INTERNATIONAL

A new era: global trade in 2020 and beyond – The coming 12 months are poised to be volatile for the global economy, but especially so for international trade. Hesitant optimism from many quarters at the start of the year has given way to much gloomier prospects. The spread of the coronavirus is affecting production in Asia, disrupting supply chains across the world and depressing consumer demand. As of April 7th, over one-third of the world’s population was under some form of lockdown.1 Movement has been restricted, work hampered and consumer spending patterns disrupted. Markets have sustained significant losses, shaking investor confidence. Economic forecasts that measure the depth of the looming recession vary, but there is a widespread consensus that the global economy will contract much more sharply than during the 2008-09 global financial crisis.  This report, written by The Economist Intelligence Unit and sponsored by Basware, focuses on the key factors that will drive global trade and, by extension, business transactions over the coming year. The findings are based on in-depth interviews with experts in global trade.

1. Covid-19
2. US-China trade relations
3. US-EU trade relations
4. Rising non-tariff protectionism
5. Taxing digital trade

These topics are closely intertwined and their overlapping nature means their combined impact is difficult to anticipate. However, the overarching view of each of our interviewees is a sense of pessimism about prospects for global trade over the coming year. The covid-19 pandemic and its knock-on effects will have a far-reaching and long-lasting impact, interviewees believe. That impact is turning countries inwards and increasing the temptations of protectionism. Export controls have already been introduced by many countries, mainly on medical equipment and agricultural supplies.3 This backdrop makes it highly uncertain whether World Trade Organisation (WTO) members will agree to extend a moratorium on customs duties on electronic transactions. This was originally due to be decided in June at the WTO Ministerial Conference in Kazakhstan, but the conference has been postponed with no alternative date yet announced. It is possible that the moratorium will hold until the conference is eventually held, but it could unravel if some countries opt to impose unilateral taxes on electronic transmissions before then. (The Economist Intelligence Unit)

Key Words: Global Trade, EIU, Development

Decade of digitalization needed to drive development for all – Digital transformation over the past three decades has altered the world as we know it. No part of life is untouched by digitalization, which will continue to shape and revolutionize the future. However, what’s in question is how it can be used to create a better future while addressing pressing sustainable development needs. This week, UNCTAD Secretary-General Mukhisa Kituyi, who chairs the United Nations Group on the Information Society (UNGIS), kicked off a new online dialogue series, which calls on 30 international agencies to respond with their vision of how digitalization can advance development. The UN’s Decade of Action calls for the acceleration of sustainable solutions to the world's biggest challenges. They range from fighting pandemics, poverty and the gender divide to combating climate change, inequality and closing the finance gap. Heeding this call will require a more digital world.

In his contribution entitled Making Digital Work for Sustainable Development: The Time to Act is Now, Dr. Kituyi stresses that urgent attention must be given to bridging existing and emerging digital divides. “If left unaddressed, the yawning gap between under-connected and hyper-digitalized countries will widen and exacerbate existing inequalities,” he warns. “The development challenges of digitalization require a coordinated multilateral response, which can also help countries build resilience and facilitate responses to other cross-cutting challenges, such as climate change and the current COVID-19 pandemic,” Dr. Kituyi adds.

Digitalization in the coming decade - The rapid rise of digital technologies is transforming economic and social activities. This affects all parts of the UN system and the work of its agencies. The UNGIS dialogue aims to inspire 30 international agencies and other stakeholders to envisage how digitalization raises both opportunities and challenges to reaching the sustainable development goals (SDGs). It also represents a call for more effective collaboration and coordination around digitalization within the UN system. Heads of the 30 UNGIS member agencies will, over the remainder of 2020, contribute brief think pieces on how digitalization affects efforts to achieve the SDGs. They will also examine how more effective collaboration in the UN system can promote inclusive development outcomes through digitalization. Read Dr. Mukhisa Kituyi’s contribution. Follow the UNGIS Dialogue.  (UNCTAD)

Key Words: Global Trade, Development, Digitalization

Europe After Coronavirus: The EU and a New Political Economy – The COVID-19 crisis could lead to a wider rethink of Europe’s political economy. This paper explores what such a model might look like, and what it would mean for the governance of the European Union. The COVID-19 pandemic has created a health and economic crisis without modern parallel. The scale of its effects could prompt a far-reaching re-evaluation of the role of the state in relation to the market in Europe. This paper is a thought experiment examining the consequences of a change in Europe’s political economy and the potential implications for the European project. The current form of the European Union, centred on the single market and the single currency, evolved during a period of economic liberalization. If the COVID-19 crisis leads to a larger role for the state and a move away from market-oriented policies, the EU will face a challenge in accommodating that change. In particular, attempts by member states to pursue more interventionist approaches could lead to clashes within the EU – especially around fiscal policy and taxation, labour markets and redistribution, and industrial policy.

