INTERNATIONAL

Keep ships moving, ports open and trade flowing, urge UN entities – The world’s reliance on maritime transport makes it more important than ever to keep ships moving, ports open and cross-border trade flowing, and to support ship crew changeovers, the United Nations maritime and trade bodies said in a joint statement published on 9 June.  UNCTAD and the International Maritime Organization (IMO) reiterated calls for governments to promote crew well-being by allowing crew changes and ensuring seafarers and other maritime personnel have access to documentation and travel options so they can return home safely. Maritime transport depends on the 2 million seafarers who operate the world’s merchant ships, which carry more than 80% of global trade by volume, including most of the world’s food, energy, raw materials and manufactured goods.

Crew changeovers are essential for the continuity of shipping in a safe and sustainable manner. It’s estimated that starting in mid-June 2020 as many as 300,000 seafarers a month will require international flights to enable ships’ crew changeover. About half will travel home by aircraft for repatriation while the other half will join ships. And approximately 70,000 cruise ship staff are waiting for their repatriation. This process is currently hampered by travel restrictions due to the COVID-19 pandemic. But to comply with international safety and employment regulations – and for humanitarian reasons – crew changes can’t be postponed indefinitely. Access to medical care for sick or injured crew and to medical prescriptions must also be provided.

Designate seafarers as “key workers” - In the statement, UNCTAD and IMO also reaffirmed the urgent need for “key worker” designation for seafarers, marine personnel, fishing vessel personnel, offshore energy sector personnel and service personnel at ports. Governments and relevant national and local authorities must recognize that these workers provide essential services, regardless of their nationality, and should thus exempt them from travel restrictions when in their jurisdiction. “Such designation will ensure that the trade in essential goods, including medical supplies and food, is not hampered by the pandemic and the associated containment measures,” the joint statement said. It added: “We emphasize that, for trade to continue during these critical times, there is a need to keep ships moving, ports open and cross-border trade flowing, while at the same time ensuring that border agencies can safely undertake all necessary controls. International collaboration, coordination and solidarity among all is going to be key to overcoming the unprecedented global challenge posed by the pandemic and its longer-term repercussions.” (UNCTAD)

Key Words: Global Trade, UNCTAD, Development

WTO report looks at trade developments in poorest countries in wake of COVID-19 – Most LDCs have experienced a significant decline in export earnings since the outbreak of COVID-19. The report anticipates that the downturn in world trade in 2020 will continue to be particularly severe for LDCs.  LDC exports of textiles and clothing have been badly affected by declining global demand and supply chain disruptions. In addition, LDCs that depend on tourism revenues are being hard hit by the slump in this sector.  There are currently 47 LDCs, 36 of which have become WTO members. The full list of LDCs can be found here. The note underscores that the pandemic is undermining the development gains of countries such as Angola, Bangladesh and Vanuatu that are expected to graduate from LDC status in the near future.   The note also collates the measures that LDCs have taken to combat the pandemic, ranging from strengthening health care systems to providing stimulus packages to export-oriented sectors and liquidity support for small and medium-sized enterprises.

In early May, the LDCs group called on other WTO members to refrain from imposing export prohibitions or restrictions on medical goods and food. They urged governments to facilitate trade in these goods, including by implementing the provisions in the WTO’s Trade Facilitation Agreement. The report notes that the international community is seeking to support LDCs’ participation in world trade by providing debt relief and strengthening social sectors.  The report can be found here. Extracts on Key Points:

• Among the COVID-19 pandemic’s far-reaching consequences for the global economy, the least developed countries (LDCs) are likely to be the hardest hit, even in countries spared the worst effects of the virus itself. A lack of resources to support an economic rebound is compounded by LDCs’ dependence on a limited range of products exported to a few markets, some of which have been those worst affected by the COVID-19 outbreak.  The ongoing pandemic threatens to derail development gains in LDCs and may affect the near-term prospects for some countries to graduate from LDC status.
• The year 2020 started against the backdrop of a subdued trade performance in 2019. The value of LDC exports of goods and services declined by 1.6 per cent in 2019, a greater decline than that of world exports (1.2 per cent). Consequently, the share of LDCs in world exports also registered a marginal decline, falling to 0.91 per cent in 2019. The expected downturn in trade in 2020 is likely to be even more severe for LDCs than at the global level.
• The pandemic has accentuated the slump in oil prices seen in 2019. Declining demand, as well as supply disruptions, have weighed significantly on LDC exports, especially exports of textiles and clothing products. LDCs dependent on tourism revenues have seen the sector come to a virtual standstill. As migrant workers from LDCs return from host countries affected by the pandemic, flows of remittances — a critical source of foreign exchange for many countries — have dramatically dried up. All of these factors are predicted to worsen further in the coming months. 

