IMPORTANT ANNOUNCEMENT

Insights on African businesses’ reactions and outlook to COVID-19 - The African Trade Policy Centre (ATPC) of the United Nations Economic Commission for Africa (ECA) and International Economics Consulting Ltd., jointly carried out the first comprehensive survey on the COVID-19 pandemic and its economic impacts across Africa in mid-April. There were 210 respondents, made up of a mix of micro, small, medium and large enterprises from across the 54 African countries. The results have highlighted the major challenges that firms are facing due to the current crisis.

Many companies have expressed their concern about the direct impact on company turnover, with the smallest firms expecting to be hit the hardest. The lack of operational cash flow, lower capacity utilisation, disruption in supply chains and decrease in demand may force some businesses to close down, with obvious adverse effect on workers, finds the survey. The survey also finds that access to credit is elusive to businesses of all size, with less than two fifths of requests being granted, while one to two thirds of loan requests are not even offered a response. The hardest hit, again, being the smallest companies. Across the board, enterprises have also signalled their disappointment with their own government responses to the crisis. 

However, the lack of external support has forced companies to come up with novel ways of conducting business. A number of effective measures have been adopted by businesses to mitigate the effects of operating in this new environment, such as adopting technology, working remotely and using e-commerce. Generally, while firms judge the short-term outlook on revenues to be severe, they are more optimistic over a longer time horizon (one year or more). (UNECA)

Key Words: COVID-19, ECA, Business Outlook

INTERNATIONAL

Top U.S., China trade officials agree to strengthen cooperation – Top U.S. and Chinese trade representatives discussed their Phase 1 trade deal on Friday with China saying they agreed to improve the atmosphere for its implementation and the United States saying both sides expected obligations to be met. The discussion in a telephone call comes amid escalating tension between the countries, exacerbated by a war of words over U.S. criticism of China’s handling of the novel coronavirus outbreak. U.S. President Donald Trump and other top officials have blamed China for the deaths of hundreds of thousands from the outbreak and have threatened punitive action, including possible tariffs and shifting supply chains away from China.

Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin agreed during the call that the two countries would work together to create a favourable environment for implementing the Phase 1 trade deal reached this year, China’s commerce ministry said. The U.S. Trade Representative’s office said both sides “also agreed that in spite of the current global health emergency, both countries fully expect to meet their obligations under the agreement in a timely manner”. The negotiators also agreed that “good progress” was being made on creating governmental infrastructures to make the Phase 1 trade deal a success, the U.S. office said. Under the deal, China agreed to increase its purchases of U.S. goods from a 2017 baseline by $200 billion over two years, with about $77 billion in increased purchases in the first year and $123 billion in the second year.  (Reuters)

Key Words: COVID-19, U.S – China, Trade Talk

What future for women small-scale and informal cross-border traders when borders close? – Along African borders, the livelihoods of entire communities depend on trading activities carried out by small-scale traders, most of which are unregistered. Informal cross-border trade has been a major characteristic of the African economic and social landscape, representing up to 40% of regional trade. Because of the flexibility it affords, the small startup capital it requires, and the earning opportunities it offers in border areas where no other alternative is available, women make up the largest share of informal traders, representing 70% to 80% in some countries. In response to the global health crisis, countries in Africa have increasingly started to introduce rest.

 Some are implementing export bans or introducing export licensing requirements while still keeping all commercial borders open, whereas some are only allowing transit of essential goods, aid and relief cargo. Others have instead restricted transit entirely by closing all borders. When cross-border trade is permitted, it mainly concerns larger commercial flows. As borders close, restrictions on freedom of movement are expected to take a particularly heavy toll on those who earn a living by making regular trips between countries. As has been the case with other shocks, women risk bearing the brunt of this pandemic. On top of missed income opportunities caused by the freeze of productive activities, many women traders are suffering economic losses from goods that have remained unsold and, in many cases, gone to waste because of their perishable nature.

