IMPORTANT ANNOUNCEMENT

Launch of ARII 2019 website for deeper understanding of Africa’s performance in regional integration – Following the release of the African Regional Integration Index (ARII) 2019 Report, ECA launches a dedicated website to enable a deeper understanding of the performance of the continent, Regional Economic Communities (RECs) and African countries in regional integration and assist African countries in making the most out of the African Continental Free Trade Area (AfCFTA) and boosting intra-African trade (BIAT) action plan. The Index evaluates regional integration on the basis of five dimensions – trade integration, productive integration, macroeconomic integration, infrastructural integration, and integration in terms of free movement of people – for 54 African countries and for the eight RECs recognised by the African Union. ARII 2019 ranks African countries’ level of integration within their respective RECs and also with the rest of the continent. The objective of this dedicated website is to enable in-depth understanding of integration across its various dimensions presented in ARII 2019. The website has features that allow access to customized maps, graphs, tables and the underlying raw data.

Africa’s overall score in regional integration from ARII 2019 is relatively low, suggesting considerable room for improvement. However, if we look closely into the scores across the five integration dimensions, it becomes apparent that Africa’s relative poor performance is due to the low scores in two specific areas: productive integration and infrastructural integration. If we go another layer deeper and look at the scores of indicators within dimensions, low trade in intermediate products tends to explain the relatively weak performance in productive integration, while inadequate infrastructure networks drive poor performance in infrastructural integration.

The five dimensions of integration in ARII 2019 are so closely interrelated that Africa’s overall performance in regional integration would improve significantly and allow African countries to make the most out of the AfCFTA if regional value chains are strengthened, thereby improving the continent’s productive integration, and the infrastructure network is enhanced. ECA has provided training to Member States on the collection and use of the information contained in ARII 2019 for policy analysis and policy development. The dedicated website can be accessed here.  (UNECA)

Key Words: ATII 2019, COVID-19, Regional Integration

INTERNATIONAL

Global oil and gas investment to fall by almost one-third in 2020, says IEA - The COVID-19 pandemic has set in motion the largest drop in global energy investment in history, with spending expected to plunge in every major sector this year, with global investment in oil and gas is expected to fall by almost one-third in 2020, according to the International Energy Agency (IEA). At the start of 2020, global energy investment was on track for growth of around two per cent, which would have been the largest annual rise in spending in six years. But after the COVID-19 crisis brought large swathes of the world economy to a standstill in a matter of months, global investment is now expected to plummet by 20 per cent or almost US$400bn, compared with last year, according to the IEA’s World Energy Investment 2020 report. The shale industry was already under pressure, and investor confidence and access to capital has now dried up: investment in shale is anticipated to fall by 50 per cent in 2020. At the same time, many national oil companies are now desperately short of funding. For oil markets, if investment stays at 2020 levels then this would reduce the previously-expected level of supply in 2025 by almost nine mmbbl a day, creating a clear risk of tighter markets if demand starts to move back towards its pre-crisis trajectory.

“The historic plunge in global energy investment is deeply troubling for many reasons,” said Dr Fatih Birol, IEA’s executive director. “It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers. The slowdown in spending on key clean energy technologies also risks undermining the much-needed transition to more resilient and sustainable energy systems.” The World Energy Investment 2020 report’s assessment of trends so far this year is based on the latest available investment data and announcements by governments and companies as of mid-May, tracking of progress on individual projects, interviews with leading industry figures and investors, and the most recent analysis from across the IEA. The estimates for 2020 then quantify the possible implications for full-year spending, based on assumptions about the duration of lockdowns and the shape of the eventual recovery. (Oil Review Africa)

Key Words: IEA, COVID-19, Global Oil Investment

Commodity exports to China could fall by $33.1 billion in 2020, study finds - Global exports of commodities to China could plunge by $15.5 billion to $33.1 billion in 2020 – a drop of up to 46% compared with annual growth projections before the coronavirus pandemic hit, according to new UNCTAD research. The findings raise concerns for economies that rely on exports of primary goods, such as energy products, ores and grains. Some two-thirds of developing countries are commodity dependent according to UNCTAD data. For commodity-dependent developing countries, some of the most vulnerable on the planet, the drop is projected to be between $2.9 billion and $7.9 billion, which would constitute a 9% loss in terms of annual growth rate. Because China absorbs about one-fifth of world commodities’ exports, such a drop in its imports would have a dramatic impact on producers of primary goods.  “Assessing the impact in China says a lot about possible general tendencies,” says Marco Fugazza, an UNCTAD economist who conducted the study. “It provides important information that may help policymakers anticipate what may happen globally.” “There have been few assessments done so far at a relatively disaggregated product level using up-to-date information,” he says, adding that UNCTAD awaits similar statistics from other big markets, such as the European Union, to expand the analysis.

