Africa's collective GDP, at $1.6 trillion in 2008, is now roughly equal to Brazil's or Russia's. While Africa's increased economic momentum is widely recognized, less known are its sources and likely staying power.
Among the key findings:
Africa's growth acceleration was widespread, with 27 of its 30 largest economies expanding more rapidly after 2000. All sectors contributed, including resources, finance, retail, agriculture, transportation and telecommunications. Natural resources directly accounted for just 24 percent of the continent's GDP growth from 2000 through 2008. Key to Africa's growth surge were improved political and macroeconomic stability and microeconomic reforms.
Future economic growth will be supported by Africa's increasing ties to the global economy. Rising demand for commodities is driving buyers around the world to pay dearly for Africa's natural riches and to forge new types of partnerships with producers. And Africa is gaining greater access to international capital; total foreign capital flows into Africa rose from $15 billion in 2000 to a peak of $87 billion in 2007.
Africa's economic growth is creating substantial new business opportunities that are often overlooked by global companies RMGI projects that at least four groups of industries-consumer-facing industries, agriculture, resources, and infrastructure-together could generate as much as $2.6 trillion in revenue annually by 2020, or $1 trillion more than today.
Today the rate of return on foreign investment in Africa is higher than in any other developing region. Early entry into African economies provides opportunities to create markets, establish brands, shape industry structure, influence customer preferences, and establish long-term relationships. Business can help build the Africa of the future.
The rise of the African urban consumer also will fuel long-term growth. Today, 40 percent of Africans live in urban areas, a portion close to China's and continuing to expand. The number of households with discretionary income is projected to rise by 50 percent over the next 10 years, reaching 128 million. By 2030, the continents' top 18 cities could have a combined spending power of $1.3 trillion.
To understand the growth opportunities and challenges of individual economies, MGI developed a framework that groups them in four broad clusters: diversified economies, oil exporters, transition economies, and pre-transition economies. Though imperfect, this framework can guide business leaders and investors developing strategies for the continent and policy makers working to sustain growth.
McKinsey
November 28, 2010
China-Africa trade ties move beyond resources
by Lucy Hornby and Deborah Kan
Energy deals took centre stage during a southern African tour by China's leader-in-waiting, but the growing ties between China and Africa are quickly moving beyond the traditional sectors of energy and infrastructure.
Vice President Xi Jinping this month wrapped up a visit to South Africa, Angola and Botswana. Xi, who is expected to succeed Hu Jintao as head of the ruling Communist Party in 2012, witnessed the signing of deals worth millions of dollars to build a power plant and solar panel factory and to increase South African exports to China. .
Less visible during state visits but increasingly important is trade in sectors besides resources. Chinese consumer goods are making huge inroads in African markets, and more and more Chinese firms are exploring manufacturing deals.
"The key trend going forward here is that we're seeing hundreds of thousands, literally, of micro Chinese entrepreneurs, procuring from China and selling at the grassroots to African consumers," said Martyn Davies, chief executive of Frontier Advisory in Johannesburg.
"At the higher end, in more formalised retail ... maybe three quarters of their procurement, non-food, is from China," he said.
While China sees Africa as a prime source for the oil and minerals that its hungry economy needs, the continent is also a promising market for everything from tiny hair decorations to automobiles churned out by China's fiercely competitive manufacturers.
"There are a lot of complementarities between the Chinese and African economies," said Xue Lan, dean of public policy at Tsinghua University in Beijing.
Better infrastructure in Africa can help move ore and oil out, and let more consumer goods in. Textiles already make up 16 percent of African purchases from China; footwear and clothing account for another 14 percent.
Craig Bond, China head for Standard Bank, South Africa's biggest bank, said China's prime objective in Africa is obviously to obtain access to natural resources, but there's another objective in the longer-term.
"The second one is looking at the long game of those markets becoming consumer markets for Chinese goods," Bond said.
China has traditionally encouraged its state-owned companies tendering for African contracts to team up with one of its policy banks, such as ExIm Bank, whose remit is to support government goals .
But as China's engagement with Africa deepens, the financing needs could be a stretch even for deep-pocketed policy lenders: the World Bank has identified a $31 billion shortfall in the continent's infrastructure funding requirements.
Industrial and Commercial Bank of China, the world's largest bank, is one of the banks that Beijing is coaxing to broaden its footprint in Africa. It owns 20 percent of Standard.
As living standards rise, other opportunities beckon. Africa in 2008 had about 80 million households with income above $5,000 a year -- roughly the population of China's four largest cities. By 2020, that number could grow to about 130 million.
"There's a lot to be said: the telecoms sector is booming, infrastructure is booming, services are booming," said Ngozi Okonjo-Iweala, the World Bank's managing director.
With a population of 800 million and growing, sub-Saharan Africa will soon approach the size of China or India, two members of the BRIC grouping. The others are Brazil and Russia.
"We're talking about Africa now as another BRIC," Okonjo-Iweala said. "So this is a vast market for all kinds of goods, both consumer goods as well as industrial goods."
Reuters
Energy deals took centre stage during a southern African tour by China's leader-in-waiting, but the growing ties between China and Africa are quickly moving beyond the traditional sectors of energy and infrastructure.
Vice President Xi Jinping this month wrapped up a visit to South Africa, Angola and Botswana. Xi, who is expected to succeed Hu Jintao as head of the ruling Communist Party in 2012, witnessed the signing of deals worth millions of dollars to build a power plant and solar panel factory and to increase South African exports to China. .
Less visible during state visits but increasingly important is trade in sectors besides resources. Chinese consumer goods are making huge inroads in African markets, and more and more Chinese firms are exploring manufacturing deals.
"The key trend going forward here is that we're seeing hundreds of thousands, literally, of micro Chinese entrepreneurs, procuring from China and selling at the grassroots to African consumers," said Martyn Davies, chief executive of Frontier Advisory in Johannesburg.
"At the higher end, in more formalised retail ... maybe three quarters of their procurement, non-food, is from China," he said.
While China sees Africa as a prime source for the oil and minerals that its hungry economy needs, the continent is also a promising market for everything from tiny hair decorations to automobiles churned out by China's fiercely competitive manufacturers.
"There are a lot of complementarities between the Chinese and African economies," said Xue Lan, dean of public policy at Tsinghua University in Beijing.
Better infrastructure in Africa can help move ore and oil out, and let more consumer goods in. Textiles already make up 16 percent of African purchases from China; footwear and clothing account for another 14 percent.
Craig Bond, China head for Standard Bank, South Africa's biggest bank, said China's prime objective in Africa is obviously to obtain access to natural resources, but there's another objective in the longer-term.
"The second one is looking at the long game of those markets becoming consumer markets for Chinese goods," Bond said.
China has traditionally encouraged its state-owned companies tendering for African contracts to team up with one of its policy banks, such as ExIm Bank, whose remit is to support government goals .
But as China's engagement with Africa deepens, the financing needs could be a stretch even for deep-pocketed policy lenders: the World Bank has identified a $31 billion shortfall in the continent's infrastructure funding requirements.
Industrial and Commercial Bank of China, the world's largest bank, is one of the banks that Beijing is coaxing to broaden its footprint in Africa. It owns 20 percent of Standard.
As living standards rise, other opportunities beckon. Africa in 2008 had about 80 million households with income above $5,000 a year -- roughly the population of China's four largest cities. By 2020, that number could grow to about 130 million.
"There's a lot to be said: the telecoms sector is booming, infrastructure is booming, services are booming," said Ngozi Okonjo-Iweala, the World Bank's managing director.
With a population of 800 million and growing, sub-Saharan Africa will soon approach the size of China or India, two members of the BRIC grouping. The others are Brazil and Russia.
"We're talking about Africa now as another BRIC," Okonjo-Iweala said. "So this is a vast market for all kinds of goods, both consumer goods as well as industrial goods."
Reuters
Zimbabwe mineral exports earn $807 million from January to September 2010
by Brian Latham
Zimbabwe’s mineral exports rose 26 percent to $807 million in the first nine months of the year, the state-controlled Herald said, citing a statement from the Mineral Marketing Corp. of Zimbabwe.
Diamond exports climbed 73 percent to $110 million from the year earlier period after gems from the Marange diamond fields went on sale, the Harare-based Herald said on its website today.
Platinum exports leaped to $540 million from $261 million, shipments of nickel increased 121 percent to $46.4 million and coal and coke exports more than doubled to $27 million, the Herald reported. Ferrochrome exports earned Zimbabwe $33 million. The southern African nation didn’t export any ferrochrome in 2009, the Herald said.
Bloomberg
Zimbabwe’s mineral exports rose 26 percent to $807 million in the first nine months of the year, the state-controlled Herald said, citing a statement from the Mineral Marketing Corp. of Zimbabwe.
Diamond exports climbed 73 percent to $110 million from the year earlier period after gems from the Marange diamond fields went on sale, the Harare-based Herald said on its website today.
Platinum exports leaped to $540 million from $261 million, shipments of nickel increased 121 percent to $46.4 million and coal and coke exports more than doubled to $27 million, the Herald reported. Ferrochrome exports earned Zimbabwe $33 million. The southern African nation didn’t export any ferrochrome in 2009, the Herald said.
Bloomberg
Kenya, Zambia in trade spat over milk
by Allan Odhiambo
Zambia has extended the ban it imposed on the entry of Kenyan milk into its domestic market in a move that is expected to inflame a long simmering trade dispute with East Africa’s largest economy that is before a top Comesa organ.
Bradford Machila, Zambia’s Livestock and Fisheries Development minister, said the southern African state that hosts the headquarters of the Common Market for Eastern and Southern Africa (Comesa) had decided to take the matter head-on in the interest of local dairy farmers.
“We will not allow any milk imports from Kenya because it will negatively affect the growth of our dairy industry,” Mr Machila told the Times of Zambia as Comesa moved closer to delivering its verdict on the five-year dispute.
