October 17, 2010
Africa's future is limited by trade ties to Europe
When the global financial system went into a convulsion that eventually became what economic experts now refer to as the Great Recession, most pundits said that Africa, with its unsophisticated financial systems, would sail through the crisis unscathed. Proponents of this theory argued that Africa was "de-coupled" from the global economy, and the popular thinking was that the stunning collapse of erstwhile financial giants like Lehman Brothers would have ramifications only in the U.S., Europe and Asia, whose monetary systems were conjoined by subsidiary operations of the mammoth multinational banks and mortgage providers.
But this prognosis changed swiftly as the economic woes in the developed world deepened, drying up demand for African export goods, killing tourism and battering African countries' currencies, with most losing value at a frightening rate because of the sudden drop in foreign cash inflows. The slowdown in demand from advanced economies pulled back economic growth for the 53 African states from an average of 5 percent in the decade before the crisis to a paltry 1.8 percent in 2009.
Africa's economies were also affected by the global economic downturn because of the millions of Africans who reside and work in developed economies -- the majority of them in the U.S. -- and send home billions of dollars every month. The World Bank estimates that the Great Recession caused a 6 percent drop in such remittances last year, in which developing countries received $316 billion.
Economic chiefs who gathered in Washington, D.C.recently for the annual International Monetary Fund and World Bank meetings, however, all agreed that the global economy has turned the corner since those ominous months in late 2008 when news about collapsing banks seemed to come at a greater frequency than weather updates. And the African continent, with its population of 1 billion, is once again getting rosy assessments of its economic prospects.
"The rate of growth [in sub-Saharan Africa] is back to something like 5 percent. This time, growth is coming back in Africa at the same rates as other parts of the world," IMF Managing Director Dominique Strauss-Kahn declared at the opening plenary.
The glowing reports will rightly hearten many in the world's poorest continent, whose huge economic potential remains bottled up by a fateful combination of historical injustices and corrupt leadership. But the bullish projections are also an eerie reminder of the mistakes that African policymakers, acting on similar assessments, made in late 2008 and early 2009.
Convinced that the crisis had little chance of spilling over to their borders, African finance ministers continued implementing the policies they had before the crisis, only to realize rather late in the day that they also needed to cushion their economies by rolling out stimulus packages similar to the ones that were announced in advanced and emerging economies.
It does not take a genius to realize that Africa's colonial past has strapped the continent's economic fortunes to its former colonial masters, who have erected such enormous trade barriers within the continent that only about 10 percent (by IMF estimates) of total exports produced in Africa are traded within the continent. More than half of all other exports -- which are primarily unprocessed agricultural goods, oil and minerals -- find their way to European countries, which to this day continue to benefit from economic exploitation of the continent.
China and the United States make up the other key destination markets for African goods.
It would not matter if African countries had been able to choose their trade partners and decided to ship half of their products to Europe. But Africa did not have any say in designing the lopsided trade alignments that colonialists entrenched in the mid- to late 1800s by ruthlessly subdividing what was once a united continent into colonies whose primary purpose was to produce raw materials for resource-hungry European factories.
By imposing national borders without regard to the harmonious coexistence and trade ties that had prevailed for centuries, the colonialists split up not only a continent but also, in many cases, families. They then introduced punitive cross-border trade tariffs that to this day make it staggeringly more expensive to transport goods from, say, Kenya in the east to Nigeria in the west than it is to send them to London.
It therefore seems disingenuous at best to assert that Africa's economy will continue to boom even as recovery in advanced economies and particularly Europe remains in doubt. By the IMF's and the World Bank's own assessments, economic recovery is still weak in Europe and is not likely to translate into the kind of demand for goods and services that Africa needs in order to return to and sustain pre-crisis growth rates.
High unemployment and jitters about the possibility of a double-dip recession have knocked consumer confidence in Europe and the U.S., diminishing growth-fueling demand that was the key driver of these economies before the downturn. The unusually high debts of some European countries, such as Greece and the Republic of Ireland, have also overshadowed the recovery, fueling market fears that these governments are holding too much debt on their books, which could trigger a default.
Africa is increasingly turning to China, Brazil, India, and other Asian and Latin American countries for new trade partnerships that not only seek to exploit the continent's natural resources but also promise -- as in the case of China, which is building thousands of miles of roads on the continent -- to be mutually beneficial.
It is not easy to undo overnight what has been well-established for more than a century, but the movement toward the East, and ongoing promotion of intra-Africa trade, are steps in the right direction for African economies that seek to gain true economic independence.
For the time being, however, and as the Great Recession has demonstrated, Africa's economic fortunes will continue to rise and fall with those of Europe and the U.S. As a result, the continent should take all of those rosy economic projections with a pinch of salt.
The Root
India competes with China, Europe for growing African market
With the help of the government, Indian industry is implementing a strategy to compete with China and European countries for capturing markets in growing African economies , particularly in East Africa.
As part of the game plan, Commerce and Industry Minister Anand Sharma will be leaving for Nairobi tonight, leading a business delegation of the Federation of Indian Chambers of Commerce and Industry.
Senior officials from 187 Indian companies would be participating in the 'Namaskar Africa' and 'India-East Africa Business Forum' events at Nairobi, opening on October 14.
FICCI President and Bharti Enterprises Vice Chairman Rajan Bharati Mittal, with a strong interest in the telecom business in Africa, is the leading member of the delegation.
Sharma will be addressing a meeting of the India-Kenya Joint Trade Committee, according to a Commerce Ministry statement here.
He is also scheduled to meet Kenyan President Mwai Kibaki and Prime Minister Raila Odinga.
While India has bilateral trade of USD 30 billion (2009- 10) with Africa, business with East African nations, mainly Kenya, Rwanda, Seychelles, Ethiopia and Uganda, amounts to just USD 4 billion.
According to a FICCI study, "India has many commercial rivals in the region, particularly European countries like UK and China... The Chinese companies, which are government- owned, have far more capital for investment than the Indian private owned companies."
The European countries may exercise pressure on the African nations to counter China and India, it said, adding, "This is harmful to India's commercial and political relations with East African countries."
India, on its part, is trying to counter the commercial threat from China and European nations by offering lines of credit to African firms. "That will help source capital goods from India," FICCI Secretary General Amit Mitra said.
With a decade of growth at the rate of 5.4 per cent, the economic outlook for Africa is improving.
"For the first time in over three decades, a large number of African countries have begun to show sustained economic growth at the rates that are similar to the rest of the developing world and exceed that of most of the developed countries," FICCI said.
Healthcare and pharmaceuticals, power, construction, information technology, roads and railways and minerals are the areas of opportunity for Indian companies, the study said.
Economic Times
As part of the game plan, Commerce and Industry Minister Anand Sharma will be leaving for Nairobi tonight, leading a business delegation of the Federation of Indian Chambers of Commerce and Industry.
Senior officials from 187 Indian companies would be participating in the 'Namaskar Africa' and 'India-East Africa Business Forum' events at Nairobi, opening on October 14.
FICCI President and Bharti Enterprises Vice Chairman Rajan Bharati Mittal, with a strong interest in the telecom business in Africa, is the leading member of the delegation.
Sharma will be addressing a meeting of the India-Kenya Joint Trade Committee, according to a Commerce Ministry statement here.
He is also scheduled to meet Kenyan President Mwai Kibaki and Prime Minister Raila Odinga.
While India has bilateral trade of USD 30 billion (2009- 10) with Africa, business with East African nations, mainly Kenya, Rwanda, Seychelles, Ethiopia and Uganda, amounts to just USD 4 billion.
According to a FICCI study, "India has many commercial rivals in the region, particularly European countries like UK and China... The Chinese companies, which are government- owned, have far more capital for investment than the Indian private owned companies."
The European countries may exercise pressure on the African nations to counter China and India, it said, adding, "This is harmful to India's commercial and political relations with East African countries."
India, on its part, is trying to counter the commercial threat from China and European nations by offering lines of credit to African firms. "That will help source capital goods from India," FICCI Secretary General Amit Mitra said.
With a decade of growth at the rate of 5.4 per cent, the economic outlook for Africa is improving.
"For the first time in over three decades, a large number of African countries have begun to show sustained economic growth at the rates that are similar to the rest of the developing world and exceed that of most of the developed countries," FICCI said.
Healthcare and pharmaceuticals, power, construction, information technology, roads and railways and minerals are the areas of opportunity for Indian companies, the study said.
Economic Times
Will new federation improve the fortunes of African textiles industry?
by Scola Kamau
The launch of the African Cotton Industries Federation (ACTIF) in Nairobi by 23 trade associations from 18 African countries has brought high expectations to the industry that pressing problems of production, processing and marketing will finally be addressed.
The federation is the first pan-African cotton body and is meant to translate the disparate policies of the cotton, textile and apparel sectors into cohesive positions at regional and international trade development forums.
The organisation will also promote the industry as a major revenue earner.
Africa currently produces 12 per cent of the world’s cotton but more than 95 per cent of it is sold either to other countries in the continent or outside before it is processed.
The remaining 5 per cent is processed within the growing countries. A value added strategy in Africa would give the industry a boost, which is what ACTIF advocates for.
The federation aims at creating a unified voice in both regional and global trade affairs to provide effective regional representation at international fora, build co-operation, interaction, linkages, and promote inter-regional trade.
This includes further negotiations with the US on the Africa Growth and Opportunity Act (Agoa) to ensure its continuation in Africa to secure investment in the entire value chain, maintain existing buyers and attract new markets.
According to ACTIF chairman Jaswinder Bedi, Agoa’s 2015 deadline to wind up the initiative should be pushed forward to enable the business continue. “We want Agoa to be more permanent to safeguard Africa’s market,” said Mr Bedi. He said a crisis could hit Agoa-eligible countries, with buyers looking elsewhere for apparel.
According to the Global and Regional Trends in Textile Fibre Consumption, March 2010 edition, Asia was by far the largest consumer of fibres in 2008, having accounted for 73.2 per cent of global usage, while Africa was ranked seventh and Oceania and Central America trailing with 1.5 per cent and 0.1 per cent respectively.
In Africa, fibre consumption fell by a marginal 0.5 per cent in 2008. The result was an 11 per cent rise in man-made fibre consumption, offset by a 10.6 per cent drop in cotton production.
On the other hand, Africa is looking at regions-based trade as an alternative in case the international market soars.
“There has been a global drop in apparel exports to the US because of the economic crisis. It is better to concentrate on regional markets like the EAC and Comesa. It is now easier because we have improved our quality of apparels,” said Suzan Muhwezi, Uganda’s presidential advisor on Agoa.
According to the Uganda Export Promotion Board, cotton export revenues dropped from $50 million in 2004/5 financial year to $38 million in 2007/8. At the same time, figures show a declining trend in production of cotton seeds from 94,000 tonnes in 2002 to 39,000 tonnes in 2008.
ACTIF campaigns for private sector involvement in regional policy formulation and implementation, since a strong private sector and political stability would attract more markets.
John Heagreaves, Madagascar’s assistant chair, Textiles and Approved Exporters Association, explained that it was due to political instability that the country lost close to 130,000 jobs when exports to the US market were terminated. “They include 30,000 direct and almost 100,000 indirect jobs.”
Imports of second-hand clothes to Africa have negatively affected the textile industry’s capacity for job creation. They have led to the sourcing of fabrics from Asia and designs from Europe and the US.
If ACTIF’s vision to ensure that fabric, design and fashion needs are met locally from the continent comes to pass, the industry will redeem its past glory where most of the states’ demands were met by their own industries.
Limited government support has contributed to the dismal performance of the African cotton and textile industry.
The East African
The launch of the African Cotton Industries Federation (ACTIF) in Nairobi by 23 trade associations from 18 African countries has brought high expectations to the industry that pressing problems of production, processing and marketing will finally be addressed.
The federation is the first pan-African cotton body and is meant to translate the disparate policies of the cotton, textile and apparel sectors into cohesive positions at regional and international trade development forums.
The organisation will also promote the industry as a major revenue earner.
Africa currently produces 12 per cent of the world’s cotton but more than 95 per cent of it is sold either to other countries in the continent or outside before it is processed.
The remaining 5 per cent is processed within the growing countries. A value added strategy in Africa would give the industry a boost, which is what ACTIF advocates for.
The federation aims at creating a unified voice in both regional and global trade affairs to provide effective regional representation at international fora, build co-operation, interaction, linkages, and promote inter-regional trade.
This includes further negotiations with the US on the Africa Growth and Opportunity Act (Agoa) to ensure its continuation in Africa to secure investment in the entire value chain, maintain existing buyers and attract new markets.
According to ACTIF chairman Jaswinder Bedi, Agoa’s 2015 deadline to wind up the initiative should be pushed forward to enable the business continue. “We want Agoa to be more permanent to safeguard Africa’s market,” said Mr Bedi. He said a crisis could hit Agoa-eligible countries, with buyers looking elsewhere for apparel.
According to the Global and Regional Trends in Textile Fibre Consumption, March 2010 edition, Asia was by far the largest consumer of fibres in 2008, having accounted for 73.2 per cent of global usage, while Africa was ranked seventh and Oceania and Central America trailing with 1.5 per cent and 0.1 per cent respectively.
In Africa, fibre consumption fell by a marginal 0.5 per cent in 2008. The result was an 11 per cent rise in man-made fibre consumption, offset by a 10.6 per cent drop in cotton production.
On the other hand, Africa is looking at regions-based trade as an alternative in case the international market soars.
“There has been a global drop in apparel exports to the US because of the economic crisis. It is better to concentrate on regional markets like the EAC and Comesa. It is now easier because we have improved our quality of apparels,” said Suzan Muhwezi, Uganda’s presidential advisor on Agoa.
According to the Uganda Export Promotion Board, cotton export revenues dropped from $50 million in 2004/5 financial year to $38 million in 2007/8. At the same time, figures show a declining trend in production of cotton seeds from 94,000 tonnes in 2002 to 39,000 tonnes in 2008.
