Author: Basssem Aly
Egypt signed two memoranda of understanding (MoU) this week with Djibouti and Angola covering bilateral relations in terms of investments and cooperation in agriculture, tourism, industry, infrastructure, mining, construction and health, respectively.
The two agreements were signed during the Investment for Africa Forum (IAF) held in Egypt’s New Administrative Capital earlier this week. Organised by the Ministry of Investment and international cooperation, the forum brought together government representatives and individuals from the private sector, civil society, and international financial institutions to talk about inclusive and sustainable growth in the African continent.
The forum was just one sign among many of increasing volumes of business taking place between countries on the African continent.
According to Egypt’s Central Agency for Public Mobilisation and Statistics (CAPMAS), the government statistics agency, total trade exchanges between Egypt and the African countries increased to $3.2 billion during the first eight months of 2018, around $700 million more than the year before.
The value of Egyptian exports reached $2.8 billion between January and August of 2018. The value of imports to Egypt from the African countries during the same period was $1.3 billion.
Egypt “is located at a strategic north-eastern position on the African continent, indeed at the ‘crossroads’ to both the Middle Eastern Gulf countries as well as the European states along the Mediterranean,” Harry Broadman, chair of the emerging markets practice at the Berkeley Research Group in the US told Al-Ahram Weekly.
“It thus provides a natural, and advantageous, outlet to those important markets for African countries located in the middle and southern portions of the continent who wish to export northwards to Europe and the Middle East.”
This week’s forum was not only about Egypt’s economic ties with Africa, however, but also focused on enhancing intra-African trade and business activities.
In a speech at the event, President Abdel-Fattah Al-Sisi called for finding “solutions based on regional integration to transform Africa into a global industrialisation hub to provide job opportunities for African citizens and attract foreign investments.
“Africa’s success in achieving the UN Sustainable Development Goals requires accelerating the pace of infrastructure development through cross-border projects, which are among the priorities of the African Union, including the project linking Cairo to Cape Town, the north-south electricity-linking project, and linking the Mediterranean Sea to Lake Victoria,” Al-Sisi added.
A major initiative that could help to bring Africa closer together is the African Continental Free-Trade Area (AfCFTA), which entered into force on 30 May. As a result, many of the “restrictions and barriers hindering intra-African trade are being dismantled, which means that investors can go into the continent without difficulties,” Obi Emekekwue, global head of communications at the Afreximbank, said.
AfCFTA will lead to the “opening up of the entire African market as a single market,” he said.
“As one of the most advanced economies in Africa, Egypt’s investors stand a unique chance to benefit from expanding into other African countries because Egyptian industries can more cost effectively meet the needs of many of these countries in terms of many of the products they currently import from outside the continent,” he added.
Emekekwue emphasised the increasing consumption potential of the continent because of the “increasing growth and expansion of the African middle class”.
Broadman agreed on AfCFTA’s potential, saying that if free-trade rules were implemented across the continent, this would vastly open up flows of intra-African trade and investment.
“Unlike in other regions of the world, most African countries trade more with countries outside the continent than between each other at the moment,” he said.
According to the UN Conference on Trade and Development’s (UNCTAD) Economic Development in Africa Report 2019, AfCFTA could generate welfare gains of $16.1 billion and boost intra-African trade by 33 per cent in its transition phase alone.
Bineswaree Bolaky, a co-author of the report, told the Weekly in July that the removal of tariffs, supplemented by trade facilitation in the African Continental Free Trade Area, could lead to intra-African trade increasing by 52.3 per cent or $34.6 billion in 2022.
However, Andy Mckay, University of Sussex economics professor who previously gave policy recommendations to governments of developing countries, is skeptical about the extent to which AfCFTA will be really implemented, saying that the past record on this has been poor.
“Countries have signed up to many free trade agreements and regional integration arrangements, but actual implementtaion, in terms of really liberalising trade has been limited,” Mckay pointed out.
“There has been a bit more progress recently in the East African Community but countries have been very reluctant to liberalise trade because they fear some of their industries will lose out,” he said.
African countries are also hopefull AfCFTA will help attract more attention to Africa from investors in other parts of the world.
According to a report in the Gulf newspaper Gulf News, the United Arab Emirates is seeking to leverage its expertise in construction, shipping, logistics, tourism and energy to persuade the world that it is a suitable entrance gate to Africa.
The Gulf country annually organises a Global Business Forum to discuss investment and business opportunities in Africa.
South Africa’s Central Energy Fund (CEF) said earlier this month that it expected to produce more than 300,000 barrels of crude oil a day thanks to a refinery that will be established along its east coast.
The project, announced in January, will start operating in 2028, creating the region’s largest refinery. It is a partnership between South Africa and Saudi Arabia’s Aramco, the world’s biggest oil company, in further evidence of external business interest in Africa.
AfCFTA could also be a way for Africa to withstand global economic challenges, including the so-called “trade war” between the United States and China.
African Development Bank (AfDB) President Akinwumi Adesina told the news agency Reuters on Monday that the African states had to diversify their exports and add value to raw materials in order to avoid the fallout from economic tensions between the world’s two largest economies.
“Many African countries export... raw materials to China. If China’s economy weakens, [then] demand for raw materials from Africa weakens,” he said.
He also underlined the fact that “Africa trades quite a lot with Europe but also with the UK,” and this could be disrupted by the upcoming Brexit. He called on Africa to focus on the “most important things” and “what works for it,” in other words, a free-trade area for Africa.
But challenges persist to AfCFTA’s success. On 14 November, Nigeria, Niger and Benin, all signatories to AfCFTA, decided to establish a joint border patrol to combat smuggling across neighbouring states in West Africa.
Nigeria partially closed its borders in August to fight smuggling, and in October it indefinitely stopped trade through its land borders.
Developing infrastructure in Africa is another concern, as the African countries need it to both attract local and foreign investment and to facilitate the development of their societies.
A 2015 report prepared by the World Bank and the UN Economic Commission for Africa concluded that “adapting infrastructure planning and design… has great potential to reduce climate-change impacts in drier areas and to take better advantages of higher water availability in wetter areas” in Africa.
In his address to the IAF, President Al-Sisi called on regional and international institutions and Africa’s development partners to participate in achieving their goals and ambitions through financing the needs of development in Africa and the necessary infrastructure.
Egypt was highlighted during the event as an example of how infrastructure could serve development. Prime minister Mustafa Madbouli told those present that the private sector would not have invested in the New Administrative Capital, if it had not been for the government’s efforts in preparing the infrastructure for private developers.
He added that overhauling the infrastructure and energy sectors would encourage the private sector to pump new investment into the economy.
Harmonising airspace is one of the issues that the East Africa Business Council will discuss during the East African Business and Investment summit slated to take place in Arusha later this week. Denis Karera, vice chairman of the Council, said the summit seeks to address the most pressing issues challenging business in the region, especially cross border trade. “Non-tariff barriers impede cross border trade. One of the key things we want to raise, again, is domestication of airspace so that our airlines can move easily and quickly and tickets can become cheaper as well.
He said that non-harmonized and heavy duties imposed on airlines landing at different African airports drives up the flight ticket prices. “You have to wonder why flight tickets are expensive in the region. Rwanda charges taxes, Kenya charges taxes, and Uganda charges taxes among others on handling services for every landing. We have to deal with this and domesticate airspace as it is happening elsewhere. We want to advocate so that governments slash such heavy taxes. We have been discussing this for so many years and now we need harmonization of the airspace.” He cited an example of some airlines that charge $800 for a passenger flying from Kigali to Nairobi for one hour. “This impedes movement of people. A flight ticket price could go for $110 but due to heavy taxes, it rises,” he said.