Lusaka’s latest move should add impetus to the long standing market access feud for key commodities, including palm-oil based cooking fats that have continued to cast a dark cloud over the Sh8 billion-a-year trade ties between Kenya and Zambia.
The dispute over the terms of entry for Kenya’s milk exports to Zambia is the subject of an ongoing arbitration by the Comesa Council of Ministers that began in 2008.
The Council of Ministers in September ordered the Comesa Secretariat to expeditiously verify facts behind Kenya’s dispute with Zambia over shipments of long life milk and report back to the Intergovernmental Committee by December 2010. Lusaka’s salvo came in the middle of a fact finding mission to Kenya by a team of Zambian officials charged with regulation of standards. The team is expected to visit Kenya’s top dairy processing firms that export to the Comesa market. Zambia is one the top export markets for Kenya’s milk.
The Kenya Dairy Board cautiously responded to Zambia’s action saying it will await the findings of the verification mission and the decision of the Council of Ministers.
“We anticipate the findings of the of the verification mission to be table at the forthcoming Comesa Council of Ministers’ meeting in December before a verdict is issued,” Kenya Dairy Board managing director Machira Gichohi said.
“Our industry standards are quite high and we are confident it will reflect in the report,” he said. Such a report should pave the way for the lifting of Zambia’s import ban within 60 days.
Lusaka slapped a ban on Kenyan milk exports five years ago following a petition by the Zambian Dairy Processors Association (ZDPA), which claimed that Kenya’s standards for raw milk were lower than those accepted in the southern African state.
It used the World Trade Organisation’s sanitary and phytosanitary standards (SPS) to reject Kenyan exports a move that the East African nation has vigorously opposed.
Zambia is also embroiled in a spat with Kenya over palm oil based cooking oil exports that the southern African state insists does not meet the 35 per cent value-added threshold for raw materials under Comesa’s rules of origin since Kenya does not produce palm oil. Lusaka has consequently been charging Kenyan exporters a security deposit of 25 per cent on imports of palm-oil based cooking fats pending verification that the products passed the rules of origin test.
Industrialist Vimal Shah, whose company Bidco Oils is the largest producer of cooking oils in Eastern Africa, says lack of clarity on Zambian demands remains the biggest obstacle to trade between the two nations.
“Zambian authorities have remained shadowy with regards to the palm oil-based products and we don’t understand what they exactly want,” he said. “We have had several missions come around to verify whether such products are done locally but they never produce any confirmation reports.” Zambia is however known to prefer local production of cooking oils to help generate employment and tax benefits.
Though Kenya has not reciprocated any of Zambia’s numerous sanctions, a recent escalation in similar rows among Comesa member is now being seen as the greatest obstacle to Eastern Africa’s regional integration initiatives. Trade between Kenya and Zambia has grown steadily since the 2001 establishment of Comesa’s free trade area.
Trade between the two nations was valued at Sh7.3 billion in 2008 with Kenya holding the bigger share of Sh5.5 billion. Imports from Zambia stood at Sh1.853 billion during the same period.
Kenya’s exports edible oils, margarines, iron sheets, steel pipes and products, detergents, baking powder, kitchen and table wares, spices, blankets, beauty products, toiletries, irrigation pumps, tyres, and textiles and crafts to Zambia.
Imports from Zambia comprises copper and copper products, maize seed, electrical conductors, tobacco, corrugated sheets of asbestos and precious stones.
Kenya’s Trade permanent secretary Abdulrazaq Ali last Thursday hit out at countries he claimed were frustrating ongoing integration efforts by imposing non-trade-barriers (NTBs). “While it is true that there may be justifiable reasons for seeking short term protection due to revenue, health, environment and other reasons, our respective treaties have clearly outlined how such time bound protection measures can be justified and made available to our member state,” he said in a statement.
The East African Community (EAC), the Southern Africa Development Community (Sadc) and Comesa agreed in 2008 to form a free trade area (FTA) covering more than 527 million people.
The three regional trading blocs have even produced a draft agreement that paves the way for the setting up of the planned $624 billion FTA, the continent’s largest.
The draft includes 14 annexes that deal with rules of origin, intellectual property rights and dispute settlement, among other provisions. It also contains proposals on common rules that will govern the trade regimes and converge into a seamless platform.
Reluctance by member countries to fully open their markets under the arrangement however remains controversial amidst concern that some of them were imposing NTBs.
“Of greater concern is the fact that in instances where trade has occurred and is expanding, NTBs have surfaced to take away the modest gains,” Mr Ali said. “For this purpose, we need to look beyond the short term gains which are obtained through protectionism by imposition of NTBs.”
Mr Ali said though a foundation and framework has been well established for the sustained treatment of NTBs, negotiating countries continued to face two major challenges including the fact that regional economic communities (RECs) have adopted different strategies in respect to NTBs elimination.
“While this may not have been a problem, the fact that we have several countries belonging to two or more regional groups, has ensured that there are conflicts and duplication in the implementation of the different approaches,” he said.
During the 28th meeting of Comesa council of ministers, Sudan announced it had settled a dispute with Kenya and now allows the importation of galvanised steel pipes from the country using the applicable criteria.
The ministers also ruled that Malawi’s imposition of excise duty on cooking oils and soaps was applicable on all regional imports as opposed to being target on Kenya’s exports only; hence a complaint earlier raised by Kenya was null and void.
A complaint by Kenya and other countries over Egypt’s continued application of a 45 per cent value addition criteria on imports coming from other Comesa nations is however still pending. The council of ministers appealed to Egypt to consider moving to the 35 per threshold for conferring origin on intra-Comesa under the Free Trade Area (FTA). However, Egypt declined the request and the council is expected to give a verdict on the matter in December.
Business Daily Africa
Zambia has extended the ban it imposed on the entry of Kenyan milk into its domestic market in a move that is expected to inflame a long simmering trade dispute with East Africa’s largest economy that is before a top Comesa organ.
Bradford Machila, Zambia’s Livestock and Fisheries Development minister, said the southern African state that hosts the headquarters of the Common Market for Eastern and Southern Africa (Comesa) had decided to take the matter head-on in the interest of local dairy farmers.
“We will not allow any milk imports from Kenya because it will negatively affect the growth of our dairy industry,” Mr Machila told the Times of Zambia as Comesa moved closer to delivering its verdict on the five-year dispute.
Lusaka’s latest move should add impetus to the long standing market access feud for key commodities, including palm-oil based cooking fats that have continued to cast a dark cloud over the Sh8 billion-a-year trade ties between Kenya and Zambia.
The dispute over the terms of entry for Kenya’s milk exports to Zambia is the subject of an ongoing arbitration by the Comesa Council of Ministers that began in 2008.
The Council of Ministers in September ordered the Comesa Secretariat to expeditiously verify facts behind Kenya’s dispute with Zambia over shipments of long life milk and report back to the Intergovernmental Committee by December 2010. Lusaka’s salvo came in the middle of a fact finding mission to Kenya by a team of Zambian officials charged with regulation of standards. The team is expected to visit Kenya’s top dairy processing firms that export to the Comesa market. Zambia is one the top export markets for Kenya’s milk.
The Kenya Dairy Board cautiously responded to Zambia’s action saying it will await the findings of the verification mission and the decision of the Council of Ministers.
“We anticipate the findings of the of the verification mission to be table at the forthcoming Comesa Council of Ministers’ meeting in December before a verdict is issued,” Kenya Dairy Board managing director Machira Gichohi said.
“Our industry standards are quite high and we are confident it will reflect in the report,” he said. Such a report should pave the way for the lifting of Zambia’s import ban within 60 days.
Lusaka slapped a ban on Kenyan milk exports five years ago following a petition by the Zambian Dairy Processors Association (ZDPA), which claimed that Kenya’s standards for raw milk were lower than those accepted in the southern African state.
It used the World Trade Organisation’s sanitary and phytosanitary standards (SPS) to reject Kenyan exports a move that the East African nation has vigorously opposed.
Zambia is also embroiled in a spat with Kenya over palm oil based cooking oil exports that the southern African state insists does not meet the 35 per cent value-added threshold for raw materials under Comesa’s rules of origin since Kenya does not produce palm oil. Lusaka has consequently been charging Kenyan exporters a security deposit of 25 per cent on imports of palm-oil based cooking fats pending verification that the products passed the rules of origin test.
Industrialist Vimal Shah, whose company Bidco Oils is the largest producer of cooking oils in Eastern Africa, says lack of clarity on Zambian demands remains the biggest obstacle to trade between the two nations.
“Zambian authorities have remained shadowy with regards to the palm oil-based products and we don’t understand what they exactly want,” he said. “We have had several missions come around to verify whether such products are done locally but they never produce any confirmation reports.” Zambia is however known to prefer local production of cooking oils to help generate employment and tax benefits.
Though Kenya has not reciprocated any of Zambia’s numerous sanctions, a recent escalation in similar rows among Comesa member is now being seen as the greatest obstacle to Eastern Africa’s regional integration initiatives. Trade between Kenya and Zambia has grown steadily since the 2001 establishment of Comesa’s free trade area.
Trade between the two nations was valued at Sh7.3 billion in 2008 with Kenya holding the bigger share of Sh5.5 billion. Imports from Zambia stood at Sh1.853 billion during the same period.
Kenya’s exports edible oils, margarines, iron sheets, steel pipes and products, detergents, baking powder, kitchen and table wares, spices, blankets, beauty products, toiletries, irrigation pumps, tyres, and textiles and crafts to Zambia.
Imports from Zambia comprises copper and copper products, maize seed, electrical conductors, tobacco, corrugated sheets of asbestos and precious stones.
