a target of 75% local content in its procurement of goods, and Davies said inroads were being made towards this.
“We can’t expect growth if we only import finished goods,” said Davies.
At the end of the current administration, R1 trillion would have been spent on infrastructure geared at transforming the country’s economic landscape, compared to the R480 billion spent by the previous administration.
The country’s infrastructure development plan would not only work to build schools and roads, among others, that are necessary but would also be used as a tool of industrial development.
“We have the capacity,” Davies said at the summit
“Over the course of the current administration, we have strengthened the regulatory framework,” he said, adding that the commitment to procure more goods and services locally has also been made.
Over the years, the department has made designations for local procurement across various industries, including those in medicine and work wear.
“We are doing further work on this,” said the minister.
The Department of Public Enterprises (DPE) Competitive Supplier Development Programme is among those that have made progress in procuring local content.
“It has been successful. For example, Transnet has procured 1 000 locomotives with the bulk of it being manufactured locally,” said Davies.
Public Enterprises Minister Malusi Gigaba said that the structure of the economy had made it difficult to “radically transform the economy”.
He said South Africa was determined to meet its set target of local procurement.
“We want private companies to at least match government in local procurement. We must move South Africa forward,” he said.
Davies said it was everyone’s responsibility to buy local products.
“Procurement is an important area to promote localisation,” said Davies, adding that the dti would not give up on its policy space.
Infrastructure state owned entities reporting to the DPE were set to invest R95 billion this year in the local economy.
Proudly South African CEO Lesley Sedibe said it was important to buy local not just for the sake of patriotism. “Government has shown commitment,” he said.
Source: http://www.sanews.gov.za/business/private-sector-urged-buy-local
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UN labour agency calls for major investment in rural Africa as key to prosperity
Rural development is key to Africa’s prosperity, yet it has been undervalued by Governments, international lenders and policy advisers, the UN International Labour Organization (ILO) said in a paper released today, calling for increased investment in the field.
“Boosting agriculture and building around it a strong rural economy is crucial for Africa. Done right, it would create millions of much needed jobs, as well as wealth, inclusion, food security, crisis resilience, and social and political peace,” ILO Deputy Director-General for Field Operations and Partnerships, Gilbert Houngbo wrote in a commentary.
“A key lesson from ILO rural work is recognizing that rural communities have much potential, and that investment can empower them through integrated approaches. This should start with basic physical and social infrastructures such as roads, energy, education and health facilities. Investments should also target relevant skills development and entrepreneurship support, including through cooperatives and innovative financial mechanisms.”
He said the failure to recognize the value of rural areas has resulted in per capita food production barely growing over the last 50 years, with agriculture representing only 17 per cent of Sub-Sahara’s gross domestic product (GDP), and its already low productivity even declining.
“It’s not surprising that over 60 per cent of rural people live in extreme poverty, and many flee to the cities, where they usually swell the ranks of the unemployed or the informal workforce,” Mr. Houngbo wrote, stressing the need to ensure proper occupational safety and health, social protection and basic rights.
He noted that the reality is not lost on African leaders and the African Union (AU) summit in Addis Ababa, Ethiopia, last month, which had the agricultural transformation as its lead theme.
Promoting rural areas also means combining agriculture with industrial and service activities to stimulate synergies and diversification, and to seize new opportunities in information and communication technology (ICT), tourism, bio-technologies, environmental protection and renewable energy generation, for instance.
Integrated approaches should include promoting links between public and private stakeholders, developing rural workers’ and entrepreneurs’ structures, encouraging dialogue between them and with the authorities, and giving capacities and a voice to youth and women, who are the true engines of rural innovation and growth.
“All important is disseminating the many winning practices,” Mr. Houngbo wrote, citing the Songhaï Centres in Benin where productive enterprises run activities in farming, processing, handicrafts, marketing, energy production, irrigation, repair, recycling and other services, with strong emphasis on holistic approaches, self-reliance, research and training.
Another good example is the Rwandan Telecentre Network, with rural centres that provide information technology (IT) services but also serve as delivery hubs where individuals, companies and government can advertise, sell, buy and exchange products and services from e-training to banking, insurance, taxation, healthcare, electricity and information.
The ILO has actively engaged in rural work since the 1920s, with growing attention to Africa. In 2008, the International Labour Conference adopted a resolution on Rural Employment for Poverty Reduction, which led to the ILO Rural Employment and Decent Work Programme (2009-13), and the declaration in 2013 of decent work in the rural economy as an area of critical importance for ILO.
See also: “The need to invest in Africa’s rural transformation” (International Labour Organisation, 12 February 2014)
Source: http://www.un.org/apps/news/story.asp?NewsID=47133&Cr=&Cr1=#.UvzxCvmSya8
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New report provides blueprint to close infrastructure financing gap
The importance of infrastructure as a key driver of growth, competitiveness and social well-being is well established. Yet, as highlighted in the World Economic Forum’s new report, Infrastructure Investment Policy Blueprint, a significant number of economically viable infrastructure investments are not moving forward.