Dramatic drop for energy, ores and grains - Total exports are being dragged down primarily by the dramatic drop in Chinese demand for energy products, ores and grains. Imports of liquefied natural gases, for example, could fall by up to 10% in 2020 compared with a projected increase of 10% before the COVID-19 outbreak. Iron imports are still expected to increase, the study says, but growth could fall by two-thirds, from a pre-coronavirus annual growth projection of 19% to just 6%. Wheat imports are now projected to decrease by 25%, twice as much as before the crisis.

Silver lining for soya and copper  - While exports of most commodities are expected to take a hit, the study projects a positive outcome for several agricultural products compared with expectations before COVID-19. Chinese imports of soya beans from commodity-dependent developing countries, for example, is now projected to grow by 34% – 10 percentage points more than earlier forecasts. Similarly, the annual growth rate of imports for copper from these nations is expected to double, from a 5.4% projection pre-pandemic to 11%. These variations at the product level could lead to very different outcomes at the country level. “While large exporters of natural gases to China, such as Myanmar, may see their trade perspectives deteriorate because of the coronavirus pandemic,” Mr. Fugazza says, “other countries such as Equatorial Guinea may see an exponential increase in, for example, exports of wood.” The data gives hope that some COVID-19 effects on trade could be positive, at least for some exporters. “A necessary condition for this to happen,” he says, “is the removal of any pandemic-specific trade interventions, such as export restrictions.” (UNCTAD)

Key Words: UNCTAD, China, COVID-19

PAN AFRICA

Keys to success for the AfCFTA negotiations: Policy Brief – As of April 29, 2019, 22 countries have deposited their instruments of ratification of the African Continental Free Trade Area (AfCFTA) agreement1 to the African Union (AU), meeting the threshold for the agreement to come into effect. Now, the date for the entry into force of the AfCFTA has been set for May 30, 2019. The significance of the AfCFTA cannot be overstated: It will be the world’s largest free trade area since the establishment of the World Trade Organization (WTO) in 1994. Landry Signé has estimated that under a successfully implemented AfCFTA, Africa will have a combined consumer and business spending of $6.7 trillion in 2030.4 He also finds that the AfCFTA will have a significant impact on manufacturing and industrial. development,5 tourism,6 intra-African cooperation, and economic transformation.7 UNECA has predicted it will raise intra-African trade by 15 to 25 percent, or $50 billion to $70 billion, by 2040, compared to an Africa without the AfCFTA. The International Monetary Fund (IMF) similarly projects that, under the AfCFTA, Africa’s expanded and more efficient goods and labor markets will significantly increase the continent’s overall ranking on the Global Competitiveness Index.

 Increased market access, in turn, is expected to enhance the competitiveness of industries and enterprises, the exploitation of economies of scale, and the efficacy of resource allocation. While the AfCFTA’s ratification is a cause for celebration, much work remains as critical parts of the agreement have yet to be completed—including countries’ schedules of tariff concessions and services commitments, rules of origin, investment, intellectual property, competition, and a possible protocol on e-commerce. The extent to which the AfCFTA will reduce barriers to intra-African trade is largely linked to the ongoing negotiations. This piece explores the implications of those negotiations, with a particular focus on market access for goods and services and rules of origin. It also briefly touches upon the outstanding regulatory issues. Download the full policy brief  (Brookings)