Kenya’s Trade permanent secretary Abdulrazaq Ali last Thursday hit out at countries he claimed were frustrating ongoing integration efforts by imposing non-trade-barriers (NTBs). “While it is true that there may be justifiable reasons for seeking short term protection due to revenue, health, environment and other reasons, our respective treaties have clearly outlined how such time bound protection measures can be justified and made available to our member state,” he said in a statement.
The East African Community (EAC), the Southern Africa Development Community (Sadc) and Comesa agreed in 2008 to form a free trade area (FTA) covering more than 527 million people.
The three regional trading blocs have even produced a draft agreement that paves the way for the setting up of the planned $624 billion FTA, the continent’s largest.
The draft includes 14 annexes that deal with rules of origin, intellectual property rights and dispute settlement, among other provisions. It also contains proposals on common rules that will govern the trade regimes and converge into a seamless platform.
Reluctance by member countries to fully open their markets under the arrangement however remains controversial amidst concern that some of them were imposing NTBs.
“Of greater concern is the fact that in instances where trade has occurred and is expanding, NTBs have surfaced to take away the modest gains,” Mr Ali said. “For this purpose, we need to look beyond the short term gains which are obtained through protectionism by imposition of NTBs.”
Mr Ali said though a foundation and framework has been well established for the sustained treatment of NTBs, negotiating countries continued to face two major challenges including the fact that regional economic communities (RECs) have adopted different strategies in respect to NTBs elimination.
“While this may not have been a problem, the fact that we have several countries belonging to two or more regional groups, has ensured that there are conflicts and duplication in the implementation of the different approaches,” he said.
During the 28th meeting of Comesa council of ministers, Sudan announced it had settled a dispute with Kenya and now allows the importation of galvanised steel pipes from the country using the applicable criteria.
The ministers also ruled that Malawi’s imposition of excise duty on cooking oils and soaps was applicable on all regional imports as opposed to being target on Kenya’s exports only; hence a complaint earlier raised by Kenya was null and void.
A complaint by Kenya and other countries over Egypt’s continued application of a 45 per cent value addition criteria on imports coming from other Comesa nations is however still pending. The council of ministers appealed to Egypt to consider moving to the 35 per threshold for conferring origin on intra-Comesa under the Free Trade Area (FTA). However, Egypt declined the request and the council is expected to give a verdict on the matter in December.
Business Daily Africa
China welcomes growing African trade, but not the Africans who facilitate it
by Violet Law
As the southern city of Guangzhou hosts the Asian Games, which will come to a close on Nov. 27 in China, the prosperous city is putting its best face forward and has welcomed foreigners from all across Asia. However, the sweet welcome the visitors are receiving puts the treatment of a growing presence of African immigrants in the city into stark relief.
Since China moved to an "open-door policy" in 1980 to stimulate economic development, foreigners have flocked to China to tap in to its market. And over the past few years, tens of thousands of Africans, mostly Nigerians, have been streaming into Guangzhou to set up trading firms to export clothing, shoes, electronics goods, and anything churned out by the factories in nearby towns in Guangdong Province that make China such a manufacturing empire.
Though the Chinese trade with the African immigrants, not everybody embraces them as neighbors. Some Chinese cite a language barrier with the English-speaking Africans. Some Africans in China on work visas said they feel they are perceived by the Chinese as violence-prone troublemakers. Still, because most Africans don't speak much Mandarin or Cantonese they do not seem a threat to take jobs, and are just in China to buy goods to take back to their home country and sell.
"People come because there are economic opportunities," says Fu Hualing, head of University of Hong Kong's law department.
But since 2009, local police have begun to regularly raid buildings teeming with Africans as they look for those who have overstayed their visa. Those who are caught face stiff fines and interminable jail time.
In July 2009, two Nigerians jumped to their deaths from a five-story building to evade police pursuit. Though such standoffs are rare, enraged Africans rallied outside the police station to protest the strong-arm tactics leading to the casualties.
"The Chinese need a shift in thinking," says Mr. Fu. "They're used to dealing with rich, Western countries. The influx of Africans is something new. And it will take a long time for China to learn how to behave."
Fu adds, "The Chinese need to broaden the basis of economic cooperation when they're making policies on visas."
Many Nigerians say few of them can get work visas renewed for longer than three months; some can only get a 30-day extension each time they seek to stay longer. Some African traders allege that they have become vulnerable to dishonest Chinese suppliers who would delay delivery beyond the Africans' visa extension, forcing them to choose between losing business and becoming illegal. To remain legal, the only option is to submit their papers and keep their fingers crossed, many say.
In fact, it wasn't until 2005 that China unveiled a green-card type program, to help major investors and top-tier experts avoid this type of hassle and to encourage business. And only now are officials and academics putting their heads together to draft the country's first immigration law, according to Zhuang Jijao, a researcher with the China Academy of Social Sciences.
“I wonder, if China wants to open up the market, why they don't allow people to come?” asks Stephen Kelvin, a polo shirts trader from Nigeria, expressing the frustration that many of his fellow traders have with the setup.
According to Chinese law, those who have to come to China to be with a spouse are eligible for permanent residency. But even that doesn't seem to make much of a difference.
For example, Nigerian clothing trader and designer Aku Chigozie and his wife, Esther Xu of Dalian, live together in northern China. The couple married and, with their small son, settled in Guangzhou five years ago to set up their trading firm, which deals in menswear. But Chigozie has to go to the local Public Security Bureau's Entry and Exit Administration every three months to renew his visa. He doesn't complain about the distance or any lines, but the uncertainty of the process.
“Every time I go in, the officials would look at the book and then [they tell me that] for Nigeria, three months only for visa renewal,” says Chigozie. “They are supposed to treat me as a citizen because I'm the husband of one of their citizens.”
Ms. Xu said someday she'd like to move to Nigeria with her husband, but she says she can't while her parents are still living.
“I'm the only child. How can I take care of my parents from Nigeria?” she said. “Of course China has to control immigration, but officials have got to consider individual circumstances. They've got no mercy.”
Xu said when she heard of a possible immigration law, she called local officials to inquire, only to be told that nothing has changed yet and that no one knows when it will. Meanwhile, if Chigozie isn't granted his visa extension, she says, the family could be torn apart and the business will have to shut down.
Mr. Zhuang, the researcher, said that in the absence of an immigration policy, “China's transnational migration management has long been focused on the legitimacy of entry and exit out of economic considerations.”
The national census that started Nov. 1 is the first time foreigners will be counted. Based on 2008 visa administration data, there were more than 50,000 foreigners who spent more than six months in a year in Guangzhou, a city of 10 million people. By some counts, at least half of the city's foreign population is from Africa.
Christian Science Monitor
As the southern city of Guangzhou hosts the Asian Games, which will come to a close on Nov. 27 in China, the prosperous city is putting its best face forward and has welcomed foreigners from all across Asia. However, the sweet welcome the visitors are receiving puts the treatment of a growing presence of African immigrants in the city into stark relief.
Since China moved to an "open-door policy" in 1980 to stimulate economic development, foreigners have flocked to China to tap in to its market. And over the past few years, tens of thousands of Africans, mostly Nigerians, have been streaming into Guangzhou to set up trading firms to export clothing, shoes, electronics goods, and anything churned out by the factories in nearby towns in Guangdong Province that make China such a manufacturing empire.
Though the Chinese trade with the African immigrants, not everybody embraces them as neighbors. Some Chinese cite a language barrier with the English-speaking Africans. Some Africans in China on work visas said they feel they are perceived by the Chinese as violence-prone troublemakers. Still, because most Africans don't speak much Mandarin or Cantonese they do not seem a threat to take jobs, and are just in China to buy goods to take back to their home country and sell.
"People come because there are economic opportunities," says Fu Hualing, head of University of Hong Kong's law department.
But since 2009, local police have begun to regularly raid buildings teeming with Africans as they look for those who have overstayed their visa. Those who are caught face stiff fines and interminable jail time.
In July 2009, two Nigerians jumped to their deaths from a five-story building to evade police pursuit. Though such standoffs are rare, enraged Africans rallied outside the police station to protest the strong-arm tactics leading to the casualties.
"The Chinese need a shift in thinking," says Mr. Fu. "They're used to dealing with rich, Western countries. The influx of Africans is something new. And it will take a long time for China to learn how to behave."
Fu adds, "The Chinese need to broaden the basis of economic cooperation when they're making policies on visas."
Many Nigerians say few of them can get work visas renewed for longer than three months; some can only get a 30-day extension each time they seek to stay longer. Some African traders allege that they have become vulnerable to dishonest Chinese suppliers who would delay delivery beyond the Africans' visa extension, forcing them to choose between losing business and becoming illegal. To remain legal, the only option is to submit their papers and keep their fingers crossed, many say.
In fact, it wasn't until 2005 that China unveiled a green-card type program, to help major investors and top-tier experts avoid this type of hassle and to encourage business. And only now are officials and academics putting their heads together to draft the country's first immigration law, according to Zhuang Jijao, a researcher with the China Academy of Social Sciences.
“I wonder, if China wants to open up the market, why they don't allow people to come?” asks Stephen Kelvin, a polo shirts trader from Nigeria, expressing the frustration that many of his fellow traders have with the setup.
According to Chinese law, those who have to come to China to be with a spouse are eligible for permanent residency. But even that doesn't seem to make much of a difference.
For example, Nigerian clothing trader and designer Aku Chigozie and his wife, Esther Xu of Dalian, live together in northern China. The couple married and, with their small son, settled in Guangzhou five years ago to set up their trading firm, which deals in menswear. But Chigozie has to go to the local Public Security Bureau's Entry and Exit Administration every three months to renew his visa. He doesn't complain about the distance or any lines, but the uncertainty of the process.
“Every time I go in, the officials would look at the book and then [they tell me that] for Nigeria, three months only for visa renewal,” says Chigozie. “They are supposed to treat me as a citizen because I'm the husband of one of their citizens.”
Ms. Xu said someday she'd like to move to Nigeria with her husband, but she says she can't while her parents are still living.