The global investment shortfall in infrastructure is estimated to be at least US$ 1 trillion per annum. Enhanced participation from the private sector, while not a complete panacea, could do much to close this gap.
The report was overseen by the World Economic Forum’s Global Agenda Council on Long-Term Investing, which is comprised of thought leaders from institutional investors and academia. Chair of the Council Danny Truell said, “Within this report, we have set out a series of practical steps that can be taken by governments to increase the flow of long-term capital into infrastructure projects. Improving collaboration between the public and private sectors, including national and regional governments, corporates and investors, is a key part of this.” Truell is the Chief Investment Officer of Wellcome Trust, United Kingdom.
“While there is a significant supply of capital in many parts of the world today, the ability to attract and availability of patient, long-term capital is much more constrained. As a global institutional investor with an exceptionally long investment horizon, we target opportunities where returns are commensurate with the risk that we are taking. Under the right conditions, including an independent and predictable regulatory framework, infrastructure assets are ideally suited for the type of investor like CPPIB,” said Mark Wiseman, President and Chief Executive Officer, Canada Pension Plan Investment Board (CPPIB), Canada.
“Infrastructure is a necessary condition for economic development and prosperity. It is also at the nexus of public and private actors, each with their own paradigms and vocabularies,” said Michael Drexler, Senior Director and Head of Investors Industries at the World Economic Forum. “With this effort, we hope to bring those paradigms closer and enable joint efforts in creating infrastructure the world so badly needs for a prosperous and sustainable future,” he added.
The report details major recommendations, including:
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More projects need to be structured with appropriate risk allocation and clear investment propositions for the private sector. Projects should be developed with the understanding that investors are “global shoppers” for infrastructure and will rank opportunities based on their risk-adjusted returns.
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Governments need to proactively address political risk, which has emerged as one of the most pressing concerns for infrastructure investors in both emerging and developed markets. Numerous contract and regulatory structures are suggested that can better align public and private sector incentives and reduce renegotiation risk.
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Develop an ongoing pipeline of investment opportunities that will give private sector players the confidence to build internal capabilities and local expertise.
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Consider capital recycling – whereby existing brownfield assets are either leased or sold to raise funds for greenfield projects – as an effective strategy to attract private capital while bringing new infrastructure online.
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Address the tremendous costs and time delays often incurred in infrastructure procurement processes. For example, task a public-private partnership unit with improving the efficiency of the procurement process by increasing standardization and providing technical skills to line agencies. Where possible, mandate fixed deadlines for regulatory or environmental approvals and streamline processes by appointing a lead agency to manage and coordinate the process.
The report is part of the World Economic Forum’s Global Strategic Infrastructure Initiative. This initiative brings together governments, business, investors and civil society to:
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Develop new models for project preparation financing to enable more bankable projects to move from early concept phase to feasibility studies
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Share, disseminate and learn from infrastructure best practices and frameworks through an interactive virtual collaboration system known as the Global Agenda Platform
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Create long-term investment frameworks to attract private capital at the global and regional levels
The Infrastructure Investment Policy Blueprint was developed with the invaluable support and collaboration of Oliver Wyman.
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Trade policies and regional integration in Africa
To address the challenges impeding the flow of goods and services within the continent, policy makers must employ strategies that would strengthen Africa’s infrastructure development.
International trade has increased exponentially in recent years. Though African countries benefited from this increase, their share in world trade has remained low; Africa’s export trade amounts to only about 3 per cent of world exports.
While this poor trade performance is partly caused by trade protectionist policies of the advanced economies against African products, there are also constraints that inhibit trade within the continent.
With the expectation of a generally moderate recovery of the global economy and world trade, it is even more pertinent now than before to foster intra-African trade for improved trade performance.
Experts say rapid conclusion and resolution of the outstanding issues in the Economic Partnership Agreements (EPAs) negotiations are crucial to Africa’s medium-term prospects in both regional and international trade.
Indeed, among the different measures that several advanced countries adopted in 2009 to curb the effect of the financial crisis, trade protectionism has been on the rise. Protectionism increased despite repeated assurances in the context of the G20 meetings in London, as well as in the context of World Trade Organization (WTO) talks.
Often stimulus packages were geared to favour domestic sectors, such as through export support, or to favour buying, lending, hiring or investing in local goods and services. Such measures clearly discriminate against developing countries, including those in Africa, on several levels. Unfortunately, African governments lack the resources to curb the domestic impact of the crisis with the same type of measures.