Key Words: AfCFTA, Regional Integration, COVID-19

Banking sector urged to go digital to build sustainable growth post COVID-19 – Bankers from sub-Saharan Africa and China who attended the Huawei sub-Saharan Africa Financial Services Industry Online Summit 2020 agree that digitisation of the sector will give it resilience against the current COVID-19 pandemic and enable sustained growth in the post COVID era  Liao Yong is the vice-president of Huawei Southern Africa Region. The pan-African conference themed “Accelerating Digital Transformation, Enable Business Growth Again” was attended by 1200 delegates from across banks, telco operators, fintech and ICT services companies.  Opening the event, Liao Yong, vice-president of Huawei southern Africa Region, said advances in ICT present unique opportunities for the banking sector, especially when almost 70 per cent of the region’s population don’t have a bank account.  “All of these ICT advances will be critical enablers to a thriving banking sector in sub-Saharan Africa. As we can see, the merging of these two curves of ICT and banking services is powerful. But how much we can unleash the power, depends on how much and how soon banking sector goes digital.” Liao added. There has been a rapid uptake of mobile technologies in the region with strong economic growth in the past two decades. According to statistics by GSMA, 4G, mobile broadband technology, adoption will overtake 2G in 2023 and the total of unique subscribers in Sub Saharan Africa will reach 600 million by 2025, representing half the region’s population.

Speaking at the online event, Brett King, author of Bank 4.0, a New York-based mobile banking startup, said the behavioural changes that come with coronavirus further underpins the needs for digital transformation in banking sector. “The declining use of physical branches is likely for many customers to remain a permanent feature of their lives. The reality is this is likely to accelerate a multi-decade trend we've already seen towards digitisation. So when we look at the architecture of banking moving forward and the real elements that have been accelerated during the coronavirus period, you can see that that shift to digital is creating much more aligned, some digital experience. This basically brings us to a new model of banking…we moved to this low friction banking embedded in the world around us,” said King.

Lucille De Kock, head of data analysis and product management at FNB, South Africa, introduced FNB’s fundamental shifts across all dimensions to transform the bank into a helpful, trusted and people centric money manager leveraging digital and data platforms. According to Alex Siboe Wekunda, head of DFS, KCB, 97 per cent of all transactions are done digitally which lead to substantial growth during the pandemic. Luckily enough, we had invested well in our platform, so we're able to handle the traffic that comes through this ecosystem. And Joshua Oigara, CEO and MD, KCB Group PLC, said KCB will continue accelerate that investment beyond just lending platform, which has been very successful.  (African Review)

Key Words: COVID-19, Africa, Digital Economy

ADS 2020: Africa's free trade area and integration will help silence the guns, say UNECA Chief Vera Songwe and other experts - The AfCFTA is an African Union (AU) flagship initiative that creates a single market for goods and services, a customs union and guarantees the free movement of people and capital. Vera Songwe, the Executive Secretary of the United Nations Economic Commission for Africa (UNECA) and Albert Muchanga, the AU’s Commissioner for Trade and Industry and others emphasized the role free trade in Africa could play in stimulating post-COVID-19 development across the continent, while at the same time mitigating conflict. Ms Songwe and Mr Muchanga were among several speakers on the topic of trade and silencing the guns in Africa during this year’s Africa Dialogue Series (ADS), an annual event organized by the UN’s Office of the Special Adviser on Africa, to raise awareness of issues related to Africa’s peace, security and development. This year the event was held virtually during 20 – 22 May.

Ms. Songwe linked inclusive development to peace and security. “When people are unemployed, conflicts arise,” she said, adding that the AfCFTA offers an opportunity to “build back better after COVID-19. We need to provide things like jobs, energy, water and so on.” A UNECA report states that, “On current trends, 86% of the global poor will be in Africa by 2030.” Mr. Muchanga and the other participants in the virtual event concurred that increased intra-African trade would foster regional integration and development, leading to peace and security. “History has shown that countries that trade amongst themselves rarely go to war,” said Mr. Muchanga, adding that: “The benefits of free trade are not only economic; nations become more economically interdependent. They swim or sink together.”

