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November 30, 2007

1. Indians are back in business in Uganda

2. Ivory Coast seeks to join AGOA


3. Mozambique worries about South African deluge in SADC Free Trade Area


4. The difficulty small businesses have accessing bank loans

Indians are back in business in Uganda

A speeding convoy of cars took Prime Minister Manmohan Singh from Entebbe airport to Sparrow Cottage at Munyonyo Speke Resort in Kampala during the recent Commonwealth summit.

The resort has 53 such cottages, one for each Commonwealth head of state. It stands out like an oasis in poverty-stricken Uganda and is owned by Sudhir Ruparelia, an Indian. Some of the best hotels and resorts in Kampala as well as in forest sanctuaries in the Ugandan interiors belong to Indians like Ruparelia. Local businessmen say almost 70 per cent top hotels in Kampala are owned by Indians.

Thirty five years after Idi Amin decided to rid Uganda of "Shahs and Patels" and gave all 55,000 Indians living in the country just three months to leave, Indians are back in control of business in Uganda. Unofficial estimates suggest they now account for 40-50 per cent of the Ugandan economy (the same as in 1972) and rank among the biggest employers and highest contributors to the government's tax kitty.

Unlike in the past, when they had a dominating presence only in farm-related businesses like sugar, this time, Indians have a thumping presence in every sector of the Ugandan economy: Manufacturing, hospitality, trading, finance, agri-businesses and real estate.

"Ten years ago, there were no rich Indians around. Now, there are so many of them," said James Mugambi, the chief operating officer of Micro Africa, a micro-finance company.
Things started improving for the Indian community when the current ruler of the country, Yoweri Museveni, came to power in 1986 and invited Indians back with the promise of restoring their property. About 2,000 Indians who had been driven out by Idi Amin returned to rebuild their businesses. This includes the Madhvani and Mehta groups, who now run the biggest sugar mills in the country.

In the last few years, more Indians have migrated to Uganda. Niraj Shrivastva, India's High Commissioner to Uganda, says there are about 16,000-20,000 Indians in Uganda, most of them in business.

The morning newspapers were full of advertisements put out by Indian firms welcoming Prime Minister Manmohan Singh to the Commonwealth Heads of Government Meeting happening here.

Doing business in Uganda does have its challenges. As a large section of the population lives on subsistence farming, Ugandans do not save much. As a result, interest rates on commercial loans are running as high as 24 per cent per annum. With the Ugandan shilling on a downward spiral, raising funds abroad is hardly a viable option. There has also been at least one recent incident of workers rising against their Indian superiors.

Meanwhile, Indian companies too have started scouting for business opportunities here. "We get a lot of queries," says Shrivastava. Cipla has set up a joint venture firm here to make drugs for treating malaria and HIV/AIDS.

State-owned Bharat Heavy Electricals Ltd will supply turbines to the 250-MW Ayago plant, which will more than double the country's electricity capacity. The Indian government has given a credit line of $350 million for the project.

In short, Indians are back in business in Uganda.

Business Standard - India

Ivory Coast seeks to join AGOA

Ivory Coast aims to rejoin a preferential trade scheme with the United States in early 2008 as it moves towards holding elections, boosting trade and ending child labour, the head of its export promotion agency said.

The world's No. 1 cocoa producer, which was split in two by a 2002/2003 civil war, was excluded amid political turmoil in 2005 from the U.S. African Growth and Opportunities Act (AGOA).


AGOA, which was launched in 2000 and runs until 2015, allows nearly 40 African states to export some goods free of duties and quotas into the U.S. market. But it makes good governance and respect for human rights conditions for AGOA status.


Former French colony Ivory Coast, which entered AGOA in 2002, was struck off the list of partners shortly after anti-French riots erupted in late 2004. This political turmoil followed the 2002/2003 conflict that divided the country into a rebel-held north and a government-controlled south.


Guy M'Bengue, director of the APEXCI export promotion association that brings together the government and the private sector, said they were working hard to recover AGOA status. A "Back to AGOA task force" had been set up to work on four specific criteria the United States had set. "We hope to regain AGOA status in the first quarter of 2008," he said.


The criteria set for Ivory Coast were: holding long-delayed national elections, settling disputes with U.S. firms, facilitating commerce, and combating abusive child labour practices on Ivorian coffee and cocoa farms.


M'Bengue said regaining eligibility for AGOA status had become more urgent for Ivory Coast as the value of the dollar continued to slip, pushing up the cost of imports into the United States.

He said Ivory Coast provided 90 percent of the exports to the United States shipped by member countries of the West African Economic and Monetary Union (UEMOA), including cocoa, textiles and tropical fruit.


Reuters

Mozambique worries about South African deluge in SADC Free Trade Area

The idea that competition from South Africa will kill off Mozambican industries is greatly exaggerated, Tomaz Salomao, the Executive Secretary of the Southern African Development Community (SADC), told the Mozambican parliament.


Salomao was addressing a seminar on regional integration, and found that there were prophets of doom on both sides of the Assembly.


The free trade area that SADC will declare in 2008 might lead to the impoverishment of Mozambique, claimed Francisco Machambisse of the opposition Renamo party. Another opposition deputy,Jose Palaco, said Mozambique would become "just a place for warehouses and the sale of other people's goods." There would be mass unemployment, he predicted, and the benefits of cheaper imports would evaporate "because the army of unemployed will not be able to buy anything."


But some deputies from the ruling frelimo Party had an equally apocalyptic vision. Palmira Francisco claimed the informal traders would suffer with the abolition of tariffs against South African goods (this claim is extraordinary, since representatives of the informal sector have been making the opposite claim for years - namely that it is the customs duties that are suffocating their businesses). "This might be annexation, not integration", warned Francisco darkly.


Salomao, who is a former Mozambican Finance Minister, retorted that tariff reduction has been under way for the past 12 years.


Even before the timetable for SADC integration was drawn up, Mozambique was reducing tariffs under its agreements with the World Bank and the IMF. Thus the phased SADC reduction of the maximum tariff to 30 per cent in 2000 and to 25 or 20 per cent by this year was exactly the same as in the Mozambican government's programme with the Bretton Woods institutions. In fact, many goods were now traded at lower tariffs, or were zero rated.


"Two or three years ago we were importing goods at a 30 per cent tariff, and today there's no tariff on them at al,l" Salomao said. "Annexation hasn't happened so far, and it won't happen."


In 2008, the great majority of goods that qualify under the SADC rules of origin will not pay customs duties. But, like all other SADC members, Mozambique has published a list of "sensitive" products (including dairy products, maize flour, and automobiles) on which duties will not be eliminated until 2012.


"In my opinion, Mozambique will emerge a winner from regional integration", Salomao said. "But under no circumstances can we go forward saying that we're going to be losers."


And while it was true that many Mozambique small and medium companies might not be able to compete against South African companies, "they can certainly compete against Malawian, Zambian or Tanzanian companies. In the region as a whole, we certainly have the capacity to compete."


While people in Maputo might be mesmerised by the nearby presence of South Africa, that wasn't the case in northern Mozambique. Salomao pointed out that the cheap goods flooding into shops in northern Mozambique do not come from any SADC member at all, but have been imported from India, China, Dubai and even Thailand.


He noted that the textile industry in one of the most prosperous SADC nations, Mauritius, has wilted under competition, not from South Africa, but from Asian producers.


Salomao added that the idea that South Africa wanted to destroy Mozambican industry was the opposite of the truth. At the SADC extraordinary summit held in Midrand, South Africa, in October 2006, it was the South African president, Thabo Mbeki, who championed the need for expanded industrial production in other SADC member states.


"South Africa wants greater productive capacity in its neighbours, because it doesn't want citizens of other SADC countries to come pouring over its borders," Salomao stressed.


allafrica.com

The difficulty small businesses have accessing bank loans

by J.H. Abola

An official of American Export Import Bank was reported to have advised members of Uganda Manufacturers Association to seek cheaper loans abroad rather than choke with exorbitant interest rates charged by local banks. Most Ugandan banks charge interest rates ranging from 20 to 28 percent for business loans compared to the 5 to 12 percent that the US Exim Bank may charge.


To get a loan from any reputable bank you need to have financial statements which the bank uses to understand how your business has been performing for say the last two-three years and what the current financing need and payment capacity of the business is.