“I'm the only child. How can I take care of my parents from Nigeria?” she said. “Of course China has to control immigration, but officials have got to consider individual circumstances. They've got no mercy.”
Xu said when she heard of a possible immigration law, she called local officials to inquire, only to be told that nothing has changed yet and that no one knows when it will. Meanwhile, if Chigozie isn't granted his visa extension, she says, the family could be torn apart and the business will have to shut down.
Mr. Zhuang, the researcher, said that in the absence of an immigration policy, “China's transnational migration management has long been focused on the legitimacy of entry and exit out of economic considerations.”
The national census that started Nov. 1 is the first time foreigners will be counted. Based on 2008 visa administration data, there were more than 50,000 foreigners who spent more than six months in a year in Guangzhou, a city of 10 million people. By some counts, at least half of the city's foreign population is from Africa.
Christian Science Monitor
China undercutting African cement producers
by Drew Hinshaw
Les Ciments Du Gabon was for decades the only building material company that the equatorial seaside African country of Gabon ever knew – a national monopoly that churned out some 250,000 tons of cement annually in beige and blue sacks that transmogrified into Libreville’s skyward-spiraling condos and government ziggurats.
Then came the imports: cement shipments from Cameroon, Kazakhstan, and most of all China. Now, as of this week (August 2010), Les Ciments’ executives are saying they may close their kilns – for good.
“Chinese cement is sold at a price that doesn’t allow [us] to compete,” Development Director Arthur Meka Me Ndong explained.
Yes, we are writing (and you are reading) about cement: Bland bags of limestone whisked with clay that are, however ho-hum, the stuff that Africa’s dawning industry, its presidential palaces and cookie-cutter walk-ups are made of. It's also what made billionaire Aliko Dangote one of Nigeria's richest men.
The commodity may lack the luster of diamonds, or the geopolitics of petrol, but cement forms the foundation of what might be Africa’s industrial big bang.
Try and fathom the stats: In Nigeria, Ashaka Cement’s profits shot up 42 percent in the first half of this year, after nearby Benue’s take more than tripled last year to $95 million. Next year, Nigeria’s cement output is expected to surge by 50 percent, in part because its biggest conglomerate, Dangote cement is spending $1.5 billion building cement plants from there to Sierra Leone.
Name a nation – Tunisia, Kenya, Egypt, Zambia – and there’s probably a $100 million-plus plant being hastily tossed up. Down South, Cimentos de Mocambique plans to double its output in 2011. Up north, cement exports from Senegal doubled last month.
Cement’s going rate is glorious, too: $200 per metric ton in Togo, a sum like a siren song luring clunky cement ships from their distant ports. Which is partly why the end of days for Africa’s cement mixers may be prefigured by plans in Hong Kong.
The People’s Republic, an industrial presence across Africa, is offloading more and more of its newfound cement surplus to distant niche markets like Gabon.
While Senegal’s kilns bake to a European Union standard, cheaper if cruddier sacks of Chinese cement are creeping in.
“In 10 years, the Chinese will control the cement market here,” Daniel Camarasa Gimeno, General Manager of Cagicex Global Trade, told me at a March conference in Dakar that was supposed to be Africa’s coming out party for its cementers.
“Their quality is bad, but the price is good,” he explained.
He could have just as easily been speculating on Chinese batiks, shoes, or sofas – all imports undercutting tailors, cobblers, and carpenters in African markets.
For the moment, Africa’s cement makers, and industrialists in other niches, can enjoy a few protections by circumstance:
1. The continent's cementers are nimbler: They can float small shipments across Africa's gulfs while distant Chinese (and Turkish and Kazakhstani) vessels wait to fill up with 400,000 tons worth of cement containers.
2. China’s low-quality cement may reap a backlash, if, come 10 years, condos and stadiums start to crack.
3. The competitiveness of China’s cement exports is entirely dependent on the country’s ability to keep its currency glued to the lowest numeral imaginable.
Better still? There’s an obvious fix to keep Africa’s mixers spinning: Cheaper energy.
The cost of pouring petrol into a grumpy generator accounts for 25 percent of the price of a cement sack. The fact is, random and pricey power puts all manner of Africa-made products on the boutique, “fair trade” shelf.
“All of our industries are in an energy crunch, without exception,” Senegal’s energy ministry spokesman Malick Ndaw said. “There’s a lot potential here, but the energy needs are enormous.”
Perhaps a few equally enormous hydrodams – built with durable, African cement – could wall in the continent’s cementers, its cobblers and manufacturers, from an influx of imports that would only further erode that industrial foundation.
Christian Science Monitor
Les Ciments Du Gabon was for decades the only building material company that the equatorial seaside African country of Gabon ever knew – a national monopoly that churned out some 250,000 tons of cement annually in beige and blue sacks that transmogrified into Libreville’s skyward-spiraling condos and government ziggurats.
Then came the imports: cement shipments from Cameroon, Kazakhstan, and most of all China. Now, as of this week (August 2010), Les Ciments’ executives are saying they may close their kilns – for good.
“Chinese cement is sold at a price that doesn’t allow [us] to compete,” Development Director Arthur Meka Me Ndong explained.
Yes, we are writing (and you are reading) about cement: Bland bags of limestone whisked with clay that are, however ho-hum, the stuff that Africa’s dawning industry, its presidential palaces and cookie-cutter walk-ups are made of. It's also what made billionaire Aliko Dangote one of Nigeria's richest men.
The commodity may lack the luster of diamonds, or the geopolitics of petrol, but cement forms the foundation of what might be Africa’s industrial big bang.
Try and fathom the stats: In Nigeria, Ashaka Cement’s profits shot up 42 percent in the first half of this year, after nearby Benue’s take more than tripled last year to $95 million. Next year, Nigeria’s cement output is expected to surge by 50 percent, in part because its biggest conglomerate, Dangote cement is spending $1.5 billion building cement plants from there to Sierra Leone.
Name a nation – Tunisia, Kenya, Egypt, Zambia – and there’s probably a $100 million-plus plant being hastily tossed up. Down South, Cimentos de Mocambique plans to double its output in 2011. Up north, cement exports from Senegal doubled last month.
Cement’s going rate is glorious, too: $200 per metric ton in Togo, a sum like a siren song luring clunky cement ships from their distant ports. Which is partly why the end of days for Africa’s cement mixers may be prefigured by plans in Hong Kong.
The People’s Republic, an industrial presence across Africa, is offloading more and more of its newfound cement surplus to distant niche markets like Gabon.
While Senegal’s kilns bake to a European Union standard, cheaper if cruddier sacks of Chinese cement are creeping in.
“In 10 years, the Chinese will control the cement market here,” Daniel Camarasa Gimeno, General Manager of Cagicex Global Trade, told me at a March conference in Dakar that was supposed to be Africa’s coming out party for its cementers.
“Their quality is bad, but the price is good,” he explained.
He could have just as easily been speculating on Chinese batiks, shoes, or sofas – all imports undercutting tailors, cobblers, and carpenters in African markets.
For the moment, Africa’s cement makers, and industrialists in other niches, can enjoy a few protections by circumstance:
1. The continent's cementers are nimbler: They can float small shipments across Africa's gulfs while distant Chinese (and Turkish and Kazakhstani) vessels wait to fill up with 400,000 tons worth of cement containers.
2. China’s low-quality cement may reap a backlash, if, come 10 years, condos and stadiums start to crack.
3. The competitiveness of China’s cement exports is entirely dependent on the country’s ability to keep its currency glued to the lowest numeral imaginable.
Better still? There’s an obvious fix to keep Africa’s mixers spinning: Cheaper energy.
The cost of pouring petrol into a grumpy generator accounts for 25 percent of the price of a cement sack. The fact is, random and pricey power puts all manner of Africa-made products on the boutique, “fair trade” shelf.
“All of our industries are in an energy crunch, without exception,” Senegal’s energy ministry spokesman Malick Ndaw said. “There’s a lot potential here, but the energy needs are enormous.”
Perhaps a few equally enormous hydrodams – built with durable, African cement – could wall in the continent’s cementers, its cobblers and manufacturers, from an influx of imports that would only further erode that industrial foundation.
Christian Science Monitor
Frustrated with EU 'pressure tactics', Africa ready to walk away from trade talks
by Leigh Phillips
African states are ready to abandon ten years of trade talks with the EU as their patience has worn thin in response to what they call "pressure tactics" on the part of the European Commission.
In a pair of papers seen by EUobserver using language as blistering as diplomatic phrasing gets, African trade chiefs call on Brussels to step up and take the same supportive attitude towards development behind closed doors in trade talks as in their public pronouncements.
"The divergences between the EU and Africa seem to be intractable and not resolvable, despite ten years of negotiations," reads one of the papers.
Raising the stakes ahead of an EU-Africa summit in Tripoli, Libya beginning on Monday, the nations say that if Europe does not abandon its demands that the continent radically liberalise its economies immediately, Africa says it is ready to walk away from the process.
The position paper and political declaration from trade ministers - for the first time involving all five African regional economic communities active in negotiations over 'Economic Partnership Agreements' and the African Union Commission together - are a catalogue of complaints.
"There is great concern within Africa about the way the EPA negotiations have been conducted and about the outcome of the negotiations so far," reads the paper.
"The critical issues that will allow Africa to move forward on the path to industrialization and sustainable economic growth and development have still not yet been addressed."
The document argues that their is a gap between Brussels's rhetoric and its negotiating posture.
"Despite the encouraging statements emanating from the EU which acknowledge the difference in the levels of development of the negotiating parties and the need to show adequate special and differential treatment for Africa, the necessary flexibility in the negotiating position of the EC on many critical issues has not been forthcoming."
"Greater political will on the part of the EU is needed to move the EPA process forward.
The paper argues that the impasse in negotiations in not due to a lack of policy reforms or market opening on the part of African countries, but that Europe continues to push a liberalising model that is inappropriate for states at their level of development.