Also, African companies face unfavourable treatment precisely in markets where additional spending is being promoted. Hence, with these new measures African products easily face discriminatory treatment in relation to similar domestic products and services in developed countries, despite the general agreements about preferential treatment they may enjoy.
FG’s Taskforce
To check the situation in the West African Sub-Regional, the Federal Government of Nigeria recently set up a taskforce on trade facilitation in Nigeria with a mandate to remove all bottlenecks to trade between Nigeria and its neighbouring countries.
The Taskforce member comprises representative from Ministries of Commerce and Industry (now trade and investment), Finance and Transport. Others are: the Nigeria Customs Service, Nigeria Shippers Council, the Nigerian Port Authority (NPA), National Agency for Food, Drug Administration and Control (NAFDAC), the Standards Organisation of Nigeria (SON), Nigeria Quarantine Services (NQS), the Nigerian Police, the Central Bank of Nigeria (CBN) and Nigeria Road Safety Corps.
While on a visit to the Managing Director of Nigerian Export Import Bank (NEXIM), Mr. Roberts Ungwaga Orya recently, the chairman of the taskforce, Mr. David Adejuwon, said the body has taken proactive steps to identify what constitutes technical and physical barriers to movement of goods in the sub region.
He confirmed that there are about 35 check points during the day and about 50 checkpoints at night from Lagos to Seme border hindering trade between both countries. This, he said, was against protocol that ECOWAS member countries signed to reduce it to 3 checkpoints.
According to him, all these have been impacting negatively on the country’s image and its competitiveness in the effort to attract Foreign Direct Investment (FDI) into the country.
He pointed out that once the taskforce was able to remove those barriers in the border post, it will go a long way to facilitate trade between Nigeria and other African States. He called for support and collaboration from NEXIM Bank to facilitate trade between Nigeria and other West African States.
Adejuwon on behalf of the taskforce sought for the support of NEXIM Bank in the provision of surveillance vehicles, trade facilitation workshop, sensitisation and public awareness as well as disseminating and publicising information on the operation of the Committee.
Earlier, the Managing director, NEXIM Bank, Orya, had pointed out that Nigeria has the biggest market in Africa and there was need to reduce the multiple checkpoints, which have militated against free movement of goods in the sub-region.
He added that Nigeria, being a strategic nation in both economic and political institution owned by ECOWAS, needs to explore the sub region market, saying that NEXIM Bank has started deepening payment system by supporting Nigerian exporters. Despite his promises at the time, nothing much has been done to show seriousness on the part of government.
NANTS Charges ECOWAS
However, despite Nigeria’s efforts, some African countries especially those in West Africa are not taking adequate steps to ensure hindrances in achieving regional integration are removed.
Recently, the National Association of Nigerian Traders (NANTS), charged Economic Community of West African States (ECOWAS) leaders to address the poor implementation of the ECOWAS Treaty and Protocols, especially the protocol on free movement by member states as a major hindrance in achieving regional integration objectives.
Also, the association, in a message and agenda to the speaker of the ECOWAS parliament, pointed out that there is poor adherence to the provisions of the protocol on Rights of Residence and Establishment.
It added that the problem is further complicated by the lack of access to the ECOWAS Court of Justice by community citizens on violations of their socio-economic rights under the Protocols and the ECOWAS Treaty itself.
“NANTS has been canvassing for the compliance of member states with these laws, but has also noted that the role of the ECOWAS Parliament in cases like this is unfortunately limited to merely advisory as it lacks law making powers necessary for the review of sub-optimal provisions in a Protocol,” the association said.
NANTS added that, “It is therefore our expectation that your administration as the Speaker of the Parliament would strengthen the extant weak powers of the ECOWAS Parliament, empower the ECOWAS Commission to be more efficient where necessary, enhance the laws of the Community by possibly infusing strict sanction mechanisms thereunto and effectively capacitate even the National Parliaments and other relevant institutions as fundamental organs in the enforcement of laws and or dispensation of justice and integration in West Africa.”
It urged the Speaker to swim into action to review the laws establishing the ECOWAS Court of Justice, with a view to broadening its mandate and jurisdiction in line with other regional Courts such as the European Court.
NANTS said it expects that the ECOWAS Parliament would be instrumental to driving the achievement of the ECOWAS Vision 2020 objectives, particularly of transforming ECOWAS from ‘an ECOWAS of States to an ECOWAS of people.’
“In this regard, we envisage that the Community Development Programme (CDP) would be institutionalised as a veritable instrument for realising the objectives of the Vision 2020 which is endorsed by the Authority of Heads of States and Governments of ECOWAS. This is essential given that the CDP seeks to anchor regional policies, programmes and plans shaped by the citizens themselves rather than erstwhile practice of approval of wholly-Consultant-drawn-policies and programmes,” NANTS said.