Stephen Karingi, the UNECA’s director of Regional Integration, Infrastructure and Trade Division, detailed how the AfCFTA could help tackle development challenges. He said AfCFTA will enhance economic interdependence of countries and increase the opportunity cost of conflict. “Trade fosters economic development and wealth that would have been lost to conflict,” said Mr. Karingi. Countries participating in a free trade area easily cooperate on security issues, he added, citing the example of the Economic Community of West African States (ECOWAS), which established in 1998 a moratorium on small arms and implemented an import ban on weapons not approved by member states. Besides, the AfCFTA could potentially secure food supplies. “Thirty-nine African countries are net importers of basic food, particularly rice and wheat. [Free] trade plays a significant role in building resilience and mitigating the severity of food security shocks,” emphasized Mr. Karingi.   (Africa Renewal)

Key Words: AfCFTA, Regional Integration, UNECA

Can Digitalization Help Deter Corruption in Africa? — This paper studies the effect of digitalization on the perception of corruption and trust in tax officials in Africa. Using individual-level data from Afrobarometer surveys and several indices of digitalization, we find that an increase in digital adoption is associated with a reduction in the perception of corruption and an increase in trust in tax officials. Exploiting the exogeneous deployment of submarine cables at the local level, the paper provides evidence of a negative impact of the use of Internet on the perception of corruption. Yet, the paper shows that the dampening effect of digitalization on corruption is hindered in countries where the government has a pattern of intentionally shutting down the Internet, while countries that successfully promote information and communication technology (ICT) enjoy a more amplified effect. (IMF)

Key Words: Africa, COVID-19, IMF

EAST AFRICA

USTR Releases Negotiating Objectives for U.S.-Kenya Trade Agreement; ITC Initiates Investigation on Probable Economic Impact on Imports from Kenya - The Office of the U.S. Trade Representative (USTR) has released its summary of specific negotiating objectives for the initiation of U.S.-Kenya trade negotiations.  As part of the process of formulating these objectives, the USTR on March 23, 2020, solicited public comments (see Trump and Trade Update of April 13, 2020) and received over 5,000 submissions.  Overall, the negotiating objectives will “seek a mutually beneficial trade agreement that can serve as a model for additional agreements across Africa” and “build on the objectives of the African Growth and Opportunity Act, promote good governance and the rule of law.”

The objectives for trade in goods are to ensure “fair, balanced, and reciprocal trade with Kenya” while increasing transparency in import and export licensing procedures and adding discipline to import and export monopolies to prevent trade distortions.  This includes addressing issues such as: sanitary and phytosanitary measures in agricultural trade; enhancing procedures and increasing transparency for customs and trade facilitation measures; developing clear rules of origin; addressing technical barriers to trade; promoting greater compatibility between U.S. and Kenya regulations; securing commitments from Kenya to provide fair and open conditions for trade in services (particularly in telecommunications and financial services); securing commitments not to impose customs duties on digital products and non-discriminatory treatment of electronically transmitted digital products; promoting adequate and effective protection of intellectual property rights; securing for U.S. investors in Kenya important rights consistent with U.S. legal principles; addressing state-owned and controlled enterprises (SOEs) by building on the definition of an SOE in the United States-Mexico-Canada Agreement; requiring Kenya to adopt and maintain in its laws and practices the internationally recognized core labor standards; establishing strong and enforceable environment obligations; securing provisions committing Kenya to criminalize government corruption; preserving the ability of the United States to enforce rigorously its trade laws, including the antidumping (AD), countervailing duty (CVD) and safeguard laws; establishing a dispute settlement mechanism that is effective and timely; and ensuring that Kenya avoids manipulating currency/exchange rates. As required by law, the USTR will continue to work with Congress as negotiations with Kenya begin and, as necessary, update these negotiating objectives in the future. (Trump and Trade)

 Key Words: USA, Kenya, Trade Agreement

Madagascar: Does Better Information Curb Customs Fraud? - This paper examines how providing better information to customs inspectors and monitoring their actions affects tax revenue and fraud detection in Madagascar. First, an instrumental variables strategy is used to show that transaction-specific, third-party valuation advice on a subset of high-risk import declarations increases fraud findings by 21.7 percentage points and tax collection by 5.2 percentage points. Second, a randomized control trial is conducted in which a subset of high-risk declarations is selected to receive detailed risk comments and another subset is explicitly tagged for ex-post monitoring. For declarations not subject to third-party valuation advice, detailed comments increase reporting of fraud by 3.1 percentage points and improve tax yield by 1 percentage point. However, valuation advice and detailed comments have a significantly smaller impact on revenue when potential tax losses and opportunities for graft are large. Monitoring induces inspectors to scan more shipments but does not result in the detection of more fraud or the collection of additional revenue. Better information thus helps curb customs fraud, but its effectiveness appears compromised by corruptionDoes Better Information Curb Customs Fraud?  (World Bank)