"Lessons to be learnt from the global financial and economic crisis highlight the need for increased regulation of the market, rather than policy reforms that put more emphasis on the removal of regulation. Africa needs policy space to diversify its economy, achieve competiveness and attain sustainable economic growth and development."
"Failure of the part of the EU to grant the flexibilities will pose serious risks to Africa's future development."
The states are opposed to EU demands that tariffs on a full 80 percent of their imports be eliminated. The depth of such liberalisation would leave much of the continent's fragile and small industry vulnerable without the umbrella of tariff protection - the same tariff protection, they say, that rich countries historically used themselves to build up their own industry - and lead to deindustrialisation.
The nations want to improve infrastructure and institutional and production capacities before opening up their markets.
They also say it is unfair to threaten to withdraw access to their EU markets unless agreements are signed.
Ahmadou Abdoulaye Diallo, Mali's trade and industry minister, said of the stalemate: "To end the impasse in the current talks, Mali suggests that a number of measurable and objective criteria be met before African countries can conclude the negotiations."
For him, this includes realisation of the Millennium Development Goals, sufficient levels of development within industry and agriculture, a diversification of exports and robust intra-African trade, meaning a development of strong domestic demand rather than just an export-orientation to wealthy countries.
"If these indicators are not met before concluding the EPAs, the entire process would be highly dysfunctional."
Earlier this month, EU trade commissioner Karel de Gucht admitted that relations between the two sides were "souring".
"It is true that [these talks] can be souring the relations between Europe and Africa," he said.
However, he also hinted that Europe is ready to shift on some of its demands and the timescale involved.
"On services we can be flexible. I think also on rules we can have a progressive approach," he added.
EU Observer
African states are ready to abandon ten years of trade talks with the EU as their patience has worn thin in response to what they call "pressure tactics" on the part of the European Commission.
In a pair of papers seen by EUobserver using language as blistering as diplomatic phrasing gets, African trade chiefs call on Brussels to step up and take the same supportive attitude towards development behind closed doors in trade talks as in their public pronouncements.
"The divergences between the EU and Africa seem to be intractable and not resolvable, despite ten years of negotiations," reads one of the papers.
Raising the stakes ahead of an EU-Africa summit in Tripoli, Libya beginning on Monday, the nations say that if Europe does not abandon its demands that the continent radically liberalise its economies immediately, Africa says it is ready to walk away from the process.
The position paper and political declaration from trade ministers - for the first time involving all five African regional economic communities active in negotiations over 'Economic Partnership Agreements' and the African Union Commission together - are a catalogue of complaints.
"There is great concern within Africa about the way the EPA negotiations have been conducted and about the outcome of the negotiations so far," reads the paper.
"The critical issues that will allow Africa to move forward on the path to industrialization and sustainable economic growth and development have still not yet been addressed."
The document argues that their is a gap between Brussels's rhetoric and its negotiating posture.
"Despite the encouraging statements emanating from the EU which acknowledge the difference in the levels of development of the negotiating parties and the need to show adequate special and differential treatment for Africa, the necessary flexibility in the negotiating position of the EC on many critical issues has not been forthcoming."
"Greater political will on the part of the EU is needed to move the EPA process forward.
The paper argues that the impasse in negotiations in not due to a lack of policy reforms or market opening on the part of African countries, but that Europe continues to push a liberalising model that is inappropriate for states at their level of development.
"Lessons to be learnt from the global financial and economic crisis highlight the need for increased regulation of the market, rather than policy reforms that put more emphasis on the removal of regulation. Africa needs policy space to diversify its economy, achieve competiveness and attain sustainable economic growth and development."
"Failure of the part of the EU to grant the flexibilities will pose serious risks to Africa's future development."
The states are opposed to EU demands that tariffs on a full 80 percent of their imports be eliminated. The depth of such liberalisation would leave much of the continent's fragile and small industry vulnerable without the umbrella of tariff protection - the same tariff protection, they say, that rich countries historically used themselves to build up their own industry - and lead to deindustrialisation.
The nations want to improve infrastructure and institutional and production capacities before opening up their markets.
They also say it is unfair to threaten to withdraw access to their EU markets unless agreements are signed.
Ahmadou Abdoulaye Diallo, Mali's trade and industry minister, said of the stalemate: "To end the impasse in the current talks, Mali suggests that a number of measurable and objective criteria be met before African countries can conclude the negotiations."
For him, this includes realisation of the Millennium Development Goals, sufficient levels of development within industry and agriculture, a diversification of exports and robust intra-African trade, meaning a development of strong domestic demand rather than just an export-orientation to wealthy countries.
"If these indicators are not met before concluding the EPAs, the entire process would be highly dysfunctional."
Earlier this month, EU trade commissioner Karel de Gucht admitted that relations between the two sides were "souring".
"It is true that [these talks] can be souring the relations between Europe and Africa," he said.
However, he also hinted that Europe is ready to shift on some of its demands and the timescale involved.
"On services we can be flexible. I think also on rules we can have a progressive approach," he added.
EU Observer
Trade barriers still working against East African common market
by Tom Maliti
East African governments have not honored an agreement to dismantle barriers that would allow a common market in the region, and Tanzania has even implemented a new fee for regional traders, a regional trade group has said.
The obstacles -- which include a new $500 fee for foreign vehicles in Tanzania's bustling Dar es Salaam port -- are slowing the transit of goods and bolstering regional prices of items produced and manufactured in the region, the East African Business Council said. Companies have also faced repeated checks at border crossings, the umbrella group said.
In July this year, the East African Community formed a common market aimed at growing local businesses and reducing the costs of investment. That agreement encompasses Burundi, Kenya, Rwanda, Tanzania and Uganda.
The community is the most integrated of Africa's regional economic blocs, running with mixed success a customs union for the past five years before forming a common market. The East African customs union broadly allows customs-free movement of goods produced in the region. The union also charges a uniform set of duties for any imports from outside the region.
The East African Community also serves as a negotiating bloc with the world's leading economies and its members tout its population size and common policies as incentives for foreign investors.
Business Council spokesman Godwin Bonge said the statement focused on some of the problems of the customs union, which is part of the more recent common market.
"We've had problems for the last five years in trying to implement some of the provisions of the customs union and we have seen little progress, especially in removing barriers to trade," said Bonge. "It raises questions to how committed the partner states are to integration especially when the common market provisions are much more ambitious than the customs union."
In October, the council said, Tanzania began charging all foreign-registered vehicles $500 for collecting cargo at its Indian Ocean port of Dar es Salaam. That has hit Burundi -- a landlocked country that relies on Tanzania for its ports -- especially hard.
The fee violates an East African Community agreement that any vehicle from a member state can spend up to 14 days at the port for free, and pay $20 if it spends a month there, Bonge said.
As Tanzania has set up new barriers, other member countries have failed to take down theirs. Burundi, for example, has received complaints about cumbersome clearance procedures at border points, said Jean Bosco Barege of Burundi's East African Community Affairs Ministry.
But there have been some improvements.
The council also called for a reduction of the numerous police checkpoints along key trade routes between member states, as in many cases they serve allow corrupt police to collect bribes.
Kenya honored that in 2008 by reducing the number of police checkpoints to a third of what they were, 15 down from 47.
Uganda's top East African affairs official, Eriya Kategaya, said that his country has already simplified clearance procedures by creating several one-stop border points.
"The time the trucks spend is two or three hours and before it was a day," Kategaya said by phone from the Ugandan capital, Kampala. He added that member states are negotiating a common rate of tonnage per axle of a truck.
Creating a federation is the ultimate goal of the nine-year-old East African Community. It brings together more than 125 million people.
Businessweek
East African governments have not honored an agreement to dismantle barriers that would allow a common market in the region, and Tanzania has even implemented a new fee for regional traders, a regional trade group has said.
The obstacles -- which include a new $500 fee for foreign vehicles in Tanzania's bustling Dar es Salaam port -- are slowing the transit of goods and bolstering regional prices of items produced and manufactured in the region, the East African Business Council said. Companies have also faced repeated checks at border crossings, the umbrella group said.
In July this year, the East African Community formed a common market aimed at growing local businesses and reducing the costs of investment. That agreement encompasses Burundi, Kenya, Rwanda, Tanzania and Uganda.
The community is the most integrated of Africa's regional economic blocs, running with mixed success a customs union for the past five years before forming a common market. The East African customs union broadly allows customs-free movement of goods produced in the region. The union also charges a uniform set of duties for any imports from outside the region.
The East African Community also serves as a negotiating bloc with the world's leading economies and its members tout its population size and common policies as incentives for foreign investors.
Business Council spokesman Godwin Bonge said the statement focused on some of the problems of the customs union, which is part of the more recent common market.
"We've had problems for the last five years in trying to implement some of the provisions of the customs union and we have seen little progress, especially in removing barriers to trade," said Bonge. "It raises questions to how committed the partner states are to integration especially when the common market provisions are much more ambitious than the customs union."
In October, the council said, Tanzania began charging all foreign-registered vehicles $500 for collecting cargo at its Indian Ocean port of Dar es Salaam. That has hit Burundi -- a landlocked country that relies on Tanzania for its ports -- especially hard.
The fee violates an East African Community agreement that any vehicle from a member state can spend up to 14 days at the port for free, and pay $20 if it spends a month there, Bonge said.
As Tanzania has set up new barriers, other member countries have failed to take down theirs. Burundi, for example, has received complaints about cumbersome clearance procedures at border points, said Jean Bosco Barege of Burundi's East African Community Affairs Ministry.
But there have been some improvements.
The council also called for a reduction of the numerous police checkpoints along key trade routes between member states, as in many cases they serve allow corrupt police to collect bribes.
Kenya honored that in 2008 by reducing the number of police checkpoints to a third of what they were, 15 down from 47.