“Basically, the CDP seeks to rather institute a ‘bottom-up’ approach to policy making in the region as opposed to a ‘top-bottom’ approach. As representative of the community citizens, NANTS believes that the ECOWAS Parliament should play a more visible role in the entire transformation process.
“We would therefore cherish an opportunity to not just brief you in details on the CDP process but also explore options for the immediate involvement of the Parliament in the CDP process. Indeed, we wish to emphasise that NANTS believes that the ECOWAS Parliament is indispensable and crucial for the actualisation of the ECOWAS vision 2020,” NANTS stressed.
Trade Performance in Africa
Meanwhile, the Organisation for Economic Cooperation and Development (OECD), in a recent report on trade performance in Africa, noted that one critical reason for Africa’s relatively poor trade performance is the weak diversification of African trade both in terms of trade structure and destination.
Most African economies, OECD said, depend on very few primary agricultural and mining commodities for their exports and mainly import manufactured goods from advanced countries.
“As the traditional markets in advanced countries are expected to grow less than markets in emerging Asian and Middle East countries as well as markets within Africa, enhancing trade relations with these more dynamic markets is key. Several inefficiencies also constrain trade within Africa. These inefficiencies include poor transport infrastructure such as maintenance and connectivity, political instability and lack of security within and among several regions, and intra-African trade barriers.
“Despite progress, intra-African trade is still low, representing on average around 10 per cent of total exports. Many factors contribute to the low trade performance, including the economic structure of African countries, which constrains the supply of diversified products; poor institutional policies; weak infrastructure; weak financial and capital markets; and failure to put trade protocols in place, “OECD said.
OECD in the report pointed out that Africa’s trade performance is extremely low compared with other trading blocs outside the continent.
It said: “For example, trade within the Association of South East Asian Nations (ASEAN) accounts for about 60 per cent of their total exports. The same is true for the countries belonging to the North American Free Trade Agreement (NAFTA) area, whose intra-regional trade accounted for 56 per cent of total exports. It is no wonder that the economies of ASEAN and NAFTA are doing remarkably well.
“Barriers to external and internal trade in Africa are numerous, despite Africa’s determination to dismantle trade restrictions in order to create a common market within the framework of regional and sub-regional agreements. These barriers are mostly the consequences of the above-mentioned factors. In addition, 15 of the countries in Africa are landlocked.”
These countries, the report stressed, continue to face serious challenges in having direct access to the sea adding that lack of territorial access to the sea, remoteness and isolation from world markets, and high transit costs continue to impose serious constraints on the overall socio-economic progress of landlocked developing countries.
The situation, it said, has pushed many landlocked developing countries to higher poverty levels.
“Currently, the African Union Commission is focusing on its Minimum Integration Programme (MIP), consistent with previous AU Conferences of African Ministers in Charge of Integration (COMAI). This focus underscores the need for rationalising resources and harmonising the activities and programmes of Regional Economic Communities (RECs). The MIP is in line with a broader undertaking, namely the realisation of the African Economic Community (AEC), as envisaged in the Abuja Treaty and the Constitutive Act of the African Union, “the report said.
UNECA, AFDB Efforts
It added that, “Furthermore, the African Union Commission, together with the United Nations Economic Commission for Africa (UNECA), the African Development Bank (AfDB) and the RECs, has also made notable progress in establishing three-pan-African financial institutions: the African Central Bank, the African Monetary Fund and the African Investment Bank.
“The AfDB is also supporting the institutional setup for improving macroeconomic and financial convergence on the continent. It has also focused on the preparation of a continental Programme on Infrastructure Development in Africa (PIDA), as well as on the development of an EPA template to be used as a guide in the negotiations for EPAs. This last aspect will be particularly conducive to greater coherence between the different EPAs being negotiated and other regional agreements, which are already in place.”
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Namibia expects to miss deadline for renewing Europe trade deal
Namibia said it won’t be able to renew a trade deal with the European Union by the time an existing agreement expires in October because the 28-nation bloc is inflexible over food and agricultural imports.
Namibia won’t renew andeal that “erodes its policy space to industrialize and to pursue free trade arrangements” with regional neighborus, Trade and Industry Minister Carl Schlettwein said in a phone interview today from the Namibian capital, Windhoek. “It won’t make sense to proceed with it.”
The EU has given Namibia and other African countries until Oct. 1 to negotiate new economic partnership agreements or risk losing the preferential market access granted in 2007. Namibia wants safeguards in the food and agriculture industries to ensure that local producers don’t have to compete with “heavily subsidized” goods from Europe, Schlettwein said.
Namibian exports of beef, fish and grapes would lose duty-free access to the EU if the trade deal isn’t renewed by October, Schlettwein said. The nature of the agreement being pushed by Europe would mean Namibia would have to give up the possibility of a free-trade area with 15-nation Southern African Development Community that ranges from South Africa to the Democratic Republic of Congo, he said.