India and South Africa have adopted a tough stand against the current moratorium on levying customs duties on electronic transmissions at the World Trade Organization, forcing the US to come to the negotiating table for the first time, said trade envoys. The existing moratorium will expire at the end of next month, unless it is extended for another six months. The moratorium has been extended since 1998 on a biennial basis at every WTO trade ministerial conference. At a meeting of the WTO’s informal General Council on Monday, the US offered a quid pro quo for extending the e-commerce moratorium by six months until the World Trade Organization’s twelfth ministerial conference in Nur Sultan, Kazakhstan, in June 2020.
In return, the US has indicated that it will agree to organise a workshop early next year, as demanded by India and South Africa, for assessing the scope and potential revenue implications of electronic transmissions, said a trade envoy, who asked not to be quoted. Previously, the US had vehemently opposed a proposal from India and South Africa for organising a workshop by experts drawn from the UNCTAD (United Nations Conference on Trade and Development), the ECIPE (European Center for International Political Economy) and the Paris-Based OECD (Organization for Economic Cooperation and Development) to present their conflicting assessments on what would constitute the e-commerce transmission and their potential revenue implications.
Work programme and moratorium on electronic commerce: Communication from Chad on behalf of the LDC Group
The following communication, dated 14 November 2019, is being circulated at the request of the delegation of Chad on behalf of the LDC Group: As the expiration of the e-commerce decision approaches at the end of 2019, the LDC Group calls n the four designated bodies under the Work Programme, to delve deeper into the benefits and costs of e-commerce for LDCs. LDCs are interested in both aspects of this platform and the relevance of e-commerce in improving trade for LDC traders and consumers. The LDC Group appreciates the submissions of others in the context of the Work Programme over recent years, including those on data flows and on the customs duties moratorium. In its interventions regarding the Work Programme at the Council for Trade in Goods and the Council for Trade in Services, the LDC Group has identified some challenges for LDCs in the utilization of e-commerce for consideration in the WTO e-commerce Work Programme including the following:
Limited knowledge among enterprises, government players, and regulators of e-commerce;
Lack of mechanisms to start up enterprises in e-commerce business;
Concerns about possible adverse effects of e-commerce and how to mitigate them;
Limited existence of and affordable information technology (ICT) infrastructure (noted above, e.g., internet, broadband coverage, electricity, telecommunications infrastructure and services);
Access to credit cards (the main vehicle for on-line payments) and high incidence of unbanked consumers or limited experience with on-line payments;
Adequate facilities for physical delivery of purchases online;
User mistrust of quality and effectiveness;
Inadequate online payment facilities;
Trade finance for LDC e-commerce enterprises;
Limited skills among enterprises desiring to use e-commerce and ICTs strategically for B2B, B2C, or B2G buying and selling goods and services;
Lack of statistical data on electronic commerce in LDCs;
Weak legal and regulatory frameworks where needed for example consumer protection laws;
Lack of clarity on the nature of electronic transmissions and the ability of LDCs to apply internal taxes versus customs duties, where appropriate.
ATAF 4th International Conference on tax in Africa: Outcome statement
The conference (19-21 November, Kampala) was held on the theme: Innovation – digitization and harnessing technology to improve tax systems.
Extract: Participants recognised that private sector players in Africa including the African Industries Tax Association, need to understand the global tax debate of taxing the digitalised economy. Therefore, participants required African governments and ATAF to include African Industries in the discussions as businesses can add a lot of practical business inputs and systems expertise.
Participants at the 4th ICTA expressed outrage with regard to a moratorium by the WTO on imposing customs tariffs on e-commerce transactions. They observed that a temporary or permanent ban results in more significant revenue losses for African countries that are net importers, quoting research that shows that revenue losses due to the moratorium are significantly larger than the revenue losses for developed economies.
The meeting highlighted that African countries seek to expand their revenue base and domestically expand the economies. However, participants were concerned that a permanent moratorium would limit their options to protect domestic products and services traded online. They urged policymakers to actively challenge the moratorium based on these key arguments, both individually through their missions, or through the African Union. They welcomed the objective of the OECD’s “Unified Approach” of allocating taxing rights to market jurisdictions, and were particularly supportive of the following details of the Unified approach;
The meeting agreed that as a result of digitisation, African countries should be able to apply VAT/GST on digital services acquired by their citizens from suppliers outside their jurisdictions. As the norm in international trade for VAT/GST systems is the destination principle, participants agreed that countries should apply the destination principle to services and intangibles acquired from overseas businesses. Additionally, similar to South Africa’s application of VAT on digital services, participants felt that African countries should require foreign suppliers of digital services to VAT in their countries. Nonetheless, participants acknowledged the potential challenge of enforcing collection of such VAT; hence, the need for investing in technologies to track the transactions digitally.
It was observed that as countries introduced VAT, revenue shot up and immediately went down as a result of more significant trading through e-commerce, which existing VAT legislation had not previously foreseen. While e-commerce has resulted in decreased VAT revenue collections, it has provided authorities with an opportunity to enhance the audit trail through the use of data-driven methodologies. It was, therefore, up to tax administrations to take advantage of this opportunity to strengthen audit capabilities, mainly where countries are willing to procure effective systems.
As a result of the various changes in policy and law brought about by digitisation, participants called on African governments and tax administrations to improve engagement with the private sector. Although the private sector is deemed in many countries as being on the other side of the fence, participants recognised that they are essential stakeholders in the tax collection process, and their involvement provides policymakers with a business perspective of the issues which is invaluable to policy design. The engagement of private actors will also reduce the uncertainty that may harm business decisions.
Participants recognised that private sector players in Africa including the African Industries Tax Association, need to understand the global tax debate of taxing the digitalised economy. Therefore, participants required African governments and
ATAF to include African Industries in the discussions as businesses can add a lot of practical business inputs and systems expertise.
The meeting observed that based on the current digital debate, in 2020 the world will decide on new taxing rules that will drastically change the international tax system. Therefore, participants called on African countries to mobilise mainly through the African Union by Heads of States and Finance Ministers the pursuit of African tax interests on the global stage. Concern was expressed that if Africa doesn’t act now, it will be too late to influence the outcomes.
Ambassador Muchanga addressed the 2019 Annual Retreat of the African Group of Ambassadors in Geneva on WTO issues. Ambassadors were invited to lobby for the support of the African Union renewed application for observer status at the WTO, which was formally submitted recently.
Addressing the 2019 Annual Retreat of the African Group of Ambassadors in Geneva on WTO issues, WTO Director General Ambassador Roberto Azevêdo reiterated the WTO's readiness, within its ability, to extend support for the implementation of the AfCFTA.
Ethiopian Prime Minister Abiy Ahmed, Alibaba Group founder Jack Ma, and Alibaba Group Director and Ant Financial Services Group Chairman and CEO Eric Jing witnessed the signing of three Memoranda of Understanding between the Ethiopian Government and Alibaba establishing a eWTP Hub in Ethiopia. Speaking after meeting with him, Prime Minister Abiy indicated that the platform will support the country’s national digital transformation strategy, PM Office said. “I am quite pleased to welcome Jack Ma, Founder of Jack Ma Foundation and Partner of Alibaba Group, to Ethiopia,” the Prime Minister noted. His visit follows our meeting at Alibaba HQ in Hangzhou earlier this year, Abiy added.
The eWTP (electronic world trade platform) Hub is intended to enable cross-border trade, provide smart logistics and fulfillment services, assist Ethiopian small and medium-sized enterprises (SMEs) to reach China and other markets, and provide talent training. “We will continue to support the creation of a more inclusive, digitally-enabled global economy, where small businesses can participate in global trade. We look forward to working together with entrepreneurs and SMEs from Ethiopia and other African nations to seize the opportunities provided by the digital era,” Jack said.
