Ethiopia's export trade faces challenges

by Dawit Taye

Illegal trade and Ethiopia’s inability to offer goods in the quantity and quality the international market demands are undermining the income the country could secure from the export market despite the fact that the export market is growing annually, it was learnt.
The problems in the management of agricultural products, which account for over 80 percent of export income, are affecting the development of the sector negatively, a report released this week by the Ministry of Agriculture and Rural Development said.

The “inefficiency” in packing and transporting agricultural products and the “slow” services at the ports have made it impossible for products to reach the companies that order them in time.

Other factors that affect the export market are the lengthening of the chain of trade and complication of the process which increases the cost of exchanges and create shortage of supply.

“Illegal trade is booming” in the form of the contraband sale of sesame, livestock, spices and coffee to neighboring countries. This has persisted for a long time but has not been solved yet.

When agricultural export products are transported from Addis Ababa their quantity keeps falling along the way to Djibouti. And this has eroded purchasers’ trust.

The Ministry is preparing to deal with all of these problems and setting a target of making about 805 million USD from agricultural products for the current fiscal year.

The Ministry is planning to export over 250,000 tons of oilseeds, 451,000 tons of sesame, 42,423 head of cattle.

It was noted in the report that while most items of Ethiopia’s export products have increased in quantity this year, dairy production and cane crops have decreased. And the export of dairy products has gone down by 50 percent in the last time years.

The number of countries importing Ethiopian products is growing, Girma Biru, Minister of Trade and Industry said. Ethiopia exported agricultural products to 112 countries last year from which the country secured 1.5 billion dollars.

The biggest importer of Ethiopian products last year was Germany, which purchased 23 kinds of products worth 141 million dollars.

The second biggest purchaser is Saudi Arabia, which imported 21 kinds of products worth 117 million dollars, and the United States stands third by purchasing products worth 106 million dollars.

The Netherlands, Japan, Italy, Switzerland, China, Somalia and Sudan are listed among the ten big customers buying Ethiopian products.

East Africa Forum

Questions asked about "fair trade" claims

by Julio Godoy

So-called fair trade is booming in Germany but it is facing strong criticism from activists against neoliberal globalisation on the grounds that companies taking part in "fair trade" do not live up to its humanitarian and developmental principles.

Fair trade refers to international trade that allegedly respects good development, environment and labour standards in the producing countries of the South.

A couple of months ago, on Sept 18, practically all children at school-going age in Germany ate "fair trade bananas", following a slogan which could come directly from the anti-globalisation movement: "Eat bananas for a better world."

The "banana day" was a proof of the success of fair trade in Germany. It celebrated the fact that one million fair trade bananas had by then been sold in the country. The celebration had been called for by Transfair, the umbrella organisation that unites all businesses in Germany that have made the fair trade campaign a growing success.

That day, as proof of the humanitarian engagements of Transfair, numerous organisations concerned with the well-being of children around the world -- such as the United Nations Children's Fund (UNICEF) -- took part in the festivity.

"Fair trade is booming in Germany," said Didier Overath, managing director of Transfair. "In 2007, the trade with goods from the South that carry our label grew by almost 30 percent." Actually, fair trade goods turnover in Germany has almost tripled since 2003, to reach 193 million euros (243 million dollars) in 2007.

This success is explained by the growing conscience among the industrialised countries' populations that the world trading system is flawed and that the small peasants and manufacturers in the countries of the South should benefit directly from the global turnover of the goods they produce. In addition, fair trade guarantees that the production of goods so labelled respects good labour and environmental standards.

"Under the fair trade label we sell mostly food," Overath said. But, along with bananas, pineapples and cacao and groceries like coffee, tea, sugar, honey, rice, wine, juices and the like, Transfair also sells cotton products, music instruments, jewellery and other items.

In total, certified fair trade includes 750 different goods sold in over 800 special stores all over Germany.

At the banana day celebrations, Didier Overath recalled that Transfair pays one dollar above the market prices for each banana box. "This additional one dollar per box is exclusively devoted to pay for school and health programmes in the producing countries for the producing communities," Overath said.

But despite all this success, fair trade in Germany is facing severe criticism from anti-globalisation activists.

Transfair claims that it is ethically superior vis-à-vis usual trade practices. In a paper aimed at the press, Transfair affirms that "fair trade tackles the problems (of the world trading system, driven by profit maximisation for the few, regardless of labour standards, human rights and the environment) by putting people before profit."

Transfair also affirms that it offers its producing partners in the countries of the South "a fair price, long term cooperation, good working conditions, democratic working processes, and respect and promotion of human rights."

Transfair defines fair trade as "a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalised producers and workers - especially in the South".

But in some cases, its critics say, exactly the opposite happens.

On the one hand, Transfair established cooperation contracts in 2006 with the German discount supermarket Lidl -- which has been accused of selling dumped goods and of violating their own workers' rights. Dumped goods are goods sold at less than what it cost to produce them.

On the other hand, Transfair is also cooperating with international corporations such as Nestlé which has faced charges of exploiting water sources around the world without paying attention to the rights of local populations or the environment.

Kay Schulze, coordinator of the ATTAC campaign against Lidl, said, "of course, it is a good thing that Lidl finally reacts to the protests of consumers. But at the same time, given that Lidl continues to sell more than 1,200 dumped products, we have to consider the cooperation with Transfair as pure cosmetics."

Schulze also recalled that "a fundamental component of the fair trade idea is the respect for the workers' rights. And in this regard, Lidl has not substantially changed its conduct towards its own workers".

Another criticism against Transfair focuses on the lack of transparency of some of its labelling criteria and on the process of certification of the goods it sells.

Transfair's spokesperson Claudia Brueck said, "the cooperation with Lidl is part of our general strategy to broaden the effect of fair trade in the German groceries' markets. We are a product certification group but we do not monitor the behaviour of corporations."

Brueck admitted that the cooperation with multinational groups such as Nestlé is ambiguous and can be considered simply the "green washing" of corporate identities.

"Ten years ago, the fair trade idea was a project of a few," Brueck said. "Now, it has become a giant market. Corporations have also realised that consumers in the North are well informed and concerned about what is going on the countries of the South and that they do not want goods stained with the exploitation of children or produced under environmental and humanitarian questionable conditions."

Therefore, she said, corporations are changing their strategies.

More criticism emanated from a recent report: "Transfair is selling coffee from Mexican labelling organisations which puts pressure upon the small producers in places like Chiapas," wrote Jan Braunholz, a German expert on fair trade.

"Therefore, the opposition against fair-trade labelling is growing in (the Mexican Southern province of) Chiapas," he added. Since the early 1990s Chiapas has been the centre of the Mexican peasants' opposition to neoliberal globalisation, and is the homeland of the Zapatista rebel movement.

According to Braunholz, one of the fair trade certificating organisations, the Fairtrade Labelling Organisations International (FLO) pays small Mexican coffee growers prices that are too low and demands high fees for the use of its labels. FLO also sources from African small producers.

The Mexican group Certimex, which stands for Mexican Certification Association for Organic Products and Processes, faces similar criticism, Braunholz said.

"FLO gets close to large state owners and multinational corporations, to involve them in fair trade," Braunholz added. "This rapprochement, and the high costs associated with the fair trade certification, is forcing small coffee growers in Mexico to deal again with the so-called coyotes, the middlepersons working for the big international coffee corporations."

In response to the issue of double costs of certifications for small producers, as in Mexico, Brueck explained that FLO has been working on a reform of the system of labels precisely to avoid double costs and aimed at accelerating the adjustment of prices for producers. "We hope we can start revising prices and reducing certification costs for producers in 2009."

IPS

Turkey says trade with Africa to hit $ 19 billion

Turkey said in late November that its trade volume with African countries is expected to hit 19 billion U.S. dollars by the year-end, the semi-official Anatolia news agency reported.

The trade volume between the two sides rose up to 12.8 billion U.S. dollars with a 131 percent surge during 2003-2007 period, thanks to the implementation of an improvement strategy targeting the African market, Undersecretary for Foreign Trade Tuncer Kayalar was quoted as saying.