Given sufficient consensus between member states, the EU could conceivably be the driver of collective change in these areas. But because of existing political differences and the fact that the health and economic crisis has had asymmetric effects within Europe, it is more likely that the pandemic response will lead to an uneven shift in economic policy across the EU. The danger is that the EU may become trapped in a suboptimal status quo without a consensus on how to change it, and could therefore be unable to make the shift towards a more state-centric political economy that citizens may now demand. The EU could reform itself to accommodate a more interventionist economic model. But for this to happen, European leaders will have to avoid thinking of European integration as a linear, one-way process in which it is impossible to change course or reverse policies that have long been considered part of the EU’s liberalizing vocation. (Chatham House)

Key Words: Global Trade, COVID-19, EU

DDG Wolff: “There can be no permanent retreat from what has been created” - In remarks delivered virtually to the Delphi Economic Forum in Greece on 10 June, Deputy Director-General Alan Wolff said there is “strong and growing interest” among WTO members to craft improved multilateral trading arrangements through the process of WTO reform. “I strongly believe that the multilateral trading system and the WTO will endure,” he declared.  Extracts of his remarks is below. A member of a visiting delegation of officials who were seeking entry into the WTO for their island government gave me a paper on predicting the future.  Assessing the future is something major corporations do as a matter of course.  Some governments also do so, and we at the WTO must better organize this feature of good governance.   A policy planning function is essential for any organization with the responsibilities that the WTO has been given. 

Since the WTO is in the middle of a mid-life crisis according to all press reports, let me reiterate that I strongly believe that the multilateral trading system and the WTO will endure.  It will survive even if the two largest trading countries apply additional tariffs on each other's goods, it will survive even if preferential trade agreements continue to proliferate, it will survive even if in response to the pandemic Members impose export restrictions and otherwise seek to amass to the exclusion of others supplies of needed medicines, medical goods and equipment. 

Let me tell you why the future for world trade is bright.

• FIRST, the nation-states of the world have not come this far over the past 75 years since the multilateral trading system was put into place in order to turn back now.  Temporary setbacks are going to occur from time to time, but full-scale retreat is not going to be our future.
• SECOND, there is no satisfactory alternative to multilateralism.  Discrimination is not going to be the new world order for trade.  That era was brought to an end by the Second World War. 
• THIRD, national economies are now deeply interconnected.  At a price, some may lessen their economic ties, but going it alone, autarky, is not an option.  The laws of economics for the conduct of business may be shaped by government edicts, but on-shoring will not overcome the need for efficiency, for a return on investment.
• FOURTH, the fact that the form of binding dispute settlement formally included in the WTO agreements has ended does not mean that there will not still be effective WTO dispute settlement.  Pragmatic approaches will largely preserve the WTO's ability to help Members resolve their disputes and I am convinced that a new, improved dispute settlement system will ultimately be achieved.  This is the case because the self-interest of all the trading countries requires it.
• FIFTH, the ambit of the world's trading rules is going to be expanded to address the issues of the increasingly digital global economy as well as actively working for the earth's environment. 
  
  • E-commerce rules are now being drafted by a broad swath of WTO Members accounting for over three-quarters of the world economy. 
  • Members are coming to grips with fisheries subsidies that deplete the ocean's resources and are planning to address the dumping of plastic waste into streams, rivers and oceans, as well as to work toward dramatically reducing waste by creating a circular economy.
• SIXTH, much of the preparatory work is already done to enable Members to address and discipline major trade- distorting measures affecting agriculture.  Global agriculture is going to have to be more agile to deal with serious disruptions due to natural disasters and climatic events. 
• SEVENTH, the benefits of international trade are going to be spread more evenly.  Small and medium enterprises will find trade less burdensome.  Women will be more empowered to benefit from international trade.
• EIGHTH, assistance to developing countries, to build their capacity to enjoy the rights and meet the obligations of the global trading system, is going to be more effective, as evidenced, for example, by a major effort that will be undertaken by all to make the African Continental Free Trade Agreement a success.
• NINTH, trade facilitation promoted by the most recent multilateral agreement added to the formidable assets of the WTO, is working to reduce the burden imposed on moving goods across borders.  The costs of trade, the process of getting goods from the factory gate to consumers on the other side of a border, averages over 240 per cent.  This is true even as super-container ships and supertankers and E commerce have revolutionized transportation, distribution and delivery to industrial and individual consumers.    