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Getting the export balance right
South Africa and Sweden have long-standing political and development connections, and linking up to find ways to monitor South Africa’s export competitiveness is the latest venture in the nations’ partnership.
Brand South Africa, custodian of South Africa’s image, and Business Sweden discussed designing an export competitive index for South Africa at a networking session held at The Michelangelo in Sandton on 10 February.
At the inaugural Brand South Africa Competitiveness Forum held in 2013, it was established that a Country Performance Tracking Index was needed to enable South Africa to track and respond to key challenges within its economy and society. At the networking meeting this week, economists Mauro Gozzo from Sweden and Chris Hart from South Africa spoke about the state of exports in their respective countries, and how to improve the sector.
Dr Petrus de Kock, the research manager at Brand South Africa, also spoke about how Brand South Africa tried to aid South African exports. Olov Hemstrom, the Swedish trade minister, said: “We from Business Sweden are working a lot to help the export development in South Africa. We have an industrial school in Temba and are working closely with the Department of Trade and Industry as well as Seta.”
sweden1
The panel consisting of Hart, Brand South Africa research manager Dr Petrus De Kock and Swedish economist Mauro Gozzo discussed ways to improve South Africa’s export competitiveness. (Image: Ray Maota)
Exports are crucial
Sweden’s economy is faring better than that of many of its peers: the nation has low public debt and a current account surplus, and since the early 1990s its growth rate has outpaced that of other members of the European Union-15 and the United States, according to the McKinsey Report, produced by the global management consultancy firm. The firm works with its clients to apply its understanding of market and industry forces to develop long-term macroeconomic perspectives.
“Sweden has an export driven economy as 50% of our gross domestic product comes from exports. And of this 50%, about 20 % comes from just three companies,” said Gozzo. He also said that Sweden’s economy had been rising better than that of North America.
“If you have a lot of cyclical exports, your economy will be hard hit at bad times, just like Sweden was in 2009. Our recovery was quick though and by 2011 we were back to normal.” Gozzo said that consumer credit was important in emerging markets.
Sweden’s economic growth mainly reflects productivity gains in the areas most exposed to international competition: manufacturing, and business and financial services, which together account for only about one-third of the nation’s economy. In its two other main components – the public sector and local services – economic growth has been much slower, at a pace comparable to that of the rest of the EU-15.
The EU-15 refers to those member countries of the European Union prior to the accession of 10 candidate countries on 1 May 2004. They are: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and United Kingdom.
“Sweden would never have had such a stable economy had IT and telecoms companies never boosted the Swedish economy,” said Gozzo, talking about major companies such as Ericsson.
South Africa’s weaknesses
Hart said South Africa had not had a great start to the year: the price of petrol had gone up; the rand had declined; interest rates were up; trade unions with political ambitions were fighting employers and not working together with them to find solutions. All of these factors were not good for investors.
“All this does not mean doom and gloom; we are part of the fragile five. These are countries with huge twin deficit markets in emerging markets and include Brazil, India, Turkey, Indonesia and South Africa,” said Hart. South Africa was a triple deficit country as even households had deficit.
“The reason why South Africa is part of the fragile five is the current account deficit because our production has fallen off due to labour unrest.”
The way forward
“Boosting competition and promoting deeper regional trade integration are critical for restarting South Africa’s export engine to bolster growth, which would help create jobs and reduce poverty,” Gozzo explained.
About Brand South Africa’s involvement, De Kock said its job was to give South Africa an endearing image to the rest of the world to boost investments.
Hart added: “South Africa has identified the exports sector as an engine for higher, more inclusive and job-intensive growth with the [National Development Plan], aiming for export volume growth of 6% a year in order to achieve an annual increase in real gross domestic product growth of about 5.5%.”
Source: http://www.mediaclubsouthafrica.com/economy/3700-getting-the-export-balance-right
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Azevêdo highlights role of academics in policymaking of developing countries
Director-General Roberto Azevêdo, in launching the WTO book “Connecting to Global Markets” on 11 February 2014, said: “By demonstrating the contribution that the academic community can make to policymaking, this book makes a powerful case for the WTO Chairs Programme itself. It shows the value of building this academic capacity in developing countries, where it can sometimes be in short supply.” This is what he said:
It’s a pleasure to be here for the launch of Connecting to Global Markets.
I have to tell you that I lost some sleep last night reading through the book, and the different countries and different experiences it brings out.
I would like to congratulate all the WTO Chairs who contributed to the book. In my view it represents a great deal of hard intellectual work – and so I hope it will be read far and wide. I will dedicate further time to it – I’m sure of that.