"Turkey's exports to African countries rose up to 5.9 billion U.S. dollars. We expect this figures to reach 9.5 billion by the end of 2008," Kayalar added.

Meanwhile, Kayalar said African countries also benefit from the trade by selling raw materials for industrial activities.

Turkey's Undersecretariat of Foreign Trade implemented a "Strategy for the Improvement of Economic Relations with Africa" in 2003 and has signed commercial and economic cooperation agreements with 11 African countries since then, said the report.

Xinhua

Algeria 2008 trade heads for record high

by William Maclean

Two-way trade between France and Algeria, France's biggest trade partner in Africa, is on course to reach 10 billion euros ($12.88 billion) in 2008, a record high, Algeria's official has reported.

French ambassador Xavier Driencourt told reporters two-way exchanges between France and the OPEC member country in the first nine months of 2008 stood at 7.7 billion euros, a rise of 49 percent from the same period in 2007, the agency reported. "This result ought to lead to ... reaching 10 billion euros in bilateral exchanges," he was quoted as saying.

In 2007 two-way trade amounted to 7.52 billion euros, with France running a surplus of 779 million euros, the French embassy website says. In 2006 trade stood at 8.17 billion euros, with France running a deficit of 97 million euros.

French diplomats say that while some of the increase is attributable to higher world prices for oil and gas -- Algeria's principal exports -- the increase also indicates a widening and deepening of French commercial interests in Algeria.

Driencourt said more than 300 subsidiaries of French companies were present in Algeria, three times as many as in 2005, directly employing 30,000 people and indirectly supporting 100,000 jobs.

French exports are mainly food and agricultural products, worth 23 percent of the total, automobiles and automotive products, worth 15 percent, and pharmaceuticals, perfumes and cosmetics, worth 12 percen.

Algeria has a big appetite for imports ranging from automobiles, pharmaceuticals, food and industrial equipment. It is one of the world's biggest cereal importers, buying an average of 5 million tonnes per year on the international market.

Oil and gas account for more than 97 percent of Algeria's exports, with the hydrocarbon industry being the main engine of economic growth. ($=0.776 euro)

The Guardian

Aid leaves Africa poorer; more dependent

By Sorious Samura

Where I come from in West Africa, we have a saying: "A fool at 40 is a fool forever", and most African countries have now been independent for over 40 years. Most are blessed with all the elements to help compete on a global stage - abundant natural resources, a young population and the climate and conditions to be a major agricultural force.

And yet today, my continent, which is home to 10% of the world's population, represents just 1% of global trade. I have no doubt we have to take responsibility for our failures. We can't afford to keep playing the blame game.

But when 50 years of foreign aid has failed to lift Africa out of poverty, could corruption be the reason? Could that really be all there is to it?

The symptoms of corruption are easy to spot. Teachers demand bribes from their students because they cannot get by on their wages. Government officials, doctors and nurses steal drugs meant for their patients to sell on the black market. African leaders have property portfolios across the globe, while their citizens live on $1 a day or less.

But searching for the causes, I had to ask myself some difficult questions. People often say a nation gets the government it deserves. And we Africans have certainly made some bad choices in terms of leaders, but all too often Western aid has ended up bankrolling them. Aid has offered legitimacy to corrupt and autocratic regimes, allowing them to hang on to power even when they have lost popularity with their own citizens.

While we were filming inside Uganda's largest hospital, Mulago hospital, these thoughts came sharply into focus. We saw dozens of mothers with their newborn babies lying on the blood-splattered floor next to disposed needles. Victims of road accidents were hauled into hospital by relatives because there are few porters, few trolleys and even fewer ambulances. Some patients were even left to bleed on the floor. These are images I have seen repeated all over Africa and it left me wondering, why we Africans cannot demand greater accountability from our leaders. Why do they keep getting away with this level of neglect? But I was quickly reminded of the proverb taught as a nursery rhyme to African children - he who pays the piper calls the tune.

Despite huge aid efforts for the very poorest Africans little has changedMany sub-Saharan African countries have had high levels of aid dependence - in excess of 10% of gross domestic product, or half of government spending - for decades. When half the government budget comes from aid, African leaders find themselves less inclined to tax their citizens. As a result, governments that are highly dependent on aid pay too much attention to donors and too little to the actual needs of their own citizens. And unfortunately donors have their own objectives which are not always the same as the citizens of African countries.

Building new schools and clinics in record numbers looks good on paper and makes politicians look good in front of voters back home. But when these clinics lack the most basic facilities and there are not enough teachers in the classroom, it is the ordinary Africans who get a raw deal. Another criticism of aid increasingly voiced by Africans, but rarely heard in the West is that it sponsors failure, but rarely rewards success.

One fifth of children in Sierra Leone will not see their fifth birthdayWhile I was filming in Uganda, local newspaper editor Andrew Mwenda took me and my crew to his home village near the town of Port Loco in the west of the country. There he introduced us to two men, one in his sixties and one aged 26. "This man represents the tragedy of aid," he said pointing to the older of the two. "While this man represents the potential of aid," he said indicating the younger man. Mr Mwenda explained that the sexagenarian was the chairman of the local parish council who had spent most of his life living off aid money, supervising projects meant to benefit the community. Today he is an alcoholic who still lives with his mother.

The younger man started selling potatoes in the village square at the age of 17. Less than 10 years later he owns the largest and busiest store in the village. He has not received one penny from aid, yet he has bought himself land and has built a house. "So you see," Mr Mwenda said. "If aid were to offer this young man support in the form of low interest credit he could not only expand his business offering employment opportunities and a valuable service to his community, he could also eventually pay the money back."

In Mulago hospital injured people lay on the blood-spattered floorBut instead of funding innovation and creativity, aid has funded the chairman's dysfunctional lifestyle. Prolonged aid programmes also have wider implications for developing economies. Thirty years of aid dollars flowing into the Ugandan economy has left the country suffering from what economists refer to as the "Dutch disease". Large inflows of foreign currency push up the value of the Ugandan shilling making its agricultural and manufactured goods less price competitive. This results in fewer exports and less home-grown, sustainable earnings for the country. Local entrepreneurs such as coffee growers and flower exporters should be cashing in on rising food and commodity prices across the globe at the moment, but they are finding themselves crowded out of their own economy by foreign aid dollars. Graduates lost Small African producers also have to compete with heavily subsided products from Europe and North America.

And in the labour ward mothers and their newborns are often without a bedUganda's cotton industry is capable of exporting almost half a million bales per year, but so far in 2008 the country has only managed 160,000 bales. High government subsidies for North American cotton farmers prevent Ugandan producers from offering competitive prices in international markets.

In their glossy pamphlets and on the pages of their high-spec websites, donors tend to wax lyrical about the importance of trade to Africa's future, yet very little progress has been made on opening up international markets. African producers still represent just 1% of global trade. And at least 70,000 skilled graduates abandon the continent every year, often trained by Western aid, but unable to stay in the market because salaries are so low. Until these gifted and enterprising people can be attracted to return, most of the world's peacekeeping efforts, on the continent, and certainly most of its aid, will have little effect. Panorama: Addicted to Aid on BBC One at 2030 on Monday 24 November.

BBC

IMF urged to "end imperialist ways"

everal countries are deeply scarred by the "imperialist" approach taken by International Monetary Fund in past lending packages and the institution must improve its public relations, France said.

Economy minister Christine Lagarde said there was widespread support for boosting funding for the IMF at a meeting of G20 financial officials discussing the credit crisis, but the lender needed to change its methods.

"I think that the old-school IMF has left some scars and I think there is a real work of communication and maybe changing the methods," Lagarde told reporters in Brazil's financial capital Sao Paulo, where the annual G20 meeting is being held.

"Some states, I think about one or two that we saw yesterday in the bilateral meetings, remember the IMF can use this very orthodox and imperialist...approach to economic analysis and on conditionality prescriptions that are demanded of countries."

Lagarde met on with the delegation from Argentina, one of the IMF's biggest critics. Relations between Argentina and the IMF soured during the country's 2001-2002 financial crisis. Argentina complained about the conditions the IMF imposed on its loans were partly responsible for causing the crisis. Former President Nestor Kirchner has said there was "no way in hell" he would ever agree to another IMF accord. His wife, Cristina Fernandez, is the current president.