And not least,

• TENTH, the strongest endorsement of the universal validity of the WTO and the multilateral trading system come from the 23 countries seeking to join it, and the 36 who have acceded to the WTO since its founding twenty-five years ago.  One cannot visit with the trade ministers and negotiators from these countries without renewed confidence in the durability and value of the WTO.  

 (WTO)

Key Words: Global Trade, COVID-19, WTO

Economic Performance of the Airline Industry June 2020 Report – Air transport is key to global economic development. This wider economic benefit is underpinned by both the direct connections between cities - enabling the flow of goods, people, capital, technology and ideas - and falling air transport costs. However, COVID-19 has caused a significant loss in city-pair connectivity. As of the end of April, the number of unique city-pairs was 67% lower than its level of a year ago.  For 2020 overall, unique city-pair connectivity is expected to decline for the first time since the global financial crisis. Moreover, there is a risk that the number of unique city-pair connections is not fully recovered, which would undo some of the gains of recent years.  

Air transport is vital for international trade in manufactured goods, particularly for the components industry which accounts for a major part of cross border trade today. We forecast that the value of international trade shipped by air this year will be $5.5 trillion, around 15% lower compared to 2019. Tourists travelling by air in 2020 are forecast to spend $457 billion, 49% less than the previous year. Another adverse impact of the crisis will be on jobs. Total employment supported (directly and indirectly) by the air transport sector is expected to decline to 38.4 million in 2020; a 45% reduction relative to the estimated 70.4 million jobs supported by aviation in 2019.  (IATA)

Key Words: International Trade, COVID-19, Airline Industry

PAN AFRICA

COMESA: Regional states show remarkable resilience to Covid-19, defying earlier predictions - At the onset of the Covid-19 pandemic, it was predicted that most of the health systems in Africa and the COMESA region would be overwhelmed by the unprecedented spread of the virus. Anecdotal evidence based on country-specific interventions, however, indicates that countries in the region have demonstrated remarkable resilience defying earlier predictions. According to an analysis conducted by Governance, Peace and Security Unit at the COMESA Secretariat, stringent measures that regional States put in place including mandatory quarantine, curfews, closure of social and entertainment venues, closure of schools, encouragement of basic hygiene measures among other interventions played a big role in containing a surge. “For the COMESA region with relatively weak health systems characterised by inadequate health personnel, inadequate equipment, inadequate budgets and a high burden of infectious diseases (such as Malaria, TB, HIV, Ebola), it was expected that the continued spread of the virus would overburden the health systems in the region,” the report says.

According to the analysis, reforms in the health sector, whereby governments have made policy commitments to implement Universal Health Care (UHC), have also worked well towards forestalling the earlier predicted surge. The UHC is premised on the idea that every citizen should receive health services they need without financial burden. COMWARN regional data indicates that most governments in the region have introduced health reforms that have led to improvements in health services. For example, Tunisia, Seychelles, Rwanda, Mauritius and Egypt have already rolled the UHC programme with positive impacts on reduction in mortality rates, improved life expectancy and public health expenditure. The report notes that majority of the regional States have strived to allocate 15% of public expenditure to the health sector and with the continued spread of the Coronavirus, this has triggered more financial investments in the sector.

“Countries in the region have increased health funding to deal with the emergencies associated with the spread of the Covid-19,” the GPS report states. “Extra budget allocations have been provided by governments to enhance for instance surveillance, purchase of medical supplies, construction of isolation centres, recruitment of more health personnel among others.” Notwithstanding, countries in the region have registered important milestones in the improvement of healthcare since the adoption of the Millennium Development Goals (MDGs) in 2000 and the launch of the Sustainable Development Goals (SDGs) in 2015 as part of the 2030 agenda for sustainable development. Reforms in the health sector have further led to the improvement in life expectancy from an average of 61.60 years in 2010 to 66.07 years in 2018. In the context of the COMESA Early Warning System’s (COMWARN’s) Structural Vulnerability Assessment (SVA) COMWARN SVA model, life expectancy is the number of years a new-born infant would live if prevailing patterns of mortality at the time of its birth were to stay the same throughout its life.