This is where the Ugandan businessman starts having a challenge. In most cases the Ugandan business does not have books of accounts and automatically becomes ineligible to receive bank financing. Even the business that has accounts may have different books for different audiences.



It is a global practice in places where accounting standards are lax or non existent that business managers and owners maintain three sets of accounts. The set of accounts prepared for the tax authorities will usually show the business making very little sales and having a lot of expenditure.


Earlier this year, the newspapers reported that the Parliamentary Public Accounts Committee was shocked that a well known business in Uganda had not made profits for over 15 years!


The second set of accounts is prepared for the banker. The report to the banker will portray a very rosy picture of the business; high sales, low expenses, excellent cash flow.


The true state of the business usually falls between what the taxman receives and what the banker is shown, that is the third set of accounts which is usually maintained by the owner of the business.


One reason why the Ugandan bank will charge high interest rate to a Ugandan business is because either the business does not have financial statements or if they exist the statement is hard to believe. The banker is therefore forced to increase her lending rates to cover hidden risks that cannot be identified from financial statements.


Financial statements aside, no bank will lend to a business in the absence of a security. The insistence of banks that borrowers provide collateral security is a big hindrance to the growth and maturity of businesses. I will illustrate using the example of Mukasa a small time flour miller who is making sales of Shs2 million or so every month.


If Mukasa had access to financing he would buy grain in bulk during the harvest period and use this to feed his mill when grain is off season. But the banks will not give him a cent unless he provides security to support his loan application.


Mukasa starts taking money from the mill first to buy a plot of land and then later to develop the land into a residential house. It takes Mukasa four years to complete the house. By the time the house is complete, the mill has been bled of cash to the point of near death. Now armed with a land title and good valuation report for his property Mukasa goes back to the bank with another loan application.


The banker is happy with the security but her face darkens when she sees Mukasa’s accounts. The monthly bank deposits have fallen from Shs2 million to about Shs300,000. The banker concludes that the proposition is too risky and declines the loan. Another good business is killed; it is the dance of death.


Some local banks have tried to solve the “collateral security” impasse by using warehouse receipts. The item the bank is financing is kept in a warehouse and only released with the consent of the bank. The warehouse system only works for businesses that deal in tangible products and may not work for service businesses. The warehouse operator is not a charity; therefore the warehouse receipt imposes additional costs on the borrower.


The banker on the other hand has to contend with the new risk of understanding and supervising the warehouse.


The Monitor

November 27, 2007

1. Kofi Amoah, the man who brought Western Union to Africa

2. Surprising confusion in East African official circles on details of EPA

3. Low costs give Chinese investors in Africa a competitive advantage

Kofi Amoah, the man who brought Western Union to Africa

Of all his accomplishments, Ghana's Kofi Amoah is best known for facilitating the entry of global remittance service provider, Western Union, into Africa.

“When I first approached Western Union to get them to extend their services to Africa, they said they were not interested. This was after I had tried all the methods of sending home money, such as through friends and through the mail. None of that worked.


“My money never found its way to my mother and the postal workers always made sure that moneys hidden in mails never reached their destination,” Dr.Amoah, who lived in the United States of America for many years, says as he recounts his frustrations.


“Weeks after turning down my proposal, I called Western Union again and convinced the company’s president to grant me audience,” he remembers. “Our meeting did not last more than 20 minutes because in the morning of our scheduled meeting, the New York Times newspaper carried bad press on Africa, running a front page story on AIDS and tribal wars.” After Western Union turned him away for the second time, Dr.Amoah did not give up. According to him, he believed there was something in him that the Western Union president did not see.


“Two months went by and I sent him another letter,” Dr. Amoah says. This time round, Western Union reluctantly gave him the green light to go to Africa and find a bank that was willing to become an agent.


“This is where the real challenge started. Initially, none of the banks in Ghana was interested. Eventually, I managed to convince the Agricultural Development Bank to become an agent. But thereafter, the problem got worse because the technology that will make money transfer to Ghana possible did not exist,” he explains.


The businessman pursued his dreams trying to secure the technology that will work. “Literally, I did all that was required to convince Western Union to come to Africa,” he says with a satisfied smile.


Western Union started its African operations from Ghana in 1995. Twelve years on, the company has expanded its operations to almost all 54 African states. And today, foreign remittance has become a major source of foreign exchange earnings to many African countries.


In 2002, the last year for which figures are available, US$12 billion was sent to Africa through official means, most of it through Western Union. Nowadays, many school children, with relatives abroad, look forward to their school fees being paid through Western Union while many Africans living abroad have huge investments back home.


Business in Africa

Surprising confusion in East African official circles on details of EPA

The news that the ministers of the East African Community (Kenya, Uganda, Tanzania, Rwanda and Burundi) are on the verge of signing an economic partnership agreement with the European Union (EU) has been received with mixed reactions by government officials from these very same countries.

The East African Community (EAC) ministers had agreed with their EU counterparts that they would sign a framework agreement on trade in goods, market access, development cooperation and fisheries by no later than November 23 this year. This framework agreement will reduce to zero 81 percent of current EU exports in industrial and agricultural products entering the EAC markets. The elimination of tariffs to zero will take place over a transition period of 25 years.

By the end of the tenth year, there will be a zero percent tariff on raw and capital goods. Tariffs on intermediate goods will be brought down to zero between the eleventh and twentieth year and tariffs on finished items will be brought to zero percent after 25 years.

Built into the agreement will also be a mechanism for the continuation of the economic partnership agreement (EPA) negotiations beyond December 31, 2007. The additional areas to be negotiated include liberalisation of services, intellectual property and the ‘‘new generation issues’’ of investment, competition policy and government procurement.

A negotiator from the region who had been involved in the negotiations felt that the outcome is good for the EAC. ‘‘Of course it is good. If it wasn’t good for us, we won’t have agreed to it.’’ He was pleased about the level of liberalisation, coupled with the exclusion list (19 percent of current trade), and the transition period. Tariff reductions will only commence from 2010.

Other government officials from the region, however, expressed unease. A major issue between the negotiating partners had been over ‘‘development." The EAC had presented the EU with a matrix of projects they wanted the richer nations to fund.

According to an inside source from Nairobi, Kenya, ‘‘what is not clear is what we are getting in the ‘development’ framework. I don’t know how concrete or binding this development framework is. It is a total mess, but unfortunately we are already there.

‘‘Are we getting additional funds? The EU is saying they will be using the current EDF (European Development Fund). We have been conned into this thing. Here we are, opening our markets to the EU, and in return we are getting a ‘best endeavour’ (non-binding) development framework,’’ he said. ‘‘We don’t know, in concrete terms, where the funds are coming from -- if there are no additional funds. So this interim arrangement is just about opening up our markets for EU.’’

Another government official from Kampala, Uganda, raised similar concerns: ‘‘I think there is an EAC development plan. Most probably that is what has been picked up for support under ‘development.’

‘‘In terms of funds, are we getting anything over and above what we would have got (without the EPA) or are we getting the same? Those answers are not very clear and nobody can tell you. We know that the EDF is coming. Maybe it will still be the same amount of money. But we are told that the EU has been the major funder of our roads, so we need to agree with them (on the EPA). So it is a bit tricky,’’ the Ugandan official said.

When asked how the package might affect the agricultural sector in Uganda, there was some uncertainty. The Ugandan official commented, ‘‘there is a list of sensitive products which has been excluded from liberalisation. I am told that the (EU agricultural) subsidies are not open for negotiation. ‘This means that, tentatively, (the EAC will not open its markets) to those products that the EU is subsidising, such as beef and dairy. But when you look at Rwanda, they are importing a lot of milk from the EU. How are Uganda and Tanzania going to keep the milk out? If there are no border measures, the milk can easily come here.’’

To the question whether the EPA will affect the industrial sector in Uganda, he commented: ‘‘We don’t have much of an industry to talk about, really. Maybe the problem is upcoming industries, I don’t know. ‘It could be a catch-22. Maybe we can attract investment or maybe it will discourage our local entrepreneurs who have already started something or who could have started something’’, were it not for external competition.

He gave the example of small grocery stores that are currently being pushed out of the market. ‘‘They are being swallowed by supermarkets. These small shops were supplying extra services. You could get a few things and pay later, and they were in the suburbs. Now, with the coming of supermarkets, some are pushed out. They are no longer competitive. We are not sure whether those (EU) people will come in (as a result of the EPA) and displace the small people.’’