ACTIF campaigns for private sector involvement in regional policy formulation and implementation, since a strong private sector and political stability would attract more markets.
John Heagreaves, Madagascar’s assistant chair, Textiles and Approved Exporters Association, explained that it was due to political instability that the country lost close to 130,000 jobs when exports to the US market were terminated. “They include 30,000 direct and almost 100,000 indirect jobs.”
Imports of second-hand clothes to Africa have negatively affected the textile industry’s capacity for job creation. They have led to the sourcing of fabrics from Asia and designs from Europe and the US.
If ACTIF’s vision to ensure that fabric, design and fashion needs are met locally from the continent comes to pass, the industry will redeem its past glory where most of the states’ demands were met by their own industries.
Limited government support has contributed to the dismal performance of the African cotton and textile industry.
The East African
Food safety training to boost EU-Africa trade
by Halima Abdallah
The European Union will spend €13 million ($17.10 million) this year to train Africans in international food safety standards.
This is in preparation for competitive trade between the continent and the EU.
The training is part of the complementary measures taken to strengthen African supply capacity so that it can benefit from market access.
“We want to prepare Africa for the future because it has the potential to trade,” said Moustapha Magumu, an advisor with the EU delegation to African Union.
The EU is the largest importer of food in the world yet very minimal quantities from Africa access these markets due to hygiene requirements. Also, EU companies certify the few products that access their markets because of limited skills and laboratories in Africa.
The funds will be channelled to the ongoing exercise aimed at building the capacities of inspectors from national bureau of standards and customs officials across 12 countries within East African Community and South African Development Community .
This year, the training started in Central Africa, then moved to North Africa and is now in East Africa and the SADC region. The beneficiaries learn inspection techniques, standards checks, quality assurance, accreditation, metrology and how to check residue levels.
It is also expected that some of the money will help to strengthen laboratory capacities in some countries through a twining programme — a laboratory technician from any EU country is accredited to work in an African laboratory.
Sudan has already been identified for the twinning programme.
The training code named Better Training for Safer Foods was launched in 2005, to provide coach both EU and third world countries’ officials responsible for checking that EU rules related to food, animal health and welfare as well as plant health are properly applied.
The inspectors will do product traceability using documents and physical checks as a basis of work.
Last year, the EU spent €10 million ($13.14 million) in five training in West Africa, North Africa and South Africa.
The East African
The European Union will spend €13 million ($17.10 million) this year to train Africans in international food safety standards.
This is in preparation for competitive trade between the continent and the EU.
The training is part of the complementary measures taken to strengthen African supply capacity so that it can benefit from market access.
“We want to prepare Africa for the future because it has the potential to trade,” said Moustapha Magumu, an advisor with the EU delegation to African Union.
The EU is the largest importer of food in the world yet very minimal quantities from Africa access these markets due to hygiene requirements. Also, EU companies certify the few products that access their markets because of limited skills and laboratories in Africa.
The funds will be channelled to the ongoing exercise aimed at building the capacities of inspectors from national bureau of standards and customs officials across 12 countries within East African Community and South African Development Community .
This year, the training started in Central Africa, then moved to North Africa and is now in East Africa and the SADC region. The beneficiaries learn inspection techniques, standards checks, quality assurance, accreditation, metrology and how to check residue levels.
It is also expected that some of the money will help to strengthen laboratory capacities in some countries through a twining programme — a laboratory technician from any EU country is accredited to work in an African laboratory.
Sudan has already been identified for the twinning programme.
The training code named Better Training for Safer Foods was launched in 2005, to provide coach both EU and third world countries’ officials responsible for checking that EU rules related to food, animal health and welfare as well as plant health are properly applied.
The inspectors will do product traceability using documents and physical checks as a basis of work.
Last year, the EU spent €10 million ($13.14 million) in five training in West Africa, North Africa and South Africa.
The East African
Is GDP an obsolete measure of progress?
by Judith D. Schwartz
Since last summer 2009 the gross Domestic Product (GDP) of the US has gone up — indeed, it grew at a surprising 5.7% rate in the 4th quarter — seeming to confirm what we've been hearing: the recession is officially over. But wait — foreclosure and unemployment rates remain high, and food banks are seeing record demand. Could it be that the GDP, that gold standard of economic data, might not be the best way to gauge a nation's relative prosperity?
Since it became the prime economic indicator during the Second World War (to monitor war production) many have criticized policy-makers' reliance on the GDP — and proposed substitute measures. For example, there is the Human Development Index (HDI), used by the UN's Development Programme, which considers life expectancy and literacy as well as standard of living as determined by GDP. And the Genuine Progress Indicator, which incorporates aspects of social welfare such as income equity, pollution, and access to health care. In the international community, perhaps the biggest nudge has come from French President Nicolas Sarkozy, who commissioned a report by marquee-name economists, including Nobel laureates Joseph Stiglitz and Amartya Sen, to find alternatives to what he calls "GDP fetishism."
What exactly have we been fetishizing? Basically, market activity and growth. The GDP, generally expressed as a per-capita figure and often adjusted to reflect purchasing power, represents the market value of good and services produced within a nation's boundaries. Sounds reasonable. Until we consider what it doesn't measure: the general progress in health and education, the condition of public infrastructure, fuel efficiency, community and leisure.
"It's a narrow calculation of cash flow," says Hazel Henderson, President of Ethical Markets Media (USA and Brazil) and who co-developed the Calvert-Henderson Quality of Life Indicators, which unbundles, rather than averages, 12 indicators. "Because it's averaged, the GDP mystifies and masks the gap between rich and poor. I don't think there's ever been such a large disconnect between the GDP and what ordinary people are experiencing."
As an example of how what's good for the GDP is not always good for the individual, take health care: rising costs may be tough on families, but it boosts the GDP.
"The GDP is a truly terrible measure of things that really matter," says James Gustave (Gus) Speth, Distinguished Senior Fellow at Demos, a public policy research and advocacy organization based in New York. "Finally, there's a broad consensus on this point. For the first time there's a chance that this concern will move out of academic and research circles and become a real policy question."
Speth notes the seemingly paradoxical relationship between the growth rate (GDP) and decline in employment. "It takes enormous GDP growth to get jobs," he says. "It focuses us as a nation on a fool's errand."
One new calculation that's been attracting attention is the Happy Planet Index (HPI), which combines economic metrics with indicators of well-being, including subjective measures of life satisfaction, which have become quite sophisticated (HPI uses data from Gallup, World Values Survey, and Ecological Footprint). The HPI assesses social and economic well-being in the context of resources used, looking at the degree of human happiness generated per quantity of environment consumed. The HPI metric was driven in part by the recognition that the environmental costs of economic growth must be figured into standard-of-living reports.
"The GDP suited a different era and now we need a metric for our times," says Nic Marks, a Fellow at the London-based New Economics Foundation, and founder of its Centre for Well-Being. "During World War II production was important. After the war was the need for rebuilding. We're way past that. We need to account for our ecological footprint and see how we're operating on the planet. The GDP is often precisely wrong in that it's not measuring progress, just the making of stuff. The HPI is striving to measure a better future." One appeal of the GDP, says Marks, has been that it presents a simple message: up is "good"; down is "bad." "HPI is trying to mirror that simplicity, using one number as a headline indicator."
In terms of what the world wants measured, it seems the HDI and HPI have it over the GDP. For its report "International Public Opinion on Measuring National Progress: 2007" GlobeScan, a research firm based in Canada and London, surveyed 1,000 people in each of 10 countries not including the U.S.. When asked whether health, social and environmental status should figure into measures of national progress as much as economic data, between 70% (Russia) and 86% (France) agreed. "It's common sense and matches their experience," says Hazel Henderson, whose firm commissioned the study. "People know there is much valuable in their lives besides what can be expressed in monetary terms."
The matter of how a nation measures performance is far from trivial, says Gus Speth, particularly at a time when environment sustainability is on many people's minds. He observes: "You tend to get what you measure, so we'd better measure what we want." In other words, to a certain extent we are what we count.
For Nic Marks, the key shift introduced by the HPI is its "move away from measuring production and toward measuring consumption. The HPI serves as a signpost pointing more toward a society we want to live in — the delivery of good lives rather than the delivery of more goods."
So how does the U.S. fare in HPI terms? Not so good. It sits pretty far down the list at 114. The U.K. is 74, behind Germany, Italy and France. Topping the chart is Costa Rica, which has long life expectancy, high life satisfaction, and a per capita ecological footprint one-fourth the size of the U.S.
As Gus Speth explains it: "We [in the U.S. are] chewing up a lot of environment for not much happiness."
Time
Since last summer 2009 the gross Domestic Product (GDP) of the US has gone up — indeed, it grew at a surprising 5.7% rate in the 4th quarter — seeming to confirm what we've been hearing: the recession is officially over. But wait — foreclosure and unemployment rates remain high, and food banks are seeing record demand. Could it be that the GDP, that gold standard of economic data, might not be the best way to gauge a nation's relative prosperity?
Since it became the prime economic indicator during the Second World War (to monitor war production) many have criticized policy-makers' reliance on the GDP — and proposed substitute measures. For example, there is the Human Development Index (HDI), used by the UN's Development Programme, which considers life expectancy and literacy as well as standard of living as determined by GDP. And the Genuine Progress Indicator, which incorporates aspects of social welfare such as income equity, pollution, and access to health care. In the international community, perhaps the biggest nudge has come from French President Nicolas Sarkozy, who commissioned a report by marquee-name economists, including Nobel laureates Joseph Stiglitz and Amartya Sen, to find alternatives to what he calls "GDP fetishism."
What exactly have we been fetishizing? Basically, market activity and growth. The GDP, generally expressed as a per-capita figure and often adjusted to reflect purchasing power, represents the market value of good and services produced within a nation's boundaries. Sounds reasonable. Until we consider what it doesn't measure: the general progress in health and education, the condition of public infrastructure, fuel efficiency, community and leisure.
"It's a narrow calculation of cash flow," says Hazel Henderson, President of Ethical Markets Media (USA and Brazil) and who co-developed the Calvert-Henderson Quality of Life Indicators, which unbundles, rather than averages, 12 indicators. "Because it's averaged, the GDP mystifies and masks the gap between rich and poor. I don't think there's ever been such a large disconnect between the GDP and what ordinary people are experiencing."
As an example of how what's good for the GDP is not always good for the individual, take health care: rising costs may be tough on families, but it boosts the GDP.
"The GDP is a truly terrible measure of things that really matter," says James Gustave (Gus) Speth, Distinguished Senior Fellow at Demos, a public policy research and advocacy organization based in New York. "Finally, there's a broad consensus on this point. For the first time there's a chance that this concern will move out of academic and research circles and become a real policy question."
Speth notes the seemingly paradoxical relationship between the growth rate (GDP) and decline in employment. "It takes enormous GDP growth to get jobs," he says. "It focuses us as a nation on a fool's errand."
One new calculation that's been attracting attention is the Happy Planet Index (HPI), which combines economic metrics with indicators of well-being, including subjective measures of life satisfaction, which have become quite sophisticated (HPI uses data from Gallup, World Values Survey, and Ecological Footprint). The HPI assesses social and economic well-being in the context of resources used, looking at the degree of human happiness generated per quantity of environment consumed. The HPI metric was driven in part by the recognition that the environmental costs of economic growth must be figured into standard-of-living reports.
"The GDP suited a different era and now we need a metric for our times," says Nic Marks, a Fellow at the London-based New Economics Foundation, and founder of its Centre for Well-Being. "During World War II production was important. After the war was the need for rebuilding. We're way past that. We need to account for our ecological footprint and see how we're operating on the planet. The GDP is often precisely wrong in that it's not measuring progress, just the making of stuff. The HPI is striving to measure a better future." One appeal of the GDP, says Marks, has been that it presents a simple message: up is "good"; down is "bad." "HPI is trying to mirror that simplicity, using one number as a headline indicator."
In terms of what the world wants measured, it seems the HDI and HPI have it over the GDP. For its report "International Public Opinion on Measuring National Progress: 2007" GlobeScan, a research firm based in Canada and London, surveyed 1,000 people in each of 10 countries not including the U.S.. When asked whether health, social and environmental status should figure into measures of national progress as much as economic data, between 70% (Russia) and 86% (France) agreed. "It's common sense and matches their experience," says Hazel Henderson, whose firm commissioned the study. "People know there is much valuable in their lives besides what can be expressed in monetary terms."
The matter of how a nation measures performance is far from trivial, says Gus Speth, particularly at a time when environment sustainability is on many people's minds. He observes: "You tend to get what you measure, so we'd better measure what we want." In other words, to a certain extent we are what we count.
For Nic Marks, the key shift introduced by the HPI is its "move away from measuring production and toward measuring consumption. The HPI serves as a signpost pointing more toward a society we want to live in — the delivery of good lives rather than the delivery of more goods."
So how does the U.S. fare in HPI terms? Not so good. It sits pretty far down the list at 114. The U.K. is 74, behind Germany, Italy and France. Topping the chart is Costa Rica, which has long life expectancy, high life satisfaction, and a per capita ecological footprint one-fourth the size of the U.S.
As Gus Speth explains it: "We [in the U.S. are] chewing up a lot of environment for not much happiness."
Time
Africa's mineral-rich countries get tough with trade partners
by Drew Hinshaw
African leaders are pushing for tougher terms on mining concessions after 25 years of structural adjustment – when countries cut red tape and offered generous tax holidays to foreign prospectors.
The new dynamic was on display at a recent mining conference in Senegal. The chief executive officer of a multinational Africa mining firm was speaking, but Senegal's president didn't appear to be listening.
Across the hall from President Abdoulaye Wade sat 500 delegates from foreign mining firms. They had come in March to see which new holes were worth digging in this continent whose riches are in demand from booming economies like China's.
When the CEO's presentation ended, Mr. Wade treated his visitors to a rhyme: "I never said, enrichissez-vous." [Enrich yourselves]. "I said enrichissons-nous." (Let's enrich one another.)