This adds to the pending payments of customers who are themselves unable to pay for goods that had been ordered or supplied before the crisis hit. As the economic prospects worsen and purchasing power drops, women traders are forced to use their capital for survival. Eventually, this will erode their capacity to respond and recover when activities reopen for business. Besides the immediate economic impacts on the livelihoods of cross-border traders, the inability to continue their business as usual is having wider negative spillover effects. Informal cross-border trade flows of staples and other agricultural products play a critical role in guaranteeing food security, especially in remote villages where the population relies more heavily on food items supplied through informal channels than on official distribution. As a result, severe shortages of essential goods coming from across the border, combined with the consequences of stockpiling by those who can afford it, risk to seriously hamper food security in border communities and to intensify poverty. (UNCTAD)

Key Words: COVID-19, Cross-Border Traders, Business

Global food commodity prices drop further in April – World food commodity prices declined for the third month in a row during April, as the economic and logistical impacts of the COVID-19 pandemic resulted in significant contractions in demand for many commodities. The FAO Food Price Index, which tracks international prices of the most commonly-traded food commodities, averaged 165.5 points in April, some 3.4 percent lower than the previous month and 3 percent lower than April 2019. The FAO Sugar Price Index hit a 13-year low, declining 14.6 percent from March, when it posted an even larger monthly drop. Collapsing international crude oil prices reduced demand for sugarcane to produce ethanol, diverting output to producing sugar and hence expanding export availabilities. Meanwhile, confinement measures in a number of countries spawned additional downward pressure on demand.

The FAO Vegetable Oil Price Index declined 5.2 percent in April, driven lower by falling palm, soy and rapeseed oil values. Reduced biofuel demand played a role, as did declining demand from the food sector along with higher-than-previously expected palm oil output in Malaysia and soy crushings in the United States of America.  The FAO Dairy Price Index fell by 3.6 percent, with butter and milk powder prices posting double-digit drops amid increased export availabilities, mounting inventories, weak import demand and diminished restaurant sales in the northern hemisphere. The FAO Meat Price index declined 2.7 percent. A partial recovery in import demand from China was insufficient to balance a slump in imports elsewhere, while major producing countries suffered logistical bottlenecks and a steep fall in demand from the food services sector due to shelter-at-home measures. (FAO)

Key Words: COVID-19, FAO, Food Prices

China says exports rose 3.5% in April, crushing expectations for a decline of 15.7% - China’s dollar-denominated exports unexpectedly rose in April, but imports fell the same month as movement restrictions to contain the coronavirus outbreak eased. According to data from the General Administration of Customs released on Thursday, exports rose 3.5% from a year ago while imports fell 14.2% in the same period. Economists polled by Reuters had expected exports to have fallen 15.7% in April from a year earlier while imports were expected to have fallen 11.2% from a year earlier. In March, China’s exports fell 6.6% from a year ago, while imports slipped 0.9% in the same month. China’s trade surplus for the month of April was $45.34 billion — compared to the $6.35 billion economists polled by Reuters had predicted. China reported trade surplus of $19.9 billion for the month of March. China’s trade surplus in April was the largest since December last year when the surplus was about $47 billion. Ahead of the data release, Liu Li-gang, chief economist for China at Citigroup, said the country’s medical exports likely rose in April as it shipped health-care goods to the rest of the world. “The number in the early part of April was very strong already,” Liu told CNBC before the official data was released. (CNBC)

Key Words: China, Trade, Export

'Trade is still happening' - Canada's DPM and other leaders on responding to the coronavirus crisis - "One of the areas where we feel that we have been more successful than people might have thought is in maintaining our trade with the United States," said Chrystia Freeland, Deputy Prime Minister of Canada, on navigating the economic limitations of the COVID-19 era.  Commenting on the need to close the Canadian-US border to limit the spread of the coronavirus, she added: "We have been able to cut down the traffic across that border by over 90% and at the same time trade is still happening – goods and services are still flowing across the border."

Freeland's remarks came during a weekly virtual meeting of the Forum's COVID Action Platform on 6 May. Launched last month, the Forum's platform aims to convene leaders from governments and the business community for collective action to protect people’s livelihoods, facilitate business continuity and mobilize support for a global response to the COVID-19 pandemic. To date, more than 1,500 people from more than 1,000 businesses and organizations have joined the platform. To find the latest updates on the Platform, check out our recently-launched highlights blog.