He also raised the issue of neighbours benefiting at the expense of Ugandans. ‘‘What if Europeans decide to put up industries in Kenya and don’t come here? ‘Unilever is in Kenya and they are bringing all the products here -- soap, toothpaste -- to our supermarkets. So the people benefiting are Kenyans and there is no guarantee that we will benefit, although we are talking as EAC."

‘‘When you look at the Kenyan private sector, their export volume is quite high. But when you look at ours, the volume is a bit low. Ours could go under the EBA (the EU’s Everything-But-Arms trade initiative). I don’t know if our private sector is aware of this. If they are not, they might be told that by January, their products will attract a higher tariff.’’

As a least developed country (LDC), Uganda can avail itself of the EBA preferential arrangement of the EU which provides zero duties on all LDC exports.

The Kenyan official had this to add: ‘‘We are better off with the generalised system of preferences (the tariff rates which the EU offers to all countries). The duties are high but they would not have stopped us from exporting and we would not have had to open our markets for the EU. But now the EU is telling us to pay a price for the preferences we are receiving from them by opening our markets. Even when we do this, the countries we fear will still be more competitive – India, Korea and others. The EU is already entering into free trade agreements with them. So there is nothing we are gaining by opening up. But the political aspect comes into play. The politicians say we need to reassure some of the key players, particularly in horticulture, that trade will not be disrupted (at the end of the year). Just because of horticulture, we are opening up our markets.’’

IPS

Low costs give Chinese investors in Africa a competitive advantage

Low costs give Chinese investors in Africa a competitive advantage over their counterparts from other countries, a Chinese analyst told the U.S.-Africa Business Summit in Cape Town.


Professor Yang Guang, director-general of the Institute of West-Asian and African Studies of the Chinese Academy of Social Sciences, said, "They [China] possess low-cost technology for resource development. They enjoy a low cost of labour – not only unskilled labour but also... engineers and managers; they employ cheap 'Made in China' electrical machinery, and they earn the support of the government."


Ambassador Princeton Lyman of the U.S. Council on Foreign Relations told the same session that the U.S. could not compete with China's offerings:

"China is able to package their government programmes, their state-owned enterprises, their aid programmes in ways that the United States can't," Lyman said. "We can't assist an oil company in making a deal by saying if they win [a contract with an African country] we'll build a road [for that country], and it's a challenge for those of us who do things differently."


China's rapidly growing economic presence on the continent has been taking up more and more space on the agendas of a range of entities interested in African business, including governments, local industries, and foreign companies operating on African soil.


Giving feedback on the dialogue to the summit, Lyman described China's recent activities in Africa as "almost breathtaking. They've come with such vigour and such energy and resources."


Yang backed Lyman's observations with evidence. China now has more than 800 companies operating in Africa in a wide variety of sectors, he said. About 100 are state-owned and the rest are private but still supported by the Chinese government. In monetary terms, Yang added, the cumulative value of Chinese investment in Africa totalled 11.7 billion U.S. dollars by the end of 2006.


"We began by investing heavily in the resource development industries," he said, "but nowadays Chinese investment is widespread in industries such as textiles,agro-industries, electricity, road construction, tourism, and telecommunications…"


Africa has had a mixed response to China's increased presence on the continent. Sindiso Ngwenya, assistant secretary-general of the Common Market of Eastern and Southern Africa (COMESA), told the summit Africa should focus on its own interests at the same time as trying to meet China's needs.


"There's nothing wrong with them [China] being after resources – everybody is after resources," he said, "but the issue is... what is it that they bring to the table?" He cautioned that China was "awash with cash, and they are looking for investment opportunities," adding that "we need to engage them with open eyes [and] ensure that it is a win-win situation."


South African trade minister Mandisi Mpahlwa agreed: "Africa, your problem is not the self-interest of the Chinese. Your problem is... how do you leverage this growth, this demand, for maximum benefit?"


allafrica.com

November 22, 2007

1. Zimbabwe to take 25% equity in mining firms

2. Equatorial Guinea to invest in massive infrastructure project

3. Africa - China trade continues to surge

4. Siemens AG accused of corrupt business practices in Nigeria

5. France Telecom buys 51% of Telkom Kenya

Zimbabwe to take 25% equity in mining firms

The government of the country with the world's fastest shrinking economy, Zimbabwe, has published a draft version of its new mining bill, which would give the government a free 25% stake in mining companies operating there.

Zimbabwe Chamber of Mines CEO Douglas Verden said that the industry body was still going through the bill, but that it "did not look very helpful to the mining industry".

"It would appear that there is a freebie of 25% in energy-supply materials miners and miners of precious metals and stones," he stated. "They call the 25% a noncontributory takeover by government."

The draft legislation also forced mining companies to be majority owned by locals.

Mining Weekly

November 20, 2007

Equatorial Guinea to invest in massive infrastructure project

Equatorial Guinea will invest 5,500 billion CFA francs ($12 million) over five years in infrastructure programmes to diversify its economy away from its reliance on oil and gas, a government report said on Monday.

The ambitious blueprint includes plans for a refinery, new motorways to penetrate the country's heavily-forested interior, a new airport and hydroelectric power plant, a gas power station, hospitals and training facilities.


Equatorial Guinea is sub-Saharan Africa's third largest oil producer, pumping nearly 400,000 barrels of oil equivalent a day. The discovery of large offshore oil fields in the mid-1990s catapulted Equatorial Guinea from one of Africa's poorest nations to one of its richest per capita, but the new-found wealth has yet to trickle down to its estimated one-million inhabitants.


The economy is expected to expand by more than 20 percent this year, the finance ministry said, sustaining one of the world's fastest rates of GDP growth. The country was ranked at the tenth most corrupt on earth this year by Berlin-based Transparency International.


Shipments began from a 3.4 million tonne liquefied natural gas plant outside the island capital Malabo in May, and officials have said that construction is expected to begin soon on a second train at the plant.


Engineering Weekly

November 19, 2007

Africa - China trade continues to surge

From giant state corporations to a host of small businesses, Chinese companies have opened up a new frontier in Africa that is expanding so fast it is already altering commodity markets and manufacturing from Cairo to Cape Town.


Last week, China released figures showing that its trade with Africa is growing by more than 20% a year. Officials in Beijing disclosed that trade between China and Africa would probably be worth more than £34 billion ($68 billion) this year, compared with £27 billion last year.


Western companies face fierce competition from Chinese firms to buy Africa’s natural resources and sell goods and services back to the continent. China’s drive into Africa marks a historic shift from its traditional role as a politically motivated aid donor to a hardheaded commercial partner. So crucial is Africa to Chinese energy needs that Beijing is willing to be condemned by world opinion for its deals with dictators and its refusal to tie trade to improvements in governance or human rights.


Although international attention focuses on China’s quest for oil in Sudan and other trouble spots, the China Business Daily has reported that more than 500,000 Chinese businessmen and merchants have set up shop in Africa.


China has emerged as Africa’s largest trading partner after America and has cancelled the debts of 33 poor African countries as a gesture of goodwill. Last July, the Chinese also cut import tariffs on 454 items from 32 “least-developed countries.” Since then, more than £200m ($400 million) of duty-free imports have flowed into the Chinese market.


“The favourable tariffs are expected to cover more categories according to market demand,” said China’s vice-minister of commerce, Wei Jianguo.


Outbound Chinese investment to Africa was only £487m in the first nine months of this year, but this is expected to grow. “Chinese enterprises . . . envisage enormous business potential on the continent,” said the China Daily newspaper.


China’s big players are already there, generating controversy as well as profits. The Shanghai Business Daily recently published a revealing account of Chinese business interests in Africa, quoting commerce minister Bo Xilai in defence of the state-run China National Offshore Oil Corporation (CNOOC), the biggest foreign investor in Sudan.


“Its investment has made a big contribution to the African people,” said Bo. “It has provided 4,000 local jobs, built hospitals and schools, and constructed an oil refinery with an output of 5m tonnes a year.”


A background report for the US Council on Foreign Relations noted that: “By 2045 China is projected to depend on imported oil for 45% of its energy needs. China is actively trying to diversify its supply lines away from Middle Eastern crude. Experts say China has adopted an aid-for-oil strategy that has resulted in increasing supplies of oil from African countries.”