Key Words: World Bank, East Africa, Customs

Kenya’s flower exports increase as EU eases lockdown – Kenya’s flower exports increased from 20 percent to 65 percent of normal levels in the last one month after some European Union countries relaxed their lockdown regulations, the industry association said on Wednesday. Clement Tulezi, CEO Kenya Flower Council (KFC), said there are high hopes that production will hit 80 percent by the end of the year as the sector recovers from the crisis caused by the COVID-19 pandemic. “We have been one of the sectors hardest hit by the pandemic and we project that we shall return to normal business by mid next year,” he said. The EU trading bloc absorbs approximately 70 percent of the east African nation’s flower exports which are among the country’s leading foreign exchange earners.

Tulezi said that the floriculture sector is currently facing challenges in accessing cargo flights to transport the perishable goods to the EU. “Currently our weekly demand is 2,800 tons per week but we can only export 1,000 tons due to lack of flights and the high charges,” he said. He observed that about 50 percent of the permanent staff of flower farms were now back on duty, adding that farmers were working to bring others on board. “Flower farmers did not sack any workers but they were sent home on unpaid leave and we have started the process of getting them back as demand for flowers rise,” he said. Earlier, Jack Kneppers, the owner of Maridadi flower farm, said that they were shipping out flowers four times a week, unlike in the past when daily production went to waste. The farmer attributed this to the reopening of the Dutch auction and some supermarkets in Europe where they shipped the majority of their flowers. (Trade Mark East Africa )

Key Words: Kenya, EU, Export Industry

WEST AFRICA

GIMPA proposes AfCFTA Implementation plan post coronavirus pandemic – The African Continental Free Trade Area (AfCFTA) Agreement was negotiated by the African Union (AU) and signed by 44 of the 55 Member States of the AU on 21st March 2018 in Kigali, Rwanda. The aim of this Agreement is to accelerate intra-African trade and boost Africa’s trading position in the global market by strengthening Africa’s common voice and policy space in global trade negotiations.

On Wednesday, 27th May 2020, Dr Alex Ansong, Senior Lecturer and Head of Public Law Department at the GIMPA Faculty of Law, delivered via Zoom, the fourth edition of the GIMPA Law and Ethics Web series on the theme: International Trade and Investment Relations after the Pandemic: Africa Rising? This session was moderated by Professor Richard Frimpong Oppong, Associate Professor, Faculty of Law, Thompson Rivers University, Canada. The presentation, essentially, made several observations and recommendations as far as the implementation of the AfCFTA after the novel Coronavirus, Covid-19 pandemic is concerned. Currently, the AfCFTA has 54 signatory States, including 28 States that have ratified it, thus paving the way for its entering into force. The AfCFTA has the potential to become the biggest free trade agreement outside the World Trade Organization (WTO), in terms of number of country participants and geographical coverage, once it is ratified by all the 54 signatory States. The outbreak of COVID-19 has however impacted International Trade and Investment flows.

Countries around the world have not been spared the economic ramifications of this virus, more so African countries who rely externally on trade, rather than trading internally on the continent. COVID-19 has seemingly forestalled plans to roll out the implementation stage of AfCFTA in July 2020. This Policy Paper suggests that the need for the economic integration of Africa post-COVID-19 is now more pronounced than ever. The AfCFTA is the key to achieve this, and further to realise the hope of ‘Africa Rising'. (Ghana Web)

Key Words: West Africa, AfCFTA, Ghana

CENTRAL AFRICA

Central African development aspirations hampered by skills shortages – Central African countries must upgrade the skills base, competencies and put innovation at the centre of their development if they want to remain competitive, break the vicious cycle of overdependence on the export of commodities and harness the opportunities offered by COVID19 in the pharmaceuticals and food sector.   