The aim of the WTO Chairs Programme is to build academic capacity in developing countries in order to improve policymaking on trade – and in particular on WTO issues.
For the last four years it has supported curriculum development, research and outreach activities by universities and research institutions
And so it strikes me that this book is a very fitting conclusion to the first phase of the Programme.
It is based on an important premise – which is that in a more globalized economy, where developing countries have emerged (or remerged) as major trading powers, and where new ways of organizing production have become more widespread, the countries that are able to connect to this new trading system will more quickly and more effectively follow the path to growth and economic development.
The authors – the WTO Chairs – were able to clearly identify some of the major challenges their countries face in trying to achieve this connection.
And what’s interesting is the wide variety of challenges identified, such as:
the diversification of exports,
upgrading in global value chains,
the ability of SMEs to take part in those value chains,
and issues with non-tariff measures.
In this way the book testifies to the diversity of developing countries and their trading interests and capabilities. The “developing country” label only tells you part of the story. By showing this diversity it suggests that the old idea of a north-south divide on trade is increasingly inaccurate – the reality is much more complex: we need to look closer if we want to understand the real picture.
Elsewhere, in contrast, other old ideas are found to be valid – for example, the positive relationship between international economic rules and economic development. A number of the Chair’s country studies show that the rules-based system accelerates the adoption of good trade policies.
The book also shows the importance of initiatives such as Aid-for-trade in seizing the benefits on offer.
But perhaps the clearest message here is just how much academics can contribute to policymaking in developing countries.
Academics are in a position to approach issues with a breadth and depth of analysis which is simply not a practical possibility for many others – such as politicians for example.
Academics have space to consider changes in the global economy so they can identify not only today’s challenges and opportunities, but also those of tomorrow. They are not bound by the silos of specific responsibilities which can exist in government – therefore enabling them to take a broader view of holistic issues like economic welfare.
Freedom from day-to-day policy-making means they are better placed than many to take the long view – an essential virtue for those dealing with economic development, which as we all know is not achieved overnight.
And they can assist policymakers by employing – or creating – more precise methods to measure the impacts of their policies and programmes.
To paraphrase Lord Kelvin, who made valuable contributions to numerous fields of science: “If you cannot measure it, you cannot improve it.”
By demonstrating the contribution that the academic community can make to policymaking, this book makes a powerful case for the WTO Chairs Programme itself. It shows the value of building this academic capacity in developing countries, where it can sometimes be in short supply.
We should thank the current WTO Chairs and the members of the Advisory Board for the success of the Programme since its launch in 2010. And I’m delighted that we will be renewing the Programme for another four years. We look forward to supporting another generation of WTO Chairs – and I have no doubt that we will benefit again from their research and insight, as we are benefitting today.
I think this work is particularly welcome and particularly relevant at this juncture of the WTO’s life.
As you know, in December members were able to conclude a multilateral agreement for the first time since the organization was created in 1995.
The Bali package represents an important boost to trade and development around the world.
At last, we are doing what we should be doing: negotiating serious issues and making new rules, which deliver for the benefit of all.
And so it is vital that all members can play their full role in the debate.
Bali was historic for a number of reasons – but, crucially, it put in check the notion that trade negotiations will inevitably end in a north-south divide. I’m pleased that this is also reflected in the book.
Bali changed the ballgame. Developing countries fought for the results just as hard as anyone. The few voices that expressed reservations about the general balance of the agreement and suggested it should be rejected found no significant echo in the developing world.
But of course the work is not done. With success in Bali we have earned the right to work even harder to tackle bigger issues.
We have two very significant tasks before us.
First and foremost, we need to implement the decisions and agreements reached in Bali.
Second, the Bali Declaration instructs us to prepare a clearly defined work program on the remaining Doha Development Agenda issues by the end of 2014.
What we do now will define the future of the WTO – so it is essential that all members have the capacity and support they need to participate fully in the debate.
As with the negotiations leading up to Bali, I will do everything I can to ensure the process is transparent and inclusive.
The better engagement and integration of developing and least-developed countries into the multilateral trading system is vital for their growth and development – but equally I think it is the defining test of whether the system works.
And I see initiatives such as the Chairs Programme as essential steps towards ensuring that we pass that test.
So thank you again for being here. Congratulations to the WTO Chairs and everyone involved in the Programme. Let’s make sure it goes from strength to strength.
Thank you very much.
Source: http://www.wto.org/english/news_e/spra_e/spra6_e.htm
Download: Connecting to global markets: Full book (236 pages, 5.86 MB)
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New Zealand gov’t blocks scrutiny of controversial TPP trade deal
The New Zealand government has blocked attempts to have the full text of the controversial 12-nation Trans Pacific Partnership (TPP) agreement released to Parliament before it is signed, opposition parties claimed Tuesday.