 (WTO)

Key Words: Global Trade, COVID-19, WTO

Exports at Risk from Non-Tariff Measures: The Experience of Commonwealth Countries - Three years since the politics of many nations took a populist and nationalist turn, the ramifica-tions for trade policy and the world trading system are being felt. For the 54 member countries of the Commonwealth, this is troubling, because national markets are often too small to sustain cur-rent living standards, let alone see them grow over time. Furthermore, countries and regions with better access to markets abroad are more attractive to domestic and foreign investors. Moreover, the contribution of non-discriminatory trade policies to societal development has been recognised in the Sustainable Development Goals (SDGs).In recent years, increases in far-reaching tariffs have been widely publicised. Any notion that pro-tectionism is largely confined to China–US bilateral trade should be set aside. Likewise any claims that protectionism is a temporary, passing phenomenon. The risks to Commonwealth exports have built up over the past 10 years, in much the same way as accumulating silt gums up river flow. The trade reforms witnessed over this time period implicate far fewer Commonwealth exports and do not compensate for the resort to protectionism, in particular to non-tariff measures. This International Trade Working Paper breaks new ground by combining three substantial data-bases of commercial policy change over the past decade to compute the shares of Commonwealth exports at risk from adverse policy changes and reforms by trading partners. The calculations undertaken for this study use the finest-grain trade data available globally, and the conservative methods employed imply that the resulting estimates almost certainly understate the scale of the threat to living standards. The study demonstrates that larger shares of Commonwealth member countries’ exports have been exposed to changes in other policies, undertaken by their trading partners, that have tilted the commercial playing field towards favoured, local firms. (OECD)

Key Words: Multilateral Trading System, Export Sector, Non-tariff measures

The Impact of COVID-19 on Employment in Mining – COVID-19 is unleashing multiple economic shocks. On the supply side, lockdown measures are disrupting global supply chains as a result of sudden factory closures and the temporary suspension of air, maritime, and land transportation, among others. On the demand side, restrictions on the movements of people and the closure of non-essential economic activities have significantly cut down on consumption. These are leading to massive capital outflows from emerging markets as investors’ confidence tumbles,  exports and revenues decline, and commodity prices  collapse, creating a perfect storm for a looming deflationary economic crisis.

Mining is an economic bedrock in many resource-rich countries, with developed and developing nations alike benefiting from its meaningful role in poverty reduction, inclusive growth, and social development. Like other economic sectors, however, the mining industry has not been spared from the negative consequences of COVID-19 outbreaks. Tight working conditions at mine sites are placing workers in the frontline in terms of health and safety risks, prompting the industry to quarantine workers when national lockdown regulations did not force them to do so. 

This briefing note looks at the impact of the pandemic on employment in the mining sector and provides an overview of immediate responses taken by governments and mining companies. Acknowledging that this crisis is unprecedented—and such events may occur in the future—the paper suggests additional measures governments and the mining industry, individually or collectively, could take to strengthen the resilience of employment in the sector moving forward. The paper highlights three key issues: Relief packages must look to the long term. To be truly effective, relief packages must be designed strategically to respond to the realities of the labour situation, both now and in the future. New regulatory frameworks and investments must be developed. As the global economy recovers, mining activities will slowly resume, but we will not be able to afford business as usual. New and permanent protocols and working conditions will have to be established, which will require new regulatory frameworks and investments. The mining sector must create resilient safeguards. The industry needs to build resilience to insulate the labour market and supply chains against the inevitable repeat of similar events. (OISD)

Key Words: COVID-19, Global Economy, Business

Doing Business Reform Advisory: Ten Year Results – The report presents findings, trends, and lessons learned from ten years of Doing Business Reform Advisory (DBRA) by the World Bank Group (WBG) between 2008 to 2018.  The analysis is based on data from the Monitoring & Evaluation system of the WBG and the Doing Business database, as well as input from WBG staff and project counterparts. The report also provides insights on how the DBRA program has been implemented and how it evolved over the years.