The University of Pretoria’s Future Africa campus, in partnership with the US Chamber of Commerce’s US-Africa Business Center and Microsoft, recently hosted a multi-partner forum on digital drivers that could grow Africa’s digital economy. The forum, themed “Digital Drivers: Enabling the Growth of Africa’s Digital Economy”, aimed “to bring together government, policy and industry experts, academics and innovators to stimulate and foster discussion on relevant topics, with the aim of highlighting the policy issues and recommendations needed to effectively address the challenges.” The event was the second in the US-Africa Business Center’s Digital Transformation Series, launched last year in Nairobi with Kenyan President Uhuru Kenyatta, where a report was delivered on the evolution of digital economy development across Africa and the best ways in which African economies can maximise the benefits of implementing the technology.
WTO’s new Trade Monitoring Report: Trade restrictions among G20 economies remain at historic highs
The WTO’s new Trade Monitoring Report (pdf) issued on 21 November shows that G20 economies from mid-May to mid-October 2019 introduced import-restrictive measures covering an estimated USD 460.4 billion worth of traded merchandise. This represents a 37% increase over the previous period going back to mid-October 2018, and is second only to the $480.9bn coverage of import-restricting measures reported between mid-May and mid-October 2018. The report notes that with restrictions accumulating over time, the share of global trade covered by such measures has soared. WTO Director-General Roberto Azevêdo called on G20 economies to de-escalate trade tensions to spur investment, growth and job creation. “The report's findings should be of serious concern for G20 governments and the broader international community. Historically high levels of trade-restrictive measures are having a clear impact on growth, job creation and purchasing power around the world. We need to see strong leadership from G20 economies if we want to avoid increased uncertainty, lower investment and even weaker trade growth. We have seen how world trade has stalled during the review period. The WTO downgraded its forecast for merchandise trade growth in 2019 to 1.2%, the slowest since the crisis a decade ago, much lower than April's estimate of 2.6%. New trade restrictions and increasing trade tensions will only add to the uncertainty that is dragging down growth in the world economy. This trend needs to be reversed.”
Foreign ministers from the Group of 20 major economies agreed Saturday that it is “urgent” to reform the World Trade Organization, Foreign Minister Toshimitsu Motegi said, amid an escalating U.S.-China tit-for-tat tariff trade war. Motegi, serving as the chairman of the G20 foreign ministers gathering in Nagoya, also said at a news conference that ongoing negotiations on a sprawling Asia-Pacific free trade agreement should be concluded by all the original 16 member states, including India, which pulled out of the agreement earlier this month. “As trust in the multilateral framework is now being undermined, the G20 has shared the view that the WTO should be reformed so that it can address several current issues,” Motegi said after the end of the two-day meeting. At the gathering, the foreign ministers discussed reforms to the WTO, as Japan, the United States and other countries are pushing for the Geneva-based organization to improve its dispute settlement system — a point touched on in a declaration issued by G20 leaders after their summit in Osaka in June. US Secretary of State Mike Pompeo, however, did not participate in the G20 meeting, apparently reflecting Washington’s lack of interest in multilateral economic and financial policy dialogue. [Statement delivered by SA's Deputy Minister Mashego-Dlamini]
This report is structured in three parts, covering four chapters. Part One includes the background chapter which highlights the introduction to the EAC, analyses the macroeconomic trends and outlines key initiatives that have the potential to affect trade and investment in the Region. Part Two deals with the trade and investment outlook in the Region. Chapter 2 reviews trade among the partner states as well as with the rest of the world. The chapter also reviews the impact of different trade promotion policies on customs revenue in the partner states and concludes with an analysis of the challenges to trade development in the region. Chapter 3 analyses foreign direct investment inflows as well as intra-regional investment flows. The chapter concludes with an analysis of the challenges of attracting investment to the region. Part Three is the wrap-up section while Chapter 4 draws conclusions.
Chapter 1: Background. As in other free trade agreements, the negotiations on Rules of Origin for the AfCFTA are likely to be dominated by strong industry lobbying. During the negotiations so far, West and Central Africa have preferred general Rules of Origin, which would probably resemble those in the East Asia and the Pacific region. On the other side, Egypt, Kenya, and South Africa have pushed for product-specific Rules of Origin, and South Africa has lobbied for adoption of the SADC Rules of Origin on a sector- or product-specific basis. If South Africa’s position prevails, the result would be costly Rules of Origin that would likely deny preferences to the low-income partners (such as Ethiopia, Mozambique, Tanzania, and Zambia). When the more developed partner has a comparative advantage in the upstream capital-intensive sector, such as weaving in textiles and apparel or engine building in the automobile sector, Rules of Origin create a captive market in the low-income partner, which has no choice but to source (at a higher cost) from the more developed partner. Potential benefits from the AfCFTA include elimination of tariff and non-tariff barriers in goods and services, customs improvements leading to reduction in cost of trading across borders.
Chapter 2: EAC merchandise trade. EAC merchandise trade grew by 11.7% to $52.4bn in 2018 from $46.9bn in 2017. The growth in merchandise trade resulted from the increase in the import bill for the region while export volumes fell during the year. Total EAC exports decreased by 4.7% to $14.0bn in 2018 from $14.7bn in 2017. The decline in exports was attributed to low international prices of mainly agricultural commodities on account of higher production as a result of improved weather conditions coupled with a drop in the export of primary minerals as a result of a fall in international demand especially due to decline in economic growth in China and the Far East. Earnings from coffee, tea and minerals fell by more than 24% during the year.
Outside the African continent, the EU was EAC’s major trading partner with exports to the EU increasing by 6.5% to $2.5bn in 2018, from $2.3bn in 2017, and constituted about 17.5% of total EAC exports. Exports to the USA and the rest of the world fell by 20.6% and 12.7%, respectively during the year.
Overall, the region continued to register a trade deficit with the rest of the world in 2018 partly due to an increase in imports into the region. The deficit for the EAC increased by 39.4% to $24.3bn in 2018 from $17.4bn registered in 2017. The increase in the deficit was attributed to increase in imports mainly due to a spike in global crude oil prices that peaked at $73 per barrel and increased the import bill for petroleum products. Other imports included machinery, motors, textile, wheat and rice. The EAC imports fossil fuels, textile, leather, crude palm oil, motors and machinery which account for a large proportion of import bill. On the other hand, the Region mainly exports agricultural commodities which in most cases, are unprocessed and fetch very little on the global market.
Chapter 3: Investment trends in the EAC. Foreign direct investment into East Africa decreased by 15.9%, to $5.7bn in 2018, from $6.8bn in 2017. Inflows to Tanzania increased by 2.3% to $3.1bn. Inflows to Burundi and Rwanda decreased by 76.8% and 11.5% to $15.1m, from $65.1m in 2017 and to $1015.3m in 2018 from $1147.7m in 2017, respectively. FDI into Kenya, South Sudan and Uganda fell by 32.4%, 11.7% and 51.8% to $485.5m, $408.6m and $630.6m, respectively in 2018. Overall, FDI inflows to the EAC were concentrated in manufacturing, construction and services sectors. FDI into manufacturing and construction amounted to $2.1bn and $1bn, respectively in 2018. China and India continued to be the major sources of FDI to EAC with inflows amounting to $1.1bn and $281.02m, respectively.
Chapter 4: Conclusions and prospects. To ensure sustained growth in trade and investment in the Region, the partner states have to support initiatives that reduce the import bill on fossil fuels, motors, crude palm oil, textiles and capital items. Initiatives such as fast tracking the production of EAC oil and gas reserves, assembly of motors in the region and support to improved agricultural production including irrigation, post-harvest handling and value addition should be explored. Further reforms will include establishment of a credible central data unit to capture and disseminate all trade statistics in the EAC for use by the Secretariat and Partner States in planning, management and monitoring of the Single Customs Territory.