A cheer rose up from the African delegates.
"I think we're at a turning point," says Bonnie Campbell, political science professor at the University of Quebec in Montreal and author of "Mining in Africa." "There's been a quarter-century where a certain investment-friendly road has been taken. [Now] there is a recognition that there needs to be another focus."
The capstone of that push, at least for Wade, would be an international alliance of Africa's mineral-rich nations, modeled after OPEC – a pan-African body that could influence the price of metals like the cobalt in Chinese-made laptop and cellphone batteries, 90 percent of which comes from Africa, according to the business watchdog SwedWatch.
"It's an ambitious but feasible idea," says Mazou Yessouph Faudy, geological director for Niger's Mining Ministry. "Our economy is falling. As a producer of uranium, it would be good to involve ourselves in a union of producers that could set the price."
Already, according to estimates by gold mining company Randgold Resources, the continent produces 30 percent of the minerals required by the US and China.
"[Africa is] going to become a very important player in the commodity and minerals market," says Roger Dixon, chairman for South Africa's SRK mining consultancy, citing China's 11.9 percent growth in its gross domestic product, the total of goods and services produced, in the first quarter of 2010. "With that kind of demand, I think it's a great opportunity for Africa to move to the forefront of things."
The question is how. For African negotiators, seizing the moment may mean demanding that companies hire more locals, adhere to stricter environmental rules, or build more roads and schools for local communities.
Those are all accommodations that mining companies find reasonable, says Mr. Dixon.
But an OPEC-like cartel? That's "crazy," says Honorary Prof. Phillip Crowson at Scotland's Center for Mineral Law and Policy.
"There were attempts to do this with phosphates, iron ore, bauxite, copper – none of them worked," he says, because too many nations opted out. "Mining companies don't have to invest, and if the terms aren't attractive, they won't."
Campbell thinks African arbitrators should call their bluff.
"The idea that global companies will go elsewhere, we've always heard that," she says. "We have to be careful about this discourse that says if you raise a finger, investment will flee."
Christian Science Monitor
African leaders are pushing for tougher terms on mining concessions after 25 years of structural adjustment – when countries cut red tape and offered generous tax holidays to foreign prospectors.
The new dynamic was on display at a recent mining conference in Senegal. The chief executive officer of a multinational Africa mining firm was speaking, but Senegal's president didn't appear to be listening.
Across the hall from President Abdoulaye Wade sat 500 delegates from foreign mining firms. They had come in March to see which new holes were worth digging in this continent whose riches are in demand from booming economies like China's.
When the CEO's presentation ended, Mr. Wade treated his visitors to a rhyme: "I never said, enrichissez-vous." [Enrich yourselves]. "I said enrichissons-nous." (Let's enrich one another.)
A cheer rose up from the African delegates.
"I think we're at a turning point," says Bonnie Campbell, political science professor at the University of Quebec in Montreal and author of "Mining in Africa." "There's been a quarter-century where a certain investment-friendly road has been taken. [Now] there is a recognition that there needs to be another focus."
The capstone of that push, at least for Wade, would be an international alliance of Africa's mineral-rich nations, modeled after OPEC – a pan-African body that could influence the price of metals like the cobalt in Chinese-made laptop and cellphone batteries, 90 percent of which comes from Africa, according to the business watchdog SwedWatch.
"It's an ambitious but feasible idea," says Mazou Yessouph Faudy, geological director for Niger's Mining Ministry. "Our economy is falling. As a producer of uranium, it would be good to involve ourselves in a union of producers that could set the price."
Already, according to estimates by gold mining company Randgold Resources, the continent produces 30 percent of the minerals required by the US and China.
"[Africa is] going to become a very important player in the commodity and minerals market," says Roger Dixon, chairman for South Africa's SRK mining consultancy, citing China's 11.9 percent growth in its gross domestic product, the total of goods and services produced, in the first quarter of 2010. "With that kind of demand, I think it's a great opportunity for Africa to move to the forefront of things."
The question is how. For African negotiators, seizing the moment may mean demanding that companies hire more locals, adhere to stricter environmental rules, or build more roads and schools for local communities.
Those are all accommodations that mining companies find reasonable, says Mr. Dixon.
But an OPEC-like cartel? That's "crazy," says Honorary Prof. Phillip Crowson at Scotland's Center for Mineral Law and Policy.
"There were attempts to do this with phosphates, iron ore, bauxite, copper – none of them worked," he says, because too many nations opted out. "Mining companies don't have to invest, and if the terms aren't attractive, they won't."
Campbell thinks African arbitrators should call their bluff.
"The idea that global companies will go elsewhere, we've always heard that," she says. "We have to be careful about this discourse that says if you raise a finger, investment will flee."
Christian Science Monitor
China opens up market to 4,000 African products
by William Gitonga
China has lifted import duties for some African products to open up its markets and fast track achievement of millennium development goals (MDGs).
Commercial Counselor in charge of Western Asian and African Affairs Xie Yajing said, "China has signed non-tariff agreements with more than 20 African countries to allow importation of more than 4,000 products and commodities duty free," said Ms Yajing.
Sino-Africa trade relations are warming up at a time when China has slapped anti-subisdy tariffs to some products from the US. This is the first time China has imposed duties on agricultural imports on the grounds of alleged subsidies to farmers.
The Chinese Government said it would levy anti-subsidy duties of up to 31.4 per cent on chicken products that have received US government subsidies. The new tariffs come on top of a February move to impose anti-dumping duties of 105.4 per cent on imported US chicken products.
Yajing said exports from China to Africa had not shown changes, but 23 African countries had increased exports to China.
"Trade volume with African countries in the first quarter of this year increased by 25 per cent to $27.8 billion over a corresponding period last year," she said.
Trade between Kenya and China has been in favour of China over the years, with an average trade imbalance of Sh18 billion in the last five years. Although trade imbalance is in favour of China, Kenya’s exports to the east Asia nation increased from $6.7 million in 2003 to $29.09 million in 2008, representing an average annual increase of 34.14 per cent over the period.
Kenya’s major imports from China include textile, electronics and footwear. Exports include cut flowers, tin ores and concentrates.
Trade imbalance has been blamed on the distance between China and Africa that makes exports uncompetitive due to transportation costs and African nations (and companies) making products that are identical to those manufactured by Chinese firms.
Yajing said her Government would also champion achievement of MDGs by increasing concession credit and commercial loans to Africa to improve infrastructure and other development projects.
The Standard
China has lifted import duties for some African products to open up its markets and fast track achievement of millennium development goals (MDGs).
Commercial Counselor in charge of Western Asian and African Affairs Xie Yajing said, "China has signed non-tariff agreements with more than 20 African countries to allow importation of more than 4,000 products and commodities duty free," said Ms Yajing.
Sino-Africa trade relations are warming up at a time when China has slapped anti-subisdy tariffs to some products from the US. This is the first time China has imposed duties on agricultural imports on the grounds of alleged subsidies to farmers.
The Chinese Government said it would levy anti-subsidy duties of up to 31.4 per cent on chicken products that have received US government subsidies. The new tariffs come on top of a February move to impose anti-dumping duties of 105.4 per cent on imported US chicken products.
Yajing said exports from China to Africa had not shown changes, but 23 African countries had increased exports to China.
"Trade volume with African countries in the first quarter of this year increased by 25 per cent to $27.8 billion over a corresponding period last year," she said.
Trade between Kenya and China has been in favour of China over the years, with an average trade imbalance of Sh18 billion in the last five years. Although trade imbalance is in favour of China, Kenya’s exports to the east Asia nation increased from $6.7 million in 2003 to $29.09 million in 2008, representing an average annual increase of 34.14 per cent over the period.
Kenya’s major imports from China include textile, electronics and footwear. Exports include cut flowers, tin ores and concentrates.
Trade imbalance has been blamed on the distance between China and Africa that makes exports uncompetitive due to transportation costs and African nations (and companies) making products that are identical to those manufactured by Chinese firms.
Yajing said her Government would also champion achievement of MDGs by increasing concession credit and commercial loans to Africa to improve infrastructure and other development projects.
The Standard
East Africa becomes key market and transit point for drugs
by Fred Oluoch
East Africa is no longer just a convenient transit point for hard drugs to the developed world. More and more East Africans are getting high, though mostly on the cheaper cannabis (bhangi) — turning the region into a large and profitable market for illicit drugs.
The latest report of the meeting of heads of anti-narcotic enforcement agencies of the East African Community countries paints a grim picture of a region losing the war on drugs.
As authorities fall behind on modernising anti-drug laws, intelligence and enforcement, an integrated regional drug economy is starting to emerge. This economy has a well-organised value chain of producers, traffickers, middlemen and street level retailers.
In Kenya, for instance, which has a big internal market for cannabis sativa that is supplied heavily by Tanzania and Uganda, local drug lords are starting to forge links with international trafficking cartels and crime groups. These links could soon extend to terrorist groups.
“Transit countries are progressively graduating into consuming countries,” says the report. “The modus operandi of transporting [these] drugs is changing day after day, both in scope and complexity, requiring new methods of detection.”
Tanzania and Kenya record the highest drug seizures, while Uganda leads with the vigour of its drug enforcement, prosecution and conviction. However, the data is too spotty for effective comparison.
The report says there is an increase in recruitment of European couriers, both young and elderly. There is also recruitment of local couriers by foreigners.
“Marriages of foreign and local drug barons/traffickers to local women [in Kenya] are a means of legitimising their stay and camouflaging their involvement in drug trafficking,” says the report.
Each country has unique enforcement challenges, depending on how its internal drug market is evolving. But one thing is common — cannabis is the most-consumed drug in the region.
This consumption is rising steadily, with thousands of farmers economically dependent on its production. Cannabis trade also employs thousands of low-income earners as couriers and street peddlers. At the producer level, EAC countries are interconnected.
While cocaine and heroin tend to attract the big headlines, the region does not constitute a big market because of their high prices.
Nairobi, Mombasa and Dar es Salaam are the main trans-shipment points to the global network, experts say.
The link between organised crime and terrorism is also a major threat to international security. The rising middle class in Kenya and Tanzania is also expected to create a growing market for these hard drugs.
All five countries of the regional bloc suffer from insufficient law enforcement, the report says. It adds that drug trafficking is a major threat to integration of the region, since transit countries are graduating into consuming countries.
Kenya, Burundi, Rwanda, Tanzania and Uganda are currently working on a joint approach to the problem. The mode of transportation of drugs, for instance, is changing by the day in scope and complexity. Traffickers are also changing routes to disguise the country of origin.
Figures on seized drugs indicate that huge quantities are being produced, trafficked and abused without the detection of law enforcement agencies. This is leading to associated crimes such as theft, violence, murder, corruption and money laundering in the five member countries.
So far, only Tanzania has ratified the EAC Protocol on combating drugs in East Africa.
With the advent of the Common Market in July — allowing free movement of goods and people — drug trafficking is set to become one of the leading transnational crimes.
The most trafficked drugs in the region are cocaine, heroin, mandrax, valium and cannabis sativa, mainly originating from the Far East, Afghanistan, Iran, India, Pakistan, Brazil, South Africa, US, and Peru. Cannabis sativa is the main drug trafficked and consumed in the region.
The capacity of law enforcement is largely deficient. Water masses, land and air transport are the main means of transportation of these drugs and involvement of airline and marine crew has worsened the menace.
Of great concern are the procedures for destruction of seized drugs, which are lenghthy and cumbersome — what with court proceedings and other red tape.
While Kenya, Uganda and Tanzania are grappling with hard drugs from outside the region, Burundi and Rwanda are dealing mainly with cases of cannabis.
The ‘danger drugs’ for East Africa are marijuana, cocaine and heroin. Khat is a controlled or illegal substance in two countries, but is legal for sale and production in the rest.
The East African
East Africa is no longer just a convenient transit point for hard drugs to the developed world. More and more East Africans are getting high, though mostly on the cheaper cannabis (bhangi) — turning the region into a large and profitable market for illicit drugs.
The latest report of the meeting of heads of anti-narcotic enforcement agencies of the East African Community countries paints a grim picture of a region losing the war on drugs.
As authorities fall behind on modernising anti-drug laws, intelligence and enforcement, an integrated regional drug economy is starting to emerge. This economy has a well-organised value chain of producers, traffickers, middlemen and street level retailers.
In Kenya, for instance, which has a big internal market for cannabis sativa that is supplied heavily by Tanzania and Uganda, local drug lords are starting to forge links with international trafficking cartels and crime groups. These links could soon extend to terrorist groups.
“Transit countries are progressively graduating into consuming countries,” says the report. “The modus operandi of transporting [these] drugs is changing day after day, both in scope and complexity, requiring new methods of detection.”
Tanzania and Kenya record the highest drug seizures, while Uganda leads with the vigour of its drug enforcement, prosecution and conviction. However, the data is too spotty for effective comparison.
The report says there is an increase in recruitment of European couriers, both young and elderly. There is also recruitment of local couriers by foreigners.
“Marriages of foreign and local drug barons/traffickers to local women [in Kenya] are a means of legitimising their stay and camouflaging their involvement in drug trafficking,” says the report.
Each country has unique enforcement challenges, depending on how its internal drug market is evolving. But one thing is common — cannabis is the most-consumed drug in the region.
This consumption is rising steadily, with thousands of farmers economically dependent on its production. Cannabis trade also employs thousands of low-income earners as couriers and street peddlers. At the producer level, EAC countries are interconnected.
While cocaine and heroin tend to attract the big headlines, the region does not constitute a big market because of their high prices.
Nairobi, Mombasa and Dar es Salaam are the main trans-shipment points to the global network, experts say.
The link between organised crime and terrorism is also a major threat to international security. The rising middle class in Kenya and Tanzania is also expected to create a growing market for these hard drugs.
All five countries of the regional bloc suffer from insufficient law enforcement, the report says. It adds that drug trafficking is a major threat to integration of the region, since transit countries are graduating into consuming countries.