Section 1. A Unique Delivery Model - This section describes DBRA’s unique delivery mechanism, which combines product standardization with flexibility to adapt to challenges faced by both the client and the WBG in a given country program. The objective of DBRA is to help clients improve their business environment. DBRA combines global knowledge of WBG staff in HQ and international experts with local expertise, and provides support to client countries through the range of WBG instruments. The delivery model relies on regional-global team collaboration as well as cross-product synergies, which enable the team to leverage WBG’s global expertise and country-specific knowledge across institutional boundaries. Regional DBRA programs have supported clients in a timely fashion often during short windows of reform opportunity. While its primary focus has been on the areas covered by the Doing Business report, DBRA also proved to be a platform for developing innovative technical assistance in response to client demand.  Examples include new advisory services on organizing for reform, addressing implementation gaps, as well as increasing women’s equity in economic participation.

Section 2. Ten Year of Results - This section provides an overview of the results of DBRA’s work with its clients. The analysis is done from three angles: global, regional and by topic. For the latter section, the focus is brought on three popular reform areas among client governments: starting a business, dealing with construction permits, and registering property. Global trends. DBRA has a global footprint in terms of reach and results. Since its creation in 2008, DBRA supported 664 reforms in 117 countries, delivering technical assistance to all the regions and across all ten topics covered by Doing Business.  The DBRA program has had a strong focus on Fragile Conflict and Violent (FCV)2 and International Development Association (IDA)3 countries. DBRA has supported 53% of FCV countries in the world, implementing a total of 132 reforms. DBRA has also supported 90% of IDA countries, implementing 408 reforms. IDA clients that have shown strong commitment through multiyear programs have made significant improvements over the decade, such as Rwanda (32 reforms), Côte d'Ivoire (20) and Kenya (18). Sub-Saharan Africa was the region with the most reforms delivered during that period, while client countries in Eastern and Central Europe saw the largest absolute improvement of their business environments. At the global level, DBRA supported all the top 10 countries that improved their business environment the most between 2008 to 2018. (World Bank)

Key Words: World Bank, Business, Investment

PAN AFRICA

OPEC’s decision to extend production cuts a positive step for African energy sector - Gradual reopening of world economies along with increased conformity to the production cuts have allowed oil prices to bounce back and reach the $40/bbl threshold over the weekend, the 11th OPEC and non-OPEC Ministerial Meeting concluded on a series of decisions which will help maintain a still fragile market stability, and which should be supported. Held via videoconference on Saturday, June 6th, the Ministerial Meeting reconfirmed the existing arrangements under the April agreement and extended the production cuts of 9.7 million barrels per day by another month, until July 30th 2020. The deal was initially due to expire on June 30th. In addition, all participating countries subscribed to the concept of compensation by those countries who were unable to reach full conformity to the agreement in May and June. As a result, and in addition to their already agreed production adjustment for May and June, countries who were not able to comply for these two months expressed their willingness to compensate for it in July, August and September.

The African Energy Chamber had called for an extension of the 9.7 million b/d production adjustment and urged all producing countries to ensure their conformity to the agreement The reaffirmation of the OPEC+ commitment to the historic deal made last April comes on the back of a steady rise in oil prices. Gradual reopening of world economies along with increased conformity to the production cuts have allowed oil prices to bounce back and reach the $40/bbl threshold. The rise has been especially beneficial for Nigerian and Angolan blends. “OPEC is taking the right steps to respond to the market and should be commended. Uncertainty is bad for the oil industry and the extension of OPEC’s cuts ensures market stability,” declared NJ Ayuk, Executive Chairman at the African Energy Chamber.

“African energy companies and even state companies are facing a battle with liquidity because of the price war and the coronavirus. They do not have state bailouts as their Western counterparts. We hope the production cuts will give the market a boost, however compliance and collaboration from the G20 is key. OPEC has proven its ability to show leadership in times of crisis. We are all in this together,” added Ayuk.