In addition to Freeland, participants on this week's webinar included: Arancha Gonzalez Laya, Minister of Foreign Affairs, European Union and Cooperation of Spain; Rich Lesser, Global Chief Executive Officer, BCG; Reema Nanavaty, Executive Director, Self-Employed Women's Association (SEWA), India; Paul Stoffels, Vice-Chairman of the Executive Committee; Chief Scientific Officer, Johnson & Johnson; Magdalena Andersson, Minister of Finance of Sweden; and Seth F. Berkley, Chief Executive Officer, Gavi, the Vaccine Alliance. (weforum)

Key Words: COVID-19, Global Trade, Canada

PAN AFRICA

ECA leads discussion on Africa’s COVID-19 lockdown exit strategies – African countries are turning their attention to lockdown exit plans as they seek to limit economic and societal damage with figures from the United Nations Economic Commission for Africa (ECA) showing the continent losing about 2.5 percent of its GDP in one month or $65 billion. Panelists on an ECA online global debate on Africa’s COVID-19 lockdown exit strategies agreed Africa could not sustain prolonged lockdowns, especially as 40 percent of the continent’s populace was struggling to survive daily as food shortages mount. But much needs to be done for the exit strategies to be successful, the panelists, including UN Under-Secretary-General and Executive Secretary of the ECA, Ms. Vera Songwe, Spain’s Foreign Affairs, European Union and Cooperation Minister, Ms. Arancha Gonzalez Laya, and Chief Executive Officer of the New Partnership for Africa’s Development (NEPAD) Agency, Mr. Ibrahim Assane Mayaki, agreed.

“Test, test, test. That is the big issue. Our leaders are now all working really hard to get test kits out to ensure that we can test more, test better and test faster,” said Ms. Songwe, adding this was crucial to curb the spread of the contagion. She said Africans were not against lockdowns in general. “It is not about lockdowns. It is about protecting lives. Lockdowns are costing us an incredible amount of money, $65 billion a month. We cannot afford it but we cannot afford to lose lives either so what we need to do is to come back quickly into an exit strategy that allows us to grow back again and grow back in a way that is sustainable.” (UNECA)

Key Words: COVID—19, AfCFTA, ECA

New free-trade pact could help Africa recover from virus – The first commerce under an Africa-wide free-trade pact will provide new stimulus to countries on the continent to overcome the economic damage of the coronavirus, even if it could be delayed for about six months, says the most senior official of this agreement. The secretariat of the African Continental Free Trade Area is exploring the feasibility of moving talks involving more than 50 countries and real-time translation into four languages online. However, full border closures by about 30 nations aimed at limiting the spread of the virus is likely to restrict trade flows over the coming months, Wamkele Mene, the secretary-general, said in an interview.

While the agreement entered into force legally in 2019, protocols for trade in goods, including tariff concessions, need to be agreed for its implementation and commerce to start on July 1. Disruptions caused by the pandemic have set negotiations back by two and a half months. “The consideration for postponement doesn’t mean that there no longer is political will and that there is no longer political commitment,” Mene said by phone from Addis Ababa on Wednesday. “We have to adjust to conditions that unfortunately nobody could have anticipated and we have to give the space to governments to solve the public health crisis as a matter of priority.” (Business Day)

Key Words: COVID—19, AfCFTA, Regional Integration

Intra-African trade, the African Continental Free Trade Area (AfCFTA) and the COVID-19 pandemic - While access to extra-regional imports of food products can help to deal with localized supply shortages, high dependence can increase the exposure of producers and consumers to shocks of a global nature, such as the food price spikes of 2007-08 and the current COVID-19 pandemic. In fact, COVID-19 could exert a significant supply shock in the region. With agricultural production being highly labour-intensive in most African countries, shortages of workers due to the lockdowns may compromise farming activities, as well as downstream trading and transportation activities. These immediate impacts on domestic food production and distribution may be compounded in the medium run, if countries are unable to manage pest and disease outbreaks due to restrictions on movement. At the same time, dependence on extra-regional imports for food makes African countries vulnerable to disruptions in international logistics and distribution, in addition to production problems in other countries. This could result in food shortages and raise food prices, particularly in countries highly dependent on food imports as is the case of many lowincome and landlocked countries and Small Island Developing States (SIDS)