Kenya, Burundi, Rwanda, Tanzania and Uganda are currently working on a joint approach to the problem. The mode of transportation of drugs, for instance, is changing by the day in scope and complexity. Traffickers are also changing routes to disguise the country of origin.
Figures on seized drugs indicate that huge quantities are being produced, trafficked and abused without the detection of law enforcement agencies. This is leading to associated crimes such as theft, violence, murder, corruption and money laundering in the five member countries.
So far, only Tanzania has ratified the EAC Protocol on combating drugs in East Africa.
With the advent of the Common Market in July — allowing free movement of goods and people — drug trafficking is set to become one of the leading transnational crimes.
The most trafficked drugs in the region are cocaine, heroin, mandrax, valium and cannabis sativa, mainly originating from the Far East, Afghanistan, Iran, India, Pakistan, Brazil, South Africa, US, and Peru. Cannabis sativa is the main drug trafficked and consumed in the region.
The capacity of law enforcement is largely deficient. Water masses, land and air transport are the main means of transportation of these drugs and involvement of airline and marine crew has worsened the menace.
Of great concern are the procedures for destruction of seized drugs, which are lenghthy and cumbersome — what with court proceedings and other red tape.
While Kenya, Uganda and Tanzania are grappling with hard drugs from outside the region, Burundi and Rwanda are dealing mainly with cases of cannabis.
The ‘danger drugs’ for East Africa are marijuana, cocaine and heroin. Khat is a controlled or illegal substance in two countries, but is legal for sale and production in the rest.
The East African
October 10, 2010
Export-led growth model is dead: UNCTAD
by Isolda Agazzi
While the recovery from the financial and economic meltdown remains fragile in especially the developed world, the outlook for Africa inspires optimism, according to UNCTAD. The agency also believes the crisis might be the death- knell for the export-led economic growth model -- especially African countries should leave it behind.
With the major industrial countries not being able to consume as much as before, export-led growth – mainly by encouraging investment in cheap labour-intensive industries - has no future.
Developing countries, especially in Africa, should therefore boost domestic consumption and allow wages to increase in line with productivity growth, according to UNCTAD (United Nations Conference on Trade and Development).
The findings are contained in the agency’s Trade and Development Report 2010, entitled "Employment, Globalisation and Development, which went public on Sep 14. Export-led growth prescriptions are associated with the neoliberal capitalist Washington Consensus.
The global economic and financial crisis has marked the end of the model of export-led growth for everybody, since "there must be somebody who imports and somebody who exports," Dr. Supachai Panitchpakdi, UNCTAD secretary general, stated at the presentation of the report in Geneva.
Now that the debt-financed consumption boom in the U.S. has ended, the U.S. economy will no longer serve as an engine of growth for the global economy. China, the euro area and Japan are unlikely to assume that role in the near future.
"Domestic demand in China is only one-eighth of that in the U.S.," Panitchpakdi continued. "Therefore, even if the Chinese economy tries to increase domestic spending, it cannot compensate for the loss of demand from the U.S. We advice developing countries to stay away from total export-led growth involving compressing domestic wages, because this will lead to less demand domestically and less employment creation."
It has been demonstrated that keeping wages low is not correlated with employment creation, Panitchpakdi argued. "We have to look at wages and income as a source of demand and with the lifting of wages, in line with productivity growth, demand could increase and lead to more investment."
To the question of how wages can be increased in a global environment where multinational companies pull out of countries and reinvest in others with more docile labour laws and lower wages, the response is that "it depends on a country’s economic policy strategy", declared Dr. Heiner Flassbeck, director of the UNCTAD division for globalisation and development strategies.
"If you believe that a flexible labour market is the best thing in the world, you will not strive to create institutions that could stabilise domestic demand. This has been the paradigm of the last 20 to 30 years and that is why such institutions do not exist."
There is a need for a paradigm shift, Flassbeck said, and UNCTAD, together with the financial institution the International Monetary Fund, should be able to convince governments about the need of establishing tripartite agreements to discuss national strategies. "This is a totally different approach for many countries, in particular for developing ones", he added.
Tripartite agreements involve the government, capital and trade unions.
The International Labour Organisation has cautioned countries about the fragility of the global economic recovery, since jobs have been created mainly in the informal sector.
UNCTAD believes that sustainable policies for wage increases need to cover both formal and informal labour markets and there needs to be a linkage between the two of them. An example would be guarantees on farming income as established by some countries.
This is particularly true for Africa, where "more than 20 years of orthodox macroeconomic policies have had limited success in creating the conditions necessary for rapid and sustainable growth," the report states.
By the end of the 1990s, according to the report, Africa’s "production structure was reminiscent of the colonial period, consisting overwhelmingly of agriculture and mining".
There is not a shortage of employment in absolute terms in African countries, but a lack of productive and decent jobs, states the report. Agriculture still absorbs more than 60 percent of the labour force and there has been a rise in employment, mainly informal, in urban services and small-scale commerce.
Formal wage jobs account for only 13 percent of employment and 60 percent of the employed are working poor.
Panitchpakdi pointed out that, "today, as shown by the recently released UNCTAD World Investment Report 2010, we are seeing an emergence of a different kind of investment policy, a mix between liberalising measures and more rules and regulations, particularly in developing countries."
Governments understand that investment left to its own devices could lead to dislocation of industries. Thus states are starting to again guide direct investment to specific geographic, social and economic areas. China, for example, is reorienting its investment policy from cheap labour-based to technology-based industries.
"UNCTAD is concerned with fragile and uneven recovery," Panitchpakdi stated. "There is real risk for some governments if they withdraw their support for the recovery too early. The pressure put on some countries, particularly industrialised ones, to try and balance their budget so early could dampen earlier stimulus measures and lead to weak growth."
But Flassbeck added that UNCTAD is "optimistic about Africa. The continent has not experienced such a dramatic drop in production in 2009 and we have seen a rebound of growth in many countries. In our view, Africa could have a continuation of 4,5 percent GDP (gross domestic product) growth in 2010."
IPS
While the recovery from the financial and economic meltdown remains fragile in especially the developed world, the outlook for Africa inspires optimism, according to UNCTAD. The agency also believes the crisis might be the death- knell for the export-led economic growth model -- especially African countries should leave it behind.
With the major industrial countries not being able to consume as much as before, export-led growth – mainly by encouraging investment in cheap labour-intensive industries - has no future.
Developing countries, especially in Africa, should therefore boost domestic consumption and allow wages to increase in line with productivity growth, according to UNCTAD (United Nations Conference on Trade and Development).
The findings are contained in the agency’s Trade and Development Report 2010, entitled "Employment, Globalisation and Development, which went public on Sep 14. Export-led growth prescriptions are associated with the neoliberal capitalist Washington Consensus.
The global economic and financial crisis has marked the end of the model of export-led growth for everybody, since "there must be somebody who imports and somebody who exports," Dr. Supachai Panitchpakdi, UNCTAD secretary general, stated at the presentation of the report in Geneva.
Now that the debt-financed consumption boom in the U.S. has ended, the U.S. economy will no longer serve as an engine of growth for the global economy. China, the euro area and Japan are unlikely to assume that role in the near future.
"Domestic demand in China is only one-eighth of that in the U.S.," Panitchpakdi continued. "Therefore, even if the Chinese economy tries to increase domestic spending, it cannot compensate for the loss of demand from the U.S. We advice developing countries to stay away from total export-led growth involving compressing domestic wages, because this will lead to less demand domestically and less employment creation."
It has been demonstrated that keeping wages low is not correlated with employment creation, Panitchpakdi argued. "We have to look at wages and income as a source of demand and with the lifting of wages, in line with productivity growth, demand could increase and lead to more investment."
To the question of how wages can be increased in a global environment where multinational companies pull out of countries and reinvest in others with more docile labour laws and lower wages, the response is that "it depends on a country’s economic policy strategy", declared Dr. Heiner Flassbeck, director of the UNCTAD division for globalisation and development strategies.
"If you believe that a flexible labour market is the best thing in the world, you will not strive to create institutions that could stabilise domestic demand. This has been the paradigm of the last 20 to 30 years and that is why such institutions do not exist."
There is a need for a paradigm shift, Flassbeck said, and UNCTAD, together with the financial institution the International Monetary Fund, should be able to convince governments about the need of establishing tripartite agreements to discuss national strategies. "This is a totally different approach for many countries, in particular for developing ones", he added.
Tripartite agreements involve the government, capital and trade unions.
The International Labour Organisation has cautioned countries about the fragility of the global economic recovery, since jobs have been created mainly in the informal sector.
UNCTAD believes that sustainable policies for wage increases need to cover both formal and informal labour markets and there needs to be a linkage between the two of them. An example would be guarantees on farming income as established by some countries.
This is particularly true for Africa, where "more than 20 years of orthodox macroeconomic policies have had limited success in creating the conditions necessary for rapid and sustainable growth," the report states.
By the end of the 1990s, according to the report, Africa’s "production structure was reminiscent of the colonial period, consisting overwhelmingly of agriculture and mining".
There is not a shortage of employment in absolute terms in African countries, but a lack of productive and decent jobs, states the report. Agriculture still absorbs more than 60 percent of the labour force and there has been a rise in employment, mainly informal, in urban services and small-scale commerce.
Formal wage jobs account for only 13 percent of employment and 60 percent of the employed are working poor.
Panitchpakdi pointed out that, "today, as shown by the recently released UNCTAD World Investment Report 2010, we are seeing an emergence of a different kind of investment policy, a mix between liberalising measures and more rules and regulations, particularly in developing countries."
Governments understand that investment left to its own devices could lead to dislocation of industries. Thus states are starting to again guide direct investment to specific geographic, social and economic areas. China, for example, is reorienting its investment policy from cheap labour-based to technology-based industries.
"UNCTAD is concerned with fragile and uneven recovery," Panitchpakdi stated. "There is real risk for some governments if they withdraw their support for the recovery too early. The pressure put on some countries, particularly industrialised ones, to try and balance their budget so early could dampen earlier stimulus measures and lead to weak growth."
But Flassbeck added that UNCTAD is "optimistic about Africa. The continent has not experienced such a dramatic drop in production in 2009 and we have seen a rebound of growth in many countries. In our view, Africa could have a continuation of 4,5 percent GDP (gross domestic product) growth in 2010."
IPS
India’s total trade with COMESA rises more than three-fold
India’s total trade with the Common Market for Eastern and Southern Africa (COMESA) region rose more than three fold and presents opportunities to enhance the bilateral commercial relations, a study conducted by Export and Import Bank of India (EXIM) has said.
During 2009-10, the COMESA, which comprises 19 countries in Eastern and Southern Africa, accounted for 38.2 per cent of India’s total exports to Africa, while the region’s share in the country’s total imports from Africa stood at 13.1 per cent.
“India’s total trade with the COMESA region has risen more than three fold from $2.55 billion in 2004-05 to $8.48 billion in 2009-10,” the study findings released here said.
It noted that the COMESA region recorded robust economic performances in recent years in spite of the global financial crisis. The total trade of the region has more than doubled from $ 108.5 billion in 2004 to $ 262.6 billion in 2008.
While the foreign direct investment (FDI) inflows into the COMESA increased over four folds in 2009 to $ 136.5 billion from $ 32.9 billion in 2000.
Exim Bank’s latest study highlights the potential items for India’s exports to the COMESA region, which broadly include electrical and electronic goods, plastic, articles of iron and steel, automotive components, petroleum products, pharmaceutical products, machinery and instruments, and cotton fabrics.
Items which hold potential for imports from COMESA region are broadly listed as: aluminium, copper, mineral fuel, coffee, resins, nuts, spices, sugar, leather, organic and inorganic chemicals and marine products.
The Hindu
During 2009-10, the COMESA, which comprises 19 countries in Eastern and Southern Africa, accounted for 38.2 per cent of India’s total exports to Africa, while the region’s share in the country’s total imports from Africa stood at 13.1 per cent.
“India’s total trade with the COMESA region has risen more than three fold from $2.55 billion in 2004-05 to $8.48 billion in 2009-10,” the study findings released here said.
It noted that the COMESA region recorded robust economic performances in recent years in spite of the global financial crisis. The total trade of the region has more than doubled from $ 108.5 billion in 2004 to $ 262.6 billion in 2008.
While the foreign direct investment (FDI) inflows into the COMESA increased over four folds in 2009 to $ 136.5 billion from $ 32.9 billion in 2000.
Exim Bank’s latest study highlights the potential items for India’s exports to the COMESA region, which broadly include electrical and electronic goods, plastic, articles of iron and steel, automotive components, petroleum products, pharmaceutical products, machinery and instruments, and cotton fabrics.
Items which hold potential for imports from COMESA region are broadly listed as: aluminium, copper, mineral fuel, coffee, resins, nuts, spices, sugar, leather, organic and inorganic chemicals and marine products.
The Hindu
India's Exim Bank gets $150 million loan to push trade with Africa
India's Export-Import Bank has secured a $150 million international loan to help expand Indian exporters' access to finance, including for small and medium enterprises, and support their exports to Africa.
IFC, a member of the World Bank Group, and the Bank of Tokyo-Mitsubishi UFJ, Ltd have each provided a medium-term trade-finance loan of up to $75 million to Exim bank, the IFC announced October 8.
IFC said it supports the transaction as part of its strategy of promoting trade and investment among countries in emerging markets.
"A large number of Indian corporations, including small and medium enterprises, have started looking at Africa as an export destination," said T.C.A Ranganathan, Exim Bank's chairman and managing director.
"The financing agreement with IFC and BTMU marks a key step in our relationship with them and in our strategy to provide finance to India's exporters with a focus on Africa."
The tie-up continues the long-standing relationship that IFC shares with Exim Bank and BTMU to provide support to emerging economies.
The Economic Times
IFC, a member of the World Bank Group, and the Bank of Tokyo-Mitsubishi UFJ, Ltd have each provided a medium-term trade-finance loan of up to $75 million to Exim bank, the IFC announced October 8.