Kenya could be allowed to secure its own preferential market access for exports to the European Union if the regional Economic Partnership Agreement fails to take shape, EU has signaled. This comes amid continued delays by the EAC member states to ratify the EPA deal as a bloc, which would secure duty-free quota-free market access with the 28-member union. EU ambassador to Kenya Simon Mordue yesterday said Kenya could be allowed to go ahead solo under the "variable geometry" provision, which allows certain members states to implement trade agreements faster than others or before others which are not ready. “Kenya is obviously very keen together with Rwanda to move forward and start this trading arrangement with European Union as quickly as possible because they full understand the benefits of this agreement,” EU ambassador to Kenya Simon Mordue said in Nairobi yesterday.
Regional clearing and freight forwarding firms are seeking to improve the professionalism of their operations through a model bill on clearing and freight forwarders industry in the East African Community region. The bill was developed through an initiative by the Federation of East African Freight Forwarders Associations (FEAFFA), in partnership with the revenue authorities and JICA. Under the lead of FEAFA, a model bill on self-regulation was initiated and developed in collaboration with various stakeholders to overcome challenges that are hindering the industry. According to Fred Seka, president of FEAFFA, even though the industry has been championing professionalism through a number of activities such as training, code of conduct, regional accreditation framework, among others, there is need to self-regulate the industry. The Rwandan government has already drafted the national bill and it is ready to be submitted to the concerned authorities, and more than 7000 thousand operators have benefited from the capacity development for international trade facilitation in the region.
Kenya National Chamber of Commerce and Industry, a business lobby, plans to promote the use of Chinese mobile payment service WeChat Pay in order to boost China-Kenya trade, an official said on Wednesday. George Kiondo, deputy CEO of the KNCCI, told Xinhua in Nairobi that adoption of the mobile payment service will be an advantage given that China is a key trading partner. "We are telling our members to use WeChat Pay because it is an affordable and convenient way to pay for imports of goods," Kiondo said on the sidelines of a forum for the preparation of the third edition of China-Kenya Industrial Capacity Cooperation Exposition that will take place 26-29 November. The event will bring about 83 Chinese enterprises which will showcase their latest industrial innovations.
UAE-Kenya Trade and Investment Forum: updates
(i) Kenya National Chamber of Commerce and Industry in partnership with Sharjah chamber of Commerce and Industry has signed a MOU to open a satellite trade office in the United Arab Emirates. The agreement signed on Monday will enable and provide strategic bilateral cooperation between the business communities in Kenya and UAE with an objective to foster cooperation in trade, investment, joint activities, information and trade policy support programmes.
(ii) Sharjah Chamber of Commerce and Industry Chairman Abdulla Sultan Al Owais: “We, at the Sharjah Chamber, are keen to enhance investment and business prospects with Kenya as a regional hub for finance and commerce in East Africa and a business gateway to the region. Likewise, the Emirate of Sharjah is a regional hub and a gateway to Gulf and Middle East Markets. I would like to seize this opportunity to invite the Kenyan business community to invest in Sharjah as an attractive destination for investors from all over the world, thanks to its outstanding strategic location, infrastructure and logistics, motivational investment environment, economic diversity, and pioneering projects in new sectors.”
(iii) Uganda is the second destination of the trade mission, where the first day will feature the UAE – Uganda Forum. The second day will feature bilateral meetings between Emirati businessmen and their Ugandan counterparts.
Kenya: Central governors in bid to revitalise agriculture (The Standard)
Meeting under the umbrella of the Central Kenya Economic Bloc in Nairobi on Monday, the leaders agreed on a raft of measures aimed at speeding up projects and sector-specific interventions in their counties. Under the chairmanship of Nyandarua Governor Francis Kimemia, the regional county chiefs also agreed on the way forward around several issues affecting the bloc, and whose resolutions will be implemented jointly and individually through the regional economic body. Some of the issues discussed include; value chain improvement on milk and agricultural produce from the region, coffee reforms sector report and its implementation, and fast-tracking the establishment of a regional development authority as a special vehicle for regional development programmes.
Mombasa port performance hits new record (Business Daily)
The Port of Mombasa has registered a new performance record of more than 6.24 million metric tonnes throughput in the month of October with containerised cargo taking the largest share of the total cargo handled in the month of September and October this year. Last month, the port recorded 6,245,960 metric tonnes with goods handled in the week of 17-23 October recording 3,269,508 metric tonnes of total cargo. In the same week, the port received 35 vessels that discharged and loaded containerised cargo, while 24 bulk cargo and 21 general cargo vessels were received during the same time. The Kenya Ports Authority weekly report for the month between September and early November indicates that for the last three weeks of October, the port registered the highest number of throughput of more than 1 million tonnes weekly.
Selected updates from the Global Gender Summit in Kigali:
(i) Rwandan firms win big at inaugural women entrepreneurship challenge. Two Rwandan entrepreneurs have been named best in their respective categories during the inaugural women entrepreneurship competition, 2X Invest2Impact, that brought together several entrepreneurs from five African countries. The duo is among the 100 women entrepreneurs selected from the five countries as winners in four categories and will form the first cohort of the 2Xconnect, an online community dedicated to African women entrepreneurs. The announcement was made in Kigali on the sidelines of the Global Gender Summit 2019 that ended Tuesday. The challenge brought together women entrepreneurs from Rwanda, Uganda, Kenya, Tanzania and Ethiopia.
(ii) AfDB, partners officially launch AFAWA Risk Sharing Facility. The African Development Bank’s Affirmative Finance Action for Women in Africa (AFAWA) programme gained momentum with significant support from commercial banks and a $1m commitment from the government of Rwanda. AFAWA is expected to unlock $3bn in private sector financing to empower female entrepreneurs through capacity-building development, access to finance as well as policy, legal and regulatory reforms to support enterprises led by women. In August, G7 leaders approved a package totaling $251m in support of AFAWA during the summit in Biarritz. Olukayode Pitan, president of Nigerian Bank of Industry said with the signings they could lend more to women. [New Times: Will AfDB’s initiative bridge the $42bn funding shortfall for African women entrepreneurs?]
(iii) Using innovative financing mechanisms to accelerate finance for women in business. Wendy Teleki, Head of the We-Fi (Women Entrepreneurs Finance Initiative) Secretariat and the panel moderator, led the six panelists in exploring how financial institutions and multilateral development banks are innovating to expand women’s access to finance. Aside from risk-sharing interventions like credit guarantees to lenders, panelists said increasing women’s financial literacy was also key to closing the gender gap. “It’s not about corporate social responsibility or charity,” said panelist Barbara Rambousek, Director for Gender and Economic Inclusion at the European Bank for Reconstruction and Development. “It is about developing that business case and developing a proper set of financial and non-financial services.”