CNOOC is to buy a 45% stake in an offshore oilfield in Nigeria, while its oil buyers are competing aggressively for supplies from Angola, Equatorial Guinea, Chad, the Democratic Republic of Congo, Gabon and Algeria.


The Chinese quest for resources goes beyond energy. “China’s manufacturing sector has created enormous demand for aluminium, copper, nickel and iron ore,” said the report for the Council on Foreign Relations. It concluded: “The strategy is working. China has gained access to key resources around the world.”


Few foreign investors have grasped the speed and extent of Chinese exploration and development in Africa.


China is engaged in mining in 13 African countries, singling out deposits of gold, copper, diamonds, titanium and manganese. Prospectors from the government’s geological and mining bureau are active in Namibia, Ghana, Congo and Mali.


The telecommunications flagship Zhongxing Communications, which began investing in Africa in 1995, has ploughed in more than £3 billion and now employs 1,100 people across the continent. In Egypt, Brother Shoes, a company based in east China’s Zhejiang province, claims to have captured 70% of the local market since it set up in 2001 and now sells 12m pairs of shoes a year.


In agriculture, the Chinese have carved out deals from Zimbabwe to Zambia and Kenya. The China Agricultural Cultivation group claims to have transformed grain production in Zambia and saved the country a fortune in transport costs by reducing the need to import grain from South Africa.


When a Chinese businessman gets off the plane in Africa (the number of flights is multiplying every year) he can count on full diplomatic support and state-directed financing.


One example cited by the Council on Foreign Relations paper is Angola, where China takes 25% of Angolan oil exports, and Beijing has a stake in future oil production, thanks to a £1 billion commitment of loans and direct aid. The package will fund Chinese companies to build railways, schools, roads, hospitals, bridges and offices, while technicians are installing a fibre-optic network and training local staff.


The boldest stroke so far came last month, when the Industrial and Commercial Bank of China (ICBC) agreed to pay £2.7 billion for a 20% stake in Africa’s largest bank, Standard Bank, which is based in Johannesburg.


The investment gives ICBC an interest in a continent-wide banking network with more than 200 branches in 18 African nations. Investment analysts noted that unlike a western investor, ICBC did not appear to be linking its money to management changes or a shift in financial strategy.


But China’s foray into economic empire-building has not been cost-free. There is resentment among small traders in Africa over the inflow of cheap Chinese goods. Campaigners against corruption claim some Chinese firms have no hesitation in paying bribes, underbid local firms and fail to employ enough Africans.

A reading of China’s own media shows that in the corporate cultural-sensitivity department, Chinese managers may have a way to go.


In an interview with Jiefang Ribao, the Shanghai communist party daily, one pharmaceuticals manager said: “African people’s rhythm of life is very slow and they also treasure their lives very much and enjoy entertainment, so they do not want to work overtime. So we don’t ask them to work at night or do overtime.”


Huang Zequan, the vice-chairman of the Sino-African People’s Friendship Association, had this advice for Chinese businessmen in an interview with the China Business Daily: “Although African countries lag behind in manufacturing ( some of them can’t even make needles and rely on imports") you should never believe Africa lacks consumers. There are a lot of rich men. And since African people, generally speaking, have little idea of finance, they like to spend all the money they have and therefore there’s a very good market for Chinese products there.”


The vice-chairman went on to give the example of a Chinese washing machine, sold for £86 at home, which he saw on sale in an Angolan market for £533.


The Times - UK

Siemens AG accused of corrupt business practices in Nigeria

Nigerian President Umaru Yar'Adua has ordered an investigation into allegations that German telecommunications giant Siemens AG paid bribes to some former Nigerian ministers to win contracts here.


"The President has directed all the relevant security agencies to thoroughly investigate the allegations and take appropriate legal actions against anybody implicated in corrupt practices," said presidential spokesman Olusegun Adeniyi in a statement received Monday.


"In this Siemens scandal, as in all cases that border on good governance and transparency, there will neither be sacred cows nor a cover up for anybody found culpable of breaching the law," the statement said.


The Wall Street Journal Europe reported on its website that Siemens paid about 17.5 million dollars (12 million euros) in bribes to government and industry officials in Nigeria, Russia and Libya in a bid to win contracts. Using documents released last month by a court in Munich, the newspaper published a list of alleged recipients of 77 bribes from the three countries, detailing how much money went to each of the officials.


The court document seen by The Journal indicated that about 10 million euros went to Nigerians, including an immigration official, a senator and four former telecommunications ministers: Bello Mohammed, Tajudeen Olanrewaju, Cornelius Adebayo and the late Haruna Elewi, the WSJ report said.


It said that in Russia, 38 bribes totalling about two million euros went to the heads of nearly two dozen regional state-controlled telephone companies in the east and west of the country.


Six bribes totaling about 300,000 euros were received by two officials at Libya's state-run General Post and Telecommunications Co., the paper said.


Africasia

France Telecom buys 51% of Telkom Kenya

A consortium led by France Telecom won a tender to buy 51 percent of Telkom Kenya for $390-million, in a deal to turn around the loss-making business and prepare it for an eventual market flotation.

France Telecom, which has interests in 12 African countries, said the deal fitted very strongly with its strategy of "targeted development in fast-growing markets."


Other contenders for the Telkom Kenya shareholding were Reliance Communication Ltd. of India, South Africa's Telkom and LAP Fund of Libya.


"We believe that there is a very strong potential in Kenya," Anne Bouverot, a senior France Telecom executive.


Mobile phone penetration is less than 30 percent in Kenya, a country of 36 million people, industry sources say.


"We got the highest bid from France Telecom at $390 million which is way above our reserve price. We had a reserve price of $300 million, so we are very happy," Kenyan government Investment Secretary Esther Koimett told a news conference.


France Telecom, which beat three other bidders, said the deal was expected to close by year-end.


The consortium is expected to prepare Telkom Kenya for an initial public offering (IPO) on the Nairobi Stock Exchange in three to five year's time.


"Our bid price is a fair price. It is based on an analysis of the potential of the Kenya telecoms market and of Telkom Kenya in this market," Bouverot said.


France Telecom said it planned to develop and launch its 2,5 G network in the short-term, and would market Telkom Kenya's services under the Orange brand.


Telkom Kenya enjoys a monopoly on land line services in the east African economy with 280,000 fixed lines. However, many businesses complain inefficiency and corruption have made its services too expensive.


"The planned implementation of submarine cables in 2009 will give Telkom Kenya the means to offer affordable prices and become the leader on the high speed Internet market," France Telcom said.


The deal will not incorporate Telkom Kenya's 60 percent stake in leading Kenyan mobile phone operator Safaricom.


Engineering News


November 16, 2007

1. Potential investors worried about African communications, contract enforcement

2. Ghana's worried civic bodies ask Prez. Kufour to clearly state his stance on EPAs

3. Africa - China trade tops $50 billion by third quarter of 2007

4. Counterfeit goods flood East African markets


5. African FDI doubles, but US investors still wary


6. WTO has no position on EPAs

7. IMF to cancel Liberia's debt

8. EPAs: Africa needs protectionism to develop, not liberalization


9. Europe is not interested in the development of Africa


10. Developing countries divided over Doha WTO talks


11. Iran eyes African markets

Potential investors worried about African communications, contract enforcement

International investors remain wary of pumping money into Africa due to poor communications and fears that contracts may not be enforced, a major business conference heard.

Amid African complaints that American businessmen are only interested in oil, delegates from overseas attending the US-Africa business summit said the continent is still far from being an investors' paradise despite some recent progress.


"Investing in Africa is not without risk," Robert Mosbacher, president of the US Overseas Private Investment Corporation (OPIC), told the conference in Cape Town.


"The single-biggest impediment is enforceability of contract. The perception is that this is an extraordinarily difficult thing in Africa."


Mosbacher said that "strengthening judicial processes and enforceability is critical" if Africa, a continent rich in natural resources, wants to draw in more international investment.


Geoffrey White, chief executive of Lonrho PLC, said the continent had huge potential given that it accounted for 22 percent of the world's land mass but only two percent of global output. However White, whose London-listed company has a wide variety of interests in southern Africa, told delegates that a lack of adequate communications was a disincentive to many potential investors.