Main opposition Labour Party leader David Cunliffe said he had called on the government to release the full negotiated TPP text at least two weeks before signing it to ensure full public scrutiny.
“That was blocked by a government that has a record of doing deals behind closed doors,” Cunliffe said in a statement.
“This agreement could impact on New Zealand’s ability to make critical decisions relating to buying medicines and obtaining intellectual property rights,” he said.
“There may be benefits for New Zealand exporters in the agreement but without the release of the full text, we have no way of knowing their extent and nature.”
Public concern about the negotiations, which the negotiators hope to conclude this year, was growing, he said.
The government had to reveal whether multi-national corporations would be given the right to sue the government over matters that affected their profits, such as New Zealand’s proposed legislation requiring plain packaging on tobacco, he said.
Trade Minister Tim Groser told Fairfax NZ News Tuesday that he would not negotiate the agreement “through the media.”
Critics claim that the TPP agreement would curb New Zealand sovereignty on matters such as health and safety and environment regulations.
An academic review rebutted the government’s claim that New Zealand will see an economic gain of 4.5 billion U.S. dollars by 2025 from the TPP as “doubtful.”
The review, commissioned by the Sustainability Council of New Zealand, said the estimate from the U.S.-based Peterson Institute was calculated using methods outside established economic theory.
Source: http://news.xinhuanet.com/english/business/2014-02/11/c_133106690.htm
See TPP Legislators for Transparency: Call made by parliamentarians involved in the negotiation of the Trans-Pacific Partnership for the release of the TPP text to enable scrutiny and debate (11 February 2014)
Download: Economic Gains and Costs from the TPP: Review of Modelled Economic Impacts of the Trans Pacific Partnership (Sustainability Council of New Zealand, February 2014)
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EAC single customs launch postponed to June
Kenya, Uganda and Rwanda have postponed the single customs territory (SCT) roll-out, giving Burundi and Tanzania more time to prepare for the shift.
East Africa Community (EAC) secretariat custom officer Ally Alexander told the committee on Communication, Trade and Investment in Mombasa that the implementation of the model would begin in June.
“We are looking at reducing the costs and number of days to clear the cargo from Mombasa to Kampala to take three days instead of the previous 18 days,” Mr Alexander said.
The SCT was initially planned to begin in January with the three countries moving their revenue staff to common entry and exit points to begin goods clearance.
But Tanzania and Burundi protested their exclusion in the arrangement after Kenya announced in January that it was ready to start accommodating revenue officials from the two landlocked states in Mombasa, prompting the three States to go slow on their plans.
On Monday, Mr Alexander told East African Legislative Assembly that SCT would reduce the cost of doing business and bring efficiency in trade.
He said for exports within the region, a single regional bond for cargo would be issued to cater for goods from the port of Mombasa to different destinations.
An electronic cargo tracking system would also be used to avoid diversion of goods into the transit market.
Under the model, goods will be checked by a single agency on compliance to regional standards and instruments.
“We want to avoid agencies replicating checking on standards, when it is done once this will not be repeated,” he said.
Mr Alexander said goods would be released upon confirmation that taxes have been paid and customs procedures fulfilled.
However goods heading to the Democratic Republic of Congo which is not a member of EAC will be cleared on a transit basis.
The establishment of SCT has raised concerns among stakeholders, key among them the registration of clearing agents and job losses.
Kenya Revenue Authority deputy commissioner customs Nicholas Kinoti said the concerns would be addressed through legislations.
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UAE at centre of multinationals’ shift towards Africa
The UAE is growing in popularity as a base for multinational companies serving the African market.
Strong transport and logistics services combined with its geographic position between the East and West have enhanced the country’s status as a springboard to the continent.
“The UAE has served as a central logistics hub through which to support more and more of our customers across the African continent,” said Peng Xiongji, the UAE general manager of Huawei, the Chinese telecoms infrastructure development company. It opened a logistics facility in Jebel Ali Free Zone last year from which it can quickly ship smartphones and other technology to the GCC and Pakistan, but also to African nations including Kenya and Tanzania.
Huawei hopes the facility will allow it to target greater spending on information communications technology by African governments.
“We can certainly support those projects from the UAE, but to address our customer needs most effectively, we feel there also needs to be investments made in local people and local facilities,” said Mr Xiongji.
The UAE’s links with Africa have swelled in recent years amid rising trade and investments. Trade between Dubai and Africa rose 27 per cent to US$30 billion in 2012 compared with the year before. The Dubai Chamber of Commerce and Industry has been active in encouraging companies in Dubai to boost exports to a continent with a market of more than 1 billion people. It opened a trade office in Ethiopia in 2012 and plans to open others.
As the UAE has built a reputation as a business-friendly destination, some multinationals are even considering relocating their African headquarters to the emirate. While pockets of Africa are still beset with political unrest and terrorism, the UAE has remained a haven of stability.