By 2017, Libya, Tunisia, Mauritius, and Seychelles had reduced child mortality to 1.4%, the lowest in the region. Other countries that have made tremendous progress are Egypt 2.3% Madagascar 4.2%, Kenya 4.5%, Uganda 5.2% and Comoros 6.9%. The GPS analysis was based on four World Health Organization health delivery framework, which covers service delivery, health workforce, access to essential equipment and medication and adequate resources/finance. This framework is in tandem with the COMWARN’s SVA model that seeks to support long term vulnerability of member states towards sustained peace and prosperity by identifying projected vulnerabilities in respective countries. (tralac)

Key Words: COMESA, Trade and Investment, COVID-19

Africa and creditors wake up to debt dilemma – Covid-19 has brought Africa’s debt problems into sharp focus. A temporary suspension of debt payments to foreign governments is a good start but does not go nearly far enough, writes Liam Taylor in Kampala. “We know how to bring an economy back to life. What we do not know is how to bring people back to life.” The words of Nana Akufo-Addo, the president of Ghana, were an eloquent rationale for his country’s lockdown amid the coronavirus pandemic, but only the second part was strictly true. Nobody knows how to resuscitate an economy after this emergency, because nothing like it has happened in living memory. 

This false sense of déjà vu has also accompanied talk of African debt problems: a challenge which only superficially resembles crises of the past.    The unprecedented shock of Covid-19 has sent revenues plummeting at exactly the moment when governments need to be spending more. The immediate effect will be a squeeze on essential services and investment. In the tough years ahead, heavy debt burdens could push inflation up and pull growth down. Suppliers sink when the government stops paying its bills, and trade slows with uncertainty. Africa’s debt burden suddenly looms larger. In mid-April the G20 announced a suspension of bilateral debt payments for 73 of the poorest countries, half of them in Africa. The moratorium brought respite until the end of the year. But many argued it did not go far enough. 

“This initiative needs to be even more ambitious,” wrote the Ethiopian prime minister Abiy Ahmed in the New York Times. “It should involve not just debt suspension but debt cancellation.” It should last until well after the pandemic is over, he added, and cover borrowing from commercial lenders too. Meanwhile the African Union and a group of finance ministers are calling for a $100bn stimulus package for the continent, including $44bn of debt relief and a two-year suspension of payments. “There is no question of anybody defaulting and not paying,” says Ngozi Okonjo-Iweala, a special envoy for the African Union (AU) and former finance minister of Nigeria. “But we need a standstill across the board to give us the breathing room.”  Finance ministers were holding Zoom meetings with creditors as African Business went to press at the end of May. Through clouds of uncertainty, one thing was clear: the changing makeup of Africa’s debt will make negotiations more complex than ever before. 

A looming crisis -No “African” debt crisis is only about Africa. The first great wave of borrowing began with the 1970s oil boom. Middle Eastern states parked their surplus “petrodollars” in Western banks, who funnelled them to the global South.  When the US Federal Reserve raised interest rates, the debt became unpayable. It was not until the turn of the century that more than $100bn of African debt was finally cancelled by foreign governments, the World Bank and the IMF.  But surplus capital was once again sloshing around the world economy – this time from thrifty Asian countries. Some of this money flooded into Africa as Chinese loans. The rest of it rippled through the West, where interest rates sank to historic lows. Investors came to Africa seeking higher yields than they could get at home.  Governments rode this new wave of capital, with many issuing their first ever dollar and euro denominated bonds at cheaper rates than they could raise funds domestically. By 2016, sub-Saharan Africa owed 19% of its external debt to bondholders. Another 30% was owed to those governments, including China, which sat outside the Paris Club of traditional lenders. Public debt doubled in a decade. Last year the IMF said that seven low-income countries in Africa were in debt distress, and nine more at high risk of it. 

‘Apocalyptic moment’- Then came Covid-19. It was an “apocalyptic moment”, in the words of Ken Ofori-Atta, the Ghanaian finance minister. Commodity prices plunged, tourists vanished and remittances dried up. Capital fled to the relative safety of developed markets, at a faster rate than during the 2008-09 financial crisis.  “There is worry about what will happen to demand from China,” says Okonjo-Iweala. “And what about Europe which is projected to contract at about 5 or 6%? Those are the two large markets for Africa’s products.”  The IMF says the economies of sub-Saharan Africa will shrink by 1.6% this year, the worst performance on record; in most of North Africa the decline will be even steeper. And interest payments make it harder to fight the virus: even before the pandemic, 32 African governments were spending more on external debt servicing than on healthcare, calculates the Jubilee Debt Campaign, a UK-based advocacy group. 