IFC said it supports the transaction as part of its strategy of promoting trade and investment among countries in emerging markets.
"A large number of Indian corporations, including small and medium enterprises, have started looking at Africa as an export destination," said T.C.A Ranganathan, Exim Bank's chairman and managing director.
"The financing agreement with IFC and BTMU marks a key step in our relationship with them and in our strategy to provide finance to India's exporters with a focus on Africa."
The tie-up continues the long-standing relationship that IFC shares with Exim Bank and BTMU to provide support to emerging economies.
The Economic Times
Senegal to cancel contract with Indian steel manufacturing company
Senegal will cancel a contract with an Indian steel manufacturing company Arcelor Mittal for failure to respect its commitment, Senegalese President Abdoulaye Wade has announced.
"I have informed them (Mittal Group) that they did not honor their commitments. This is why I have asked the French judiciary to cancel the contract that it bound us together with Mittal," Wade said in a statement on October 6.
The Senegalese president made the announcement at a ceremony to hand over 150 keys to minibuses. The vehicles mounted at Thies assembly plant, 79 km from the capital Dakar, will facilitate public transport in Dakar.
In February 2007, Arcelor Mittal signed a partnership accord with Senegal, under which, the company was to invest 1.61 billion euros to mine iron ore deposits in Faleme region along the River Senegal.
The iron ore deposits in Faleme are estimated to be 750 million tons.
The Indian group agreed to construct an iron ore tanker at Bargny port, which is situated some 40 km from Dakar, and the company was also supposed to renovate the 750 km railways linking the mine to Bargny port.
"Today many investors are ready to take up the contract. We also intend to transform part of the iron ore here in Senegal," Wade pointed out.
Trading Markets
"I have informed them (Mittal Group) that they did not honor their commitments. This is why I have asked the French judiciary to cancel the contract that it bound us together with Mittal," Wade said in a statement on October 6.
The Senegalese president made the announcement at a ceremony to hand over 150 keys to minibuses. The vehicles mounted at Thies assembly plant, 79 km from the capital Dakar, will facilitate public transport in Dakar.
In February 2007, Arcelor Mittal signed a partnership accord with Senegal, under which, the company was to invest 1.61 billion euros to mine iron ore deposits in Faleme region along the River Senegal.
The iron ore deposits in Faleme are estimated to be 750 million tons.
The Indian group agreed to construct an iron ore tanker at Bargny port, which is situated some 40 km from Dakar, and the company was also supposed to renovate the 750 km railways linking the mine to Bargny port.
"Today many investors are ready to take up the contract. We also intend to transform part of the iron ore here in Senegal," Wade pointed out.
Trading Markets
Trade within East Africa on the rise as barriers fall
by McAdams Michael
Trade volumes in the region have increased tremendously since the establishment of the East African Community Customs Union Protocol on January 1, 2005.
According to Uganda’s First Deputy Prime Minister and Minister for EAC Affairs Eriya Kategaya, the region has witnessed improved revenue collections, intra-trade and Foreign Direct Investment, contrary to initial expectations.
He said Kenya’s revenue collection swelled from $2,511.9 million in 2001/2 to $6,538.3 million in 2007/8 while Uganda’s rose from $300 million to $650 million in the same period.
Tanzania’s tax revenue has been growing at an average of 35.9 per cent per annum from 2005/6 to 2007/8 compared with the average growth rate of 23.3 per cent attained between 2003/4 and 2004/5.
Mr Kategaya said the most rewarding achievement has been intra-trade.
Uganda’s volume of trade for instance, increased by 87.9 per cent to $947.0 million in 2008 from $504.0 million in 2004.
Tanzania’s trade volume increased by 65.3 per cent to $465.0 million from 281.3 million in the period under review.
Kenya’s trade volume swelled by 91.6 per cent to $1,395.0 million from $741 million.
FDI to the region almost tripled from $692 million in 2002 to $1.8 billion in 2008, with Uganda and Tanzania receiving the largest proportions.
This has augmented FDI stock in the region to $13.2 billion, Mr Kategaya explained.
Mr Mwapachu affirmed that the coming into force of the Common Market from July 1 would usher in new opportunities which local entrepreneurs need to exploit.
The EA trading bloc has a combined gross domestic product of $73 billion and average GDP per capita of $506.
The East African
Trade volumes in the region have increased tremendously since the establishment of the East African Community Customs Union Protocol on January 1, 2005.
According to Uganda’s First Deputy Prime Minister and Minister for EAC Affairs Eriya Kategaya, the region has witnessed improved revenue collections, intra-trade and Foreign Direct Investment, contrary to initial expectations.
He said Kenya’s revenue collection swelled from $2,511.9 million in 2001/2 to $6,538.3 million in 2007/8 while Uganda’s rose from $300 million to $650 million in the same period.
Tanzania’s tax revenue has been growing at an average of 35.9 per cent per annum from 2005/6 to 2007/8 compared with the average growth rate of 23.3 per cent attained between 2003/4 and 2004/5.
Mr Kategaya said the most rewarding achievement has been intra-trade.
Uganda’s volume of trade for instance, increased by 87.9 per cent to $947.0 million in 2008 from $504.0 million in 2004.
Tanzania’s trade volume increased by 65.3 per cent to $465.0 million from 281.3 million in the period under review.
Kenya’s trade volume swelled by 91.6 per cent to $1,395.0 million from $741 million.
FDI to the region almost tripled from $692 million in 2002 to $1.8 billion in 2008, with Uganda and Tanzania receiving the largest proportions.
This has augmented FDI stock in the region to $13.2 billion, Mr Kategaya explained.
Mr Mwapachu affirmed that the coming into force of the Common Market from July 1 would usher in new opportunities which local entrepreneurs need to exploit.
The EA trading bloc has a combined gross domestic product of $73 billion and average GDP per capita of $506.
The East African
Congo, South Africa to deepen trade ties
by Loni Prinsloo
Trade between South Africa and Republic of Congo reached a peak in 2009, and the two countries met in Johannesburg in early April to further trade relations between them.
Business Unity South Africa chairperson Sandile Zungu said that South Africa exported about R500-million worth of goods to the Congo last year. "Even though this represents a peak it is actually of a very low base and the potential exists to double or even triple that number with the right structures in place within the next year.
"With the assistance of the two governments and private business taking initiative and identifying potential areas of growth, R500-million in exports will look minimal in years to come."
South Africa exports a number of products to Congo that includes juice, fruit and vegetables, parts and accessories of machines, propylene, copolymers, front-end shovel loaders, light oils, containers, sodium triphosphate, telephones for cellular networks, mineral water, cable and other electrical conductors.
Zungu also emphasised that business activity between the two countries would not be a one-way path, and noted that South Africa had a special interest in importing products such as timber, oil, agro-processed food, coco and other beneficiated products from the Congo. "The Congo has the second-biggest forestry industry in the world, and is able to produce large volumes and very high quality timber," commented Zungu.
Further, Zuma said that even though the Congo's oil and petroleum sector was its biggest revenue earner and contributed more than 60% of the country's nominal gross domestic product, agriculture and other industries, were equally important for trade activities.
He welcomed the long-term land lease agreement of over 200 000 ha of idle farmland from the Congo to a consortium of South African farmers. Zuma said that South Africa also saw great potential to invest in the Congo's transport business especially relating to infrastructure development of its roads, maritime- and rail construction, mining, harnessing of energy, tourism development, and information communication technology services.
Bilateral relations between South Africa and Congo were first established on March 22,1993. Cooperation between the two countries operates within the general cooperation agreement and a cooperation agreement instituting a joint commission for cooperation (JCC), which was signed on 25 November 2003. However, the JCC was never formally launched. A bilateral trade agreement between the countries was signed in 2005.
Engineering News
Trade between South Africa and Republic of Congo reached a peak in 2009, and the two countries met in Johannesburg in early April to further trade relations between them.
Business Unity South Africa chairperson Sandile Zungu said that South Africa exported about R500-million worth of goods to the Congo last year. "Even though this represents a peak it is actually of a very low base and the potential exists to double or even triple that number with the right structures in place within the next year.
"With the assistance of the two governments and private business taking initiative and identifying potential areas of growth, R500-million in exports will look minimal in years to come."
South Africa exports a number of products to Congo that includes juice, fruit and vegetables, parts and accessories of machines, propylene, copolymers, front-end shovel loaders, light oils, containers, sodium triphosphate, telephones for cellular networks, mineral water, cable and other electrical conductors.
Zungu also emphasised that business activity between the two countries would not be a one-way path, and noted that South Africa had a special interest in importing products such as timber, oil, agro-processed food, coco and other beneficiated products from the Congo. "The Congo has the second-biggest forestry industry in the world, and is able to produce large volumes and very high quality timber," commented Zungu.
Further, Zuma said that even though the Congo's oil and petroleum sector was its biggest revenue earner and contributed more than 60% of the country's nominal gross domestic product, agriculture and other industries, were equally important for trade activities.
He welcomed the long-term land lease agreement of over 200 000 ha of idle farmland from the Congo to a consortium of South African farmers. Zuma said that South Africa also saw great potential to invest in the Congo's transport business especially relating to infrastructure development of its roads, maritime- and rail construction, mining, harnessing of energy, tourism development, and information communication technology services.
Bilateral relations between South Africa and Congo were first established on March 22,1993. Cooperation between the two countries operates within the general cooperation agreement and a cooperation agreement instituting a joint commission for cooperation (JCC), which was signed on 25 November 2003. However, the JCC was never formally launched. A bilateral trade agreement between the countries was signed in 2005.
Engineering News
Nigeria and China sign $23bn deal for three refineries
Nigeria's state-run oil firm NNPC and China State Construction Engineering Corporation (CSCEC) signed a $23bn (£16bn; 18bn euros) deal in May.
The two will jointly seek financing and credits from Chinese authorities and banks to build three refineries and a fuel complex in Nigeria.
The project would add 750,000 barrels per day of extra refining capacity.
NNPC hopes the construction of new refineries will stem the flood of imported refined products into Nigeria.
Nigeria is the world's 12th-largest oil producer and the eighth-largest oil exporter. But the country imports roughly 85% of its fuel needs because of the disrepair and mismanagement of its four state-owned refineries.
The three refineries will be built in Bayelsa, Kogi and Lagos states, while a location has to be confirmed for the petrochemicals complex.
The Nigerian government has said that foreign companies must invest in developing Nigeria's infrastructure and economy first, before they can benefit from its oil and gas exports.
BBC
The two will jointly seek financing and credits from Chinese authorities and banks to build three refineries and a fuel complex in Nigeria.
The project would add 750,000 barrels per day of extra refining capacity.
NNPC hopes the construction of new refineries will stem the flood of imported refined products into Nigeria.
Nigeria is the world's 12th-largest oil producer and the eighth-largest oil exporter. But the country imports roughly 85% of its fuel needs because of the disrepair and mismanagement of its four state-owned refineries.
The three refineries will be built in Bayelsa, Kogi and Lagos states, while a location has to be confirmed for the petrochemicals complex.
The Nigerian government has said that foreign companies must invest in developing Nigeria's infrastructure and economy first, before they can benefit from its oil and gas exports.
BBC
StanChart raises Africa trade loan facility
Standard Chartered said on May 18 it had raised its syndicated loan facility, used to finance trade of soft commodities in Africa, to $120 million from $47.5 million to promote food security in the continent.
The London-based bank, which has operations in Africa, Asia and the Middle East, said the facility, said the facility would be used to import commodities into Africa which are in short supply.
"On the inverse, the facility will be used to purchase locally produced cash crops directly from small-holder farmers which will help to support local agricultural production and support economic growth of that economy," Zhann Meyer, said the bank's head of Commodity Traders and Agriculture for Africa.
Meyer said most soft commodities produced in Africa or imported by Africa -- such as wheat, sugar, rice, cashew nuts and ground nuts -- are traded within the facility, which started in 2008.
Reuters
The London-based bank, which has operations in Africa, Asia and the Middle East, said the facility, said the facility would be used to import commodities into Africa which are in short supply.
"On the inverse, the facility will be used to purchase locally produced cash crops directly from small-holder farmers which will help to support local agricultural production and support economic growth of that economy," Zhann Meyer, said the bank's head of Commodity Traders and Agriculture for Africa.
Meyer said most soft commodities produced in Africa or imported by Africa -- such as wheat, sugar, rice, cashew nuts and ground nuts -- are traded within the facility, which started in 2008.
Reuters
October 07, 2010
Twelve reasons to invest in Africa
by Ben Baden
Forget the BRIC countries of Brazil, Russia, India, and China. Larry Seruma, chief investment officer of Nile Capital Management, says many retail investors are missing a tremendous opportunity for growth in Africa. Seruma manages the Nile Pan Africa fund, the first actively managed, U.S.-based mutual fund to focus exclusively on Africa. He recently released a report, which can be seen here, that explains his investment firm's reasons for investing in the continent.
Seruma says more investors will begin to look outside of developed markets like the United States for growth, because those markets aren't expected to grow as fast as they have in the past. "It's only much more recently you're beginning to see these huge disparities coalesce," he says. "The U.S. is going to have very low investment opportunities going forward."
Investing in Africa involves plenty of risks. The biggest, Seruma says, is liquidity. "Liquidity is really the ability to trade frequently," he says. "When you want to get out of a position, it's not easy to get out of a position." Executing trades can be difficult because some African stock markets aren't as transparent and not as much trading takes place compared with, say, the S&P 500. There are other concerns, including the threat of government and corporate corruption. Many African countries have become functioning democracies, however, according to Seruma.
There are a number of other funds that give investors access to Africa and other "frontier" markets, which are also sometimes called pre-emerging markets. Templeton Frontier Marketsand iShares MSCI South Africa Index ETF are two examples. Out of the 53 countries in Africa, Seruma's fund currently invests in 14, which together account for about 90 percent of Africa's overall market capitalization. Here are Seruma's reasons for investing in Africa.