But Lagarde said other countries were unhappy with the IMF's past performance. "They (Argentina) are not the only ones. They don't hate the IMF. They have scars," she said.

"The IMF has been dormant in the last few years because it has not been necessary," Lagarde added. "It is becoming necessary again because a certain number of countries have asked for aid."

France, which holds the rotating European Union presidency, wants to reinforce the IMF with new funds and new powers.

Last month, the IMF approved a new short-term lending facility for emerging market economies that have been hurt by the global credit crunch and which could provide them with funding without the strings traditionally attached to aid.

Russia also bears a grudge against the IMF, which provided advice for many ill-fated market reforms in the 1990s.

A senior Kremlin official said on Friday that Russia would be pushing for a diminished role for the IMF at the G20 leaders summit in Washington on November 15.

The Citizen

Renowned Nigeria computer market shut over taxes

by Bolaji Omole

The Lagos State Government yesterday sealed off Africa’s biggest computer market, Ikeja Computer Village, popularly called ‘Otigba’ over allegation that operators have been defaulting in the payment of state taxes.

Technology Times investigations reveal that armed law enforcement and officials of the Lagos State government closed all entries into the market early yesterday morning to carry out the shutdown order before businesses opened shops crippling the bustling market for computers and allied products.
The Computers and Allied Products Dealers Association of Nigeria (CAPDAN), the umbrella body of businesses in the market said this that it has waded into the matter and is in talks with the Lagos State Government to ensure the compliance of its members. The body is hopeful of possible reopening of “Computer Village” by today.
A senior member of the CAPDAN executive board told Technology Times anonymously on phone that the body is meeting with officials of the Lagos State Inland Revenue to amicably resolve the alleged breach of provisions of tax laws by its members.

The shutdown also affected banks sited within the market including UBA, Zenith, Skye Bank, Spring Bank among others.

Regarded as one of the largest single market for computers and allied products, Otigba enjoys huge patronage from Lagosians, residents of others states across the country as well as neighbouring West African nations like Benin Republic, Ghana, among others.
While the market offers a wide variety of brand new desktop computers, laptops, software applications, it has also become a huge channel for the sale of used computers and allied systems serving buyers seeking cheaper alternatives.

Diverse variety of new and used mobile phone handsets have also been added to the growing businesses in the market in response to the growing appetite of the nation’s mobile telephone market officially estimated at over 57 million lines at the end of September this year.
Government officials said anonymously that the state government has also observed that the operators in Ikeja Computer Village have over time allegedly contravened sections of the state’s sanitation laws.

A source said that operators have failed to heed repeated calls by the state government, “to check the nuisance and they have to pay stipulated fine into the treasury of the Lagos Ministry of the Environment before their premises can be opened.”

Additionally, Technology Times confirmed that businesses operating in the market have been slammed a blanket order to pay annual personal income taxes said to have been pegged at a minimum of N5000 for business owners and N2500 for their employees.

As at press time, all the nine major gates leading into Computer village have been sealed by the officials of the Lagos State Ministry of Environment and are also complemented by fully-armed men of the Mobile Police attached to the State Task Force.

Business Day

Is failure to export manufactured products due to comparative advantage?

A number of analysts consider that Africa’s failure to export manufactured products is a result of the continent’s comparative advantage. Wood and Mayer (2001: 369), for example, note that Africa’s export dependence on primary commodities is due to the “combination of low levels of education and abundant natural resources”.

In the same connection, Mayer and Fajarnes (2005) write that Africa could triple its primary commodity exports given its comparative advantage. The reasoning follows the Heckscher-Ohlin theory, which asserts that a country’s export composition reflects its resources. According to the theory, African countries should specialize in the production of primary commodities, given the continent’s relatively generous endowment in natural resources. Africa should specialize in the export of coffee, cocoa, cotton and similar primary commodities and use its export revenue to purchase manufactured goods produced in developed economies and elsewhere.

Even if this view has remained influential in many development circles, it is flawed in several respects. The assumptions underlying the comparative advantage argument are, empirically speaking, rarely met in reality. These assumptions include the following: (a) factors of production must be immobile; (b) the country must have the capacity to produce all types of goods; (c) trade must be balanced (no trade deficits); (d) perfect competition must prevail; and (e) all productive resources within the country must be fully employed. Even if some of these assumptions can be relaxed without totally invalidating the comparative advantage theory, it seems inadequate to advise African countries to specialize in the production and export of primary commodities based on the comparative advantage thesis before establishing its relevance.

Globalization and the organization of international trade in primary commodities have changed the global economic system and brought to the fore several factors that contradict most of the assumptions of the comparative advantage theory. For example, financial globalization and emigration have grown to such important proportions that it has become difficult to defend the assumption of immobility of the factors of production. Moreover, price volatility of primary commodities and the secular decline in their terms of trade have made income and growth more volatile, aggravating African countries’ trade deficits, which invalidates the “balanced trade” assumption of the comparative advantage hypothesis.

From 1965 to 2004, sub-Saharan Africa’s terms of trade did not improve. In fact, over a longer time horizon — the period 1900–2000 — calculations in Ocampo and Parra (2003) show that the prices of the 24 major non-fuel commodities — including those of special interest to Africa, such as cocoa, coffee, copper, cotton, sugar and tea — declined by an average of 1 percent per year. African export prices in 2002 were a fraction of their 1995 level. Coffee exports lost two-thirds of their value, whereas exports of copper, cotton and sugar lost roughly half of their 1995 value (Ackah and Morrissey, 2005). The recent increase in commodity prices does not fundamentally affect this secular trend.

With this generally negative picture, the suggestion that Africa should continue to export its traditional primary commodities is difficult to justify. Commodity exporters have also suffered from the ills of market concentration in importing countries, where a small number of large companies act as processors, traders and retailers. This is the case with cocoa and chocolate, for example. In addition, advising African countries to focus on the production and export of primary commodities, which are produced more competitively in other regions, contributes to keeping commodity prices low due to oversupply. Although the prices of a number of commodities of export interest to Africa have recently increased, this does not reduce these economies’ need to diversify out of commodities. Also, it is untenable to assume that all factors of production within African economies are fully employed to justify the relevance of the comparative advantage argument.

There is an emerging literature arguing that the most important issue for a country’s export potential is not its static comparative advantage, but its potential, determined by what the country specializes in through developing its competitive advantage (Lall et al., 2006; Hausmann et al., 2007). Economic development entails structural change, usually from primary commodity dependence to manufacturing and services. Even within manufacturing, the experience of newly industrialized countries has shown a transformation from the production of mainly low-technology goods such as textiles and garments, to more technology intensive products, which are characterized by increasing or at least stable terms of trade. This explains the preference for exporting more sophisticated products, even in economies that may have a comparative advantage in the production of primary commodities.

If anything, justifying a country’s export performance based solely on the traditional comparative advantage thesis misses the dynamic aspect of the concept. Lall et al. (2006) provide an interesting illustration of this dynamic. The authors ranked 766 export products according to their “sophistication” in 1990 and 2000 to determine which types of products moved on the sophistication ladder over time. They found that upward mobility on the sophistication ladder was not uniform; it was much easier to add more value to relatively sophisticated products than to unsophisticated ones. This finding supports the argument that comparative advantage must be understood as a dynamic concept. Countries can acquire new comparative advantages depending on the way they use their resources to promote new competitive products. Hence, the strategy of product diversification consisting of simply adding value to originally unsophisticated products such as primary commodities has its limits.

It is also clear that not all traded goods have the same effect on economic performance. According to Hausmann et al. (2007: 2), “Countries that continue to produce ‘poor-country’ goods remain poor… [so] countries become what they produce”. The countries that specialize in higher productivity goods record a better economic performance than those specializing in low-productivity goods. Using an index of the productivity level associated with a country’s specialization pattern, poor African countries such as Niger, Ethiopia, Burundi, Benin and Guinea display the smallest values of the index. On the other hand, rich countries such as Luxembourg, Ireland, Switzerland and Iceland have the highest values. As a result, the countries that have been able to reap the benefits offered by expanding export markets thanks to the process of globalization are those that have successfully transformed their economies from the production and export of poor-country goods to high-productivity goods.