"An essential to develop is access to markets, good logistics ... and communications," said White.


The conference came the day after a new World Bank report said growth rates in Africa were catching up with the rest of the world, a trend which could help the continent become "an exciting investment destination for global capital."

AFP

Ghana's worried civic bodies ask Prez. Kufour to clearly state his stance on EPAs

If Ghana’s government used civil society protests as a guide as to which way to go in the negotiations with the European Union (EU) on the economic partnership agreement (EPA), the talks would have been terminated.

The message to the government has been clear: the EPA will not improve trade between the country and its European trading partners. Unfortunately, governments do not always consult their people in such matters.

Civil society has shown clearly where it stands when it comes to the EPA currently being negotiated between the EU and, among other groupings, the Economic Community of West African States (ECOWAS).

In its present form, the EPA will lead to the loss of livelihood for most peasant farmers, Mohammed Adam Nashiru, president of the Ghana Trade and Livelihood Coalition Campaign (GTLCC), told a recent meeting of peasant farmers organised by the GTLCC in Tamale in the north of the country.

Some 60 percent of Ghana’s workers are in the agricultural sector, which is the main source of livelihood for Ghanaians and supplies 35 percent of the country’s gross domestic product (GDP).

Nashiru referred to a study by the United Nations Economic Commission for Africa which has estimated that Ghana would lose revenue equal to eight percent of its GDP. He identified the poultry industry and tomato factories as those most at risk to be negatively affected if the EPA were to be implemented.

The country’s industrialists, organised under the auspices of the Ghana Association of Industries, are also applying pressure on the government.

The executive director, Cletus Kosiba, told IPS in an interview in Accra that ‘‘we are not opposed to trade liberalisation. We are aware that liberalisation has its positive side. However, our main concern is the way liberalisation is being handled under the EPA negotiations’’.

Kosiba said Ghanaian industries are not in any position to compete with their European counterparts because of the challenging conditions under which they operate.

‘‘There is a need to improve the competitiveness of the country’s industries. This would help us benefit from any liberalisation regime. This would require some support to the local industries to expand their capacity,’’ he added.

Kosiba said the negotiations should be postponed for three years. This extra time should be utilised to create structures that would help build the capacity of industries and improve conditions. This will enable African countries to take advantage of the opportunities that the EPA liberalisation regime may offer.

‘‘Until this happens, any attempt to impose wholesale liberalisation, as envisaged under the EPAs, will only kill infant industries,’’ Kosiba said.

He mentioned the fruit processing industry as an example. In its present form, there is no way that the exporters of processed pineapple could compete with their European counterparts because of their cost structure. Pineapples are one of Ghana’s top exports.

Kosiba also cited the influx of Chinese goods into the country and said this has posed a significant threat to the survival of the country’s industries. The government has not been able to do anything about this, he said. ‘‘Therefore, any further opening of the Ghanaian market will amount to nothing less than killing struggling industries.’’

In spite of these protestations, Ghana’s President John Kufuor seems unsure as to which position to adopt on the EPA. He has given mixed signals about the country’s position on the negotiations.

Addressing the United Nations General Assembly in September in New York, Kufuor asked the EU to give Africa enough time to think through the EPA before appending their signatures.

The one exception has been cocoa exports. Cocoa is Ghana’s main export and any upset in cocoa production would greatly affect the country. Thus, in an address in Accra on October 12, Kufuor told cocoa producers to unite against the imposition of tariffs on cocoa products to the European countries.

Addressing a meeting of ministers from countries that belong to the Cocoa Producers Alliance (COPAL) he said, ‘‘speaking against the imposition of tariffs would be one of the surest ways of ensuring sustainability of the cocoa industry’’.

If the EPA is not signed by Ghana, 30 percent of the country’s exports, including cocoa butter and paste, will face stiff tariffs, according to a report written by Oxford University researcher Mayur Patel for the Realizing Rights Ethical Globalisation Initiative.

The Trade Union Congress has asked Kufuor to state his position clearly. Secretary general Kwasi Adu-Amankwa said Ghanaian workers do not want any agreement with Europe that would further devastate an already ailing industrial sector.

Adu-Amankwa does not regard the EPA as an answer to the continent’s problems. ‘‘Rather, it is a tool for re-colonising us.’’ The main beneficiary of the EPAs would be the EU and ‘‘the people of Africa would lose even the little that they have achieved so far,’’ he added.

He has used every opportunity over the past few months to call on the government to resist ‘‘EU pressures and manipulation to sign the agreements’’. For Adu-Amankwa, the EPA holds far-reaching negative implications for domestic production.

He warned that Ghana and, for that matter, Africa as a whole, stands to lose when the EPA comes into force.

Among other concerns, the EU has been pushing for the inclusion of government procurement in the EPA to enable their suppliers to outbid local suppliers and further bleed the ailing West African economy, Adu-Amankwa argued.

The deputy minister of trade, Kwaku Agyeman Manu, has said that the EPA should provide a mechanism to enable Africans achieve their development goals.

‘‘We need an EPA with true development provisions built into it to ensure that the EU’s promises of making the EPAs function as development tools, are translated into commitments that can be fulfilled.’’

Manu said Africans ‘‘can only take advantage of the market opening opportunities and ensure that the EPA, indeed, becomes a development tool,’’ if the final outcome of the negotiations is the building of ‘‘our productive capacity, competitiveness and industrial upgrading as well as the enhancement of our integration process’’.

IPS

Africa - China trade tops $50 billion by third quarter of 2007

Trade between China and Africa reached US$52.3 billion in the first nine months of 2007, according to statistics of the Chinese ministry of commerce.

According to the report, during 2006, global trade between China and Africa rose to US$55.5 billion, up from US$40 billion in 2005 and only US$10 billion in 2000.

China became the second largest commercial partner of Africa after the United States and surpassed France which now ranks 3rd, added the ministry in a periodical report.

According to the current annual rate of growth which is more than 22 per cent, it is expected that by the end of this year, it would certainly surpass US$70 billion and it is likely to hit US$100 billion before 2010.

The Chinese ministry of commerce said that since the Beijing summit between China and Africa in November 2006, trade and cooperation has expanded rapidly, adding that China is preparing to launch the construction of three trade and economic cooperation zones in Africa this year.

An African diplomat said that China has already launched the construction of a Chinese economic zone in Zambia and is making final preparations with Egypt for a second one in the region of Suez.

APA News

Counterfeit goods flood East African markets

Counterfeits have taken over the local market in Tanzania as they now command over 50 per cent of sales and now threaten thousands of jobs, says a new private sector study.


According to the study, commissioned by the Confederation of Tanzania Industries (CTI) to determine the gravity of the counterfeits problem in the local markets, raw materials top the list at $20 million-$200 million, followed by agricultural inputs ($10 million-$20 million), electronic equipment and appliances ($20 million-$50 million), pharmaceutical and medical equipment ($20 million-$50 million) and cosmetics and detergents ($15 million-$50 million).

In the process, the government loses millions of dollars in revenue. The Tanzania Food and Drugs Authority estimates market value of counterfeits at about $800 million.

The researchers said that respondents — mostly traders, importers and manufacturers — mentioned China, as the major source of counterfeits. Other countries mentioned were Taiwan, India, Indonesia, Malaysia, Korea, Hong Kong, Pakistan, Burma and Singapore.

The report mentioned Kenya as a manufacturer as well as a major route, while South Africa, Democratic Republic of Congo, Zimbabwe and Zambia were mentioned as major routes of the counterfeits.

Most respondents described unemployment caused by large imports of counterfeits products as huge due to the fact that it denies domestic industries to expand production. “It scares off potential investors from Tanzania, often seen as a dumping place,” says the report. Loss in employment was estimated at 40 per cent of the total workforce.

The study revealed that the problem saw Kibo Safety Match lay off 300 employees in 2005 with an additional 500 employees expected to be sent home should the problem persist.

General Tyre is also considering retrenching over 30 per cent of its workforce while Baby Food and Superfood sent home 140 people. On its part, Haco Industries Ltd, one of the region’s largest manufacturing firms, recently said it may retrench 300 employees as counterfeits begins to bite.

Equally devastating is the foregone investment opportunity for domestic and foreign investors due to an influx of substandard and counterfeit goods in the market, the report said.