'Ground-floor opportunity.' Seruma says many investors have already missed what he calls a "ground-floor opportunity" in Africa. For the decade ending Dec. 31, 2009, an African composite index made up of eight countries, including South Africa, Nigeria, and Egypt, returned about 14 percent annualized. South Africa alone returned an average of 13 percent per year over that period.
Forget the BRIC countries of Brazil, Russia, India, and China. Larry Seruma, chief investment officer of Nile Capital Management, says many retail investors are missing a tremendous opportunity for growth in Africa. Seruma manages the Nile Pan Africa fund, the first actively managed, U.S.-based mutual fund to focus exclusively on Africa. He recently released a report, which can be seen here, that explains his investment firm's reasons for investing in the continent.
Seruma says more investors will begin to look outside of developed markets like the United States for growth, because those markets aren't expected to grow as fast as they have in the past. "It's only much more recently you're beginning to see these huge disparities coalesce," he says. "The U.S. is going to have very low investment opportunities going forward."
Investing in Africa involves plenty of risks. The biggest, Seruma says, is liquidity. "Liquidity is really the ability to trade frequently," he says. "When you want to get out of a position, it's not easy to get out of a position." Executing trades can be difficult because some African stock markets aren't as transparent and not as much trading takes place compared with, say, the S&P 500. There are other concerns, including the threat of government and corporate corruption. Many African countries have become functioning democracies, however, according to Seruma.
There are a number of other funds that give investors access to Africa and other "frontier" markets, which are also sometimes called pre-emerging markets. Templeton Frontier Marketsand iShares MSCI South Africa Index ETF are two examples. Out of the 53 countries in Africa, Seruma's fund currently invests in 14, which together account for about 90 percent of Africa's overall market capitalization. Here are Seruma's reasons for investing in Africa.
'Ground-floor opportunity.' Seruma says many investors have already missed what he calls a "ground-floor opportunity" in Africa. For the decade ending Dec. 31, 2009, an African composite index made up of eight countries, including South Africa, Nigeria, and Egypt, returned about 14 percent annualized. South Africa alone returned an average of 13 percent per year over that period.
Compare that with the MSCI Emerging Markets Index, which returned about 7 percent annualized, or the S&P 500, which lost about 3 percent over the same time period. He compares the risk versus return ratio in Africa today with emergingmarkets like China, India, and Brazil in the late 1900s—meaning that investors who enter a new high-growth market first reap the highest returns over time because they're willing to take on more risk.
Low correlation. Correlation is a measure of how investments perform in relation to each other. A low correlation, for example, means that two securities will frequently move in opposite directions. According to Seruma's research, from January 2002 through June 2009, an African composite index of eight countries had a correlation of 0.59 with the S&P 500, 0.66 with the MSCI EAFE Index (which measures developed markets outside of North America), and 0.60 with the MSCI Emerging Markets Index.
Low correlation. Correlation is a measure of how investments perform in relation to each other. A low correlation, for example, means that two securities will frequently move in opposite directions. According to Seruma's research, from January 2002 through June 2009, an African composite index of eight countries had a correlation of 0.59 with the S&P 500, 0.66 with the MSCI EAFE Index (which measures developed markets outside of North America), and 0.60 with the MSCI Emerging Markets Index.
That means that 59 percent of the time, the returns of the African index differed from those of the S&P 500. Investors can use correlation statistics to find out how to better diversify their portfolios. "The African markets have a very low correlation with domestic or other emerging markets, so [you have a] good opportunity to actually reduce risk in the overall portfolio," he says. Diversifying your portfolio among uncorrelated assets can help offset big losses.
Strong growth expected. According to projections from the World Bank, nine of the 15 countries in the world with the highest rate of five-year economic growth are in Africa. Seruma estimates that Africa is likely to grow by 4.7 percent over the next five years. Economists expect much slower growth in places like the United States and U.K. over the next few years. "It's a pretty huge growth differential," he says.
Profitable companies. There are a number of well-known companies that are based in Africa, including South African Breweries (a subsidiary of SABMiller) and telecom company MTN. Africa's total stock market capitalization now exceeds $1 trillion. A recent study by two economists, Paul Collier and Jean-Louis Warnholz, found that from 2002 to 2007, the average annual return on capital of African companies was 65 percent to 70 percent higher than that of comparable companies in China, India, Indonesia, and Vietnam. That means the African companies were more profitable.
Demand for commodities. "It's mainly driven by [the] BRICs," Seruma says. "As they industrialize, they're going to be demanding more and more of these commodities." For instance, 10 percent of the world's oil reserves and 40 percent of the world's proven gold reserves are found in Africa, according to Seruma.
Increasingly less violent. According to Freedom House, 63 percent of Africa's population now lives in countries designated "free or partially free." Compare that with Asia, which has a score of 66 percent. Seruma says most African countries now have functioning democracies. "It's a very different picture from what it was 20 years ago, and that has increased investment," he says.
China's involvement in the region. Seruma singles out China because many Chinese companies—some of which are backed by the government—have made significant investments in Africa. "They are really taking a long-term view about investing in Africa," he says. The governments of countries like China have realized that they're going to need resources from the African continent to fund their growth and consumption in the future, Seruma says.
Infrastructure spending. Countries are no longer coming to Africa solely to extract resources. They're beginning to stay and help make important infrastructure improvements in the continent, Seruma says. "The old story of investment in Africa was 'let us get the natural resources out of the ground and immediately ship it out,'" Seruma says. "Now it's changing. Not only do they go to Africa and make an investment in Africa, but they're also making the additional development projects." For instance, diamond giant De Beers recently signed a deal to mine diamonds in Botswana, including a commitment to build a diamond sorting facility.
Low debt. Concerns about sovereign debt—the debt that governments owe—has made headlines in Europe. Countries like Greece, Portugal, and most recently, Ireland have seen their debt downgraded by ratings agencies like Standard & Poor's. The United States also faces a huge budget deficit. Seruma says he believes that the United States will see five or six more years of low interest rates, which will lead many investors to look to different regions of the world for higher yield. "The capital being pushed out of the developed markets is going to benefit Africa," he says. "We believe this time around, there is some sustainability in terms of capital flows." Many African countries don't have the same worries. Seruma cites Nigeria, which has a debt-to-GDP ratio of only 18 percent, compared with countries like Greece and Japan whose debt-to-GDP ratio is more than 100 percent.
Growing investment from abroad. Seruma also cites a United Nations Conference on Trade and Development report, which shows that capital flows to Africa are higher than three of the four BRIC countries. Africa is ahead of Brazil, India, and Russia. It's second only to China.
Attractive valuations. Seruma believes that many African countries are currently trading at attractive valuations. He says the average price-to-earnings ratio for African companies is about 8 to 9 percent compared with the S&P 500, which has an average P/E ratio of about 15 or 16 percent. "There's a huge valuation differential that is not explained by the risk," he says.
Young demographics. Compared with other regions of the world, Africa has a much younger median age, which means African governments aren't as burdened by elderly populations andpension plans. It also means that Africa has a young, vibrant workforce, Seruma says. Africa's most populous nation is Nigeria, which Seruma accounts for about a quarter of Africa's total population. Nigeria's median age is 19 years old. Compare that with 37 in the United States, 40 in the U.K., and 45 in Japan.
US News & World Report
Strong growth expected. According to projections from the World Bank, nine of the 15 countries in the world with the highest rate of five-year economic growth are in Africa. Seruma estimates that Africa is likely to grow by 4.7 percent over the next five years. Economists expect much slower growth in places like the United States and U.K. over the next few years. "It's a pretty huge growth differential," he says.
Profitable companies. There are a number of well-known companies that are based in Africa, including South African Breweries (a subsidiary of SABMiller) and telecom company MTN. Africa's total stock market capitalization now exceeds $1 trillion. A recent study by two economists, Paul Collier and Jean-Louis Warnholz, found that from 2002 to 2007, the average annual return on capital of African companies was 65 percent to 70 percent higher than that of comparable companies in China, India, Indonesia, and Vietnam. That means the African companies were more profitable.
Demand for commodities. "It's mainly driven by [the] BRICs," Seruma says. "As they industrialize, they're going to be demanding more and more of these commodities." For instance, 10 percent of the world's oil reserves and 40 percent of the world's proven gold reserves are found in Africa, according to Seruma.
Increasingly less violent. According to Freedom House, 63 percent of Africa's population now lives in countries designated "free or partially free." Compare that with Asia, which has a score of 66 percent. Seruma says most African countries now have functioning democracies. "It's a very different picture from what it was 20 years ago, and that has increased investment," he says.
China's involvement in the region. Seruma singles out China because many Chinese companies—some of which are backed by the government—have made significant investments in Africa. "They are really taking a long-term view about investing in Africa," he says. The governments of countries like China have realized that they're going to need resources from the African continent to fund their growth and consumption in the future, Seruma says.
Infrastructure spending. Countries are no longer coming to Africa solely to extract resources. They're beginning to stay and help make important infrastructure improvements in the continent, Seruma says. "The old story of investment in Africa was 'let us get the natural resources out of the ground and immediately ship it out,'" Seruma says. "Now it's changing. Not only do they go to Africa and make an investment in Africa, but they're also making the additional development projects." For instance, diamond giant De Beers recently signed a deal to mine diamonds in Botswana, including a commitment to build a diamond sorting facility.
Low debt. Concerns about sovereign debt—the debt that governments owe—has made headlines in Europe. Countries like Greece, Portugal, and most recently, Ireland have seen their debt downgraded by ratings agencies like Standard & Poor's. The United States also faces a huge budget deficit. Seruma says he believes that the United States will see five or six more years of low interest rates, which will lead many investors to look to different regions of the world for higher yield. "The capital being pushed out of the developed markets is going to benefit Africa," he says. "We believe this time around, there is some sustainability in terms of capital flows." Many African countries don't have the same worries. Seruma cites Nigeria, which has a debt-to-GDP ratio of only 18 percent, compared with countries like Greece and Japan whose debt-to-GDP ratio is more than 100 percent.
Growing investment from abroad. Seruma also cites a United Nations Conference on Trade and Development report, which shows that capital flows to Africa are higher than three of the four BRIC countries. Africa is ahead of Brazil, India, and Russia. It's second only to China.
Attractive valuations. Seruma believes that many African countries are currently trading at attractive valuations. He says the average price-to-earnings ratio for African companies is about 8 to 9 percent compared with the S&P 500, which has an average P/E ratio of about 15 or 16 percent. "There's a huge valuation differential that is not explained by the risk," he says.
Young demographics. Compared with other regions of the world, Africa has a much younger median age, which means African governments aren't as burdened by elderly populations andpension plans. It also means that Africa has a young, vibrant workforce, Seruma says. Africa's most populous nation is Nigeria, which Seruma accounts for about a quarter of Africa's total population. Nigeria's median age is 19 years old. Compare that with 37 in the United States, 40 in the U.K., and 45 in Japan.
US News & World Report
New trade finance facility for African exporters, importers announced
The African Development Bank (AfDB) Group, US-based financial services company Citigroup and the International Finance Corporation (IFC) have partnered to provide US$175 million in trade financing for exporters and importers in Africa to help boost economic growth.
The financing is part of the Global Trade Liquidity Program, a public-private partnership launched in July 2009 to support trade in developing markets and address the shortage of trade finance following the global financial crisis.
Under the transaction, Citigroup will originate a $175 million portfolio in trade finance transactions from banks across Africa, focusing on low-income countries. The local banks, in turn, will extend trade financing to importers and exporters. IFC and AfDB will jointly fund 40% of the portfolio to provide Citigroup with additional liquidity. The short-term, revolving nature of the assets financed could mean a $1 billion total impact in trade financing.
The transaction, part of a larger strategy to transform trade finance in Africa, addresses increased demand in the region.
The financing is part of the Global Trade Liquidity Program, a public-private partnership launched in July 2009 to support trade in developing markets and address the shortage of trade finance following the global financial crisis.
Under the transaction, Citigroup will originate a $175 million portfolio in trade finance transactions from banks across Africa, focusing on low-income countries. The local banks, in turn, will extend trade financing to importers and exporters. IFC and AfDB will jointly fund 40% of the portfolio to provide Citigroup with additional liquidity. The short-term, revolving nature of the assets financed could mean a $1 billion total impact in trade financing.
The transaction, part of a larger strategy to transform trade finance in Africa, addresses increased demand in the region.
Trade between Rwanda and neighbours up 41% in two years
by Saul Butera
Trade between Rwanda and its East African Community (EAC) partner states rose by 41 percent in the previous two years, an indication of the immense potential of the region's trading block, a Rwandan government official has said.
The Minister of Trade and Industry, Monique Nsanzabaganwa, said that trade between Rwanda and the rest of the EAC states of Kenya, Uganda, Burundi and Tanzania grew to $337.6 million (Rwf 197.1 billion), up from $237.8 million (Rwf 138.8 b) in 2008.
"These figures are an indication of the immense potential of the EAC trading block and the role it can play in boosting trade for development across the region," Nsanzabaganwa said.
Rwanda's imports from the EAC region increased from $199.9 million (Rwf 116.6 billion) in 2007 to $299.8 million (Rwf 175 billion) in 2008.
"Portland Cement, fertilizers, salt, minerals, fuels and oils, iron and steel, cereals and soaps dominated imports from EAC in 2008," Nsanzabaganwa said.
The Minister also revealed that the country's exports to the region remained stable at $37.9 million (Rwf 22.1 billion) and total exports to EAC in 2007 and 2008 accounted for 16.0 percent and 11.2 percent of the country's total exports respectively.
"Tea, coffee, minerals, dried leguminous vegetables and fruits dominated exports to the EAC," she said.
New Times
Trade between Rwanda and its East African Community (EAC) partner states rose by 41 percent in the previous two years, an indication of the immense potential of the region's trading block, a Rwandan government official has said.