Poor-country goods are generally primary commodities and the high concentration in the export of such primary commodities is another characteristic of poor African countries. Amurgo-Pacheco and Pierola (2008) score economies according to their export diversification and find that, relative to developed and other developing economies, sub-Saharan Africa has the lowest level of product diversification over the period 1990–2005. In fact, most African countries continue to export one or two primary commodities. East Asian economies display the highest diversification score, and this region has displayed the most spectacular economic performance over the last few decades. Confining Africa to the production and export of low productivity goods (the so-called “poor-country” goods) based on the traditional comparative advantage argument is tantamount to condemning the continent to remain poor.

There is no reason why African countries should remain commodity exporters forever. As suggested by the endogenous growth theory, countries can create new comparative advantages outside the primary commodity sector through the positive externalities created by the accumulation of human capital and increases in technological capabilities. Above all, rather than encouraging African countries to maintain their specialization in the production and export of primary commodities, in spite of the continuous deterioration in their terms of trade, these countries should be assisted to get out of the primary commodity trap by putting in place economic structures that encourage the production and export of manufacturing products. Strategies towards economic diversification into higher productivity goods would increase welfare in the future, even if they may be costly and hence not necessarily optimal in the short term.

In the light of the foregoing, the main barrier preventing African countries from exporting high-value manufactured products is not comparative advantage. Africa’s failure to export manufacturing products is due to the combination of macroeconomic and microeconomic factors that define the incentive structure for producing and exporting manufactured products. For example, the lack or weakness of an incentive system encouraging entrepreneurs to engage in the “cost discovery” process is considered a major factor explaining why Africa has been locked up in the undiversified primary commodity economy. Macroeconomic policies such as exchange rate and fiscal policies can affect the incentive to produce more exportable products. However, microeconomic factors - such as firm productivity, investment, firm size and firm access to factors of production - are the most direct determinants of what firms produce and how competitive they are in their ability to export them. Focusing on these factors could create a new competitive advantage in manufactured products in African economies; this is discussed in the next section.

Differences in trade liberalization policies implemented in Africa over the last 25 years can explain only part of the difference in export performance between Africa and other developing regions. Firm-level evidence is central in explaining why some firms are successful exporters of manufactured products while others are not. Put differently, why do countries such as China export competitively the same manufactured products African countries have been unsuccessfully trying to export? The small size of domestic African markets implies that African firms should target export markets in order to expand their production (Bigsten and Soderbom, 2006). The export liberalization measures discussed in chapter 1 - eliminating foreign exchange rationing, export licensing and export taxes, and dismantling marketing boards - could be considered the means, not the ends, through which African countries could increase their manufacturing exports. Studies that seek to relate trade reforms and the export performance of the manufacturing sector in Africa identify low productivity as one key factor constraining African firms’ capacity to participate in export markets (Teal, 1999b; Bigsten and Soderbom, 2006). Low productivity in Africa originated from import substitution policies pursued during the 1960s and 1970s. For example, the use of quotas rather than tariffs shielded domestic firms from the effect of external competition, which led to their inefficiency and lack of competitiveness in international markets. In Ghana, for example, even the modest increase in manufacturing output in the first half of the 1990s (about 4 per cent per annum) following trade liberalization in the 1980s, was not due to technical progress, but to physical and human capital accumulation (Teal, 1999b).

However, technical efficiency does not seem to be the main determinant of the difference in competitiveness between Africa and other developing countries, particularly those in Asia. This is illustrated in a comparison of productivity levels in the garments industries of Kenya and Bangladesh, two countries at a comparable level of income (GDP per capita was $456 and $454, respectively, in 2006). Bangladeshi and Kenyan garments producers use similar technologies, but Bangladesh has become one of the top garments exporters, selling all its production to the European and United States markets (Fukunishi, 2007). Kenya, on the other hand, has not been able to penetrate the export market, and even lost a big share of its domestic market due to strong pressure from cheap imports following trade liberalization in the 1980s and 1990s.

The comparison between Bangladesh and Kenya is interesting because the former is a success story of a poor country, sharing the same characteristics with many African countries, which has been able to break into the world garment market. One of the main barriers to the competitiveness of Kenya’s garments relative to those from Bangladesh is the high production cost. On average, the production cost is three times higher in Kenya than in Bangladesh. Decomposing this cost, the most important determinant is the wage cost, which is 138 percent higher in Kenya than in Bangladesh.

The difference in wage costs between firms in Africa and other developing regions appears to be an empirical regularity (Dollar and Zeufack, 1999). Allocative inefficiency, the second most important factor, is just 17 per cent higher in Kenya than in Bangladesh. Technical inefficiency, the cost of capital and firm size (scale economies) do not seem to have a significant influence on the difference in production costs of firms in the two countries. There is no doubt that cost efficiency is important for a firm’s competitiveness in global markets. The examples of Ethiopia, Ghana and Kenya show that there is a positive correlation between manufacturing firm productivity and exporting (Mengistae and Pattillo, 2004). Hence, whether or not a firm will export mainly depends on two factors — the cost of production and the level of entry barriers in the export market. Exporting requires production costs that are below a certain threshold, while firms with costs above the threshold focus on the domestic market.

High costs in Africa’s manufacturing include not just labour costs. Non-labour costs of credit and transport, as well as indirect costs, are much higher in Africa than in China. In Kenya and Madagascar, for example, export finance costs borne by clothing exporters represent 136 per cent and 227 per cent, respectively, of the cost in China. Material costs in the two African countries are twice and almost three times, respectively, the cost in China (Kaplinsky and Morris, 2007). Therefore, the high cost of Africa’s manufacturing exports relative to those of its competitors appears to be a structural problem rather than a relatively limited issue of labour productivity.

The Ethiopian Reporter

Demand high for Africa-China trade facilitation services

Written by Washington Gikunju

Presidents at the China - Africa Summit The Standard Bank of South Africa reports that it has seen an upsurge in demand for trade facilitation services from its customers who do business with Chinese firms in the last two months. The increased interest, the bank says, has been spurred by last month’s purchase of a 20 per cent stake in the continent’s biggest lender by the Industrial and Commercial Bank of China (ICBC). The Standard Bank director and global head for structured trade finance, Mr Craig Polkinghorne, told Business Daily last week that the bank has recorded a rise demand for trade finance and letters of credit from old and new clients who have business links with China. “We have since increased demand for trade facilitation for our customers all over Africa and even had enquiries from as far off as Brazil since our partnership with ICBC Bank was announced,” said Mr Polkinghorne. Business Daily

Rwandan growth could reach 10%

Rwanda's booming manufacturing and farming sectors could push growth in the country to 10% this year, according to the Rwandan central bank governor. Agriculture is particularly strong and is growing at a minimum rate of 10%, said Francois Kanimba. But Rwanda's growth rate is likely to fall to 6-7% next year because of the global financial crises. Several African countries are feeling the fallout of the financial crisis and are readjusting their growth forecasts. "The current assumption we have [for 2009] is a growth rate of 6-7%, not more," Mr Kanimba told Reuters news agency. He also said that the drop in commodity prices, a slowdown in the growth of manufacturing and services and a decrease in the amount of remittances Rwanda received would contribute to the lower figure. Agricultural growth But he maintained a positive outlook on 2008's growth figures. "I do not see why economic growth will not be close to 10%." "Agriculture output is growing at a minimum of 10% ...manufacturing and service sectors over the last five years have averaged higher than 10%," he added. The forecast 2008 growth rate figures are considerably higher than last year figure of 6%. Rwanda has been trying to revamp its battered economy since the 1994 genocide. It is particularly ramping up its farming, tourism, mining and energy sectors. Franc fears At the same time, Mr Kanimba revealed that the Rwandan franc is overvalued by 10-15%. The governor attributed the overvaluation to Rwanda's high inflation rate compared to its trading partners. Inflation in the country stood at 21.9% in October. Mr Kanimba said he anticipated the figure would fall to single digits in 2009.