The report recommends that regulatory institutions be more vigilant and intensify anti-corruption measures as well as undertake vigorous surveillance to block unofficial border and sea routes and reduce illegal imports. It further recommends that the government reduce costs for local manufacturers (by reviewing and lowering taxation rates) to enhance the competitiveness of domestic products.

The East African
**********
EA can't stem the tide of fakes
The Kenya government has admitted that it is ill-prepared to counter the influx of fake commodities into the region.

Trade and Industry Permanent Secretary David Nalo has warned that unless the country and the other East African Community partner states — Uganda, Tanzania, Rwanda and Burundi — strengthen their bureaux of standards, the region will continue to suffer the use of counterfeit goods.

According to Mr Nalo, most bureaux of standards in the region are too weak to effectively undertake quality controls. They have also failed to sensitise the public to the dangers of using substandard or counterfeit goods.

But the biggest challenge facing the institutions, he said, was the need to expand their capacity for quality control and inspection of goods coming into the region.

“The matter becomes more complex when dealing with countries like China, with millions of industries. Sometimes, our radar fails to detect when fake goods arrive in the region,” Mr Nalo said. He proposed that the bureaux enter into formal agreements with Chinese authorities to jointly implement quality standards. As a region, EAC has succeeded in signing such an agreement only with the European Union.

According to observers, the major undoing of the EAC countries in the fight against counterfeits is that most don’t have a harmonised mechanism for enforcement of the national standards.

Early this year, the EAC secretary general, Juma Mwapachu, warned that at a time when the EAC is promoting the East African region as a common investment destination, it would be sending the wrong signal to investors in the Common Market — the second stage of the EAC integration process — if they felt they would be undermined by piracy, counterfeits and cheap and shoddy imports.

The East African


African FDI doubles, but US investors still wary

Foreign direct investment in Africa has more than doubled since 1998, but few U.S. corporations have shown interest in the region except for the oil and mining sectors, say investment experts.

But major U.S. companies watching Africa's rapidly improving investment climate will be examining ways to increase their activity at a meeting in Cape Town, Nov. 14-16.


U.S. companies including Chevron , Merck & Co , Exxon Mobil , Marathon Oil , Boeing Co , 3M Co , Cargill, General Motors , Chrysler, Hewlett-Packard , and Coca-Cola have confirmed their participation in the U.S.-Africa Business Summit, said the event organizer, the Corporate Council on Africa.


The rise in investment in Africa has been accompanied by a drop in infant mortality, despite high AIDS rates, especially in countries where the foreign investment has been diversified, according to experts.


Foreign direct investment in sub-Saharan Africa has risen from $7 billion in 1998 to $18.5 billion last year, said Steve Radelet of the Center for Global Development.


The U.S. share is so small that American holdings in the sub-Saharan region total just $19.6 billion, according to U.S. government figures. The United States is so far behind that it had little presence at a meeting last week of the mobile phone industry group, the GSM Association, to discuss a $50 billion investment in sub-Saharan Africa in the next five years. Telecommunications is considered one of Africa's most vibrant industries.


Mozambique, despite an adult AIDS rate of 16.2 percent, has had an average GDP growth rate of 8 percent over the past decade and attracted $6.5 billion in investment since 2002. Economic reforms included allowing multinationals to repatriate their profits.


While it is difficult to know if international investment in Mozambique or elsewhere has meant that Africa's poorest are less poor, infant mortality figures indicate they might be. In the mid-1990s, 287 out of every 1,000 Mozambique children died before age five. Ten years later, that figure was a much improved but still tragic 152 per 1,0000, according to the World Health Organization.


Uganda has been another success story. Outside of Entebbe, near the airport, greenhouses have sprung up where flowers are grown for flower shops in Europe.


And Uganda is another country that has seen its child mortality rate drop. In the mid-1990s, 185 children died before age five out of every 1,000 born. Ten years later, Uganda's under-five mortality rate was 138 per 1,000, according to the World Health Organization.


But in Nigeria, where investment has been almost entirely in oil, 191 out of every 1,000 children born died before age five. A decade later, that figure actually rose to 197 per 1,000, according to WHO.


Radelet argues that about 20 African countries are doing well because they have become democratic, have instituted better macroeconomic policies and been the recipients of debt relief.


"Never in the history of the world have we seen so many low income countries become democracies," he said.


Reuters

WTO has no position on EPAs

The Director-General of the WTO, Pascal Lamy, has cautioned Trade Ministers of the ACP states to stay within the multilateral trade regimes of WTO if they are not sure of the dangers of the bilateral negotiations of the Economic Partnership Agreements.

He said the world trade body has no position on the sticky and controversial free trade negotiations between the European Union and the ACP states. "It is a dangerous ground for me because both sides are pulling me to support their arguments, which I cannot go further in terms of advising you because I'm supposed to be in the middle."


According to the WTO boss, it is up to the ACP trade Ministers and the European Commission to assess their own risk in negotiating for a free trade arrangement. "Unilateral trade preferences are accepted by the WTO if they apply to all countries in similar economic circumstances.. It's a decision you have to take based on your assessment of your interest in terms of what you gave and what you got," Lamy said.


With less than two moths before the official deadline to complete the EPA negotiations, questions are still being asked on the nature, scope, and possible impact of the free trade agreement to be signed this year by the EU and its ACP partners.


Ghana’s Trade Minister Joe Baidoe-Ansah said ... ECOWAS will not accede to the implementation of a full EPA with the EU before the expiration of the December deadline. "Our countries are not ready for a full EPA and the common position is that we are not signing ... when we are not ready."


But fuming Ivoirean Ambassador to the meeting, Agosset Marie, who stormed out of the meeting disappointed, said Ivory Coast is ready for the EPA and that Cote d’Ivoire is ready to do business with the EU. She said her country has indicated its preparedness to sign up to the EPA’s without delay, which according to her has stalled the country’s trade and development.


Last week an European Communication acknowledged that it will not be possible to conclude full EPA’s in all regions this year, and proposed to focus on concluding interim agreements covering market access for goods now, and negotiate the rest of the agenda inn 2008.


Substantial differences still exist between the negotiating positions of the EU and the ACP countries have anticipated that they will need more time to even complete a goods-only agreement.


The Statesman


IMF to cancel Liberia's debt

The International Monetary Fund says it has secured sufficient funding to start cancelling Liberia's debt to the international agency.

The IMF says donor nations have pledged $842m which will start the process once the pledges are honoured.


Liberia is struggling with the legacy of 14 years of brutal civil war, which ended in 2003, with 270,000 dead. The country has found it difficult to get financial support because of a total international debt estimated to be $4.5 billion.


The IMF debt relief plan involves a three-year growth programme to reduce poverty and help for Liberia to finance its remaining obligations.


The money to pay off the debts is understood to come mainly from existing IMF reserves, and an additional $71m from the G8 group of industrialised nations.


BBC


EPAs: Africa needs protectionism to develop, not liberalization

By John Ochola

I am responding to the opinion piece by Peter Mandelson and Louis Michel.


There is an old saying: "Give a man a fish and you feed him for a day, teach a man to fish and you feed him for life."

Economic Partnership Agreements (EPAs) are the equivalent of Europe telling the African fisherman that if he does not give them his fishing net (tariff flexibility) he will not be able to sell any more fish to them (fish exports). In return for the fishing net, Europe promises a European fish (aid) that the fisherman has to apply for and wait for over two years.

Let me explain further. Michel and Mandelson ask: "How can we use trade to help African, Caribbean and Pacific (ACP) countries?" They would do well to go back to the drawing board with regard to their trade relationship with Africa.

The EC believes that free trade will encourage development and reduce poverty in Africa. But a free trade deal will create direct competition between European manufacturers and farmers, and their counterparts in poor countries, thus putting people in poor countries out of work and exacerbating their poverty.

The EC article states: "Critics of EPAs claim they will open up ACP markets to EU trade at the expense of local business and local growth; This is not true."


But critics of EPAs take figures from official EPA impact assessments that point to a contraction in regional trade, industry, agriculture and government revenue and list many sensitive products that could be hurt. For example, it is estimated that in Kenya, 65% of domestic industrial products could be vulnerable to unfair competition under EPAs and that a 15% contraction in regional trade would occur because more EU manufactured products would come into the region. In Uganda EPAs is estimated to create an annual loss in Government revenue of $9,458,170.