(iv) McKinsey Global Institute: The power of parity - advancing women’s equality in Africa. If Africa steps up its efforts now to close gender gaps, it can secure a substantial growth dividend in the process. Accelerating progress toward parity could boost African economies by the equivalent of 10% of their collective GDP by 2025, new research from the MGI finds. Advancing women’s equality can deliver a significant growth dividend. In a realistic “best-in-region” scenario in which the progress of each country in Africa matches the country in the region that has shown most progress toward gender parity, the continent could add $316bn or 10% to GDP in the period to 2025 (see Exhibit 1). Another increasingly important gateway to economic opportunity is access to digital technologies. Africa’s progress toward parity on digital inclusion is not far below the global average (0.81 female-to-male digital inclusion ratio vs. 0.86 globally), but that progress has stagnated. The continent still has the second largest gender gap in mobile ownership at 15% and only one woman out of three has access to the mobile internet in Sub-Saharan Africa compared with one man in two. [Acha Leke, Lohini Moodley: The economic potential of gender parity for Africa]
The following communication, dated 22 November 2019 (pdf), addressed to the Chair of the General Council and the Director-General of the World Trade Organization, is being circulated at the request of the delegation of Benin on behalf of the African Group:
I wish to request Your Excellency to allow the African Union to have an observer status in the WTO. The African Union is Africa's inter-governmental Organization with the ultimate objective to accelerate the political and social-economic integration of the Continent. As you may be aware, the African Union operationalized the AfCFTA at the 12th Extraordinary Summit of the Heads of State and Government of the African Union in Niamey, Niger, on 7 July 2019. Once fully implemented, this historical continental flagship project of the AU's development Agenda 2063, would make the continent the world's largest single market with 1.5 billion people and a combined GDP of $2.5 trillion. In recognition of the determinant role that trade plays for economic growth and sustainable development in today's globalized economy, the African Union attaches great importance to the enhancement of trade performance of its Member States of which 44 are Members of the World Trade Organization. Nine African countries are currently candidates to the WTO, including 6 LDC's.
Africa remains committed to the rules-based multilateral trading system in which WTO serves as the principal global organ of governance. To ensure that Africa is effectively integrated and represented into this international trading system and that its interests and concerns are adequately taken into account, the AU has been given the mandate by its Member States as per its policy organs, to coordinate and harmonize the position of African countries and regions, with a view to speak with one voice in international trade negotiations and fora. I have no doubt that the granting of observer status to the AU and its participation in the activities of the WTO and its technical sub-committees will facilitate the formulation of common African policies and enhance the equitable participation of the member States of the WTO to contribute to a rules-based multilateral international trading system. Above all, this will greatly reinforce the growing strategic partnership between the African Union and the WTO.
Note: Text of letter from Mr Moussa Faki Mahamat, Chair of the African Union Commission, addressed to Ms Sunanta Kangvalkulkij, Chair of the General Council and Mr Roberto Azevêdo, WTO Director-General, on 17 November 2019
The following communication, dated 22 November 2019 (pdf), is being circulated at the request of the delegation of Benin of behalf of the African Group:
Agriculture is a vital sector for achieving Africa's aspirations to growth and development. Agriculture contributes by almost 15% to the total GDP of the continent, creating job opportunities for almost half of its working force, and therefore agriculture for Africa is a matter of food security, employment, income and mere existence.
The negotiations on Agriculture in the DDA are therefore of paramount importance to the African Group. It is widely known that Agriculture remains the most trade-distorted sector in the context of WTO rules. Hence, reforming the agricultural rules is a critical development outcome in the DDA.
The African Group reiterates its position that discussions on reforming the Agreement on Agriculture (AoA) in particular and the WTO in general shall be revolving around the means to make the rules more development oriented and responsive to the challenges our continent is facing. Therefore, our priority in Agriculture negotiations is to correct the historical imbalances in the AoA in a manner that would enable our countries to respond to the challenges of food security compounded by climate change.
On the Special Safeguard Mechanism:
African countries have been subject to massive and repetitive import surges, resulting over the years and in the absence of any means to safeguard the market in substantial reductions in production mounting in some cases to more than 50% decrease, and the loss of numerous jobs.
Members are to intensify the discussions in the dedicated session on SSM of the Committee on Agriculture in Special Session with the view of concluding the negotiations on the SSM by MC12.
The Mechanism shall cover both price-based and volume-based triggers with no a priori product limitations as to its availability, and it shall be easily applied by developing countries, with flexible time limits for application to address the needs of the developing Member utilizing the mechanism.
The operation of the SSM shall be carried out in a transparent manner, and the Member invoking the SSM should afford any interested Member the opportunity to consult with it in respect of the conditions of application of the measure. Transparency requirements shall be conducted in a manner that would not impose onerous burden on developing countries and especially LDCs and NFIDCs.
The Chairperson of the AUC Moussa Faki Mahamat concluded a two-day working visit to the Republic of South Africa. Accompanied by Dr Ibrahim Assane Mayaki, CEO of AUDA-Nepad and other senior officials, the Chairperson held discussions with President Cyril Ramaphosa, Foreign Minister Naledi Pandor, Finance Minister Tito Mboweni and senior officials from the Department of International Relations and Cooperation. The two leaders and their teams held discussions to discuss the strategic priorities of South Africa ahead of the country’s assumption as Chair of the African Union in 2020.
President Ramaphosa emphasised his commitment to deepen engagement regarding unresolved conflicts on the continent, including Libya, as part of South Africa’s desire to accelerate action to Silence the Guns by 2020. President Ramaphosa also reaffirmed South Africa’s support to the AfCFTA and the critical role that infrastructure development should play in making the AfCFTA a reality. For his part, the Chairperson of the Commission Moussa Faki Mahamat noted the importance of the upcoming presidency of South Africa to head the Union in 2020, and reaffirmed the commitment of the Commission and to support South Africa in preparing for this crucial role to push ahead with promoting the continental agenda. [Communiqué on the Chairperson’s working visit to Botswana]
South Africa: Staff concluding statement of the 2019 Article IV Mission (IMF)
IMF staff projects economic growth to remain sluggish in 2020 - below population growth for the sixth consecutive year. On current policies, the medium-term growth outlook would remain subdued accompanied by somewhat muted inflationary pressures. With low growth and low job creation, the increasing labor force is projected to exacerbate unemployment pressures, poverty, and inequality. Amid weak economic performance, credit expansion remains low, notwithstanding an uptick in unsecured loans. External debt and gross financing needs remain elevated, while external financing continues to be heavily reliant on non-FDI inflows. However, the relatively easy global financing conditions are providing breathing space to finance government operations. South Africa’s undeniable economic potential remains largely untapped and the recent economic performance points to rising risks. The economy faces three immediate challenges...:
The vulnerable outlook emphasizes the urgency of rebuilding policy buffers and implementing reforms to put the economy on a sustainable and inclusive growth path. Failure to implement the needed adjustment in government and SOE spending and efficiency will worsen debt dynamics, erode financial stability, and further raise the country risk premium. With delays in structural reforms, growth and social conditions will worsen. Implementing the reforms now will benefit from the benign financing conditions in international markets and prevent disruption from an abrupt adjustment in future.
Ethiopia: Science, Technology and Innovation Policy Review (UNCTAD)
The STIP review contrasts Ethiopia's rapid economic growth with much slower growth in technological learning and innovation capacity as a major obstacle to sustaining this impressive performance and achieving more sustainable development. It shows that on paper, Ethiopia has most of the policies, regulations, background studies and roadmaps necessary to kick-start a successful process of technological learning, innovation and technological upgrading. However, in reality the country faces challenges in policy implementation across public institutions related to capacity constraints and sub-optimal allocation of efforts and resources. “Innovation ultimately takes place at the firm-level, but the state plays a key role as a facilitator of the national innovation system,” said Shamika N. Sirimanne, UNCTAD’s director of technology and logistics division during the report’s launch in Addis Ababa. “The state is the glue that holds the innovation system together.”
The STIP review also provides an in-depth analysis of two sectors as case studies for understanding how STI policy can stimulate technological upgrading and innovation and thereby improve the performance of industries identified as important for Ethiopia's development. They are the apparel and textile sector for resource-based labour-intensive exports and the pharmaceuticals sector for knowledge-intensive import substitution. The STIP review is based on fact-finding missions to Ethiopia conducted in December 2018 and March 2019.