Earlier this month, the African Energy Chamber had called for an extension of the 9.7 million b/d production adjustment and urged all producing countries to ensure their conformity to the agreement. The rebalancing of the market is key for African oil producing nations to preserve jobs in the sector and give the continent an opportunity to stabilize and recover. The chamber acknowledges the role of African OPEC players like Ghana, Nigeria, Algeria, Equatorial Guinea, Gabon, Congo, Angola, and Libya in making this work. (Ghana Web)

Key Words: Africa, Business, Investment

COVID-19: Africa in urgent need of affordable broadband internet – The director of Technology, Climate Change and Natural Resources Management at the Economic Commission for Africa (ECA), Jean-Paul Adam, told journalists during a virtual press briefing on 10 June 2020 that Africa contributes less than 1% to the world’s digital economy, which accounts for about 15% of global GDP. He said the continent needs about USD100 billion to achieve universal, affordable and good quality internet access by 2030 (according to the World Bank). Presently, only 17.8% of households in Africa have internet at home and the continent accounts for only 21% of worldwide internet users. It is estimated that over a quarter of a billion school children in Africa have been affected by COVID-19 and most of them lack the digital tools to continue their education online. 

“This is very concerning and conveys a strong message that broadband connectivity is absolutely crucial for educational institutions and businesses to continue to provide essential services,”  said Mr. Adam, adding “reliable, high-speed internet is key to ensuring that hospitals and medical institutions can access the global information network and resources necessary to fight COVID-19.” He cited affordability as one of the biggest barriers to internet access in Africa, stating “The average cost of 1GB of data on the continent is 7.12 percent of average income, with some countries having rates as high as 20 percent, which is way above the 1 – 2 percent deemed to be affordable.” In terms of bandwidth, Mr. Adam said many African countries still have bandwidth as low as 64 kilobits. He noted that “in certain situations, bandwidths for an entire country is less than what is available to an individual residential subscriber in the USA.” “Data shows that downloading a 5GB movie took 734 minutes in the Democratic Republic of Congo, 788 minutes in Sao Tome, 850 minutes in Ethiopia, 965 minutes in Niger, 1,342 minutes in Equatorial Guinea and only about 11 minutes and 8 seconds in Singapore,” said Mr. Adam. Adding to the issues of access and bandwidth is what Mr. Adam referred to as a “deplorable digital gender gap in Africa” with a 33.8% internet penetration rate for men and only 22.6 % for women in 2019. Despite the limited connectivity across the continent (with close 40% of the population online), Mr Adam said the digital response to COVID-19 has been great.   He cited Ghana’s COVI-19 Tracker App, which traces contacts of persons infected by the virus and shows where they have been in recent times through various telephone-related data. Such persons are then linked to health professionals for urgent action to be taken. (UNECA)

Key Words: COVID-19, AfCFTA, Economic Development

COVID-19 is reducing domestic remittances in Africa: What does it mean for poor households? The amount remitted by migrants from Sub-Saharan Africa (SSA) has grown tenfold in two decades, from $4.8 billion in 2000 to $48 billion in 2018. This reflects a steady increase in the number of people who decided to move in search of a better life: from 21.6 million in 2000, the number of migrants from Africa grew to 36.3 million in 2017. In Nigeria, remittances reached $25 billion in 2018 – almost four times more than foreign direct investment and official development assistance combined. In Lesotho, remittances amounted to 16% of the country’s gross domestic product (GDP.) But that is forecasted to change. The World Bank’s latest Migration and Development Brief predicts that international remittances to SSA will decline by 23% in 2020 because of the COVID-19 (coronavirus) pandemic, with implications for major recipient countries in the region. While much work has gone into tracking international remittances, less is known about remittances sent by migrants within countries. This gap limits informed assessments of these remittances’ trends and impacts, especially at a time of crisis when the information would be extremely important.

Tracking internal remittances is crucial for several reasons. First, the number of people who move within African countries is likely far higher than those who move across borders. Estimates from 2005 suggest that there could be 113 million internal migrants in the region. Second, internal migrants are often poorer than international migrants, as migrating across borders requires high upfront costs that few poor households can afford. Third, remittances sent by internal migrants, mostly from urban to rural areas, are a vital source of non-labor income for rural households. The urban economic closures due to COVID-19 will severely impact internal migrants’ ability to send remittances to rural areas. The International Labour Organization estimates that earnings of informal sector workers in Africa will decline by 81% in the first month of the crisis. This could potentially have catastrophic impacts on rural livelihoods.