Promoting intra-regional trade in agri-food products is crucial, both as a short- and long-term policy objective in Africa. Reducing vulnerabilities to COVID-19-related market disruptions and mitigating its impacts on the poor would require immediate efforts by African countries to ensure that agri-food supply chains and trade channels remain open. In the medium to long run, given the rapidly growing populations, incomes and levels of urbanization in African countries, substantial growth in food demand is expected, providing significant market potential for African producers. The entry into force of the AfCFTA in 2019 will likely expedite regional integration efforts and promote intra-regional trade in agri-food products, which is projected to expand by 20-30 percent by year 2040.  The role of intra-regional trade as a catalyst for agricultural development has been recognized in both the 2003 Comprehensive Africa Agricultural Development Programme (CAADP) and the 2014 Malabo Declaration. The AfCFTA provides a concrete and timely mechanism to realize such continental agricultural policy commitments.  (FAO)

Key Words: COVID—19, AfCFTA, Regional Integration

NORTH AFRICA

Morocco’s Port Activity Increases by 6.3% in First Four Months of 2020 – Moroccan seaports have recorded an imports and exports volume of 31.1 million tons between the start of 2020 and the end of April, the National Port Agency (ANP) announced. The number represents a 6.3% increase compared to the same period in 2019, when the volume reached 29.2 million tons. Moroccan imports amounted to 20 million tons, marking a yearly increase of 5.2%, while exports amounted to 11.1 million tons, increasing by 7.4% in one year.

The four first months of 2020 were marked by an unprecedented import volume of grains. According to ANP, Morocco imported 3.4 million tons of grains and cereals, approximately 36% more than during the same period in 2019. Coal imports have also recorded a yearly increase of 5%. Meanwhile, the volume of exported fertilizers grew by 63% and raw phosphate exports increased by 6%. The Jorf Lasfar port, near Casablanca, recorded the highest traffic volume in Morocco with 12.7 million tons by the end of April (a 13.1% yearly increase), followed by the Casablanca Port with 10.3 million tons (+4.9%), and the Agadir Port with 2.2 million tons (+8.6%). The southern ports of Dakhla and Tan-Tan also recorded an increase in traffic volume, with +8.1% and +51.5% respectively. In April alone, port activity in Morocco increased by 3.2% compared to the same month in 2019, reaching 7.7 million tons. Cereal imports reached 1.2 million tons in April, increasing by 70%, followed by sulfur imports (579,084 tons, +37%) and ammonia (165,244 tons, +45%). Meanwhile, exports of fertilizers increased by 72% in April to reach 1.1 million tons. Phosphate exports amounted to 857,999 tons (+6%) and clinker exports reached 135,948 tons (+45%).  (Morocco World News)

 Key Words: COVID—19, Morocco, Business

EAST AFRICA

IMF Executive Board Approves US$411 Million in Emergency Assistance to Ethiopia to Address the COVID-19 Pandemic – The Executive Board of the International Monetary Fund (IMF) approved today a purchase under the Rapid Financing Instrument (RFI) equivalent to SDR 300.7 million (about US$411 million, 100 percent of quota) to help Ethiopia meet the urgent balance of payment needs stemming from the COVID-19 pandemic. The Executive Board also approved a rephasing of disbursements under the Extended Credit Facility (ECF) and Extended Financing Facility (EFF) arrangements that have been supporting Ethiopia’s economic reform program since December 2019, and a reduction in access under the EFF arrangement, to maximize financial support under the RFI.

In addition, Ethiopia will benefit from the IMF Executive Board decision of April 13, 2020 to provide debt service relief to the poorest and most vulnerable countries that are eligible for grant assistance under the Catastrophe Containment and Relief Trust (CCRT). As a result, the Board today approved Ethiopia’s request for relief under the CCRT on debt service falling due to the IMF until October 13, 2020 of about US$12 million. This relief could be extended up to April 13, 2022, subject to the availability of resources under the CCRT.  The COVID-19 pandemic has created severe health risks and weighed heavily on the Ethiopian economy. If the pandemic is not contained, it will put severe pressure on the health system with devasting social consequences. On the economic front, a fall in demand for exports, combined with domestic containment measures will slow growth and weaken external and fiscal accounts. (IMF)

Key Words: COVID-19, IMF, Ethiopia

IMF approves $491.5 mln loan for Uganda to limit coronavirus impact –Uganda will receive an emergency loan worth $491.5 million from the International Monetary Fund to help cushion its economy from the impact of the new coronavirus, the fund said on Wednesday. Key sectors of the East African economy such as tourism have taken a heavy blow from the crisis. The effect has been compounded by a lockdown of the entire population to curb the spread of the virus. “The weakening economic conditions emanating from the Covid-19 pandemic have put significant pressures on revenue collection, expenditure, reserves and the exchange rate, creating urgent large external and fiscal financing needs,” the IMF said in a statement.