BBC

Investments pour into Sierra Leone mining

A steadily growing number of foreign mining companies is entering Sierra Leone's gold and diamond sector. Only today, a minor Canadian gold and diamond mining company announced it has formed a subsidiary in Freetown.

Mexivada, a junior Vancouver-based mining company, today said it had "formed a new subsidiary to pursue small scale rapid gold and diamond mining opportunities in Sierra Leone." Several fast-track mining opportunities were now being "evaluated" by the company, and the Freetown subsidiary was to "focus on the identification and development of gold placer deposits and alluvial- and kimberlite dike-hosted diamond deposits."

The Canadian company is only one in a line to enter Sierra Leone as the democratically elected government of President Ernest Bai Koroma, in 2007, has managed to rid the country off its "blood diamond" image, created in the brutal 1991-2001 civil war. Sierra Leone's governance has improved dramatically since the conflict, and government has instituted the Kimberley Accord for the mining, sale, and distribution of diamonds.

Among the first to enter the sector was Toronto-based Sierra Gold, which in early 2007 moved to secure gold property in the country. Sierra secured large tracts in the greenstone belt in Sula Mountains, which it said "contains the largest known hard rock gold vein deposit in Sierra Leone."

In August this year, London-listed Cluff Gold announced it had completed the acquisition of the remaining 40 percent stake in the Sierra Leone Baomahun gold project for US$ 22 million. The government of Sierra Leone granted Baomahun Gold Limited, Cluff's 100 percent-owned subsidiary, a mining lease for 25 years.

Sierra Leone indeed is a country rich in minerals, with more than 70 percent of the country underlain by Archaean rocks. The geology is similar and connected to the most yielding rocks of West Africa, including Guinea, Ghana and Mali.

Diamonds, gold, bauxite and platinum are Sierra Leone's main mapped resources, but mining - at least the legal part of the business - came to an abrupt end during the civil war. Since the 1990s, artisanal mining has been dominant, with smugglers taking diamonds and gold to world markets.

"Like its neighbours, Sierra Leone also has the potential to become a significant gold producing country," holds Sierra Gold. But the greatest potential is still believed to be the diamond sector. Before the war, Sierra Leone had yielded more than 100 million carats of alluvial diamonds, and gems up to 968 carats in size - the "Star of Sierra Leone" - have been produced in the country.

Now, as the country is assessed a safe place to invest, foreign companies are lining up to get lucrative properties - despite the global recession that has made mineral prices plummet.

afrolnews.com

EU "plans to dump" milk, butter in Africa

Fair trade organisations warn against newly increased European Union (EU) quotas for milk production and continued high export subsidies, which will lead to increased milk and butter dumping on world markets. EU dairy products already dominate the African market.
Germanwatch, FIAN and MISEREOR, three German organisations working for global fair trade, today warn about the consequences of the EU's reforms of its Common Agricultural Policy (CAP) for Africa. While the new compromise includes some cuts in production subsidies, it also holds a major increase in milk quotas for EU farmers.

EU Ministers have renegotiated the CAP, which due to heavy subsidies consumes around 50 percent of Union budgets, and had a special tough time reaching a solution on milk quotas, which some countries wanted abandoned altogether. The Ministers at last agreed to progressively lift milk quotas for farmers by one percent each year before lifting them entirely in 2015.

This, according to Germanwatch, inevitably will lead to cheaper milk in the EU and an even greater pressure to export dairy products. Excessive diary products will increasingly be "dumped" at the world markets, the organisations predict.

Especially for milk and butter, EU Agriculture Ministers agreed on further high export subsidies. In the case of milk and butter, says Mute Schimpf from MISEROR, the EU "continues to opt for export dumping in developing countries."

Tobias Reichert of Germanwatch adds that this kind of dumping does not do anything to fight poverty and hunger. "Having in mind the growing number of hungry people, it would have been necessary to stabilise international food prices and as such aiding small-scale farmers to increase their production. With its decisions regarding the milk market, the EU is doing exactly the opposite," concludes Mr Reichert.

According to MISEROR, it is a general problem for development in rural Africa that subsidised products from Europe enter markets in developing countries and create unfair conditions in the competition with local farmers.

Especially when it comes to milk, EU policies are ruining local development. "Milk produced by local famers in Burkina Faso and sold on domestic markets is more expensive than imported milk powder from Europe," according to MISEROR. "These dumping prices of imported products ruin local farmers' only source of income. This process increases poverty, hunger and forces more people to migrate to cities in order to earn an income," the organisation adds.

European dairy products indeed are dominant over most of Africa, even in the many countries where cattle holding is the dominant livelihood. In many African countries, such as The Gambia, attempts to establish dairy plants to provide the national market with milk, butter and other basic products have utterly failed due to EU competition.

afrolnews.com

Spanish investors explore Senegalese market

A forum on tourism, food, industry, energy and construct ion opened in Dakar under the aegis of the Chamber of Commerce, Industry and Navigation of Santa Cruz de Tenerife (Spain) and the Senegal Investment Pro motion Agency and Major Work (APIX). Forty five Spanish businessmen are particip ating in the event.

According to Pedro Santiago Gonzalez, president of Spain-Senegal Bilateral Committee, it is the largest delegation of Spanish investors who came to Senegal for e xploratory visit in the last five years.

"The meeting is an ideal time to promote economic, financial and technology acti vities between Spain and Senegal," Gonzalez said, adding that more than 300 Span i sh companies have continuous trade relations with Senegal, while 30 Spanish comp a nies are already installed in Senegal.

Spain, he said, is the fourth supplier of Senegal behind France, Germany and Ita ly and the third destination of Senegalese exports to the EU.

According to 1996-2000 statistics of foreign trade in Senegal, Senegalese import s from Spain stood at over 171 billion CFA francs (over US$ 340 million), while e xports amounted to 88 billion CFA francs (US$ 176 million).

Commending the efforts made by Senegal on macroeconomic reforms and business env ironment, Gonzalez urged the country to ratify a bilateral treaty between the tw o countries on investment.

"This is a very important project for us", he stressed, noting that Spain had al ready ratified it and was still waiting Senegal to do so.

African Manager

Ugandan traders face attack in Sudan

New trade opportunities after 20 years of fighting in Southern Sudan have turned out to be death traps for Ugandan traders because of violence and physical intimidation by the military and civilians alike.

More than 100 trucks and buses from Uganda pass daily through the border at Nimule to Southern Sudan, carrying foodstuffs, construction materials, groceries and beverages from Uganda and Kenya.

The trade has largely been profitable since the Sudanese civil war ended in 2005 but Ugandan traders are now threatening to pull out of Sudan, complaining about extreme violence, intimidation from the military and civilians and unfair ‘‘duties’’.

Some female traders have allegedly been raped while others have lost their lives.

Akbar Godi, a Ugandan parliamentarian representing Nimule near the Uganda –Southern Sudan border, told the Ugandan parliament that mistreatment of Ugandan traders in Southern Sudan has gone from bad to worse.

Southern Sudan’s capital of Juba has turned into a death trap for traders from Uganda and other states.

Some traders told IPS that they are harassed and victimised by military commanders, citizens and immigration officials. Duties have rocketed.

Humphrey Wanada, a trader operating in the town called Bor in Southern Sudan, explained that traders are required to pay money on top of a ‘‘state development tax’’ on all goods going through Eastern Equatorial State Province in Southern Sudan.

Wanada says most of the taxes are duplicated – they are exploitative in nature. At times, traders ‘‘lose’’ some of the goods before reaching their final destination.

‘‘We pay these taxes because we have no other option. But even our safety is not guaranteed. The civilians are also not welcoming. At anytime you can see a person pointing a gun at you. You do not know whether it is a soldier or not because almost everyone in Sudan has a gun,’’ Wanada told IPS.

Geoffrey Drani, a Ugandan truck driver, said that authorities in Juba have introduced over 15 taxes to be paid at various checkpoints. ‘‘At the security registration point, we pay five dollars for registering the vehicle entering the town. Traders with goods on the trucks also have to pay up to 50 dollars at a security checkpoint at the River Nile Bridge near Juba.’’

Drani said drivers are also required to register their vehicles with the traffic police at a fee of 10 dollars for having a foreign-registered number plate.