Initial analysis further stresses the importance of domestic remittances for poor households in SSA. A few things are apparent from analyzing domestic and international remittances among households in Ghana, Nigeria, and Sierra Leone (Figure 1):

• The percentage of households receiving domestic remittances is much higher on average than the percentage receiving international remittances.
• The poorest households don’t benefit directly from international remittances as much as they do from domestic remittances.

 (World Bank Blogs)

Key Words: COVID-19, Africa, Economic Development

Blog: Consular chambers to the rescue of businesses: The COVID-19 crisis in French-speaking Africa - By Caitlin Borges, Barometer and studies project manager, and Denis Deschamps, General Delegate, Chambers of Commerce of Francophone Africa (@CPCCAF) – Placed at the centre of their national or local business ecosystem, the consular chambers¹ in Africa have effectively been mobilized to mitigate the effects the COVID-19 pandemic has on businesses.The Permanent Conference of the Consular Chambers in Francophone Africa (CPCCAF) conducted a survey on the 'role of consular chambers in managing the Covid-19 crisis', covering 31 chambers and organizations within its network of 17 countries. The survey has revealed alarming findings. The results show a drop in sales for nine out of ten companies across French-speaking African countries, while eight out of ten companies experienced temporary closings and export difficulties. Companies in the Sahel region (Mali, Niger, Chad and Senegal) suffer greater impacts. Forecasts from the African Union show that imports and exports from the continent could drop by 35%, which accounts for around €250 billion². In addition, difficulties in purchasing inputs have affected three-quarters of businesses. 

Businesses call out for support - The survey results show that companies would need support in the area of logistics and input supply (23.3%) and cash management (16.6%). Results also indicate companies' need for support in their relations with external operators and suppliers as well as with training staff. To this effect, one in three responding chambers organized relevant training for companies. With a focus on specific sectors, 50% of companies in wholesale and retail trade requested support from the chambers in the CPCCAF network, compared with 30% and over 23% respectively of companies active in the services and crafts sector. The industrial and agricultural sectors are also severely impacted. Moreover, even though the CPCCAF survey questions did not address the informal sector, many chambers expressed their concerns, especially with regard to the consequences of government confinement measures.

Whether countries have chosen to establish total or partial confinement or a curfew, these measures will inevitably lead to serious economic, political and social consequences. A third of the surveyed chambers estimate that between 20% and 40% of businesses have been forced to close due to these confinement measures. A survey conducted by the Chamber of Commerce and Industry in Antananarivo, Madagascar reveals that 30% of the companies were forced to close temporarily. In addition, according to the African Union, more than 20 million jobs are threatened by COVID-19 in Africa. (ITC)

Key Words: Africa, COVID-19, Business

Hippolyte Fofack: A mightier, united Africa will emerge from the coronavirus downturn -  Supply chain disruption has impeded global trade, while household incomes have been impacted by reduced production, which is driving up prices on the supply side.  Global demand and supply shocks are also impacting Africa through other channels. These include tightening financial conditions, increased risk premiums, capital flows reversals and commodity market stress, all of which exacerbate liquidity challenges and encumber balances of payments. UNCTAD’s free-market commodity price index, which measures the price movements of primary commodities exported by developing economies, lost 20% of its value in March. Furthermore, with unemployment rising in Europe and North America, remittance inflows could plummet. The World Bank estimates that remittance flows to low- and middle-income countries could drop by more than 20% this year.

Synchronised and speedy recovery - Amid these challenges, there are reasons to be optimistic about Africa’s growth prospects. Global coordination of economic policy has improved and the policy responses by countries and multilateral development banks have been exceptionally strong. This could help create conditions for a global recovery just as synchronised and speedy as the outbreak of the virus downturn.  In this context, the near-term outlook points to the increased resilience of African economies, with output expanding above trend growth rates in 2021. This will be supported by a synchronised global recovery and robust economic expansion in Africa’s leading trading partners: the European Union, China, India and the US, which account for more than 60% of total African trade. Instead of falling into financial black holes – as happened in the 2007-08 crisis – countries’ enormous fiscal and monetary stimulus programmes are helping avoid avoidable bankruptcies, curtailing insolvencies, and will boost global demand and trade and lift commodity prices in the post-containment phase. Concurrently, the timely support of multilateral development banks is helping the worst affected nations adjust to the virus-induced macroeconomic fallout. Through their countercyclical liquidity support, these institutions are helping countries deal with acute pressures on liquidity that are giving rise to twin deficits. Health and social expenditures are escalating exactly as fiscal revenues and export earnings shrink.