“The IMF’s emergency financial support under the Rapid Credit Facility, along with the additional donor financing it is expected to help catalyse, will help address Uganda’s urgent balance of payments and budget support needs.” The Ministry of Finance projects the country’s foreign exchange reserves will decline to the equivalent of 3.5 months’ worth of imports from 4.2 months’ worth as exports slump due to the global pandemic. Countries receiving loans extended under the IMF's Rapid Credit Facility pay no interest and have 10 years to return the money, according to the Fund's website here. Uganda’s central bank expects economic growth to fall to 3%-4% for the financial year to June from its previous projection of 5.5%-6%, as COVID-19 slashes activity in manufacturing, entertainment and trade. (Reuters)

Key Words: COVID-19, IMF, Uganda

SOUTHERN AFRICA

South Africa’s new status as a ‘developed country’ for purposes of United States’ subsidies and countervailing duty investigations– South Africa has been the subject of approximately twenty ‘import injury’ investigations (anti-dumping and countervailing duty) by the US since 2003. These, along with the related remedial action, are listed by the USITC in its register of investigations (or this link – already with ‘South Africa’ filter applied). While most of these investigations feature two countries or more (including South Africa), a small number relate to imports from South Africa only.

However, almost all investigations relate to dumping rather than subsidised imports , and most pertain to products such as steel, manganese, ferro-vanadium, aluminium, and most recently, acetone. One long-standing investigation that does involve subsidy investigations against South Africa and brings into play countervailing duties is ‘stainless steel plate in coils’ which under further sunset reviews (see for example here and here) led to a continuation of the countervailing duty rates (of 3.95%) against imports from South Africa.

No record was found showing any investigation against (allegedly) subsidised imports from South Africa having been terminated on the grounds of any de minimis or import volume thresholds being breached, which may be reflective of low risk exposure for South African exports to the US following the revised CVD rules recently implemented. South Africa is not generally a candidate for CVD investigations against its exports, and according to a source [Perscom. Dr Gustav Brink 22 April 2020] has not had such measures imposed against it in the last 18 years. (tralacBlog)

Key Words: COVID-19, South Africa, Trade

Investment Report examines Angola Oil and Gas Projects – In line with Angola’s aim to drive capital inflows into its bankable oil and gas projects, Africa Oil & Power (AOP) (www.AfricaOilAndPower.com) has launched the Africa Energy Series Special Report: Angola 2020 as a resource for investors entering or expanding their presence in the country’s energy sector. Available for free download on AOP’s website, the report provides a concise look at Angola’s investment opportunities still on track for development in the face of project delays caused by COVID-19. “While COVID-19 continues to rattle our industry and stall energy developments across the continent, Angola boldly moves forward with a number of its large-scale, capital intensive projects, as explained in the Africa Energy Series Special Report: Angola 2020,” said AOP Acting CEO, James Chester. “While the current investment climate remains challenging for the oil and gas industry, sufficient and sustained FDI is required across the energy supply chain to not only survive the crisis in 2020, but also overcome it in 2021.”

The report primarily focuses on upstream developments in Angola, including the 2020 oil and gas licensing round which, as of May 6, is still scheduled to take place; recent block extensions granted to major operators, including ExxonMobil, Chevron, and Total; the increase in the appraisal of estimated recoverable resources of ENI’s Agogo discovery; the installation of the Lifua -A platform to support oil and gas exploration in Block 0; and the establishment of the New Gas Consortium that represents Angola’s first upstream natural gas partnership. “Special reports like this one serve as an important investment promotion and information dissemination tool, which we celebrate from the African Energy Chamber. AOP’s presence in Angola, with the assistance of the African Energy Chamber, helps to promote the local oil and gas and energy sector via different means,” notes Sergio Pugliese, President for Angola, African Energy Chamber. (Top Africa News)

Key Words: COVID-19, Angola, Oil and Gas Industry