The traders are also required to pay for road toll, which varies according to the vehicle's weight. The toll is paid every time a vehicle enters Southern Sudan.

Despite the controversy, authorities in Uganda and Southern Sudan are eager to foster trade between the two countries and the region.

Ugandan State Minister for Trade Gagawala Wambuzi acknowledged receiving complaints from Ugandan traders. The complaints are being verified with the Ugandan consulate in Southern Sudan.

‘‘The Sudan market is new and it means a lot to us. That is why we have to find ways of sustaining the growing trade. Of course we get disturbed if our traders are harassed but this can be handled with appropriate authorities,’’ he said.

There is a plan to construct a railway linking Uganda to Sudan. A memorandum of understanding has been signed for the joint development of a proposed Sudan-Uganda route.

The existing railway from Mombasa, Kenya, stops at Pakwach-Gulu in northern Uganda.

The missing link is between Pakwach-Gulu and Juba-Wau. A new railway also has potential to connect to the Cairo-Wau and the proposed Dakar-Port Sudan railway lines.

Southern Sudan borders Ethiopia to the east; Kenya, Uganda, and the Democratic Republic of the Congo to the south; and the Central African Republic to the west.

IPS

1. Chinese exporters destroy Nigerian textile industry, lament manufacturers

2. Chinese imports make it tough for African producers to develop

3. Angola-China trade exceeds US$14 billion between January and September

4. Barack Obama knows that Africa needs to be left alone

5. Oil, gas shippers may shun Suez as East Africa piracy escalates

6. African trade blocs agree on free trade zone

7. The intricacies of the Doha Round for ACP countries

Chinese exporters destroy Nigerian textile industry, lament manufacturers

MANUFACTURERS Association of Nigeria (MAN) and Nigerian Textile Manufacturers Association (NTMA), has raised alarm over the systematic and deliberate destruction of the Nigerian textile industry and economy by unscrupulous Chinese their textile exporters and called on the Federal government to engage the Chinese government over the matter.

Textile

In a joint presentation at a policy dialogue forum on Nigerian Textile, organised by the National Union of Textile, Garment Tailoring Workers of Nigeria in collaboration with Friedrich Ebert Foundation (FEF) in Abuja, MAN and NTMA, lamented that the most serious problem afflicting the textile industry in Nigeria is the unabated influx of counterfeit textiles from China.

Presenting the joint position of MAN and NTMA, Executive Secretary of NTMA, Mr. Paul Olarewaju alleged the counterfeited textile fabrics originate in China and specifically target and copy the trade marks of Nigerian textile manufacturers, ‘Made-in-Nigeria’ or ‘Made-as-Nigeria’ on the selvedge and even blatantly take SON/NIS markings to deliberately mislead consumers.

According to Mr. Olarewaju, the markets in Kano, Ibadan, Onitsha and Lagos are flooded with smuggled textiles through nation’s land borders, particularly, Niger Republic which now occupy over 80% market share.

He said: “The situation in the Nigerian Textile Industry is alarming. Unless urgent steps are taken by the government, a total collapse is imminent. The most serious problem afflicting the industry is the unabated influx of counterfeit textiles from China. There has been a sharp increase in the volume of textiles being smuggled in through our land borders, particularly via Niger Republic.

These goods originate in China and specifically target and copy the trade marks of Nigerian textile manufacturers; print ‘Made in Nigeria’ or ‘Made as Nigeria’ on the selvedge and even blatantly take SON/NIS markings to deliberately mislead consumers. The markets in Kano, Ibadan, Onitsha and Lagos are flooded with smuggled textiles which occupy over 80% market share. The Federal Government is urged to engage the Chinese authorities by drawing their attention to the serious damage caused by the trade malpractices of their textile exporters to the Nigerian economy. Federal enforcement agencies such as Customs and Standard Organisation of Nigeria (SON) should be tasked to take effective measures against faking and counterfeiting of Nigerian manufacturers’ trade marks.

The Textile sector is a strategic non-oil industry in Nigeria. A basic industry that almost all countries have as their first industrial activity and most developing economies show a high degree of self-sufficiency for textiles and garments. An industry which uses maximum indigenous raw materials — Cotton. An employer of 200,000 workers in 1985 now reduced to 24,000 workers and a million indirect people — cotton growers and labour. The second largest textile industry in Africa (after Egypt). On a replacement basis the present installed textile manufacturing capacity in Nigeria represents a US$2 billion investment. There is a huge potentials to create thousands of jobs in the garment sector if the textile industry is allowed to survive.”

Given details of the modus operandi of the dubious Chinese textile exporters, the Executive Secretary of NTMA, said: “Chinese companies violate intellectual property rights (IPR) of Nigerian textile manufacturers by specifically targeting popular Nigerian textile companies and counterfeiting their trade marks on the material produced in China and destined for Nigerian market. Several Nigerian and international laws are broken to gain illegal market entry to the detriment of Nigerian textile industry in particular and economy in general. The faking of trade marks is done to mislead Nigerian consumers into buying counterfeits of genuine materials at cheap price by evading duties and taxes due to the government.

Chinese companies target popular Nigerian textile companies and counterfeit their trade marks which are printed on the cloth selvedge. Made in Nigeria or Made as Nigeria is printed on the cloth selvedge and labels to falsify country of origin declaration. Chinese textile companies even openly display the Nigerian manufacturers’ trade mark on their websites to attract potential importers. There is an urgent need to draw the attention of the Chinese authorities to the serious damage caused by their exporters to Nigerian economy.”

“Federal Government of Nigeria should make an official complaint to the Chinese authorities about the trade malpractices followed by Chinese companies and which are destroying Nigerian economy. ECOWAS Commission should be also urged to lodge a complaint as these goods are circulated in West Africa through land borders. Chinese authorities should be urged to inspect their textile mills which counterfeit Nigerian trade marks, falsify country of origin and fake SON quality standard marks. Chinese authorities should be urged to make pre-shipment inspection compulsory for export of African Prints to check non-compliance.

Nigerian enforcement authorities should seize and destroy textiles which fake Nigerian manufacturers trade marks and falsify country of origin and quality certification markings on labels/selvedge. Chinese Government. The Chinese authorities need to be engaged by drawing their urgent attention to the serious injury caused by their companies on Nigerian economy. The Federal Government should seize this opportunity. China has been promoting itself as a partner for Africa’s development. China is energy hungry with insatiable appetite for Nigerian oil and minerals. China wants to participate in African infrastructural development. Above all, China wants to project an image as a responsible nation which abides by rule of law and play by WTO rules.”

Vanguard

Chinese imports make it tough for African producers to develop

by Mary Fitzgerald

EARLY EACH morning the Chinese traders come to Kamwala market, a sprawling maze of shops, stalls and alleyways in the heart of the Zambian capital, Lusaka. They arrive before everybody else to open shutters, arrange the merchandise and then hand over to the Zambians they have employed as shopkeepers.

There's a good reason why they don't serve customers themselves. Two years ago supporters of Michael Sata, an opposition leader who had unsuccessfully run for president with a campaign criticising China's growing push into Zambia, targeted Chinese-owned businesses in Kamwala during post-election rioting.

Chinese traders at the market have been harassed and abused in recent years. Nowadays, most of the Chinese names above shop doors have been painted over or replaced and Zambians man the tills until their Chinese bosses come to shut up shop.

Sitting behind the counter at one Chinese-owned business, Nelson gestures at the piles of blankets, sports shoes, T-shirts and nylon bags for sale. "Everything here comes from China," he says. "That's why it's so cheap." Nelson has no shortage of customers eager for bargains to stretch their limited budgets.

Around the corner, Susan Kalal is not so lucky. She sells clothing produced in South Africa and says the Chinese have lured away her customers with their cut-price goods. "Business has been very slow since they moved in. The Chinese sell everything so cheaply, it's impossible for me to compete." A few stalls away, another Zambian trader selling jeans made in South Africa sniffs that Chinese imports are of inferior quality. "People buy them and then they fall apart after one wear," he says. "That's hardly value for money."