PIDA Week 2019 is underway in Cairo on the theme: Positioning Africa to deliver on Agenda 2063 and economic integration through multi- sectoral approaches to infrastructure development
(i) Extracts from the concept note: Intended outcomes of PIDA Week include (pdf). Validation of key studies that contribute to the PIDA PAP 2 process; Validation of the Dispute Settlement Mechanism for operationalization of the Single African Air Transport Market; Progress on the Digital Transformation Strategy; Validation of the Strategy to unlock access to rural areas; Validation of the strategy paper as well as the Detail scoping study of the Continental High Speed Railway Network, followed by a capacity building workshop on the Luxembourg Protocol on railways; Launch of the African Network for Women in Infrastructure (ANWIn)
Sector specific workshops will be also held during the week, including: Validation workshop of the detailed scoping study for the Continental High Speed Railway Network ; Efficiency and competitiveness of ports in Africa; Coordination workshop on the implementation of the Tourism Action Plan 2019-2021; Meeting of the working group in charge of the feasibility study on the African Tourism Organisation
(ii) Speech by AUC Commissioner for Infrastructure and Energy, Dr Amani Abou Zeid: Yesterday the Members of the Bureau of the STC on Transport, Transcontinental and Interregional Infrastructure, Energy and Tourism composed of the Arab Republic of Egypt, Democratic Republic of Congo, Somalia, Lesotho and Togo, met and validated the PIDA PAP 2 integrated corridor approach, the projects selection criteria, the strategy to unlock access to rural areas and the detailed scoping study of the Continental High Speed Railway Network.
With the validation of the PIDA PAP 2 studies by the Ministers the African Union Commission in collaboration with AUDA-NEPAD, the RECs and the Member States will engage the consultations for the selection of the list of priority projects which are expected to be implemented from 2021-2030.
At the political level, there is a need for African countries and RECs to mainstream PIDA projects into their national and regional development plans. It is also important that African Member States take ownership in the development and implementation of national and continental initiatives. This is necessary to ensure that there are clear and harmonized ambitions, strategies and political commitments towards ensuring access to infrastructure services as well as provide the necessary policy and financial instruments for infrastructure development at the local, national and regional levels.
(iii) Speech by AUDA-NEPAD CEO, Mr Ibrahim Mayaki: As we embark on the development of the next set of priority projects in PIDA PAP 2 we should take note of the lessons learned and match these with the imperative to deliver on the promise of infrastructure for Africa’s people. We particularly welcome the integrated corridor development approach for PIDA PAP 2.
With the aim of fully implementing MoveAfrica, AUDA-NEPAD developed a Traffic Light System (TLS) to rank and track the level and the quality of the service of Africa’ s transport corridors, starting with border posts as a point of departure. Four border posts, Beitbridge, Chirundu, Kasumbalesa and Kazungula along the North-South Corridor in the SADC Region were selected for the pilot phase. If we have to achieve the Continental Free-trade Area we must reprioritise African border posts and commit to addressing the unnecessary delays at these critical trading routes. To date the TLS has been expanded into 21 COMESA member states, 15 SADC members states and 15 West African countries. The current corridor coverage is on the North South Corridor, Abidjan Lagos Corridor and the Trans Kalahari Corridor. The TLS under MoveAfrica is growing becoming a credible tool that ensures the Africa Continental Free-trade Area is actualised.
(iv) PIDA Week Programme (pdf)
CFA franc reform: CEMAC launches deep reflection (Cameroon Tribune)
The 15th Extraordinary Summit of Heads of State and Government of 22 November, in Yaounde, mandated the CEMAC Monetary Union and BEAC to carry out a study and make proposals within reasonable time. The six countries of the Economic and Monetary Community of Central Africa (CEMAC) have unanimously agreed to reform its currency so as to have a stable and strong legal tender capable of giving the economies the boost for better development and population's livelihood. The direction the reform will take can only be known when the CEMAC Monetary Union and Bank of Central African States, mandated by the Heads of State of CEMAC to carry out the study, must have tabled their proposals in the shortest or reasonable time possible.
According to point seven of the 16-point resolutions read by the President of the CEMAC Commission, Daniel Ona Ondo, "... concerning monetary cooperation with France on the CFA Franc, the Heads of State decided to engage a deep reflection on conditions and framework of new cooperation. To this effect, they mandated the Central African Monetary Union and BEAC to propose within a reasonable timeframe an appropriate scheme that can lead to the evolution of a common currency."
The newly minted African Continental Free Trade Area (ACFTA) agreement heralds a new dawn for the continent’s states. The free trade deal involves 54 nations with a combined population of more than a billion people and gross domestic product surpassing $3.4 trillion, which would make it the fourth largest economy among G20 nations.
The deal signed in Kigala, Rwanda in 2018 goes a long way in realising the vision of the African Union and its Agenda 2063 to create “an integrated, prosperous, and peaceful Africa, driven by its citizens, representing a dynamic force in the global arena”.
But the ACFTA is the start of a journey rather than its culmination. Creating a single continental market for goods and services, with free movement of business persons and investments, across more than 50 varied nations with different regulatory, political and economic imperatives remains a work in progress.
“In launching the African Continental Free Trade Area and making it work, Africa is overcoming the historic fragmentation and isolation of her economies by opening up huge commercial opportunities as well as improving transport and communication linkages among our countries,” according to the African Union.
It is still in the early days, but the African Union is working towards accelerating the establishment of the Continental Customs Union and the African customs union. Last year, ACFTA held its First Intra-African Trade Fair in Cairo, Egypt, which attracted 1,086 exhibitors, and business deals of more than $32 billion, well above the target of $25 billion.
The member states are also working towards establishing the Single African Air Transport Market as well as the Protocol to the Treaty Establishing the African Economic Community Relating to the Free Movement of Persons, Right of Residence and Right of Establishment.
The Middle East states have long valued the African continent’s immense promise. From the skills and potential of its people, to its natural resources and need for investment in infrastructure and businesses, Africa has long been considered a dynamic investing destination by Arab states, who have been major strategic investors in the region for decades.
The Middle East and Africa enjoy a $108 billion bilateral trade partnership, according to Swiss-based International Trade Centre. Trade between the six GCC nations and Africa dominates the flow, with total two-way trade reaching around $71 billion last year.
In recent years, Gulf states have also invested heavily in African companies and assets. The UAE’s Emirates Global Aluminium recently received its first shipment of bauxite ore from its $1.4 billion mine in Guinea. The western African state will earn $700 million annually from the development.
Dubai Ports World is looking to develop the commercial port of Assab in Eritrea, and in August 2018 the UAE announced a pipeline project linking Addis Ababa in Ethiopia to Assab in Eritrea. Last year, the UAE also agreed to invest $10 billion in South Africa’s economy, including in areas of tourism and mining sectors.
Earlier this year, Saudi Arabia said it plans to invest $10 billion to build an oil refinery and a petrochemicals plant in South Africa.
Clearly, the GCC states are drawn to the African states’ promise, especially as the new pan-continental trade deal will facilitate opportunities and unlock growth in parts of Africa that were previously difficult to access.
A singular trading platform, similar to the European Union, will strengthen Africa’s hand when negotiating with trading partners. The African Union believe it will build up the continent’s economic clout in trade negotiations at the global level such as in the World Trade Organisation.
Middle East states, especially Gulf sovereign funds, will also be attracted by the critical mass of a continentwide economy.
“With restrictions lifted on foreign investments, investors will flock to the continent. This adds capital to expand local industries and boost domestic businesses,” according to the World Economic Forum. “New capital enhances an upward productivity cycle that stimulates the entire economy. An inflow of foreign capital can also stimulate banking systems, leading to more investment and consumer lending.”
The UAE has a lead over its Gulf counterparts in investments in Africa, and is leveraging its construction, shipping, logistics, tourism and energy development expertise to position itself as a gateway to Africa. Dubai Chamber of Commerce and Industry organises a Global Business Forum every year to identify investment and business opportunities in the continent.