Some indebted governments are already on the brink.  Zambia’s Patriotic Front, in power since 2011, has splurged on roads, salaries, and a fleet of expensive fire trucks. “Because they didn’t grow the economy, they simply borrowed to finance the fulfilment of election campaign promises,” says Sishuwa Sishuwa of the University of Zambia.  The country’s public debt will reach 110% of GDP this year, say the IMF, and a tumbling kwacha will make loans more costly to service. The government is seeking to restructure its debts  Ghana and the Republic of Congo are also a worry, says Yvonne Mhango, an analyst at Renaissance Capital, a bank. “We are most concerned about those countries which have payments in the short-term,” she explains.  Meanwhile Nigeria, the region’s largest economy, faces a different kind of fiscal crisis. Public debt is only 29% of GDP, but swallows 60% of federal government revenues.   (African Business)

Key Words: Africa, Trade, COVID-19

Alternet Systems earns investment interest as Uber features African electric motorcycle market – Alternet Systems has announced that the interest expressed by UBER in the African electric motorcycle market has spurred new investment interest in ALYI's ongoing US$300mn electric mobility project in Africa centred on the commercial manufacturing launch of ALYI's ReVolt Electric Motorcycle. ALYI has an overall comprehensive electric vehicle strategy in Africa founded on initially launching the commercial production of the company's own ReVolt Electric Motorcycle.  The ReVolt Electric Motorcycle pilot passed initial design requirements and ongoing pilot design refinements are expected to soon deliver a reduced overall weight and improved cruising range.  

ALYI has partnered with an independent firm founded specifically for launching an initial crypto currency offering (ICO) dedicated to funding ALYI's overall $300 million electric mobility project in Africa. ALYI is well on track with its funding partner for the African electric mobility project.  A cryptocurrency has already been partitioned on the Ethereum Blockchain. A pre ICO funding round is ready to launch and ICO details are being finalized.  Uber Africa has launched Uber Cash with Flutterwave and explores EVs. Regarding this news, ALYI management was subsequently contacted by investors that have already expressed interest in potentially underwriting the planned ICO.  As a result, ALYI management will be presenting a detailed update to the investors next Wednesday, June 17th, aimed at accelerating and increasing the pre ICO funding round in order to likewise accelerate the manufacturing launch of the ReVolt Electric Motorcycle.  (African Review)

Key Words: Africa, Trade and Investment, COVID-19

EAST AFRICA

EAC Urged to Work On Barriers to Free Cargo Movement in Bloc – THE East African Business Council (EABC) has urged Ministers Responsible for Transport, Health and East African Community (EAC) to convene and find a winwin lasting solution to barriers hindering the free movement of cargo across EAC borders, particularly the border between Tanzania and Kenya. The call came a few days after the government reiterated that it was keen on bringing to an end a border tension, pitting truckers and health officials from both countries. In a statement availed to the 'Daily News', the regional apex body of private sector associations and corporates in East Africa, noted that the 14-day- standstill on the movement of goods between the Kenya and Tanzania border risked business continuity and had adverse effects on intra-EAC trade. According to EABC, there were currently over 1,000 trucks stranded on both sides of the border, a move which is significantly affecting the intra-EAC trade and movement of essential and perishable goods across borders.

"Furthermore, there is a slowdown in the movement of cargo across all EAC borders. This is disrupting regional value chains due to emerging challenges restricting the movement of truck drivers to contain the spread of Covid-19," it said. Quoting International Trade Centre 2018 findings, the EABC pointed out that Kenya had imported products from Tanzania valued about $175.9m while exports stood at $293.5m. According to the EABC, EAC Partner States rely on sourcing final products, intermediate input and raw materials within the region due to the Covid-19 pandemic's disruption of global supply chains. "Facilitating the free movement of cross-border cargo is vital towards the economic recovery of the EAC region during and post Covid- 19 pandemic." It emphasised a need for concerned ministries to dialogue and reach consensus on Covid-19, while also pledging to offer support towards a public-private dialogue on cross-border trade to unblock the trade barriers, as they were detrimental to economic recovery of the EAC region.