The article states that the EU is not threatening to raise tariffs for countries like Kenya, rather that "it is doing everything it can to avoid it." But the EU has refused to look at any options other than EPAs for Africa, has refused to look into another waiver, and has refused to provide a transition period in spite of such a request made by Kenya.

The EC and the East African Community should take heed of lessons from our national and global economic history. Liberalisation brings about factory closures, not start-ups. Witness what happened during structural adjustment policies in Uganda in the 1990s. Since then, other countries like Kenya have strategically raised import tariffs, along with investment, to revive both the dairy and the tannery industry. Just when African countries are realising the power it has to help agriculture and industry develop using tariffs as economic policy tools, these very tools, " this fishing rod for development" will be removed through signing the EPA.

Countries that are successful today did not start out by liberalising. They started out by using tariffs to protect industries and having the state invest in them. Korea and Taiwan both achieved their phenomenal growth rates by using high tariffs strategically to promote specific industries. China and Vietnam also successfully used high tariffs and state intervention for trade-driven development. The EU itself took many years to develop behind protective barriers before opening up its markets to competition.

If the EC were serious about supporting Africa to trade its way out of poverty, it would drastically change non-tariff barriers into the EU that have seriously hindered the ability of Africa to access the EU market. These include such things as domestic subsidises to EU agriculture, complicated Rules of Origin and Sanitary and Phytosanitary measures, as well as support around private sector standards that have the ability to restrict exports from Africa.

But none of these issues will be part of any final EPA text that may be hastily cobbled together to meet the December 2007 deadline. A goods-only EPA is a reciprocal free trade deal, not a fair trade deal.

The EC argue that the current trade arrangements under Cotonou must change because "they are not compatible with international trade rules and that calling for an end to EPA negotiations when there is no credible alternative is playing poker with the livelihoods of those we are trying to help." But a credible alternative to EPAs exists.

Least developed countries like Uganda already have the option of the Everything But Arms (EBA) scheme. It is as simple as labelling the produce for export differently. Ugandan EPA negotiators should seriously consider making use of the EBA scheme like other least developed countries in the region are doing before rushing headlong into another round of liberalisation through EPA. The policy space still exists for Uganda to make use of tariffs under the EBA regime if it chooses to do so and to give its industry and agriculture a head start over Europe.

The writer works for EcoNews Africa and represents Civil Society Organisations working on trade at the East and Southern Africa Regional Grouping and can be
contacted on jochola@econewsafrica.org

New Vision


Europe is not interested in the development of Africa

by Owen Mukamana

The matter of EPAs and whether or not to sign them, is of fundamental importance to the wellbeing of the Kenyan economy.

We live in a different world from the days when the West exploited others by the power of guns. In the information age, colonisation is by economic strangulation.

It is in the interest of the EU that Africa must never develop. In the outgoing world order, the power equation between the two has been to the EU’s advantage. Why should they want to change that by giving Africa a fighting chance to develop? The EU being as powerful as it is, is arm twisting poor countries to gain advantage, and throw them deeper into the deepest levels of poverty. It is not interested in the development of Africa.

It is, in many ways, fighting to secure its place in a new world order in which new emerging powers are gaining ground by the day.

The choices our ministers face are stark. Do they protect our horticultural markets and throw away jobs to Europe? Whatever decision they take will lead to job losses.

But let us take a realistic view of our horticultural exports. The truth is that this is a fragile market that can be blocked at any time using excuses such as global warming. Indeed, most analysts familiar with European way of operations believe that this industry is living on borrowed time.

Times have changed but European trickery towards Africans remains the same. The principle that was in play when Africans were given a mirror in exchange for land still remains in play. Only in this case, we are being offered horticultural markets in exchange for economic independence. Have we not learnt any lessons from our history?

If your readers are aware of Peter Mandelson’s reputation as the Prince of Darkness in his native Britain (a title well and truly earned due to his fluency in lies —read spin), then they would be embarrassed about such brazen cheerleading. Notice how Mandelson never mentions job losses in Africa that will follow the signing of the EPAs.

For Africa to develop, it must develop its own economic institutions and industries. Europe knows that Africa is ripe for economic take off. But Europe wants 80 per cent of that economic growth exported from Africa. It is anyone’s guess where to.

It is time to put a stop to the principle of “take a mirror and give me your future.” Africa has been drawn into an economic war with Europe. It has no choice but to protect itself.

This will be painful. But not as painful as the war for independence, when lives were lost and blood was shed. We have to make painful sacrifices to secure our future.

A farmer may decide not to eat all his maize, to preserve some as seed maize. His family may suffer hunger in the mean time, but the consequences of eating the seed maize will be hunger throughout the next year. One tin of seed maize gives yield to a whole plot of harvest.

Let us open our eyes, and weigh what comes from foreigners carefully. We all have a responsibility to our selves and our children.

Business Daily Africa

Developing countries divided over Doha WTO talks

Developing countries are deeply divided about how to advance troubled talks over a new global trade deal, and few ministers were to attend a meeting this week meant to show their unity, diplomats said on Monday.

Brazil invited nearly 30 top officials from emerging nations to Geneva to discuss next steps for the six-year-old Doha round of World Trade Organisation (WTO) talks, which are mired in tensions between rich and poor countries.


Ministers from India, South Africa, Indonesia, Paraguay, Tanzania, Uruguay, along with vice-ministers from Cuba and Ecuador, will participate, but most members of the Group of 20 or "G20" developing-power negotiating block are not sending ministers to the session on Thursday.


Trade insiders said the absence of key players including Mexico, Chile and Peru reflected a growing rift among developing powers in the talks, particularly over the extent to which industrial goods markets should be opened to more competition.


Though poorer nations have mainly stood together in talks in agriculture, calling on rich nations to cut price-distorting subsidies and tariffs, they have been at odds in parallel negotiations over manufacturing.

Canadian WTO ambassador Don Stephenson, who chairs the industrial goods talks, said last week that several weeks of intensive talks had yielded "little progress on all fronts."


Many developing countries want the right to shield more of their sensitive markets from tariff-ceiling cuts in a Doha accord, which requires consensus among the WTO's 151 member states to be clinched. Others, including Pakistan and Thailand, are opposed to such exclusions, according to sources familiar with the closed-door talks.


The Doha talks, named after the Qatari capital where they were launched in 2001, are meant to boost trade flows and help poor-country producers export more. The World Bank has estimated a pact could add $96 billion to the global economy every year.

Washington Post

Iran eyes African markets

Iran is scheduled to hold several solo exhibition in African countries by the year end, the director general of trade office of the Trade Promotion Organization of Iran (TPOI) has said.

Amir-Houshang Kargar added that holding various exhibitions in other countries is one of important ways to introduce industrial and trade capabilities of Iran, and that this will help Iranians get acquainted with target markets, in particular those in Africa.


In the wake of a seminar of Iran-Africa trade opportunities, he said that the event has produced eye-catching results such as signing of several deals in the fields of investment, technical and engineering services.


Iran has held 32 exhibitions in Africa between 2002 and 2006, he said, noting that most of them have been organized by the private sector and under supervision of the Commerce Ministry.


Kargar said that TPOI with the support of Iran's Chamber of Cooperatives has held numerous solo exhibitions in African countries in the current Iranian year (started March 21, 2007).


IRNA

November 12, 2007

1. The link between African illegal migration to Europe and EPAs

The link between African illegal migration to Europe and EPAs

by Chido Makunike

Over the past few years the world has heard horrific stories and seen wrenching images of desperate people who have departed from the shores of West Africa in flimsy boats to try to get to Europe, seeking what they hope will be an easier, better life. There are many tales of mass deaths on the crowded boats, with the “lucky” often reaching the Canary Islands or being rescued at sea emaciated from hunger and dehydration.


Reports suggest that the number making the perilous journey has declined this year, following the agreement of European and West African countries to more aggressively patrol the West African coastline. This has been accompanied by several other measures to clamp down on illegal migration in general, particularly the perilous sea-faring kind.


Those efforts include high-profile media campaigns in several countries to discourage would-be migrants by warning them of the perils of the journey, and that life in Europe for them is unlikely to be as they imagine. In the last few days, there was also an announcement of a plan to grant 2700 young Senegalese visas to work in agricultural and fishing jobs in Spain.