The Minister of Trade and Industry, Monique Nsanzabaganwa, said that trade between Rwanda and the rest of the EAC states of Kenya, Uganda, Burundi and Tanzania grew to $337.6 million (Rwf 197.1 billion), up from $237.8 million (Rwf 138.8 b) in 2008.
"These figures are an indication of the immense potential of the EAC trading block and the role it can play in boosting trade for development across the region," Nsanzabaganwa said.
Rwanda's imports from the EAC region increased from $199.9 million (Rwf 116.6 billion) in 2007 to $299.8 million (Rwf 175 billion) in 2008.
"Portland Cement, fertilizers, salt, minerals, fuels and oils, iron and steel, cereals and soaps dominated imports from EAC in 2008," Nsanzabaganwa said.
The Minister also revealed that the country's exports to the region remained stable at $37.9 million (Rwf 22.1 billion) and total exports to EAC in 2007 and 2008 accounted for 16.0 percent and 11.2 percent of the country's total exports respectively.
"Tea, coffee, minerals, dried leguminous vegetables and fruits dominated exports to the EAC," she said.
New Times
Regional power generation and trade could save Africa $2 billion a year
by Chanel de Bruyn
Hydropower projects in Africa should be approached in a regional manner, World Bank Africa region water and hydropower adviser Vahid Alavian said on August 17, highlighting that economies of scale in terms of electricity generation and regional power trade could save Africa $2-billion a year.
Despite its large hydropower potential, of about 100 000 MW, Africa remained behind all other regions in terms of harnessing this potential, Alavian told the Hydropower Africa conference in Johannesburg.
The continent, with its lack of electricity generation capacity, had a huge power investment requirement.
Energy availability in Africa remained pitifully low, while power remained expensive. This put a brake on the continent's economic growth and competitiveness, said Alavain. He added that the continent needed to boost its generation capacity by about 7 000 MW a year and power connections by about five-million a year to keep up with demand.
Regional development of hydropower projects could assist Africa in expanding its generation capacity.
Alavian highlighted that most countries in Africa were too small to generate hydropower efficiently. More than 20 countries had a population of less than five-million people, while another more than 20 countries had economies smaller than $5-billion.
Further, Africa had 60 international river basins. Any upstream decisions could also potentially impact on downstream operations on the same river system if proper interregional discussions were not held, said Alavian. However, in many cases, the critical transmission links for the trade of regional power were missing. Regional power trading could help to reduce costs and facilitate a shift to cleaner energy forms, including hydropower, he said.
Engineering News
Hydropower projects in Africa should be approached in a regional manner, World Bank Africa region water and hydropower adviser Vahid Alavian said on August 17, highlighting that economies of scale in terms of electricity generation and regional power trade could save Africa $2-billion a year.
Despite its large hydropower potential, of about 100 000 MW, Africa remained behind all other regions in terms of harnessing this potential, Alavian told the Hydropower Africa conference in Johannesburg.
The continent, with its lack of electricity generation capacity, had a huge power investment requirement.
Energy availability in Africa remained pitifully low, while power remained expensive. This put a brake on the continent's economic growth and competitiveness, said Alavain. He added that the continent needed to boost its generation capacity by about 7 000 MW a year and power connections by about five-million a year to keep up with demand.
Regional development of hydropower projects could assist Africa in expanding its generation capacity.
Alavian highlighted that most countries in Africa were too small to generate hydropower efficiently. More than 20 countries had a population of less than five-million people, while another more than 20 countries had economies smaller than $5-billion.
Further, Africa had 60 international river basins. Any upstream decisions could also potentially impact on downstream operations on the same river system if proper interregional discussions were not held, said Alavian. However, in many cases, the critical transmission links for the trade of regional power were missing. Regional power trading could help to reduce costs and facilitate a shift to cleaner energy forms, including hydropower, he said.
Engineering News
"Borderless Southern Africa is a pie in the sky"
by Servaas van den Bosch
Regional economic integration plans in southern Africa are not rooted in reality, according to civil society organisations holding a parallel meeting alongside the Southern African Development Community (SADC) summit in Namibia’s capital of Windhoek.
Banned by the Namibian government from marching and voicing their discontent while the SADC heads of state meet between Aug 16-17, civil society organised a "people’s summit" in the city’s Catholic cathedral to discuss trade agreements and regional economic integration.
"A borderless southern Africa is a pie in the sky at the moment," says trade analyst Dot Keet from the Alternative Information and Development Centre (AIDC), based in South Africa. "The 2008 SADC Free Trade Agreement wasn’t signed by all member states. More importantly, it is not being implemented."
The customs union due to be launched in 2010 has been put on the backburner because the region is not ready.
Part of the failure to move ahead with a regional economic integration agenda, which foresees a monetary union in 2015 and a common currency in 2018, is due to the widely varying priorities of SADC member states, according to Keet and other civil society analysts.
"Botswana wants to be this hub for business and financial services, banking on its strong legal system and market access to South Africa," explains Keet. "Countries like Lesotho and Swaziland desperately want to hold on to the aid they receive. Some countries are going ahead with liberalisation at a faster rate than others, which has dramatic effects on the region."
According to Keet, "trade is extremely imbalanced currently. For instance, for every 20 products that South Africa exports to Zambia, only one comes back. A functioning free trade area (FTA) will exacerbate this situation. The countries with stronger economies take advantage of the weaker countries that have little to offer."
In additions, the economic partnership agreements (EPAs) with the European Union (EU), spelling out liberalisation of 85 percent of tariff lines, will make it easier for European goods to enter the FTA. "This will multiply the existing trade imbalances," states Keet.
Cross-border traders in the region, who recently obtained a tax waiver on consignments under 500 dollars, could be severely affected by different tariff regimes in the SADC area, she argues.
"Mozambique is liberalising tariffs at a fast pace, which can cause problems for traders trying to import goods into South Africa that has a different tariff regime. Border officials will interrogate the traders more intensely and examine the origin of the products closely."
United Nations (UN) Millennium Campaign coordinator Thomas Deve says, "not one single country in the region is happy with the pace of development. Instead of resource mobilisation through trade, liberalisation has led to deindustrialisation and massive job losses, with the number of poor people in the region increasing".
The UN Millennium Campaign is aimed at mobilising popular support for the actualisation of the UN millennium development goals.
The civil society representatives argue that the process of economic integration needs to be stripped from political rhetoric and built up from the ground.
Rumbidzai Masango of the Economic Justice Network (EJN), a project of the Fellowship of Christian Councils of Southern Africa (FOCCISA), says that: "SADC is not ready for the ambitious milestones that are currently set out.
"Introducing one currency in the near future would throw countries like South Africa and Namibia 10 years back." FOCCISA is an ecumenical organisation working with 11 national church councils in southern Africa.
She adds: "The region should set minimum standards with regards to inflation targets, budget deficits and monetary policies. It’s important to ensure countries are stable before marrying the different economies."
Keet agrees: "The region needs to move rapidly to put in place common strategies where it can. The transport and communications sector is one area where progress can be made quickly. But we also really need strategies on water management, food security and energy provision.
"Even a common industrial policy like South Africa is pushing at the moment is not out of reach," Keet believes.
The immediate economic survival of the region depends on harmonisation of policies and a common negotiating position with the EU and other trade blocs, argue the trade experts.
The perceived dominance of South Africa in SADC does not have to be an impediment, says Keet. "You can’t wish South Africa away. Instead the other countries can stick together to offer a counter-weight.
"They have to negotiate a charter on cross border investment, regulating the profits South Africa companies can repatriate. Pretoria will welcome this as it will alleviate some of the political pressure.
"This heads of state summit will deliver the usual rhetoric. What I really would like to see is the SADC states coming together in the EPA discussions and negotiating as one bloc," says Keet.
"As long as we haven’t determined our own position in the region on some vital issues such as export taxes, infant industry protection, rules of origin and so on, there cannot be final EPAs," she adds.
"Economic integration will be gradual, incremental and based on variable geometry in different sectors," argues Keet, who is of the opinion that the system of preferences in the EU – currently the focus of heated negotiations – will gradually disappear.
"And then our products will have to compete with those of the rest of the world."
Masango calls it a "catch-22 situation": "Countries are coerced into signing for future development, yet the regional economic integration that the EPAs supposedly offer is clearly not taking place."
For example, some provisions, such as those on fisheries, are contradictory to countries’ development goals, Masango argues. "The Europeans want to come and fish in waters all along Africa’s shores and sell the fish at huge profit in Europe.
"But, on the other hand, it is often impossible for African countries to export fish themselves because of the high phyto-sanitary requirements. How can that be fair trade?" she asks.
IPS
Regional economic integration plans in southern Africa are not rooted in reality, according to civil society organisations holding a parallel meeting alongside the Southern African Development Community (SADC) summit in Namibia’s capital of Windhoek.
Banned by the Namibian government from marching and voicing their discontent while the SADC heads of state meet between Aug 16-17, civil society organised a "people’s summit" in the city’s Catholic cathedral to discuss trade agreements and regional economic integration.
"A borderless southern Africa is a pie in the sky at the moment," says trade analyst Dot Keet from the Alternative Information and Development Centre (AIDC), based in South Africa. "The 2008 SADC Free Trade Agreement wasn’t signed by all member states. More importantly, it is not being implemented."
The customs union due to be launched in 2010 has been put on the backburner because the region is not ready.
Part of the failure to move ahead with a regional economic integration agenda, which foresees a monetary union in 2015 and a common currency in 2018, is due to the widely varying priorities of SADC member states, according to Keet and other civil society analysts.
"Botswana wants to be this hub for business and financial services, banking on its strong legal system and market access to South Africa," explains Keet. "Countries like Lesotho and Swaziland desperately want to hold on to the aid they receive. Some countries are going ahead with liberalisation at a faster rate than others, which has dramatic effects on the region."
According to Keet, "trade is extremely imbalanced currently. For instance, for every 20 products that South Africa exports to Zambia, only one comes back. A functioning free trade area (FTA) will exacerbate this situation. The countries with stronger economies take advantage of the weaker countries that have little to offer."
In additions, the economic partnership agreements (EPAs) with the European Union (EU), spelling out liberalisation of 85 percent of tariff lines, will make it easier for European goods to enter the FTA. "This will multiply the existing trade imbalances," states Keet.
Cross-border traders in the region, who recently obtained a tax waiver on consignments under 500 dollars, could be severely affected by different tariff regimes in the SADC area, she argues.
"Mozambique is liberalising tariffs at a fast pace, which can cause problems for traders trying to import goods into South Africa that has a different tariff regime. Border officials will interrogate the traders more intensely and examine the origin of the products closely."
United Nations (UN) Millennium Campaign coordinator Thomas Deve says, "not one single country in the region is happy with the pace of development. Instead of resource mobilisation through trade, liberalisation has led to deindustrialisation and massive job losses, with the number of poor people in the region increasing".
The UN Millennium Campaign is aimed at mobilising popular support for the actualisation of the UN millennium development goals.
The civil society representatives argue that the process of economic integration needs to be stripped from political rhetoric and built up from the ground.
Rumbidzai Masango of the Economic Justice Network (EJN), a project of the Fellowship of Christian Councils of Southern Africa (FOCCISA), says that: "SADC is not ready for the ambitious milestones that are currently set out.
"Introducing one currency in the near future would throw countries like South Africa and Namibia 10 years back." FOCCISA is an ecumenical organisation working with 11 national church councils in southern Africa.
She adds: "The region should set minimum standards with regards to inflation targets, budget deficits and monetary policies. It’s important to ensure countries are stable before marrying the different economies."
Keet agrees: "The region needs to move rapidly to put in place common strategies where it can. The transport and communications sector is one area where progress can be made quickly. But we also really need strategies on water management, food security and energy provision.
"Even a common industrial policy like South Africa is pushing at the moment is not out of reach," Keet believes.
The immediate economic survival of the region depends on harmonisation of policies and a common negotiating position with the EU and other trade blocs, argue the trade experts.
The perceived dominance of South Africa in SADC does not have to be an impediment, says Keet. "You can’t wish South Africa away. Instead the other countries can stick together to offer a counter-weight.
"They have to negotiate a charter on cross border investment, regulating the profits South Africa companies can repatriate. Pretoria will welcome this as it will alleviate some of the political pressure.
"This heads of state summit will deliver the usual rhetoric. What I really would like to see is the SADC states coming together in the EPA discussions and negotiating as one bloc," says Keet.
"As long as we haven’t determined our own position in the region on some vital issues such as export taxes, infant industry protection, rules of origin and so on, there cannot be final EPAs," she adds.
"Economic integration will be gradual, incremental and based on variable geometry in different sectors," argues Keet, who is of the opinion that the system of preferences in the EU – currently the focus of heated negotiations – will gradually disappear.
"And then our products will have to compete with those of the rest of the world."
Masango calls it a "catch-22 situation": "Countries are coerced into signing for future development, yet the regional economic integration that the EPAs supposedly offer is clearly not taking place."
For example, some provisions, such as those on fisheries, are contradictory to countries’ development goals, Masango argues. "The Europeans want to come and fish in waters all along Africa’s shores and sell the fish at huge profit in Europe.
"But, on the other hand, it is often impossible for African countries to export fish themselves because of the high phyto-sanitary requirements. How can that be fair trade?" she asks.
IPS
South Africa flexing its muscles with poor neighbours over customs integration
by Servaas van den Bosch
The beleaguered Southern African Customs Union (SACU) has to face up to serious challenges at its upcoming heads of state meeting in October, including the divergent interests of its member states and the lack of coordinated industrial policies in the union.
In Oct 2010 SACU heads of state will meet again to discuss progress on critical issues in the customs union, such as the raging debate on the revenue sharing formula that sees significant capital flows into the national budgets of the small states of Botswana, Lesotho, Namibia and Swaziland (BLNS).
High-level intervention could assist in pushing through the structural changes that the customs union has embarked on. "One of the key challenges in SACU is lack of leadership on how it can be a platform for deeper regional integration," stated Trudi Hartzenberg, director of the Trade Law Centre of Southern Africa (Tralac). The non-profit Tralac provides capacity-building support to governments.