Uganda's top East African affairs official, Eriya Kategaya, said that his country has already simplified clearance procedures by creating several one-stop border points.
"The time the trucks spend is two or three hours and before it was a day," Kategaya said by phone from the Ugandan capital, Kampala. He added that member states are negotiating a common rate of tonnage per axle of a truck.
Creating a federation is the ultimate goal of the nine-year-old East African Community. It brings together more than 125 million people.
Businessweek
Africa resisting the threat of EPAs with Europe
by Martin Khor
African Trade Ministers recently criticised attempts by Europe to get them to sign Economic Partnership Agreements that would damage their economies, and they are proposing more beneficial alternatives.”
The economies of Africa, the world’s poorest region, are under severe threat from free trade agreements that they are under pressure to sign with the European Union, the world’s richest region.
Under these economic partnership agreements (EPAs), Europe wants Africa to open up its economies to European goods, services and companies.
But the African countries are understandably worried their small industries and service operators will not be able to survive free competition from giant European companies, banks and commercial firms.
Moreover, African farmers will lose their markets to artificially cheap European food imports that are heavily subsidised, if agricultural tariffs are reduced or eliminated.
These concerns, and more, were expressed by African trade ministers at their meeting in Rwandan capital of Kigali earlier this month.
One minister described the EPAs as placing African countries into the mouth of a lion in a repeat of the colonial experience.
The Ministers adopted a declaration on the EPAs which made clear their opposition to the EU’s model of EPAs.
Also, in a show of regional unity, the African Union Commission and the continent’s five regional economic commissions covering Eastern, Central, Western and Southern Africa, published a position paper detailing the many problems the EPAs will cause.
They also proposed various ways for Africa to get out of its predicament, instead of signing the kind of EPAs that Europe insists on.
Some African Presidents are expected to voice the region’s concerns at a Europe-Africa summit in Tripoli next week.
The growing African resistance to the EPAs is the latest stage in a long saga which started when Europe decided to end the long-standing post-colonial arrangement which gave trade preferences for products coming from African, Caribbean and Pacific (ACP) countries.
The ACP countries did not have to give preferences for European products in return.
However, under the Cotonou agreement, these ACP countries would have to sign EPAs with Europe by the end of 2007 if they want to continue to enjoy trade preferences.
Three years after the deadline, few African countries have signed the EPAs because of their damaging effects.
The EC has threatened to remove the preferences from countries that have not signed up. These countries face a dilemma.
They face the pressure to sign in order to maintain their preferences and not lose some of their exports to Europe.
On the other hand, these countries resist signing because of the many adverse consequences.
Firstly, the African countries fear that their local industries and farms will be damaged because the EPAs require them to reduce their tariffs to zero for 80% of their imports from the EU.
Many local products may not survive or will lose market share to the cheapened European imports.
They are also against several other trade conditions, including prohibiting or restricting the use of export taxes.
Most African countries tax the exports of some of their raw materials so that local industries can use them for processing or manufacturing.
A ban on export taxes will prevent African countries from taking measures to add value to their primary commodities and to climb the value chain and industrialise.
The loss of import duties and export taxes will also reduce government revenue since these trade taxes are a large part of their income.
Secondly, the African countries are asked to open up their service sector, ranging from telecoms and retail trade to banking, to European firms.
In the EPAs with the Caribbean countries, they opened up 70% of their service sectors.
The smaller African service firms may be displaced by the big European companies.
Thirdly, the EPAs require liberalisation and deregulation of financial flows, investment and government procurement.
This will make it difficult for the countries to regulate capital flows when such regulation or capital controls are now recognised as important policy tools because of the present volatility of financial flows.
The opening of government procurement business to foreign firms (to be treated equally as locals) will affect the ability of the governments to give preference to locals, or to boost the domestic economy, because of the leakage to imports and foreign services.
Fourthly, the African Ministers are worried that the EPAs would adversely affect Africa’s regional integration process, since trade between countries in the region would be partly diverted to European products and services.
Fifthly, the EPAs would also make it more difficult for African countries to cope with the economic slowdown, since their trade balance with Europe is likely to deteriorate; and their ability to regulate capital flows, to boost domestic or regional demand and to earn revenue through trade taxes, will be affected.
What, then, can be done to avoid these damaging effects?
First, 34 of the 47 African countries involved in the EPAs are least developed countries (LDCs), and they do not have to sign the EPAs since their preferences will continue under an existing “Everything But Arms” scheme.
And secondly, the 13 non-LDCs can request that the EU provide them also with the “Everything But Arms” scheme, without their having to give preferences to the EU in return.
There is a good case, as the 13 African countries are also poor and vulnerable, similar to the LDCs.
There is a precedence. The United States provides a non-reciprocal preference scheme for Africa (known as AGOA), and the EU itself is also providing non-reciprocal preferences to Maldova and Western Balkan countries, which are better off than the Africans.
In any case, a good solution should be found because it would be hypocritical for European countries to pledge to help Africa with aid and to achieve the Millennium Develop ment Goals on one hand, and then to seek one-sided trade agreements that would severely damage their economic prospects on the other hand.
The Star
African Trade Ministers recently criticised attempts by Europe to get them to sign Economic Partnership Agreements that would damage their economies, and they are proposing more beneficial alternatives.”
The economies of Africa, the world’s poorest region, are under severe threat from free trade agreements that they are under pressure to sign with the European Union, the world’s richest region.
Under these economic partnership agreements (EPAs), Europe wants Africa to open up its economies to European goods, services and companies.
But the African countries are understandably worried their small industries and service operators will not be able to survive free competition from giant European companies, banks and commercial firms.
Moreover, African farmers will lose their markets to artificially cheap European food imports that are heavily subsidised, if agricultural tariffs are reduced or eliminated.
These concerns, and more, were expressed by African trade ministers at their meeting in Rwandan capital of Kigali earlier this month.
One minister described the EPAs as placing African countries into the mouth of a lion in a repeat of the colonial experience.
The Ministers adopted a declaration on the EPAs which made clear their opposition to the EU’s model of EPAs.
Also, in a show of regional unity, the African Union Commission and the continent’s five regional economic commissions covering Eastern, Central, Western and Southern Africa, published a position paper detailing the many problems the EPAs will cause.
They also proposed various ways for Africa to get out of its predicament, instead of signing the kind of EPAs that Europe insists on.
Some African Presidents are expected to voice the region’s concerns at a Europe-Africa summit in Tripoli next week.
The growing African resistance to the EPAs is the latest stage in a long saga which started when Europe decided to end the long-standing post-colonial arrangement which gave trade preferences for products coming from African, Caribbean and Pacific (ACP) countries.
The ACP countries did not have to give preferences for European products in return.
However, under the Cotonou agreement, these ACP countries would have to sign EPAs with Europe by the end of 2007 if they want to continue to enjoy trade preferences.
Three years after the deadline, few African countries have signed the EPAs because of their damaging effects.
The EC has threatened to remove the preferences from countries that have not signed up. These countries face a dilemma.
They face the pressure to sign in order to maintain their preferences and not lose some of their exports to Europe.
On the other hand, these countries resist signing because of the many adverse consequences.
Firstly, the African countries fear that their local industries and farms will be damaged because the EPAs require them to reduce their tariffs to zero for 80% of their imports from the EU.
Many local products may not survive or will lose market share to the cheapened European imports.
They are also against several other trade conditions, including prohibiting or restricting the use of export taxes.
Most African countries tax the exports of some of their raw materials so that local industries can use them for processing or manufacturing.
A ban on export taxes will prevent African countries from taking measures to add value to their primary commodities and to climb the value chain and industrialise.
The loss of import duties and export taxes will also reduce government revenue since these trade taxes are a large part of their income.
Secondly, the African countries are asked to open up their service sector, ranging from telecoms and retail trade to banking, to European firms.
In the EPAs with the Caribbean countries, they opened up 70% of their service sectors.
The smaller African service firms may be displaced by the big European companies.
Thirdly, the EPAs require liberalisation and deregulation of financial flows, investment and government procurement.
This will make it difficult for the countries to regulate capital flows when such regulation or capital controls are now recognised as important policy tools because of the present volatility of financial flows.
The opening of government procurement business to foreign firms (to be treated equally as locals) will affect the ability of the governments to give preference to locals, or to boost the domestic economy, because of the leakage to imports and foreign services.
Fourthly, the African Ministers are worried that the EPAs would adversely affect Africa’s regional integration process, since trade between countries in the region would be partly diverted to European products and services.
Fifthly, the EPAs would also make it more difficult for African countries to cope with the economic slowdown, since their trade balance with Europe is likely to deteriorate; and their ability to regulate capital flows, to boost domestic or regional demand and to earn revenue through trade taxes, will be affected.
What, then, can be done to avoid these damaging effects?
First, 34 of the 47 African countries involved in the EPAs are least developed countries (LDCs), and they do not have to sign the EPAs since their preferences will continue under an existing “Everything But Arms” scheme.
And secondly, the 13 non-LDCs can request that the EU provide them also with the “Everything But Arms” scheme, without their having to give preferences to the EU in return.
There is a good case, as the 13 African countries are also poor and vulnerable, similar to the LDCs.
There is a precedence. The United States provides a non-reciprocal preference scheme for Africa (known as AGOA), and the EU itself is also providing non-reciprocal preferences to Maldova and Western Balkan countries, which are better off than the Africans.
In any case, a good solution should be found because it would be hypocritical for European countries to pledge to help Africa with aid and to achieve the Millennium Develop ment Goals on one hand, and then to seek one-sided trade agreements that would severely damage their economic prospects on the other hand.
The Star
Shipping company sees Africa trade outpacing mature markets
by Peter Levring
The world's biggest container shipping company, Maersk Line, expects volume on African routes to grow faster than shipping in mature markets, though underperform other emerging markets such as Brazil and China.