The border tension between the two East African neighbours resurfaced after Tanzanian truckers were blocked from crossing into Kenya a week ago. The trade tiff erupted when Kenyan authorities started blocking Tanzanian truckers from crossing Namanga border due to a lack of valid Covid-19 clearance certificates. Responding in kind, Tanzania also started restricting Kenyan truckers from entering the country. This happened hardly a month since Tanzanian and Kenyan leaders agreed on modalities for enabling truck drivers to cross border posts.  (Daily News)

Key Words: East Africa, Regional Trade, COVID-19

The impact of COVID-19 on East African Economies – Summary of government intervention measures and Deloitte insights - The Coronavirus (COVID-19) pandemic is currently causing significant adverse impact on the global economy with governments around the world implementing various fiscal measures to mitigate its effects and provide relief for businesses and households. Within Africa, the impacts of COVID-19 are being felt in different ways and the measures taken by the respective governments have also differed on the areas of focus and comprehensiveness. Africa’s projected GDP growth of 3.2% for 2020 is now expected to fall to -0.8%. This is due to the enforced partial or total lockdown of economies brought on by the pandemic. The outbreak has led to disruption in the various sectors, most notably the financial industry and the tourism and hospitality sectors. A new report from Deloitte analyses some of the impacts for the East African region with a view on the effects on the general economy, as well as sectoral views touching on industries such as aviation, tourism agriculture, and manufacturing.

In Kenya, projected GDP growth in 2020 now stands at 1% from 5.7% due to the gravity of the pandemic; with the economy seeing a decline in tourism activity, export revenues, and a disruption in the supply chain. In Ethiopia, the country is expected to grapple with high unemployment, and GDP growth has been revised to 3.2% from 6.2% in 2020. Similarly, the outlooks in Tanzania and Uganda show a similar trend with GDP growth being revised to 2% and 3.5% respectively (decline in 3.3% and 1.8% percentage points). Tanzania is showing waning demand for mineral exports considering global supply chain interruptions. The economy in Uganda is also faced with the disruption of supply chains and weakened global demand for goods. In addition to economic outlooks, the publication looks at how governments in each country across the region have responded to the pandemic through social and health-related measures and the fiscal and monetary interventions introduced to safeguard the economy. (tralac)

Key Words: East Africa, Regional Trade, COVID-19

The impact of Covid-19 on the manufacturing sector in Kenya – The Covid-19 pandemic has resulted in unprecedented health and economic challenges across the world. While the greatest effect of the pandemic has been loss of life and strain on health facilities, businesses have not been spared. Nations have put in place stringent measures to curb the spread of the coronavirus which include lockdown regulations that have crippled business operations. This is in response to the clarion call of ‘flattening the curve’ and preventing health care systems from being overwhelmed with Covid-19 cases. The lockdown regulations put in place have resulted in shut down of industries and massive job losses. Fear looms of an economic recession with far greater magnitude than the 2008/2009 global financial crisis.

The International Monetary Fund (IMF) estimates that the global economy will contract by 3% in 2020 with an assumption that the Covid-19 pandemic fades away in the second half of 2020 and containment measures are gradually eased1. Similarly, the IMF has revised downwards the Sub Saharan Africa economic growth prospect for 2020 from an expected growth of 3.5% to -1.6%.

The Government of Kenya (GoK) has undertaken a raft of interventions in response to the Covid-19 pandemic to curb the transmission of the coronavirus since the confirmation of the first positive case of the coronavirus in the country on 12 Mar 2020. The measures include: cessation of  movement from the larger Nairobi metropolitan area, Mandera county, coastal counties of Mombasa, Kilifi and Kwale; imposition of a nationwide curfew from 7pm to 5am with the movement of essential goods and service providers exempted from the curfew; and enforcement of social distancing. This has affected normal business operations in the country. The GoK has rolled out economic measures to mitigate against the adverse effect of the coronavirus on the economy. So far, the government has adopted an expansionary monetary policy by reducing the cash reserve ratio to increase liquidity of KShs 35.2 billion to commercial banks for further lending2. In addition, the Central Bank of Kenya has further lowered the Central Bank rate from 7.25% to 7%3 in a bid to lower the interest rate charged by commercial banks. On the fiscal front, tax measures have been instituted to cushion low income earners by lowering the payroll tax, increasing tax relief as well as increasing tax refund payments due to bona fide tax payers. Furthermore, the government has increased allocation towards social protection and increased expenditure in the health sector.  (KPMG)

Key Words: East Africa, Regional Trade, COVID-19

2020/2021 East Africa Budget Analysis - On 11 June 2020, the Finance Ministers of the East African Community (EAC) member countries, with the exception of Rwanda, continued the tradition of the synchronised presentation of their respective budgets. On 11 June 2020, the Finance Ministers of the East African Community (EAC) member countries, with the exception of Rwanda, continued the tradition of the synchronised presentation of their respective budgets.