Recovery will also rely on Africa’s commitment to macroeconomic stability, which has grown into a pillar of economic policy across the continent. For the first time, decreasing inflationary pressures and expectations have enabled central banks to extend monetary stimulus and other policy responses to support small and medium-sized enterprises, helping them avert payment defaults. Beyond supporting economic recovery, this shift from a single monetary policy objective (inflation targeting) towards the dual objectives of price stability and growth represents a profound change in the policymaking landscape of a region where financial repression has hitherto inhibited long-run growth and structural transformation. It also denotes the deepening integration of Africa into the world economy and ongoing global macroeconomic convergence. (African Business)

Key Words: Africa, Trade, Regional Integration

NORTH AFRICA

Tough times for Moroccan exporters in 2020– Exporting companies based in Morocco are facing enormous challenges to juggle the coronavirus impact due to a rise in the cost of risk emanating from orders cancellation, trade barriers and low demand. In the first three months this year, most of which was coronavirus-free, exports dropped 18% compared to the same period last year, according to foreign exchange office. In April, exports plummeted by 47.2% while imports dropped 33% as lockdown measures weighed on the global economy leaving Morocco’s trade deficit narrowing by 1.9% in the first four months this year.

“Concerning May, we still have no data available but we are aware that the situation has further worsened,” said Hassani Maghraoui director of protection and trade regulation at the industry and trade ministry. Speaking at a virtual meeting with Moroccan exporters, Maghraoui cited bleak prospects issued by the WTO forecasting a 13% to 32% plunge in trade in 2020. “We should expect very limited export performance,” he said. Moroccan exporters should brace for a meagre demand in the European market where consumers tend to save more in order to be able to deal with challenges posed by coronavirus limiting consumption to necessities, he said. Another worrying factor is the insolvency of many European enterprises which would require a gradual restart, he said, warning of the rise of the far right and their tendency to trade protectionism.  (The North Africa Post)

Key Words: North Africa, Trade, Investment

EAST AFRICA

Rwanda, Uganda Record Reduced Trade Flows – Rwanda and Uganda have recorded a reduction in trade flows in April and May 2020, according to the latest report from the COMESA Statistics on ‘COVID 19 Impact on Trade’. The report was prepared in the first two months in which COVID-19 spread to the region. Imports into Rwanda declined by 32 % in April compared to March. Rusumo and Airport borders posts recorded declines in imports of 35% and 16% respectively. In Uganda a drop in imports were recorded at 30% in April compared to March. Malabo, Busia and Entebbe border posts recorded declines in imports of 35%, 28% and 24% respectively. Imports for the month of May were projected to decline by 20%. Exports for Rwanda also declined by 8% in April compared to March 2020 while Uganda recorded a decline in Exports by 15% in April compared to March.

According to the report, reduction in customs duties are listed as among the critical challenges faced by the Rwanda Revenue Authority. Customs duty receipts declined by 55% in April compared to March. Rusumo, Kagitumba and the Airport border posts recorded declines in customs duty receipts of 52%, 71% and 41% respectively. For Uganda, a reduction in customs duties was listed among the critical challenges faced by the Uganda Revenue Authority with declines of 42% recorded in April compared to March. Malaba, Busia and Entebbe recorded declined duties of 43%, 36% and 21% respectively. Both countries have however put in place measures to respond to the COVID-19. In Rwanda for example, a dry port has been established near the border that operates 24/7. It is extended to all customs services to facilitate faster clearance of essential and relief goods at the first point of entry in an effort to contain the spread of the pandemic.