Shot in the arm
The manufacturing sector may be the biggest beneficiary of the ACFTA as it remains under-represented in Africa’s GDP, and is one of the most crucial segments that can provide jobs, foreign direct investment and infrastructure in African economies. “A bigger manufacturing sector will lead SMEs to create more well-paid jobs, especially for young people, thereby alleviating poverty,” the World Economic Forum said.
Africa’s agriculture sector could also emerge as a winner as Middle East nations seek food security. However, there is a danger that more advanced nations on the continent such as South Africa, Nigeria, Egypt — which make up 50 per cent of Africa’s GDP — may be outsize beneficiaries of trade at the expense of smaller, and more developed nations. There is also concern about revenue losses from tariff liberalisation, estimated at $4 billion.
The next few years are important as ACFTA implements key regulatory pieces in place such as trade documents, tariff schedules, rules of origin and a system for addressing non-tariff barriers, but it appears the continent is gearing up for the next chapter of its development.
“It carries the promise of a much rejuvenated Africa on a high economic growth path, for social economic transformation,” wrote Francis Mangeni, director of Trade and Customs at the Common Market for Eastern and Southern Africa. “The eternal challenge that will remain is to duly implement and utilise it. Leadership in the public, private and academic sectors is required.”
As an international bank with the most extensive sub-Saharan footprint and over 150 years of history in the continent, Standard Chartered is well positioned to capitalise on the opportunities ACFTA agreement will bring to the continent. We will continue to support the agreement, facilitate trade and help companies venture into the continent.
Source: Trade Law Center (TRALAC)
This [AfCFTA] greement requires policymakers to align a wide range of complex and divergent trade strategies across the continent. To support this ambitious endeavour, the International Trade Centre has launched a report that assesses Africa’s existing national and sub-regional trade strategies to identify common trends and opportunities in the ongoing AfCFTA negotiations. Diversifying Trade in Africa: New strategy approaches for the African Continental Free Trade Area examines 181 strategic African trade and development documents in ITC’s Trade Strategy Map database. To achieve robust regional integration, the report suggests that Africa should focus more on manufacturing and innovation sectors that can add value. ‘If not designed properly and used by the private sector, the African Continental Free Trade Agreement will foster little economic benefits. This is why investing in the ‘design phase’ will be essential for African policymakers to align often complex and even divergent national trade strategies across the continent,’ said ITC Executive Director Director Arancha González.
Extract (pdf): The report suggests that African trade policy considerations should take into account the following trends:
While Africa’s regional strategy discourse is on manufacturing and industrialization, its national trade strategies continue to focus on agriculture and primary products. Agriculture accounts for less than 20% of the continent’s GDP but more than 60% of the priority sectors in African trade strategies. Manufacturing and high value-added sectors are rarely prioritized at both the country and regional level. This focus on a narrow range of agricultural and primary products only contributes to perpetuate, rather than evolve, existing trade relationships within Africa and between Africa and other regions.
With almost half of the world’s regional trade strategies, Africa is a champion of regionalism. Close to 80% of existing trade strategies in Africa identify trade integration and regionalism as crucial policy areas, but currently only 10% of African strategies have a regional scope, which indicates there is space for regionalism to grow.
There are significant similarities in the sectors that African countries prioritize in their national trade strategies, with agricultural products being prioritized across all regions. Differences can nevertheless be appreciated in the sectoral focus across African regions. North Africa focuses mostly on energy and bio-fuels while textiles and clothing predominate in subSaharan Africa. East Africa and West Africa focus on foodstuffs, animals and animal products. Services sector priorities are highly concentrated on tourism, transport and, to a lesser extent, on information and communications technology, and finance.
Given the degree of overlap of sector priorities at the country and regional level, developing a common space for a regional strategy for Africa is not going to be simple. Overlapping sector priorities could become a potential source of tensions during AfCFTA negotiations. Neighbouring countries find themselves very often prioritizing the same type of agricultural products. Examples include maize (Democratic Rep. of the Congo, Uganda, United Rep. of Tanzania), pulses (Ethiopia, Kenya), mango and onions (Burkina Faso, Mali), and cashew (Benin, Burkina Faso, Mali, Côte d’Ivoire, Gambia, United Rep. of Tanzania) among many other.
Table of contents: Connecting trade strategies with regional ambitions for African industrialization; Challenges facing regional trade strategies; African trade strategies over time; Conclusions
Uganda and the AfCFTA: Impact Assessment Report (ECA)
The ECA and Trademark East Africa launched the national impact assessment report that presented the effects of the AfCFTA on Uganda, during a national AfCFTA stakeholder consultation meeting on 31 October 2019. Emphasizing that regional platforms are “the way to go” for developing countries to overcome trade challenges, the Minister for Trade, Industry and Cooperatives, Amelia Kyambadde, used her opening statement as an opportunity to applaud the ECA/TMEA partnership in supporting regional integration in Eastern Africa.
The forum proceeded to present an Impact Assessment Report, set out by Andrew Mold, Acting Director of the ECA Office for Eastern Africa. With Uganda exporting close to 51% of her exports to the African market, the findings projected welfare gains post-AfCFTA, clearly demonstrating the importance of the AfCFTA to Uganda. To get the most out of the AfCFTA in Uganda, the role of manufacturing, services and value addition were rightly flagged up as priority areas to consider. The stakeholders also discussed how to make the most out of the electronic payment systems that the EAC has put in place to lower transaction costs for intra-regional trade.
Do you think we are ready for the opportunities to be offered by AfCFTA? Well, I will say that some industries are ready. Some big companies are ready to take advantage because of their size, network, capital base, the resources that they have and because they can take the advantages of economy of scale easily. You can say that those ones are ready. You can also say that in the service sector our people are ready. Because the challenges you face in the service sector are not the same that you face in the real sector. We have our people in fashion, creative industry, entertainment, ICT, financial service, legal service, advertising, trading, that are ready to lash on the opportunities. These are areas our people will take advantage in. But when it comes to manufacturing, especially with the SMEs, I cannot say that we are ready.
(i) Arkebe Oqubay: Why industrialisation is vital for the AfCFTA to succeed. In my view, at least three interventions are required for the AfCFTA to succeed as a development opportunity: A commitment and strategic focus on industrialisation; Increase marginal share in global exports; Invest in connectivity and infrastructure.
(ii) ODI Africa Industrialisation Day perspectives: Dirk Willem te Velde: Digitalisation and innovation are vital for African manufacturing; Linda Calabrese: Lessons for Tanzania on value chain integration; Stephen Gelb: Lower tariffs are not sufficient for industrialization; Karishma Banga: The digital economy and the AfCFTA
(iii) World Export Development Forum puts focus on value addition for inclusive growth in one Africa. Inclusive economic growth across Africa hinges on ensuring greater value addition in manufacturing, agriculture and services. The successful implementation of the African Continental Free Trade Area will be critical to ensuring this. That was the message from public and private-sector leaders at the opening of the 19th World Export Development Forum taking place in Addis Ababa. The opening of WEDF 2019 coincided with the 30th anniversary of Africa Industrialization Day reaffirming the event’s focus on addressing key priorities of the African continent. Opening the event, Ethiopian President Sahle-Work Zewde said: “It is high time to expedite [of the African Continental Free Trade Area] implementation in order to unleash a complementary economic ecosystem among African nations. It is imperative we leverage the collective market size that we have as a continent. By creating a complementary economic system, we will be able to reap the full potential of our respective nations and become a major player in the international trade arena.”
(iv) ITC Executive Director Arancha González: "We also know that the AfCFTA has the potential to change the trading landscape of Africa and boost intra-Africa trade by more than 50%. However, if policies are going to work, they need to work for everyone—and that includes women. For this reason, the past two days, ITC, the AUC and the UNECA have worked with more than 40 women business associations representing one million African women entrepreneurs and producers to develop priorities to shape an AfCFTA that works for women. We will continue the discussion into next year by bringing together women and trade policymakers.”