The economic partnership agreement (EPA) negotiations with the European Union (EU) brought the underlying dissonances in the sub-regional organisation to the fore.
A key difference among the member states, of which the current discussion on revenue sharing is a symptom, is the divergent views on the roles of the customs union.
"The labour union movement in South Africa takes exception to South Africa making transfers to countries with a higher GDP (gross domestic product) per capita, such as Botswana," commented economist Colin McCarthy from Stellenbosch University near Cape Town, South Africa.
Pretoria is said to be getting fed up with functioning as "the regional ATM," or automatic teller machine, especially in the case of Swaziland, where revenues flow straight into the coffers of the autocratic royal rulers. Last year South Africa contributed 98 percent of the revenue pool while taking out only 22.5 percent.
"Where the BLNS states need the revenue to complement their narrow tax bases, South Africa sees import tariffs as an instrument of industrial policy," McCarthy spelled out the fundamental difference.
"Article 38 of the SACU Agreement requires member states to develop such industrial policies geared towards a more equal distribution of economic activity in the region. But this cannot happen through thumb sucking and crystal ball gazing. There is a need for policies and guidelines on which national SACU institutions can base recommendations."
In South Africa, industrial policy is hotly debated and politically "sensitive," as evidenced by the mid-September 2010 release of an economic policy paper, putting forward views on industrial development, by the most powerful trade union federation in the country, the Congress of South African Trade Unions (Cosatu).
"The region will certainly not be unaffected by what comes out of this discussion, but how often are the BLNS states consulted? I expect a number approaching zero," opined McCarthy.
He pointed out that after eight years SACU still does not have a tariff board or other institutions such as a tribunal. "In the BLNS states I do not detect any seriousness around this, while in Pretoria senior government officials are against a tariff board. The question arises whether South Africa really would be willing to sacrifice its policy space to such institutions?"
"The space for cosily muddling through in SACU will become smaller as developments around us take place," remarked Tralac associate professor Gerhard Erasmus. "The EPA negotiations were a traumatic exercise which taxed the relationship between the members. They served as a sober reminder of what it takes to be part of a new world."
This seems borne out by SACU’s lack of progress in closing preferential trade agreements (PTAs) -- not just with EU but with virtually every major trade partner. A new PTA with Mercosur, the largest trading bloc in South America, was signed in 2008 but analysts argue the agreement is not as beneficial as it could have been, as exhibited by a reluctance in the BLNS to ratify the pact.
A PTA with China is equally problematic. "The Chinese feel that South Africa backtracked on an agreement, not appreciating that it is, domestically speaking, politically impossible right now," noted South African Institute of International Affairs (SAIIA) research associate Catherine Grant. The non- governmental SAIIA conducts international relations research.
"SACU countries also have different levels of engagement with China, such as Swaziland that does not recognize the one-China policy (due to trade relations with Taiwan). China also elicits a lot of concern from the labour and manufacturing sectors."
A PTA with the U.S. proved a bridge too far even though the U.S. and SACU signed a trade, investment and development cooperation agreement (TIDCA) in 2008. However, during meetings at the U.S. embassy in Pretoria it is apparently often bemoaned that SACU won’t engage on the TIDCA.
A trade deal with India has been under negotiation for years but is met by a lack of enthusiasm from the private sector.
"The trade agreement with India illustrates the difficulties of SACU operating as a coherent bloc," commented trade expert Mike Humphrey.
"South Africa uses the high common external tariff to protect its markets. It makes it hard for a country like Swaziland to import primary industry manufacturing goods, such as fertilizer from India. This has led to very fraught negotiations where the Indians were thrown out of the room and we spent hours and hours fighting among ourselves."
It indicates all is still not well within SACU, with South Africa not engaging the other members in its industrial development plans and the BLNS not putting forward any industrial policy vision.
Even internal border controls, as several experts pointed out, are more arduous than 10 years back, indicating increased use of non-tariff barriers among the member states. "There is a danger that South Africa is retreating in a laager, protecting borders and keeping up competition," argued Humphrey. Too often, he said, the debate in South Africa "is about SACU, rather than with SACU".
IPS News
The beleaguered Southern African Customs Union (SACU) has to face up to serious challenges at its upcoming heads of state meeting in October, including the divergent interests of its member states and the lack of coordinated industrial policies in the union.
In Oct 2010 SACU heads of state will meet again to discuss progress on critical issues in the customs union, such as the raging debate on the revenue sharing formula that sees significant capital flows into the national budgets of the small states of Botswana, Lesotho, Namibia and Swaziland (BLNS).
High-level intervention could assist in pushing through the structural changes that the customs union has embarked on. "One of the key challenges in SACU is lack of leadership on how it can be a platform for deeper regional integration," stated Trudi Hartzenberg, director of the Trade Law Centre of Southern Africa (Tralac). The non-profit Tralac provides capacity-building support to governments.
The economic partnership agreement (EPA) negotiations with the European Union (EU) brought the underlying dissonances in the sub-regional organisation to the fore.
A key difference among the member states, of which the current discussion on revenue sharing is a symptom, is the divergent views on the roles of the customs union.
"The labour union movement in South Africa takes exception to South Africa making transfers to countries with a higher GDP (gross domestic product) per capita, such as Botswana," commented economist Colin McCarthy from Stellenbosch University near Cape Town, South Africa.
Pretoria is said to be getting fed up with functioning as "the regional ATM," or automatic teller machine, especially in the case of Swaziland, where revenues flow straight into the coffers of the autocratic royal rulers. Last year South Africa contributed 98 percent of the revenue pool while taking out only 22.5 percent.
"Where the BLNS states need the revenue to complement their narrow tax bases, South Africa sees import tariffs as an instrument of industrial policy," McCarthy spelled out the fundamental difference.
"Article 38 of the SACU Agreement requires member states to develop such industrial policies geared towards a more equal distribution of economic activity in the region. But this cannot happen through thumb sucking and crystal ball gazing. There is a need for policies and guidelines on which national SACU institutions can base recommendations."
In South Africa, industrial policy is hotly debated and politically "sensitive," as evidenced by the mid-September 2010 release of an economic policy paper, putting forward views on industrial development, by the most powerful trade union federation in the country, the Congress of South African Trade Unions (Cosatu).
"The region will certainly not be unaffected by what comes out of this discussion, but how often are the BLNS states consulted? I expect a number approaching zero," opined McCarthy.
He pointed out that after eight years SACU still does not have a tariff board or other institutions such as a tribunal. "In the BLNS states I do not detect any seriousness around this, while in Pretoria senior government officials are against a tariff board. The question arises whether South Africa really would be willing to sacrifice its policy space to such institutions?"
"The space for cosily muddling through in SACU will become smaller as developments around us take place," remarked Tralac associate professor Gerhard Erasmus. "The EPA negotiations were a traumatic exercise which taxed the relationship between the members. They served as a sober reminder of what it takes to be part of a new world."
This seems borne out by SACU’s lack of progress in closing preferential trade agreements (PTAs) -- not just with EU but with virtually every major trade partner. A new PTA with Mercosur, the largest trading bloc in South America, was signed in 2008 but analysts argue the agreement is not as beneficial as it could have been, as exhibited by a reluctance in the BLNS to ratify the pact.
A PTA with China is equally problematic. "The Chinese feel that South Africa backtracked on an agreement, not appreciating that it is, domestically speaking, politically impossible right now," noted South African Institute of International Affairs (SAIIA) research associate Catherine Grant. The non- governmental SAIIA conducts international relations research.
"SACU countries also have different levels of engagement with China, such as Swaziland that does not recognize the one-China policy (due to trade relations with Taiwan). China also elicits a lot of concern from the labour and manufacturing sectors."
A PTA with the U.S. proved a bridge too far even though the U.S. and SACU signed a trade, investment and development cooperation agreement (TIDCA) in 2008. However, during meetings at the U.S. embassy in Pretoria it is apparently often bemoaned that SACU won’t engage on the TIDCA.
A trade deal with India has been under negotiation for years but is met by a lack of enthusiasm from the private sector.
"The trade agreement with India illustrates the difficulties of SACU operating as a coherent bloc," commented trade expert Mike Humphrey.
"South Africa uses the high common external tariff to protect its markets. It makes it hard for a country like Swaziland to import primary industry manufacturing goods, such as fertilizer from India. This has led to very fraught negotiations where the Indians were thrown out of the room and we spent hours and hours fighting among ourselves."
It indicates all is still not well within SACU, with South Africa not engaging the other members in its industrial development plans and the BLNS not putting forward any industrial policy vision.
Even internal border controls, as several experts pointed out, are more arduous than 10 years back, indicating increased use of non-tariff barriers among the member states. "There is a danger that South Africa is retreating in a laager, protecting borders and keeping up competition," argued Humphrey. Too often, he said, the debate in South Africa "is about SACU, rather than with SACU".
IPS News
Africa-China trade to top $100 billion again this year
The trade between China and African countries will rebound from a year ago and exceed 100 billion U.S. dollars again this year, according to forecast by the Ministry of Commerce (MOC).
The MOC data showed trade between China and Africa jumped sharply by 65 percent year on year to 61.2 billion U.S. dollars in the first half of this year.
Due to the global economic downturn last year, China-Africa trade fell 14.7 percent from the previous year to 91.06 billion in 2009, compared with 106.8 billion U.S. dollars in 2008, according to the MOC.
The Chinese government supports reputable Chinese enterprises to invest in Africa on the principle of equality, mutual benefit and common development, the MOC said.
More than 1,600 Chinese enterprises are now investing in Africa in the fields of agriculture, mining, processing and manufacturing, infrastructure facilities and commerce, according to the MOC.
The MOC announced in July this year that China would cease levying tariffs on 60 percent of imports from 26 least developed African nations as of July 1 this year.
Xinhua
The MOC data showed trade between China and Africa jumped sharply by 65 percent year on year to 61.2 billion U.S. dollars in the first half of this year.
Due to the global economic downturn last year, China-Africa trade fell 14.7 percent from the previous year to 91.06 billion in 2009, compared with 106.8 billion U.S. dollars in 2008, according to the MOC.
The Chinese government supports reputable Chinese enterprises to invest in Africa on the principle of equality, mutual benefit and common development, the MOC said.
More than 1,600 Chinese enterprises are now investing in Africa in the fields of agriculture, mining, processing and manufacturing, infrastructure facilities and commerce, according to the MOC.
The MOC announced in July this year that China would cease levying tariffs on 60 percent of imports from 26 least developed African nations as of July 1 this year.
Xinhua
Nigeria crude oil September output to top 2 million bpd
by Emma Farge and Joe Brock
Nigeria's crude oil exports were set to top 2 million barrels per day (bpd) for the third month running in September, trade sources said in late July, as Africa's largest energy producer improves output reliability.
Nigeria was to export an average of 2.10 million bpd of crude oil in September, up slightly from a revised 2.08 million bpd in August, according to data from oil companies and traders.
Preliminary loading programmes showed that 71 full or part cargoes were due to be shipped in September, little changed from the 70 planned in the longer month of August.
Crude oil production from the OPEC member has stabilised since an amnesty programme for militants in the oil-producing Niger Delta region resulted in a year without significant attacks on facilities.
Production hit multi-year highs above 2.2 million bpd in July, but some minor technical problems are expected to trim output in August and September.
ExxonMobil operator of the Qua Iboe stream, declared force majeure on exports of Nigeria's benchmark crude due to pipeline damage in May this year, leading to a reduction in output in June and July. But repair works look to have recaptured some of the lost production.
Loading programmes showed that September Qua Iboe output will average around 318,000 bpd, up from around 275,000 bpd the previous month but still down from 2010 highs of more than 380,000 bpd reached in May.
Elsewhere, six cargoes of Bonny Light and five cargoes each of Escravos, Bonga and Erha are due to load in September, the programmes showed.
Nigeria will again far exceed its crude production target agreed with the Organization of the Petroleum Exporting Countries, which has been set at 1.67 million bpd, trade sources said.
OPEC agreed on output curbs in 2008 to support falling oil prices, which dropped from a high of nearly $150 a barrel in July 2008 to below $33 in December the same year.
With U.S. crude oil trading mostly between $70 and $80 per barrel, OPEC members have said they are happy and that there is little incentive to adhere to output targets.
Reuters
Nigeria's crude oil exports were set to top 2 million barrels per day (bpd) for the third month running in September, trade sources said in late July, as Africa's largest energy producer improves output reliability.
Nigeria was to export an average of 2.10 million bpd of crude oil in September, up slightly from a revised 2.08 million bpd in August, according to data from oil companies and traders.
Preliminary loading programmes showed that 71 full or part cargoes were due to be shipped in September, little changed from the 70 planned in the longer month of August.
Crude oil production from the OPEC member has stabilised since an amnesty programme for militants in the oil-producing Niger Delta region resulted in a year without significant attacks on facilities.
Production hit multi-year highs above 2.2 million bpd in July, but some minor technical problems are expected to trim output in August and September.
ExxonMobil operator of the Qua Iboe stream, declared force majeure on exports of Nigeria's benchmark crude due to pipeline damage in May this year, leading to a reduction in output in June and July. But repair works look to have recaptured some of the lost production.
Loading programmes showed that September Qua Iboe output will average around 318,000 bpd, up from around 275,000 bpd the previous month but still down from 2010 highs of more than 380,000 bpd reached in May.
Elsewhere, six cargoes of Bonny Light and five cargoes each of Escravos, Bonga and Erha are due to load in September, the programmes showed.
Nigeria will again far exceed its crude production target agreed with the Organization of the Petroleum Exporting Countries, which has been set at 1.67 million bpd, trade sources said.
OPEC agreed on output curbs in 2008 to support falling oil prices, which dropped from a high of nearly $150 a barrel in July 2008 to below $33 in December the same year.
With U.S. crude oil trading mostly between $70 and $80 per barrel, OPEC members have said they are happy and that there is little incentive to adhere to output targets.
Reuters
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