The country has also intensified the use of online services available in the Rwanda Electronic Single Window System through engagement with stakeholders both private and public (Clearing and forwarding Association, importers, exporters, warehouse operators and the general public to facilitate clearance of essential goods). The country has also introduced flexible terms of payment for duties and taxes for essential goods by granting instalment facility. In Uganda, the government has also introduced measures to facilitate the movement of goods, transport, persons and services. Some of the strategies include testing of drivers prior to transiting through Uganda and using online engagement with clients. This report is part of a series that provides initial results on tracking trade flows in the COMESA region to demonstrate the impacts of the COVID-19 pandemic on trade (COMESA)

Key Words: East Africa, Regional Trade Flows, Investment

African Dev't Bank Gives $1.2 M for Ethiopia-Sudan Railway Study – The two-year, comprehensive feasibility study will assess the proposed project's technical, economic, environmental and social viability. The African Development Bank's Board of Directors has approved a $1.2 million grant to Ethiopia's government to finance a feasibility study for construction of a standard-gauge railway (SGR) link between Ethiopia and neighboring Sudan, the Bank said in a statement sent to Addis Standard. The grant, from the African Development Fund, the Bank Group's concessional-rate lending arm, would cover 35% of the total estimated $3.4 million cost of the study. The remaining funding will be provided by the NEPAD Infrastructure Project Preparation Facility (NEPAD-IPPF) in the form of a $2-million grant, and by a contribution of $100,000 each from the two countries involved. The financing was approved in January. The two-year, comprehensive feasibility study will assess the proposed project's technical, economic, environmental and social viability, as well as alternative financing arrangements, including a public-private partnership (PPP).

The railway line will link Addis Abeba in Ethiopia to Khartoum in Sudan, with an extension to Port Sudan on the Red Sea. The route, agreed by both governments, stretches 1,522 kilometers between Addis Abeba and Port Sudan. According to the document presented to directors of the African Development Fund, the absence of a regional arterial route linking Ethiopia, Sudan and other countries in the Horn of Africa is a brake on trade, development and regional integration. The movement of goods and people between Sudan and Ethiopia often requires the use of several modes of transport, which increases costs and lengthens journey times. The feasibility study's findings will be keenly awaited because its implementation would benefit a large proportion of Ethiopia's 110 million people and 43 million inhabitants of Sudan, as well as populations in the wider region.

The proposed project is aligned with the Bank's Country Strategy Paper 2016-2020 for Ethiopia. It is also consistent with the long-term development goals of the Sudanese Government, as set out in its national 25-year strategy (2007-2031). It also accords with the Bank's Ten-Year Strategy 2013-2022 and the operational priority of infrastructure development. The proposed project also would satisfy four of the Bank's High 5 strategic priorities: Integrate Africa, Feed Africa, Industrialize Africa, and Improve the Quality of Life for the People of Africa. (Addis Standards)

Key Words: Ethiopia, Regional Trade, AfDB

Fake goods cost Kenya ‘Sh40bn’ yearly, says KAM – Counterfeits and substandard goods could be costing the country over Sh40 billion loss in revenue per year, the Kenya Association of Manufacturers has said. Association chairman Steven Smith said that such products have also exposed the local business people to unfair competition adding that some were a health risk to citizens. “Apart from unfair business competition, these counterfeits and substandard goods also affect the tax base of the country,” said Mr Smith who is also the Eveready East Africa chief executive officer. He said that his association will push for the enactment of the Counterfeit Bill 2008 to protect local consumers and business community. “Enactment of the Bill will help us improve our capacity in business and protect the industry even in days to come,” said Mr Smith.

He said that KAM is working closely with the private sector to find ways of facilitating dialogue with legislatures to try and ensure that appropriate Bills that enjoy support from all stakeholders in the business industry are passed by parliament. “We can contain the entry of counterfeit goods and substandard goods into the country if we implement the right laws and encourage relevant departments to act,” said Mr Smith. He spoke in Kisumu on Tuesday during the KAM Nyanza chapter annual general meeting. (Daily Nation)

Key Words: Illicit Trade, East Africa, Business

WEST AFRICA

ITFC moves to support trade finance in struggling Senegal - With Senegal’s economy rocked by the impact of coronavirus, the International Islamic Trade Finance Corporation (ITFC) has inked a murabaha financing deal with a domestic bank. The Islamic Development Bank (IsDB) Group member has agreed to provide €8mn in financing to Banque Islamique du Sénégal (BIS) to support the bank’s trade finance operations in Senegal’s private sector. In a statement, ITFC says the financing is aiming to gear capital towards private companies in “this period of economic crisis resulting from the Covid-19” pandemic. It is also intended to serve the ITFC’s mandate of boosting trade between the members of the Organisation of Islamic Cooperation (OIC). With 57 member states spread across four continents, Senegal has been a member of the OIC since its founding in 1969.