Yet such are the pressures fuelling the phenomenon, and the misconceptions of what life in Europe is going to be like, that it seems doubtful that these efforts will significantly reduce the desire to make the journey, even if they succeed in stemming the human tide in the short term.


The current methods of attempted physical interception or prevention of this type of immigration only address a part of the cause and effects of the phenomenon. We are likely to see a resort to bolder, more imaginative and even more desperate means of making the journey, even if the result is more pain, tragedy and loss. This is a phenomenon that is likely to test the coping strategies of governments in Europe and Africa for a long time to come.


Whether one is in Africa or Europe, illegal migration is a human interest story, especially when it is as dramatic and desperate as scores of men, women and children setting out onto the sea in thin, open wooden boats, and particularly when it ends in tragedy. The tales are horrific but also gripping, the pictures and videos heart-wrenching but at the same time fascinating. Whatever one’s feelings about the “rightness” or “wrongness” of the practice, it is a reminder of how the last few centuries’ history has inextricably tied Europe and Africa together, for better as well as for worse.


Not quite as dramatic or interesting, but with far more potential to substantially affect the Europe-Africa relationship, are the Economic Partnership Agreements (EPAs) that are being negotiated.


Trade issues generally do not elicit much public interest anywhere in the world, especially when they involve the complexities of the EPAs. So while there is a raging debate about the pros and cons of the EPAs in certain elite circles in Africa and Europe, the general public has little or no awareness of the issues. This is a great pity, because the EPAs are likely to usher in significant changes in economic relations between Europe and Africa, which in turn will have far-reaching consequences on many other aspects of the relationship, including Africa to Europe migration, legal or otherwise. It is unfortunate that negotiations which will have such deep and long-term effects are being conducted with almost no involvement of the ordinary people who will most be affected by them.


There is deep disagreement between the EU and African countries on the benefits of the EPAs. The EU says that not only is signing them required to be in compliance with WTO rules, but it insists that the EPAs are beneficial to African economic development. It says they will foster African economic growth and integration, and will encourage greater intra-African trade, as well as forcing African economies and industries to become more competitive by gradually opening up to greater competition.


The EU also says they will be beneficial by spurring a shift away from African dependence on a few commodities, a trend which has left Africa weak and vulnerable, and with growth rates far behind those of Asia and Latin America. Beyond WTO requirements, the EU also says the EPAs are necessary medicine to move Africa away from a relationship of economic dependency of Europe. Cynics counter that this dependency relationship benefits Europe more than it does Africa, and incredulous at the suggestion that scrapping it is one of the EU’s motivations for pushing so hard for the signing of the EPAs. The EU in turn dismisses the many critics of EPAs as being alarmists who are naïve and unrealistic about what it will take to significantly move Africa forward economically.


While the African economic blocs negotiating EPAs have various region-specific objections, there are also many they have in common. First and foremost, regardless of issues of WTO compliance, they are coming to the negotiating table reluctantly. They would prefer to operate under the current dispensation of preferential tariff access of their goods into the EU, which has far fewer strings and reform requirements attached than do the EPAs that are being negotiated.


They protest that they are not ready for competition with the strong industries of Europe, and fear that their nascent economic sectors would be drowned out by the new competition. Apart from issues of vastly different levels of industrial productivity and sophistication, they also stress fears of the consequences of unfair competition, such as of their agricultural goods against the subsidised agriculture of Europe.


This is a particularly sore point because African economies and trade are heavily dependent on un-processed crops. If the African countries are apprehensive about the competition aspects of opening up their fragile economies, they are even more alarmed at the prospect of lost revenue entailed in lifting or reducing tariffs on imports into their economies, as Customs revenue are a significant source of income for most of them.


These are just some of the many points of contention between the EU and the African blocs, and the reasons why getting agreements on the EPAs has been so difficult. With just weeks to go before the signing deadline, there have been calls from the African blocs for extensions or major concessions by the EU on the most difficult issues. The EU has taken a carrot and stick approach, offering signing inducements and relenting on some points, while all the while insisting that the underlying reforms necessitated by the EPAs are unavoidable, necessary and good for Africa.


Whatever trade offs are agreed to between the negotiating parties, there seems little doubt that some version of EPAs will soon be signed, and that they will usher in significant changes in how the EU and Africa do business with each other, and with economic trends within Africa.


That is why the seemingly un-related issues of the rates of African migration to Europe and Economic Partnership Agreements between Africa and Europe are in fact closely aligned. Precisely how the two issues will be linked depends to a great extent on whether the post-EPA signing reality is the positive one cited by its EU promoters, or the calamitous one feared by its African doubters and opponents. Either outcome will have wide-ranging repercussions, including on migration rates.


If the EPAs do indeed promote greater economic growth in African countries, and if that growth is widely and perceivably felt by sections of even those levels of society that have so lost hope at home that they are willing to die on the open seas trying to get to Europe, then perhaps an eventual lowering of illegal migration would be one result. Presumably many would-be migrants would then choose to pursue opportunities at home rather than risk life and limb on the high seas, trying to reach the distant European unknown.


Yet even if the EPAs are more positive for Africa than negative, they are unlikely to produce those results in the short term, and in ways that would be widely felt in African societies. Africa’s structural economic problems go far beyond the limited trade scope of the EPAs.


Where the EPAs are likely to have the greatest potential effect on Africa to Europe migration rates is if they fail. For Africa, that failure would include being swamped by more competitively produced European goods, resulting in the collapse of what few, weak industries there are, with all the associated effects on employment, tax revenues and so forth. If the much feared loss of Customs revenue is also a significant part of the post-EPA reality, that would also have a cascade effect on national budgets, social spending, etc.


If the worst African EPA nightmare came true and in addition to all the other EPA ill-effects feared by African governments, the continent was also no longer able to export as much agricultural produce to Europe, then the results would be as catastrophic as EPA opponents allege, despite EU dismissals of “scare-mongering.” Export earnings would decline, farming would be under even more pressure than it is now from various factors, setting off a chain of social and economic effects in heavily agriculture-dependent countries.


The potential negative effects of the EPAs on migration in the event of their failure are therefore far greater than the potential positive effects in the event of their success, certainly in the short to medium term. “Negative effects” here means tens of thousands more Africans risking their lives to try to get into Europe by any means possible, if they perceive there to be even less opportunity and hope at home in the post-EPA era than before.


Probably no one on either side can accurately predict what is going to be the outcome of the EPAs. But if the scenario leans more towards the “negative” one, it is not difficult to guess that regardless of whatever obstacles would have been put in the way; Europe would be seen as a viable escape route by even more Africans than today, no matter how unrealistically.


Some EPA opponents who agree that the economic and trade relations between Europe and Africa need revision argue that the EPAs are not the right means of reform, because of what they identify as their many flaws. Still, and quite apart from the WTO’s requirements and its looming deadline, the fact of the matter is that the balance of negotiating power is overwhelmingly in the EU’s favour. So in one form or another, EPAs are going to be signed, even if the African blocs grumble about it to the last minute. Indeed, some in Europe see little need to be negotiating new trade terms at all. They argue that the EU has the power to unilaterally impose trade terms on the African blocs, even if that would be politically unpalatable on all sides for all kinds of historical and other reasons.


Many in Africa see the increasing number of non-tariff barriers to trade the EU is imposing as part of this unilateralism. There is no pretence of negotiation between the EU and would be exporters when these regulatory and other barriers are being put up: you either scramble to abide by them or your goods simply don’t get into Fortress Europe, case closed. The result is that access to EU markets for African exporters is getting tougher all the time, regardless of what is happening in regards to the EPAs.


In short, we could be about to see the signing of a raft of EU-Africa Economic Partnership Agreements that involve very little actual partnership or agreement!


Migration issues are way outside the ambit of the EPA talks and are probably far from the minds of the various negotiators. Similarly, intricate Africa-Europe trade issues are probably not part of the conscious decision of those who sail from West Africa to Europe in small wooden boats, in search of their El Dorado.


But there is no doubt that the two issues will increasingly intersect, and perhaps even clash with one another. The signing of the EPAs will be yet another defining moment in the long, not always happy relationship between Africa and Europe. Apart from whichever of the positive and negative consequences that are being predicted come to pass, with the EPAs are likely to also come all sorts of unknown and un-intended consequences.


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