CBRE, the property consultancy, has experienced a 30 per cent rise in inquiries from businesses considering moving offices from Africa to Dubai.
“The airlines and the pool of talent here are the two critical issues that make people come here,” said Nicholas Maclean, CBRE’s managing director in the Middle East.
“We are seeing a significant increase in companies currently based in Africa which have two difficulties – one is travelling around the continent of Africa and two is staff. Expanding their business to match the growth in GDP is critically difficult and therefore the assumption is that there’s an easier of way of doing that by relocating their business within Dubai.”
Emirates Airline has strengthened its services to Africa in recent years, bringing its total passenger destinations to 26 across the continent. It also serves 15 destinations through its freighter service, SkyCargo. This week the carrier announced the launch from August 1 of a daily linked service between Dubai and the Nigerian cities of Abuja and Kano.
“The country is strategic to Emirates’ global expansion, as is Africa,” said Thierry Antinori, Emirates Airline’s executive vice president and chief commercial officer.
Etihad Airways flies to seven destinations on the continent, as well as to the Seychelles. On Wednesday, the Abu Dhabi-based airline said it was opening a sales office in Johannesburg to serve its newly created Africa sub-Sahara and Indian Ocean region.
In a news release, Peter Baumgartner, Etihad’s chief commercial officer, said: “Africa is quickly developing into the next big investment destination, with business growth on the rise and African economies amongst the fastest growing in the world. We are experiencing strong passenger loads right across the continent.”
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Transparency needed to curb Africa’s loss of $38bn through trade mispricing
There has been a general improvement by several mining companies, as well as some governments and policy makers, concerning transparency in mining deals and taxation in Africa, according to Caroline Kende-Robb, executive director of the Africa Progress Panel.
“If you look at governments, a country like Guinea is now publishing contracts online. They have now 60 contracts online within the last year. Nobody thought that that would happen about a year ago,” Kende-Robb told How we made it in Africa.
A report published by the Africa Progress Panel last year revealed that billions were leaving Africa through illicit deals such as tax avoidance and evasion, unfair pricing practices and secrecy around company ownership and revenue flows.
“Billions and billions of dollars are leaving Africa. We calculated, with the help of Global Financial Integrity, that there was US$38bn leaving Africa every year… [through] trade mispricing, where you undervalue the prices of your imports and exports so you don’t have to pay the appropriate amount of tax,” added Kende-Robb.
Other illicit outflows – such as funds that are illegally earned, transferred or utilised, as well as unrecorded private financial outflows – are estimated to total $25bn. In fact, the report highlights that Africa loses more through illicit outflows than it receives through aid and foreign direct investment.
“And we estimate when we look at the Democratic Republic of the Congo that they undervalued just five deals by $1.4bn… over a matter of two years,” continued Kende-Robb. “And these are massive amounts of money that are flowing out, that people have difficulty tracking, because of the lack of transparency.”
She added that with beneficial ownership and a large portion of companies registering in offshore accounts, it is also difficult to know who owns which companies and where mining goods, tax and financial inflows are actually going.
“But this is now on the agenda so I think we are seeing an alignment of interests where people recognise that there has to be more transparency,” she said, adding that this was one of the central discussion points at the G8 Summit last year.
“This whole issue of tax justice is affecting everybody. It’s affecting the tax base in Africa and it’s affecting the tax base in Europe and these European countries with the financial crisis in their own region… But it’s also companies that are saying we don’t want to trade with people we feel are not acting in a way that is ethical. In Africa there are a lot of companies knocking around the place who are taking a lot of money out of these countries, through a process of undervalued assets.”
Recognising a need for a social licence
The Africa Progress Panel – chaired by former United Nations Secretary-General Kofi Annan – consists of 10 influential members who advocate for shared responsibility between African leaders and their international partners to promote fair and sustainable development for Africa by ensuring that African issues remain prominent in global discussions.
One major issue the panel wants to bring to international attention is how local communities can benefit from the extractive companies operating in their areas.
Kende-Robb said many of the mining companies operating in Africa are now beginning to understand that they need a “social licence” to operate within communities.
“I think that some of the companies are now saying to us that this can’t be a short term relationship between the communities and [themselves]. [They] have to think more long term, and [they] can’t see the communities as a liability… Without the support of the communities the companies will get into very big trouble and that will affect their reputation, which affects their long term investment.”
She added that mining companies should place community development at the top of their agendas, not just for the community’s benefit, but for the sustainability of the company’s operations too.
“It’s about partnering with communities to make sure that they are part of the development process because business should not be seen outside society. Business and society should be joined to add social value thereby increasing the chances of sustainability in the longer term. It’s good for business; it’s good for society,” emphasised Kende-Robb.