All the EAC member countries registered negative GDP growth rates, primarily occasioned by the outbreak of the Coronavirus disease 2019 (COVID-19) pandemic which has had a devastating impact on global economies, people’s health and livelihoods. Most of the measures proposed are therefore largely stimulus packages and social safety net programs designed to provide relief from the economic hardships that may have arisen from the specific restrictions aimed at curbing the COVID-19 pandemic and to facilitate quick recovery once the pandemic is brought under control. It is on this backdrop, that the EAC member countries presented ambitious budgets which have effectively balanced tax and economic reliefs against the anticipated potential revenue gaps.

Riding under the theme of “Stimulating the Economy to Safeguard Livelihoods, Jobs, Businesses and Industrial Recovery,” this year’s budget process has seen Kenya adding an 8-point Economic Stimulus Plan to its ambitious “Big Four” Agenda; Uganda focusing on improving the wellbeing of its citizens, boosting economic transformation and improving good governance and Tanzania prioritising amongst others, economic growth, industrialisation and providing an enabling environment for doing business and encouraging investments.

We expect a raft of legislation across the region to anchor these expenditure proposals and the revenue raising measures in law and shall keep you updated as and when they happen. In the meantime, we have reviewed the respective budget speeches and now provide a summary of the budget proposals and tax measures across the three countries for your consideration. 

KPMG Kenya Budget Brief 2020

KPMG Uganda Budget Brief 2020

KPMG Tanzania Budget Brief 2020

(KPMG)

Key Words: East Africa, Trade, COVID-19

WEST AFRICA

Ghana: Let’s shift from supply-based to demand-driven agriculture— Agriculture should be moved from the usual supply-focused approach to a demand-driven one whereby the government works with farmers to identify readily available markets to inform what they produce, Director-General of the National Development Planning Commission (NDPC), Dr. Kodjo Esseim Mensah-Abrampa, has advised. “Traditionally, what we [government] do is to provide seedlings, fertilizers, and related support to farmers, telling them what to grow or produce. When their product is ready for the market, they are ignored, leaving them to struggle to sell what is produced. “This has been the cyclical approach to agriculture, which ends up making the farmers even poorer as they produce more based on ‘cobweb theory’ because they cannot obtain markets to sell,” he said at a national dialogue on vegetables in Accra organized by the Agency for Health and Food Security (AHES).

The one-day forum was held on the theme “Systems approach to vegetable value chain policy, pandemic response and AfCFTA”. According to the NDPC boss, it is only with demand-driven agriculture that farmers would be able to determine the volume of various crops to produce to curtail the perennial food glut and wastage across the value chain. In Ghana, there are seasons when basic food items such as maize, rice, mango, avocado, and eggs flood various markets and food points across the country, after which they gradually disappear from the markets.
Dr. Mensah-Abrampa said the Covid-19 crisis calls for prioritizing and investing in areas where change is most needed, especially the dominant agricultural sector. “If we want to modernize agriculture, this is the time to put the resources where agriculture can be modernized. If we want to modernize industrialization, this is the time; and the opportunities have been created,” he said.

“Governance elements of agriculture must be looked at—where are the policies, regulations, and road infrastructure? These are very important, and there must be a conscious effort to bring about these changes,” he added. He said farming is a business and must be approached with entrepreneurial skills and effective training of farmers. In the absence of such capacity building and empowerment, he said, most farmers just offer their labor in a very tedious way in order to get something out of it, instead of seeing farming as an entrepreneurial activity that they can invest in. “Whenever there is a disaster, our farmers just throw their arms in the air and cry because we have not taught them the means to identify risks and adapt, and therefore, they are not entrepreneurs,” he noted. Director-General of the NDPC, Dr. Kodjo Esseim Mensah-Abrampa, wants a new paradigm for the agricultural sector to help better the lives of farmers and other actors. (Ghana Web)