(v) Representatives of over 43 African countries call for harnessing SEZs to drive Africa's industrialization. More than 220 African experts and policymakers representing 43 countries and 60 African economic zones on Tuesday called for harnessing the potential of special economic zones to spur industrialization in Africa. They made the joint call on Tuesday during the fourth annual meeting of African Economic Zones in Addis Ababa, held under the theme "Special Economic Zones: Accelerator for Industrialization in Africa." The Ethiopian Minister of Transport, Dagmawit Moges underscored the crucial imperative to further tap into the economic potential of free zones by creating synergy with other relevant infrastructures. "There is a strong need for transit and transport corridors to link Special Economic Zones with national and regional centers.”
Mehdi Tazi Riffi, AFZO President stressed that "AFZO was put in place by Africans, for Africans and to develop successful African Special Economic Zones." The Africa Free Zones Organization , which currently has more than 72 members representing 37 African countries, envisages improving the attractiveness of economic zones by "setting up of tailored model for economic zones development.” Prior to the ongoing meeting in Addis Ababa, AFZO had previously conducted four similar regional meetings on SEZs in Ghana, Gabon, and Togo, eventually bringing together more than 500 participants from 30 different countries. [Nigeria Export Processing Zones Authority: N1.45trn goods smuggled into Nigeria from Benin Republic annually]
(vi) "China has focused a lot of attention to the industrialization of the African continent" the ITC Executive Director told Xinhua on the sidelines of the Africa Industrialization Day commemoration event. “It (China) has focused a lot in manufacturing," Gonzalez said, as she emphasized other emerging potential areas in the industry sector that are benefiting from and attracting Chinese engagement across Africa. “First, I think now there is interesting opportunity that is coming in two other sectors, one is agro-processing, so helping Africa transform a lot of the raw materials, agricultural commodities that this continent produces into processed products. The second sector, still under leverage in my view, is a big opportunity in the services economy," Gonzalez said, adding investment in the health, education, logistics, and digital connectivity areas will also make a more competitive African economy.
(vii) A high-level meeting of policymakers, regulators and industry experts in the field of pharmaceuticals and trade opened in Addis Ababa, Thursday to discuss a bold path towards affordable pharmaceuticals through leveraging the African Continental Free Trade Area. The Continent is home to 11% of the world’s population yet it carries 25% of the world’s burden of disease. If implemented, pooling procurement of essential drugs and products and expanding local pharmaceutical production on the continent is seen as a critical pathway to the prosperity of African citizens, thereby achieving universal healthcare in Africa. Executive Secretary of the ECA, Vera Songwe, told the meeting that 50% of all children who die before the age of five in the world are in Africa. The meeting discussed the role of African businesses in driving the growth in this sector as well as the need for financing instruments to facilitate pooled procurement. These include a strategic fund, levy and social bonds that can link up with financial markets.
(i ) Rwandan industrialists have claimed that the importation of rival products, high cost of electricity and imported raw materials and operating below capacity were hampering their competitiveness on local and continental markets. The challenges were highlighted on Wednesday during the celebration of Africa Industrialization day. Constantin Rugaba, the Sales and Marketing Manager at Master Steel, a factory that manufactures construction materials, said imported rival products have led their sales to decrease. Telesphore Mugwiza, Director General of industry and entrepreneurship department in the Ministry of Trade and Industry, said lack of competitiveness among local manufacturers is driven by high production cost and operating below production capacity.
(ii) Nigeria's Minister of Industry, Trade and Investment, Niyi Adebayo, has called on African countries to implement strategies that would promote industrialisation and diversification of their economies in order to optimise the opportunities offered by the AfCFTA agreement to African economy. Adebayo said: “The road ahead to realising these opportunities are tough and challenging but we have no choice but to tackle them head on.” He made the call yesterday at the 2019 edition of the Africa Industrialisation Da), which took place in Calabar, Cross River State. He also called for increased intra-African trade to lessen the continent’s exposure to external macroeconomic shocks and protectionist trade policies. [Nigerian government invests additional $250m in Sovereign Wealth Fund]
(iii) Nigeria's federal government on Thursday said it has resuscitated the Presidential Mines Surveillance Task Force to curb illegal mining and environmental degradation. The Task Force, which would be operating in all states of the federation, will also be responsible for plugging revenue leakages and institutionalisation of the National Council of Mining, and Mineral Resources Development. The Minister of Mines and Steel Development, Olamilekan Adegbite, who disclosed this in his presentation to the National Economic Council also updated members of the current relationship between the federal and state governments in relation to fiscal governance of solid mineral sector.
Author: Gerhard Erasmus
The AfCFTA has been designed to comply with the typical multilateral rules applicable to an FTA covering trade in goods and service. They include Article XXIV of the General Agreement on Tariffs and Trade (GATT) and Article V of the General Agreement on Trade in Services (GATS), as well as those requirements dealing with the elimination of substantially all tariffs and other restrictive regulations of commerce among the State Parties. The AfCFTA Agreement and the Protocols contain several provisions incorporating disciplines from the trade regulating instruments of the World Trade Organization (WTO), such as those dealing with trade remedies and standards. And the AfCFTA Protocol on dispute settlement is based on the Dispute Settlement Understanding of the WTO.
On face value the AfCFTA is meant to be a rules-based trade arrangement; legal obligations agreed upon should be respected. Monitoring of compliance and dispute settlement are part of such endeavours. These are important technical aspects of the AfCFTA. They constitute benchmarks for evaluating the AfCFTA and assessing its implementation over time.
AS the drive towards operationalising the African Continental Free Trade Agreement (AfCFTA) gathers momentum, revenue authorities within the region are apprehensive of the potential compromise this would pose on domestic revenue collections mainly on the customs front.
Africa is in dire need of a strong domestic revenue base to meet its development needs as part of a wider long-term desire to wean itself off donors.
Speaking at the ongoing 4th International Conference on Tax in Africa here, revenue administrators and their stakeholders stressed the need to boost domestic revenue through expanding the tax base in a manner that will notably increase their tax-to-GDP ratios while ensuring stability in revenue.
However, they expressed fear that the AfCFTA deal, which has already been signed by many African governments and is due for implementation in July 2020, might offset customs revenue gains.
“The African Continental Free Trade Area brings exciting new prospects for the continent, but immediately, means a loss in customs revenue meaning, it is imperative to tap into efficiency in collecting revenue,” said Mr Logan Wort, executive secretary for ATAF, a 38-country member regional advocacy organisation on tax administration issues in Africa.
Moreover, given that the notion of digitalised economies is getting more prevalent in Africa, Mr Wort said policy and administrative action needs to be considered “to counter the decreasing contribution of corporate income taxes relative to total tax revenue”.
Head of the Federal Inland Revenue Service, Nigeria, Mr Tunde Fowler, concurred but said the possible customs revenue loss from embracing the AfCFTA would be for a short while and that states need to put interim interventions to ease the impact.
“Indeed, many countries have signed and ratified the AfCFTA. While spelling exciting news for intra-Africa trade, it could lead to a reduction in the customs revenue in the short term, thus requiring stop-gap measures not to affect development plans,” he said.
Mr Fowler said in the long-run the AfCFTA would yield positive dividend that will cushion economies as members will realise benefits of trading in a wider market.
The African Tax Outlook calculates customs revenue as contributing about 14 percent to the total tax basket in the continent.
This requires Africa to develop more efficient and effective ways of collecting revenue, with technology as a prime instrument.
Africa’s Agenda 2063 views domestic resources as an important enabler of its aspirations.
In fact, the regional blueprint specifically stresses the need to “build effective, transparent, and harmonised tax, revenue collection, and public expenditure systems” as one of the key pillars.