In Zimbabwe, disgruntled consumers coined a derisive phrase - zhing zhong - to describe such products and the expression appears to have spread to several other African countries where markets are piled high with cheap electronics, clothes, toys and other goods imported from China. But the issue goes deeper than complaints of shoddy workmanship.

When it comes to Africa's tilt towards Beijing, several of the continent's commentators have argued that while the winners are the countries that export the raw materials China so desperately needs to fire its economy, the losers are those who face competition from the cheap manufactured goods that result.

"Chinese investors are extremely interested in Africa as a market," says Lucy Corkin, projects director at the Centre for Chinese Studies at South Africa's Stellenbosch University, the only African institute devoted entirely to researching China's engagement with the continent. "They realise the potential of Africa as a consumer market to a far greater degree than the West has."

In Malawi, the most recent African country to sever ties with Taiwan in order to secure a multi-million dollar investment deal with Beijing, some fear that fledgling industries may suffer if China floods local markets with imports. The landlocked nation has few natural resources but over 10 million potential consumers.

"The Chinese talk of a win-win situation, but how can it be when one party is a major economic and geopolitical player and the other is a tiny country like Malawi? Malawian products can never compete against the might of China," says Ephraim Munthali, a journalist in the capital, Lilongwe.

"When it comes to production, it is difficult for Africa to compete with China," notes a report entitled China's Economic Takeoff: Implications for Africa, published by the Brenthurst Foundation, a South African think-tank.

Despite low wages, the report argues, "the continent's disadvantages, such as poor infrastructure and high transport costs" make African products prohibitively expensive.

Ironically, in Zambia, a textile factory built with Chinese cash as a sign of Sino-Zambian solidarity has been hit by competition from subsidised Chinese imports. The Zambia-China Mulungushi Textiles firm was once the biggest such mill in Zambia, employing over 1,000 people. Last year, the factory ceased production after suffering repeated losses.

"Just like some sectors will win, you are obviously going to have some sectors that are hurt. There is absolutely no way you are going to protect all sectors in this globalised world," says Zambia's minister for trade and commerce Felix Mutati.

Concern has been raised about the impact of cheap Chinese imports on clothing and footwear industries following job losses in countries including South Africa, Kenya, Botswana, Lesotho and Swaziland. Tanzania's only flip-flop factory is struggling to break even in the face of increasing competition from China. In South Africa, the government imposed a quota on Chinese imports to protect local industry after trade unions cried foul.

Moeletsi Mbeki, deputy chairman of the South African Institute of International Affairs, says China represents both "a tantalising opportunity and a terrifying threat".

The story is all too familiar, he notes. "We sell them raw materials and they sell us manufactured goods with a predictable result - an unfavourable trade balance."

Writing in Nigeria's Daily Trust newspaper, columnist Charles Onunaiju observed that unless efforts are made to alter the current pattern of trade, the Sino-African relationship will "come to resemble the Europe/America and Africa relations, that is, lopsided, dependent and even detrimental to Africa".

Such criticism has not gone unnoticed in Beijing. During an eight-nation tour of the continent last year, Chinese president Hu Jintao promised to increase imports from Africa. "China takes seriously the concerns about the imbalance in the structure in China-Africa trade," Hu told an audience in Pretoria, going on to pledge "effective steps" to address concerns.

That July, China removed import tariffs on 454 goods from the 26 least-developed countries in Africa. Since then some $450 million (€306 million) worth of duty-free imports, including sesame, coffee beans, animal hides, cocoa and other products have flowed into the Chinese market from Africa.

"The favourable tariffs are expected to cover more categories according to market demand," Wei Jianguo, China's deputy minister of commerce has stated.

But many say this is not enough, arguing that the durability of the relationship between the world's most populous country and its poorest continent will depend on whether China encourages African efforts to progress from being mere producers of raw materials to becoming authors of their own development through economic diversification.

Last September, Calestous Juma, a professor at Harvard's Kennedy School of Government, made this point in Kenya's Business Daily.

"The worst that China can do is to continue Africa's mineral and plantation economies. China needs to complement its raw material imports with serious efforts that help African countries become exporters of finished goods to the Chinese market," he wrote. "Failure to do so will reinforce the perception that China's involvement in Africa will undercut the continent's efforts to increase its participation in the global economy."

Irish Times

Global financial crisis to affect African development efforts

By Tom Pfeiffer

The global credit crisis has come just as African economies were turning the corner, forcing governments to delay or scale back projects to stimulate growth and fight poverty, government officials and economists said at a gathering in Tunis.

Many African countries have spent decades gearing economic policies to attract more private capital and dispel a reputation as unreliable investment destinations.

The continent's economic growth has accelerated as inward investment grows and foreign capital takes a bigger role in road, power and utility projects.

But turmoil on world markets has cut the supply of money as the world's biggest banks shift funds from new projects to shoring up balance sheets, leaving African governments wondering how their infrastructure will get built.

"A number of African policy makers feel doubly sad about this situation," the World Bank's Vice President for Africa, Obiageli Ezekwesili, told Reuters at the Tunis conference.

"Many have been steadfast in pursuing sound policies and gone to second and third-generation reforms to diversify their economies and now they are saying: 'What is this?'"

Economists and central bank officials said African banks were mostly decoupled from the financial crisis but delegates at the conference said Africa was already suffering from gathering recessions in rich countries.

"The information we are getting on the ground is that promised funding is declining," said Leonce Ndikumana, head of research at the African Development Bank.

Kenya's government planned to issue bonds on the international market and must now hold back as the risks are too high. Tanzania is also delaying a move to seek capital, he said.

"This crisis could not have come at a worse time for the African continent; it constitutes a major setback at a time when African economies were turning the corner," African finance ministers and central bank heads said in a statement at the Tunis conference.

LIFELINE

Ezekwesili of the World Bank said remittances to the continent by Africans working abroad -- a lifeline for poor relatives back home -- are falling and trade finance, which is essential for export-reliant countries, is drying up.

Goals for poverty reduction, already compromised by the food crisis, will see another setback, she said, especially if cash strapped donor countries fail to send promised development aid.

"I listened to the ministers of Liberia and Sierra Leone and you can clearly see a feeling of vulnerability at its deepest," Ezekwesili said.

Delegates from Zambia, Uganda and other countries reported investors selling securities and pushing down local currencies.

Tumbling prices of commodities such as copper meant investment by exporting states could collapse, said Ezekwesili.

Ndikumana of the ADB said there was growing pressure for loans from African banks to make up the lack of foreign financing and those banks had begun seeking assistance as they are unable to find enough resources.

More African states have turned to western banks in recent years to help build ports and bring power to their populations.

Guinea and Ethiopia were preparing to raise finance for electricity networks when the crisis struck, said Gilbert Mbesherubusa, the ADB's head of infrastructure development.

"Projects which are ready to go may suffer just as a consequence of what is going on," he said.

Road projects needed to boost regional integration were also threatened, he said, even though they tend to be funded by foreign governments, not banks.

"We are talking about a 700 billion dollar (U.S.) bank bailout using public funds. Is America willing to continue its public funding of Africa at the same pace? We are afraid it is not," he said.

Reuters

Angola-China trade exceeds US$14 billion between January and September

Trade between Angola and China in the first nine months of 2008 has already exceeded US$14 billion, Angolan ambassador João Manuel Bernardo said Monday in Beijing.

At a press conference to commemorate the 33rd anniversary of Angola’s independence, the Angolan ambassador in Beijing said that of bilateral trade over 80 percent was Angolan oil imported by China.

Over the last four years Angola has become one of China’s largest suppliers of oil and the amount of credit granted by China to the West African country totals US$4.5 billion.

The Angolan ambassador also announced that since the beginning of the year the Angolan embassy had issued 40,000 visas, made up of 5,000 working visas and the remainder short stay visas, confirming the increase in relations between the countries.

Bernardo also said that, “there are many Chinese working on the national reconstruction,” of his country, namely the, “reconstruction of roads and schools,” but did not give precise figures.

“Cooperation with Angola is at a very good level (..) There are Chinese in all 18 provinces of Angola, but I don’t know exactly how many,” he said.

macauhub

Barack Obama knows that Africa needs to be left alone

by Carl Mortished

The good news is that the incoming Democratic White House has a firm grasp that Africa is a large continent comprised of many nations (a key individual in the opposing Republican camp was shaky at this level of detail) but, beyond recognition, President-elect Obama has little to offer Africans.