Antonio Pedro, Director of UN Economic Commission for Africa in Central Africa told the participants at a 29-May-2020 webinar that COVID19 had made it amply evident how the high degree of concentration of exports in primary commodities exposes the sub-region to external shocks, making economic diversification an urgent development imperative for Central Africa. “For 23 African countries, 10 per cent of annual output and 50 per cent of their annual exports are from extractive resources and Central Africa is no exception. Economic diversification is path dependent. We will be forever locked in the lower ends of global value chains, where the terms of trade are less favourable if we do not sophisticate our productions systems. Human capital development is at the centre of it”, he added. The Webinar discussed Skills for Economic diversification: challenges and opportunities and virtually gathered  about 100 people, featuring government and Regional Economic Communities officials, academics, business and private sector as well as media. It was organized and hosted by the ECA office for Central Africa. A recording of the livestream is available for watching in the following sequence: 1) https://bit.ly/webi-a  2) https://bit.ly/webi-b  3) https://bit.ly/webi-c. Experts at the e-meeting stressed that crisis like the current COVID-19 pandemic affects both demand for and supply of the commodities, and cause disruptions to supply chains, deepening Central Africa’s systemic issues and macro-economic instability. Economic diversification calls for  performant  ecosystems with primacy given to the development of human capital  as a life-long process from school through work to retirement, said Adama Coulibaly – Head of the  Sub-regional Initiatives section of ECA’s Office for Central Africa has he gave context to the exercise. (UNECA)

Key Words: Central Africa, COVID -19, Export Sector

SOUTHERN AFRICA

SARS releases merchandise trade statistics for April 2020  – The South African Revenue Service (SARS) today released trade statistics for April 2020 recording a trade deficit of R35.02 billion. These statistics include trade data with Botswana, Eswatini, Lesotho and Namibia (BELN). The year-to-date (01 January to 30 April 2020) trade deficit of R0.33 billion is an improvement from the R8.87 billion deficit for the comparable period in 2019. Exports decreased by 3.5% year-on-year whilst imports deteriorated by 5.5% over the same period.

Including trade data with Botswana, Eswatini, Lesotho and Namibia (BELN) -The R35.02 billion trade deficit for April 2020 is attributable to exports of R53.01 billion and imports of R88.03 billion. Exports decreased from March 2020 to April 2020 by R65.06 billion (55.1%) and imports decreased from March 2020 to April 2020 by R6.11 billion (6.5%). Exports for the year-to-date (01 January to 30 April 2020) decreased by 3.5% from R394.72 billion in 2019 to R381.08 billion in 2020. Imports for the year-to-date of R381.41 billion are 5.5% less than the R403.58 billion imports recorded during the same period in 2019. The cumulative trade deficit for 2020 is R0.33 billion. On a year-on-year basis, the R35.02 billion trade deficit for April 2020 is a deterioration from the R3.56 billion deficit recorded in April 2019. Exports of R53.01 billion are 48.8% less than the R103.45 billion exports recorded in April 2019. Imports of R88.03 billion are 17.7% less than the R107.01 billion imports recorded in April 2019. March 2020’s trade surplus was revised downwards by R0.31 billion. Due to the ongoing Vouchers of Correction (VOC’s), the revision was from the preliminary surplus of R24.25 billion to the revised surplus of R23.94 billion.

Excluding trade data with Botswana, Eswatini, Lesotho and Namibia (BELN) - The trade data excluding BELN for April 2020 recorded a trade deficit of R37.42 billion. This deficit is a result of exports of R48.60 billion and imports of R86.02 billion. Exports decreased from March 2020 to April 2020 by R57.45 billion (54.2%) and imports decreased by R4.48 billion (4.9%) over the same period. The cumulative deficit for 2020 is R25.52 billion compared to R38.29 billion deficit in 2019.

Botswana, Eswatini, Lesotho and Namibia (Only) - Trade statistics with the BELN countries for April 2020 recorded a trade surplus of R2.41 billion. This surplus is a result of exports of R4.41 billion and imports of R2.01 billion. Exports decreased from March 2020 to April 2020 by R7.61 billion (63.3%) and imports decreased from March 2020 to April 2020 by R1.63 billion (44.8%). The cumulative surplus for 2020 is R25.19 billion compared to R29.43 billion in 2019. (tralac)

Key Words: SA, COVID -19, Trade