ITFC CEO, Hani Salem Sonbol, adds: “This murabaha is a necessary intervention during extraordinarily difficult global conditions and will support BIS’ and the government’s efforts to safeguard the availability of much-needed commodities for the people of Senegal.” According to the ITFC, the financing has already enabled local private companies to “procure urgent food staples, and support national response efforts to ensure food security”. Senegal’s economy has been hard hit in recent months by the dual blow of a sharp economic global economic downturn and domestic containment measures. Since March, stringent government measures to quell the spread of the virus have seen the enforcement of a dusk-to-dawn curfew, a ban on inter-regional travel, and a closing off of the borders to all but essential goods.

In the past week, however, after protests against the lockdown flared up in the country, the government has announced these restrictions will be eased. Nevertheless, the African Development Bank (AfDB) says it has revised its real GDP growth projections for Senegal down from 6.8% to less than 3% for 2020, having also extended financial support to Senegal recently. Towards the end of May, the AfDB provided an €88mn loan to help support the Senegalese government’s Covid-19 relief programme and address the health, social and economic impacts of the crisis. The Senegalese state’s resilience package – worth up to 7% of its GDP – includes money for the economy, with CFAFr100bn in direct support going towards hard hit sectors such as tourism and transport. Cash will also be used to secure supplies and distribution for key foodstuffs, medicine and energy products. Meanwhile the programme will provide food aid to 1 million of the poorest households, while also helping improve the health system’s ability to treat and control Covid-19. Much like the global economy, African countries are expected to feel the economic impact of Covid-19 this year, with the World Bank forecasting in April that the continent is facing the prospect of its first recession in 25 years. (GTR)

Key Words: Senegal, Trade Finance, COVID-19

SOUTHERN AFRICA

South Africa must rapidly implement measures to attract FDI–The South African economy finds itself on the edge of a fiscal cliff, especially as the Covid-19 pandemic has caused a “massive and rapid shock”, says law firm Herbert Smith Freehills partner and Africa co-chair Peter Leon. While the effects of the pandemic were initially localised to Asia, Europe and the US, the virus has transmitted rapidly in South Africa and the rest of the continent, with a dual impact on the demand and supply side of the affected economies. Considering that the virus will have a “very significant” effect on South Africa’s economic growth prospects, Leon notes that the International Monetary Fund (IMF) has forecast that the country’s economy may contract by 5.8% this year, while the National Treasury forecasts a contraction of 6.1%. The IMF also forecast a fiscal deficit of 13%, adding that the public debt to gross domestic product (GDP) ratio could exceed 80% by 2021.

It is for these reasons that Leon stresses that enticing more local and global businesses to invest in South Africa “is an absolute imperative”, as it will help to prevent a severe economic decline from materialising. “South Africa needs to rethink our economy and identify measures to resuscitate it post Covid-19, and to do so, the country must rapidly [start] implementing mechanisms to attract more foreign direct investment (FDI),” he says. To determine which measures ought to be implemented, he highlights that South Africa’s share of regional inward FDI stock declined dramatically between 2010 and 2018, with Southern Africa's share having fallen from 76% to 55%; sub-Saharan Africa's share from 43% to 21% and Africa's share from 29% to 14%. “While FDI in the region has been forthcoming, South Africa has been left behind,” he laments. Yearly FDI inflows into South Africa followed “a steep downward trajectory from 2009”, Leon adds, noting that yearly FDI inflows were around $9-billion in 2008, prior to the global financial crisis. This has declined to just over $5.3-billion following President Cyril Ramaphosa’s instatement as President, and subsequently lowered to $5-billion amid the Covid-19 pandemic.

During this 12-year period, South Africa’s GDP growth rate followed a similar trajectory, from 5.4% in 2007, to 0.2% in 2019 and now to -5.8% in 2020 amid the global health crisis. However, Leon notes that, during the same period, South African investments abroad have continued to grow, which has made South Africa “unusually a net exporter of capital, despite being a developing country”. In terms of measures that can be taken to secure post-Covid-19 FDI, Leon says a structural adjustment from the IMF is a potential option. Given South Africa’s economic fragility, “the government is rapidly running out of fiscal headroom”. (Engineering News)

Key Words: SA, Investment Policy, Trade