Key Words: West Africa, AfCFTA, COVID-19

Nigeria: Bill Seeking Stiffer Penalties for Unfair Trade Passes Second Reading- The House of Representatives at the plenary yesterday passed for second reading a bill which seeks to strengthen the Price Control Board to ensure there is no unfair trade on essential commodities in Nigeria, especially during emergencies. The proposed legislation titled: ‘A Bill for an Act to Amend the Price Control Act, Cap. P28, Laws of the Federation of Nigeria, 2004 to Provide for stiffer penalties and make better provisions for implementation of the price control regime in Nigeria; and for related matters’, was sponsored by Hon. Taiwo Olukemi Oluga. Leading the debate on the bill, Oluga said there’s need for the government to check the worrisome increase in the prices of commodities, and this can be done via monetary policies of the Central Bank of Nigeria (CBN) and legislative intervention. She noted that the 1977 Price Control Act contains certain provisions that are not in tandem with current realities, and that this bill seeks to review them upwards for more efficiency and deterrence.

The lawmaker further said the bill seeks to reconstitute the Price Control Board for greater efficiency, and recognise geopolitical zones of Nigeria in the membership of its board by having one member each from the geopolitical zones. According to Oluga, ‘’Nigeria has a Price Control Act that was enacted in 1977, and it still remains part of our laws. The law was enacted to ensure that citizens of our great country are not unnecessarily exploited in the quest to purchase basic and essential commodities. The essence of the law was to control artificial scarcity and arbitrary increase in the price of basic commodities consumed by households. ‘’Nigeria’s annual inflation rate increased to 11.61 percent in October 2019 from 11.24 percent in the previous month, reaching the highest since May of 2018. Prices rose mainly for food due to the ongoing closure of the country’s land borders and the impact of unusual heavy rainfall on harvest. Hoarding of household consumables and food items and price manipulations are also causes of increase in inflation.

‘’The bill seeks to amend the fines and penalties for offences prescribed under the Act, many of them are around N2,000 for selling above controlled price as contained in Section ‘6, 7 ,8 ,10 ,12, 13, 17 of the Act, and this bill seeks to review them upwards for more efficiency for deterrence. Also, there have been a lot of changes in Nigeria since 1977; the Federal Ministry of Commerce is now the Federal Ministry of Trade and Investment. This needs to be reflected in the Act hence one of the objectives of this bill.” (This Day)

Key Words: West Africa, Trade, COVID-19

SOUTHERN AFRICA

Eswatini Revenue Authority embarks on an electronic tariff project - Electronic tariff (e-tariff) platforms are gathering momentum across the world and there is a growing recognition that these instruments offer massive benefits both for Customs and trade. E-tariff platforms are designed to integrate all relevant information on regulatory measures applied to international trade transactions in one place for online consultation by all interested parties.    Realizing the benefits that such electronic tools can offer and in line with its modernization strategy, the Eswatini Revenue Authority (SRA) has moved to establish a comprehensive e-tariff platform, with the support of the WCO under the framework of the EU-WCO Programme for HS in Africa, funded by the European Union. The official start of the project was announced at the kick-off meeting, held on 3 June 2020 in an online format, with the participation of representatives of the SRA, the WCO and the Global Trade Solutions (GTS) – a South African company specializing in electronic tools for Customs and Member of the WCO Private Sector Consultative Group.

In his opening remarks, Mr. Dumisani Masilela, Commissioner General of the SRA welcomed the support from the WCO and expressed the commitment of his administration to set up a modern platform through which stakeholders could be informed and kept up to date on the policies and practices in place. He expressed confidence that the project will contribute to the timely and efficient implementation of the HS, avoid revenue loss, and support the ongoing efforts of Eswatini to meet the WTO Trade Facilitation Agreement commitments.

In her congratulatory remarks, the Deputy Director for Capacity Building, Mrs. Brendah Mundia conveyed the WCO’s appreciation for SRA’s keen interest to implement this important project. She reaffirmed the WCOs commitment to provide technical support and to assure the successful implementation of this important project In order to give a comprehensive and efficient user experience to trade operators in Eswatini, the e-tariff platform will seek to include an interactive section on advance rulings to allow the submission of paperless online applications for rulings. A multidisciplinary team at the SRA has been assigned to coordinate this project and will ensure close collaboration with the Eswatini National Trade Facilitation Committee. For more details, please contact capacity.building@wcoomd.org. (WCO)

Key Words: Southern Africa, WCO, Trade and Investment, COVID-19