Maersk Line, a unit of Danish shipping and oil group A.P. Moller-Maersk, operates about 100 of its 550-vessel fleet in African trades and has a bigger slice of the market there than its 15 percent share of global boxship capacity.
"I'll be surprised if Africa does not continue to outpace non-emerging markets, though it's coming off a very low starting point," Anders Boenaes, Maersk Line's vice-president for Africa trades, said in an interview in Copenhagen.
Containerised imports, driven by consumer goods and machinery, continue to top exports by three to one, he said.
Boxed goods imports to Africa are largely funded by Africans wiring money back from Europe, the Middle East and elsewhere, which has helped sustain demand in the past despite the many armed conflicts that have ravaged the continent.
Improved political stability and rule of law are helping boost container imports after several armed conflicts in Africa ended in recent years, Boenaes said, adding political unrest continues to have a dramatic impact on demand. "We still see the biggest slump in volumes prior to elections. Nobody wants to have a large stock of something that may be looted if events turn into unrest," Boenaes said.
The Danish shipper and South African subsidiary Safmarine want to retain their historically strong market share in Sub-Saharan Africa, though annual African container trade volume barely matches the weekly throughput on the world's biggest trade routes between Asia and Europe.
The Maersk group's port arm, APM Terminals, this month said it signed a deal to run the port of Monrovia in Liberia for 25 years, which it said reflected its positive view of the region's potential in freight.
And Maersk Line's chief executive said last month that it was looking increasingly to serve Africa and Latin America with ships sailing directly from Asia.
Boenaes said Maersk Line needed smaller vessels to serve African ports which are shallower than those in Asia and Europe. Maersk will take delivery of 22 small and mid-size container ships to replace time charters before 2013.
"Growth in African exports is in the hands of international, particularly Asian, hunger for commodities," Boenaes said.
Maersk expects boxship exports from Africa to continue to lag imports until value-boosting processing industries emerge in Sub-Saharan Africa outside South Africa and Kenya.
"We don't expect that to happen until the longer term," Boenaes said.
Reuters
The world's biggest container shipping company, Maersk Line, expects volume on African routes to grow faster than shipping in mature markets, though underperform other emerging markets such as Brazil and China.
Maersk Line, a unit of Danish shipping and oil group A.P. Moller-Maersk, operates about 100 of its 550-vessel fleet in African trades and has a bigger slice of the market there than its 15 percent share of global boxship capacity.
"I'll be surprised if Africa does not continue to outpace non-emerging markets, though it's coming off a very low starting point," Anders Boenaes, Maersk Line's vice-president for Africa trades, said in an interview in Copenhagen.
Containerised imports, driven by consumer goods and machinery, continue to top exports by three to one, he said.
Boxed goods imports to Africa are largely funded by Africans wiring money back from Europe, the Middle East and elsewhere, which has helped sustain demand in the past despite the many armed conflicts that have ravaged the continent.
Improved political stability and rule of law are helping boost container imports after several armed conflicts in Africa ended in recent years, Boenaes said, adding political unrest continues to have a dramatic impact on demand. "We still see the biggest slump in volumes prior to elections. Nobody wants to have a large stock of something that may be looted if events turn into unrest," Boenaes said.
The Danish shipper and South African subsidiary Safmarine want to retain their historically strong market share in Sub-Saharan Africa, though annual African container trade volume barely matches the weekly throughput on the world's biggest trade routes between Asia and Europe.
The Maersk group's port arm, APM Terminals, this month said it signed a deal to run the port of Monrovia in Liberia for 25 years, which it said reflected its positive view of the region's potential in freight.
And Maersk Line's chief executive said last month that it was looking increasingly to serve Africa and Latin America with ships sailing directly from Asia.
Boenaes said Maersk Line needed smaller vessels to serve African ports which are shallower than those in Asia and Europe. Maersk will take delivery of 22 small and mid-size container ships to replace time charters before 2013.
"Growth in African exports is in the hands of international, particularly Asian, hunger for commodities," Boenaes said.
Maersk expects boxship exports from Africa to continue to lag imports until value-boosting processing industries emerge in Sub-Saharan Africa outside South Africa and Kenya.
"We don't expect that to happen until the longer term," Boenaes said.
Reuters
Malawi opens trade waterway to Mozambique
President Bingu wa Mutharika in late October opened a waterway linking inland Malawi to the Indian ocean and opening up trade opportunities for neighbouring Zambia and Zimbabwe.
The 238-kilometre (148-mile) Shire-Zambezi waterway, navigable from the Nsanje inland port in southern Malawi to the Mozambican coast at the port of Chinde, will bring economic benefits to the land-locked region, said Mutharika.
"This is a regional project which will improve the import and export trade of Malawi and our neighbours," he said at the ceremony attended by his counterparts Rupiah Banda of Zambia and Zimbabwe's Robert Mugabe.
"We want to move goods cheaply across international borders," Mutharika said, after cutting a ribbon to officially inaugurate phase one of the port.
The project will cost six billion dollars to complete and includes funding from the African Development Bank, World Bank and the European Union.
"The waterway is now operational. It means barges and vessels can now start docking at the port," Dennis Mzembe, said a spokesman of the Nsanje inland.
A 2005 study found that Malawi could save a total of 175 million dollars of its annual import transport bill through the waterway.
The route follows the Shire river which flows out of Lake Malawi, Africa's third largest body of water, and joins the Zambezi river in Mozambique.
AFP
The 238-kilometre (148-mile) Shire-Zambezi waterway, navigable from the Nsanje inland port in southern Malawi to the Mozambican coast at the port of Chinde, will bring economic benefits to the land-locked region, said Mutharika.
"This is a regional project which will improve the import and export trade of Malawi and our neighbours," he said at the ceremony attended by his counterparts Rupiah Banda of Zambia and Zimbabwe's Robert Mugabe.
"We want to move goods cheaply across international borders," Mutharika said, after cutting a ribbon to officially inaugurate phase one of the port.
The project will cost six billion dollars to complete and includes funding from the African Development Bank, World Bank and the European Union.
"The waterway is now operational. It means barges and vessels can now start docking at the port," Dennis Mzembe, said a spokesman of the Nsanje inland.
A 2005 study found that Malawi could save a total of 175 million dollars of its annual import transport bill through the waterway.
The route follows the Shire river which flows out of Lake Malawi, Africa's third largest body of water, and joins the Zambezi river in Mozambique.
AFP
Walmart checks out Africa
by Robb M. Stewart
It's another sunny Saturday morning, and car trunks are open, ready for loading, in the parking lot here as South Africans return from shopping.
"Shopping? Yeah, people here love it," says a saleswoman in the electronics department of giant discount retailer Makro, a unit of Massmart Holdings Ltd. "By midday," she says, "there is a stampede through the doors."
Similar scenes across South Africa help to explain why Wal-Mart Stores Inc. is considering making a 32 billion rand ($4.63 billion) bid for Massmart, which operates warehouse-sized stores that sell goods ranging from food and liquor to clothing, gym equipment and home furnishings.
Wal-Mart is now in its fifth week of conducting due diligence on Massmart. Executives are inspecting each of Massmart's 288 stores, which are located in 14 African countries, though mostly in South Africa.
If the company proceeds with a formal offer, the acquisition would be the Bentonville, Ark., retailer's biggest in more than a decade. It would also give Wal-Mart a head start in sub-Saharan Africa over European rivals Carrefour SA and Tesco PLC, which don't have any stores in the region.
Carrefour owns supermarkets in Morocco, Egypt and Tunisia with partners, but spokeswoman Amandine Cuinet declined to comment on the retailer's strategy for the rest of the continent. Tesco also declined to comment on markets where it doesn't operate.
South African labor unions have spoken out against Wal-Mart's potential arrival, but the country appears to offer friendlier and more familiar terrain than China and India, where Wal-Mart made earlier forays.
For starters, South Africa has embraced shopping malls. They dot cities, suburbs and, increasingly, the townships where a new and increasingly affluent black middle class has emerged over the past decade. In townships like Soweto, in southern Johannesburg, megamalls have largely displaced street traders.
"There is a new middle class of savvy consumers," says Simon Susman, the chief executive of clothing, homeware and food retailer Woolworths Holdings Ltd. "A shopping mall in South Africa is not very different from an Australian shopping mall or a British shopping mall."
Massmart itself has grown through acquisitions, according to Grant Pattison, Massmart's chief executive. Founded with Makro and six stores in 1990, it has bought a number of other brands, including upmarket Dion electronic stores in 1993. Last year it bought Cambridge Foods, a price-competitive supermarket chain catering to the millions of poorer South Africans who have to commute to their jobs from townships and villages. If a deal goes ahead, Wal-Mart is expected to keep Massmart management to guide its entry into the continent.
"South Africa forces you down a multiplatform route," Mr. Pattison says. Decades of apartheid rule, when blacks were kept out of the mainstream economy and the suburbs, ended in 1994. But the legacy is a two-tier economy that is only slowly eroding. The country boasts the presence of multinational companies, a wealth of mineral resources and the emergence of a middle class. But unemployment remains at about 25% of the working age population.
The two-tier approach has allowed Massmart and other retailers to do well even when the rest of the economy hasn't. In the 12 months through June, Massmart managed to increase its revenue 10% to 47.55 billion rand even though the country continued to lose jobs.
The Congress of South African Trade Unions, the country's biggest labor federation and a political ally of the ruling African National Congress, said it would fight the "Walmartization" of the retail sector. But Wal-Mart's Andy Bond, a former chief executive of Wal-Mart's U.K. subsidiary Asda who is spearheading the purchase, has said the company would work with Massmart's existing unions.
Mr. Pattison says that labor unions have a strong position in the country and the labor laws are very clear, something that wouldn't change with foreign ownership of Massmart.