Africa must fend for itself and the Senator, whose father was Kenyan, should deliver the bad news quickly: no money, no reason and no time.

America is broke; with Wall Street and Motown thrusting the begging bowl into Congress, there is no cash for foreign aid other than famine relief and the occasional bung to solve a foreign policy crisis.

Moreover, the incoming president has bigger files piling up on his desk (two wars, the economy and mounting hostility in Moscow).

Time for sub-Saharan Africa will be limited to 15 minutes on alternate Wednesdays. The third argument not to do much for Africa is the best one and, surprisingly, it is also good news.

The credit crunch has not affected sub-Saharan Africa as deeply as it has some other emerging markets. We have not seen the sudden drain of funds that sent the transition economies of Eastern Europe on a downward spiral.

Of course, much of the reason for Africa's escape is the continent's relative isolation from the financial markets. Fewer Africans have bank accounts, so demand for credit is weaker and the emerging markets of sub-Saharan Africa remain illiquid.

Less hot money flew in during the good times to fund speculative growth, which means less capital to fly out in a downturn and minimal risk of a banking collapse.

Better still, sub-Saharan Africa is no longer merely a playground for resource companies to dig metal and siphon oil.

In previous global downturns in the early 1980s and 1990s, sub-Saharan Africa fell into recession with the fall in commodity prices.

We have already seen that commodity downturn with the collapse in crude oil and base metal prices, but, surprisingly, the IMF is expecting average growth of 6 per cent next year.

Africa is no longer a commodity seam fit only to be looted. Attempts at economic reform in the so-called “frontier economies” of Botswana, Ghana, Kenya, Nigeria, Mozambique, Tanzania, Uganda and Zambia have stimulated private consumption, says Razia Khan at Standard Chartered Bank.

An analysis of GDP growth rates in the region since 2000 showed that private consumption was the biggest factor in maintaining growth, well ahead of exports and the state payroll.

Sightings of thriving internal economies beyond South Africa is the best news that the continent has had for decades. Unfortunately, the green shoots are fragile and the boost to disposable incomes provided by economic reform is at risk from inflation, Ms Khan says.

Food is still the biggest item of personal expenditure - riots broke out this year in several countries over the price of grain and the costly burden of imported food is playing havoc with government budgets.

To fight price rises, governments have brought down import tariffs, an obvious solution but in such fragile economies, tariffs are often the State's only reliable source of income. If food inflation is not brought under control, Africa's new engines could quickly sputter and die.

Governments are subsidising food and there will be pressure to do more, hence the enthusiasm for Senator Obama. Supplicants are likely to get short shrift. America is already well-outpaced by the European Union in aid for Africa, spending about $5billion (£3.2billion) compared with the EU's €50 billion (£40.6billion).

Democrats have not in the past been distinguished Africaphiles. While President Clinton talked well about Africa, it was his successor, President Bush who secured large packages of money to support HIV-Aids and anti-malaria programmes.

Foreign aid is also unpopular; it wins few votes and is now widely viewed as a deep well of potential corruption. The fashionable view is that America should open up trade, but other than oil and metals, Africa has little to offer the US. Indeed, if the President-elect has his way, it would trade less.

He wants to reduce America's dependence on foreign oil and Africa is a leading exporter, supplying more to the US than the Gulf states. Nigeria and Angolan volumes together already exceed supplies from Saudi Arabia.

As president, Barak Obama's best gambit would be to tell Africans to look to their neighbours. The biggest untapped resource in the sub-Saharan region is consumers.

Despite war, ethnic conflict, disease and lousy infrastructure, African consumers are still supporting GDP growth rates of more than 6 per cent. This is happening despite the grotesque tariff barriers that prevent intra-African trade. What is the point of complaining about modest EU and US tariffs when the walls between Africans are so high.

Much has been made of the impression that a black president might have on America's enemies. Even more interesting might be his effect on a continent riven by ethnic rivalry and tribalism.

In a joking reference to his search for the right breed of puppy for his daughter, the senator described himself as “a mutt”. Africa, too, could do with a few mongrels in high places.

The Times

Oil, gas shippers may shun Suez as East Africa piracy escalates

By Alaric Nightingale and John Martens

Shipowners controlling almost a fifth of the world's oil supertankers may shun Egypt's Suez Canal after an escalation in pirate attacks off the east coast of Africa, potentially increasing the cost of delivering crude.

Euronav NV and TMT Co. Ltd., owners of ships designed to haul Middle East crude to Europe and the U.S., today joined Frontline Ltd., the largest operator, in saying they are reviewing whether to divert carriers around South Africa. Bergen, Norway-based Odfjell SE, the world's largest owner of chemical transporters, already said it won't sail past Somalia while BW Gas Ltd., the biggest liquefied-gas shipper, may do the same.

``We've always told our captains to stay far from the coast in that region, but that may not be enough now,'' Euronav's Chief Financial Officer Hugo De Stoop said by phone from Antwerp, Belgium, today. ``Terrorists or pirates, I don't really see the difference.''

Frontline, Euronav and TMT together control 90 supertankers, enough to carry more than two days of global demand, according to Athens-based Optima Shipbrokers. A decision to avoid the Suez Canal, Egypt's third-biggest foreign-currency earner, would delay oil deliveries and reduce the supply of available vessels.

TMT Chief Executive Officer Nobu Su ``urged'' other owners to take the same action to secure trade routes. Jens Martin Jensen, interim chief executive officer of Hamilton, Bermuda-based Frontline's management unit, yesterday said he may also divert ships.

Somali pirates on Nov. 15 seized their largest ever prize, a Saudi Arabian supertanker laden with 2 million barrels of crude, worth about $108 million at current prices. The ship itself is worth about $148 million.

The Sirius Star is now anchored in Somalia's northern Eyl coastal region with the hijackers negotiating a ransom payment with Vela International Marine Ltd., a Saudi Arabian state-backed oil-tanker company.

There have been at least 88 attacks against ships in the area since January and Somalian pirates are holding 250 crew hostage on board 14 merchant vessels.

Shippers sailing to the U.S. and Europe from the Middle East would instead have to take vessels around South Africa's Cape of Good Hope rather than the Suez Canal. The waterway links the Mediterranean and Red Seas.

Customers have been given ``the option to safeguard their cargo,'' BW Gas Chief Executive Officer Jan Hakon Pettersen said from Oslo today. ``For us, we would prefer them to use the cape route.''

The Joint Hull Committee, representing ship insurers, is advising shipowners to ``seriously consider'' avoiding Somalian waters, Chairman Simon Stonehouse said yesterday.

Insurance premiums will rise and unless the Egyptian government becomes ``more actively interested'' in combating piracy in the region they risk damaging the business of the Suez Canal, Stonehouse said.

``If they stop shipping through the Suez, going round Africa instead, that's going to reduce supply,'' said Glenn Lodden, an analyst at DnB NOR Markets in Oslo. ``There's a clear incentive for owners to go around Africa.''

Other shipowners are likely to follow should Frontline, Euronav and TMT choose to divert vessels and after the Joint Hull Committee has urged companies to do so, Lodden said.

Tanker owners may elect to charge more for sailing through Somalia's waters rather than re-routing, Per Mansson, managing director of shipbroker Nor Ocean Stockholm AB, said in an e- mailed note today.

``Maybe one or two will avoid, but most will go there against a premium to start with,'' Mansson said. Still, ``one more hijacking of a tanker and the situation is in a different light.''

Derivatives contracts indicating the December cost of shipping Saudi Arabian crude to Japan, the industry benchmark, advanced 6 percent to 71 Worldscale points, Justin King, a broker of the contracts at Tradition Financial Services in London, said in an e-mailed note today.

Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

The fact owners say they are considering rerouting is buoying demand for the contracts, said Ben Goggin, a broker at SSY Futures Ltd., a unit of the world's second-biggest shipbroker.

The European Union last month joined the North Atlantic Treaty Organization, India, Malaysia and Russia in deploying vessels to combat piracy.

Bloomberg