Of course, Wal-Mart hasn't always managed to get its expansion into new markets right. In 2006, it had to abandon its German operation after spending eight years trying to crack one of Europe's most competitive discount-retailing environments. Last decade, it pulled out of South Korea.
Wal-Mart opened its first store in mainland China in 1996. In a country mired in bureaucracy, it has had to navigate a commercial environment that favors local companies and a distribution system closed to foreign firms. The retailer has also stumbled on its own, with failed efforts in its early days to sell extension ladders and a year's supply of soy sauce to customers living in tiny apartments.
In India, where it plans to use its discount, big-store model to capture a slice of a retail market that has annual sales of more than $350 billion, Wal-Mart has been waiting for years for the government to ease restrictions on foreign investment in the retail sector. There, it must also compete in an industry made up of small merchants.
By contrast, South Africa has relatively little regulatory oversight, executives in the country say. "Although like any business we like to complain from time to time, you can do business in South Africa and you can open a store in South Africa," says Woolworths' Mr. Susman. In the rare instances where licenses to trade are required, they are easy to obtain, he says.
There is an established infrastructure of roads and ports for the movement of goods, and a modern banking system and effective telecommunications to run the business, he adds.
The challenge is that for all its potential, South Africa remains a relatively small market of only about 50 million people.
But some like Wal-Mart now see the country as a gateway into another huge continental market. "You have to take the long view on Africa," says Massmart's Mr. Pattison.
All Voices
It's another sunny Saturday morning, and car trunks are open, ready for loading, in the parking lot here as South Africans return from shopping.
"Shopping? Yeah, people here love it," says a saleswoman in the electronics department of giant discount retailer Makro, a unit of Massmart Holdings Ltd. "By midday," she says, "there is a stampede through the doors."
Similar scenes across South Africa help to explain why Wal-Mart Stores Inc. is considering making a 32 billion rand ($4.63 billion) bid for Massmart, which operates warehouse-sized stores that sell goods ranging from food and liquor to clothing, gym equipment and home furnishings.
Wal-Mart is now in its fifth week of conducting due diligence on Massmart. Executives are inspecting each of Massmart's 288 stores, which are located in 14 African countries, though mostly in South Africa.
If the company proceeds with a formal offer, the acquisition would be the Bentonville, Ark., retailer's biggest in more than a decade. It would also give Wal-Mart a head start in sub-Saharan Africa over European rivals Carrefour SA and Tesco PLC, which don't have any stores in the region.
Carrefour owns supermarkets in Morocco, Egypt and Tunisia with partners, but spokeswoman Amandine Cuinet declined to comment on the retailer's strategy for the rest of the continent. Tesco also declined to comment on markets where it doesn't operate.
South African labor unions have spoken out against Wal-Mart's potential arrival, but the country appears to offer friendlier and more familiar terrain than China and India, where Wal-Mart made earlier forays.
For starters, South Africa has embraced shopping malls. They dot cities, suburbs and, increasingly, the townships where a new and increasingly affluent black middle class has emerged over the past decade. In townships like Soweto, in southern Johannesburg, megamalls have largely displaced street traders.
"There is a new middle class of savvy consumers," says Simon Susman, the chief executive of clothing, homeware and food retailer Woolworths Holdings Ltd. "A shopping mall in South Africa is not very different from an Australian shopping mall or a British shopping mall."
Massmart itself has grown through acquisitions, according to Grant Pattison, Massmart's chief executive. Founded with Makro and six stores in 1990, it has bought a number of other brands, including upmarket Dion electronic stores in 1993. Last year it bought Cambridge Foods, a price-competitive supermarket chain catering to the millions of poorer South Africans who have to commute to their jobs from townships and villages. If a deal goes ahead, Wal-Mart is expected to keep Massmart management to guide its entry into the continent.
"South Africa forces you down a multiplatform route," Mr. Pattison says. Decades of apartheid rule, when blacks were kept out of the mainstream economy and the suburbs, ended in 1994. But the legacy is a two-tier economy that is only slowly eroding. The country boasts the presence of multinational companies, a wealth of mineral resources and the emergence of a middle class. But unemployment remains at about 25% of the working age population.
The two-tier approach has allowed Massmart and other retailers to do well even when the rest of the economy hasn't. In the 12 months through June, Massmart managed to increase its revenue 10% to 47.55 billion rand even though the country continued to lose jobs.
The Congress of South African Trade Unions, the country's biggest labor federation and a political ally of the ruling African National Congress, said it would fight the "Walmartization" of the retail sector. But Wal-Mart's Andy Bond, a former chief executive of Wal-Mart's U.K. subsidiary Asda who is spearheading the purchase, has said the company would work with Massmart's existing unions.
Mr. Pattison says that labor unions have a strong position in the country and the labor laws are very clear, something that wouldn't change with foreign ownership of Massmart.
Of course, Wal-Mart hasn't always managed to get its expansion into new markets right. In 2006, it had to abandon its German operation after spending eight years trying to crack one of Europe's most competitive discount-retailing environments. Last decade, it pulled out of South Korea.
Wal-Mart opened its first store in mainland China in 1996. In a country mired in bureaucracy, it has had to navigate a commercial environment that favors local companies and a distribution system closed to foreign firms. The retailer has also stumbled on its own, with failed efforts in its early days to sell extension ladders and a year's supply of soy sauce to customers living in tiny apartments.
In India, where it plans to use its discount, big-store model to capture a slice of a retail market that has annual sales of more than $350 billion, Wal-Mart has been waiting for years for the government to ease restrictions on foreign investment in the retail sector. There, it must also compete in an industry made up of small merchants.
By contrast, South Africa has relatively little regulatory oversight, executives in the country say. "Although like any business we like to complain from time to time, you can do business in South Africa and you can open a store in South Africa," says Woolworths' Mr. Susman. In the rare instances where licenses to trade are required, they are easy to obtain, he says.
There is an established infrastructure of roads and ports for the movement of goods, and a modern banking system and effective telecommunications to run the business, he adds.
The challenge is that for all its potential, South Africa remains a relatively small market of only about 50 million people.
But some like Wal-Mart now see the country as a gateway into another huge continental market. "You have to take the long view on Africa," says Massmart's Mr. Pattison.
All Voices
Many poor states still cut off from trade finance
by Jonathan Lynn
Many developing countries remain cut off from trade finance, which before the credit crunch was often their only source of private-sector funding, despite a recovery in the industry, a recent meeting of experts heard.
Difficulties still encountered by some poor countries in Africa, Asia, Latin America, Eastern Europe and Central Asia to obtain funding for their exports threatens to undermine their entire economic development, one expert said.
"For them it's an important lifeline with respect to development," said the expert, requesting anonymity, after the meeting of commercial and development bankers active in trade finance hosted by the World Trade Organization.
Trade finance -- the lifeblood of global commerce -- dried up in late 2008 and early 2009 amid the broader credit crunch, contributing to a 12 percent decline in global trade volumes in 2009, the biggest contraction since World War Two.
The industry, which underpins 60-80 percent of the $12-13 trillion in merchandise trade, has recovered since the G20 agreed at its summit in London in April last year to mobilise up to $250 billion to revive the sector.
But even as trade expands by an unprecedented 13.5 percent this year, banks are concentrating on the safest customers.
Countries finding it hard to access trade finance include Vietnam, Pakistan and Bangladesh in Asia, some 20 countries in Africa, 5 low-income states in central and southern America, and Ukraine and Kazakhstan, the trade finance expert told reporters.
WTO Director-General Pascal Lamy is likely to raise the issue at next month's G20 summit in Seoul and on October 27 when he attends a meeting of the African Development Bank in Tunis, trade sources said.
Current and proposed regulations are discouraging banks from providing trade finance to developing countries because they increase the amount of money banks must set aside to cover risks, making the low-margin transactions unprofitable.
"There comes a point at which the cost of doing business ... is just not worth it," said the trade finance expert.
Under current banking regulations, known as Basel II, banks must set aside capital according to the risk of the country they are lending to, not the corporate customer. In many developing countries, companies -- especially those selling commodities and raw materials -- have much better credit ratings than the state.
Proposed new rules known as Basel III, intended to prevent banks hiding toxic assets off their balance sheets -- one of the causes of the financial crisis -- also penalise trade finance because its traditionally safe instruments such as letters of credit are held off-balance-sheet.
The irony is, bankers argue, that trade finance is much safer than other forms of credit.
That was long a matter of faith and anecdote, but nine leading trade finance banks have now pooled data on trade finance to demonstrate to regulators just how safe it is and argue for a change in the rules.
A trade finance default register, set up by the International Chamber of Commerce (ICC) and Asian Development Bank, collected 5.2 million transactions over 5 years, worth $2.5 trillion.
The database shows only 1,140 transactions defaulted -- a default rate of 0.02 percent, compared with rates of several percentage points on real estate lending.
Even in those cases 60 percent of the money was recovered as trade finance lending is secured on the underlying shipment.
Banks attending the WTO meeting included BNP Paribas, Citibank, Commerzbank, HSBC, JPMorgan Chase , RBS, Standard Chartered and Tokyo-Mitsubishi.
Reuters
Many developing countries remain cut off from trade finance, which before the credit crunch was often their only source of private-sector funding, despite a recovery in the industry, a recent meeting of experts heard.
Difficulties still encountered by some poor countries in Africa, Asia, Latin America, Eastern Europe and Central Asia to obtain funding for their exports threatens to undermine their entire economic development, one expert said.
"For them it's an important lifeline with respect to development," said the expert, requesting anonymity, after the meeting of commercial and development bankers active in trade finance hosted by the World Trade Organization.
Trade finance -- the lifeblood of global commerce -- dried up in late 2008 and early 2009 amid the broader credit crunch, contributing to a 12 percent decline in global trade volumes in 2009, the biggest contraction since World War Two.
The industry, which underpins 60-80 percent of the $12-13 trillion in merchandise trade, has recovered since the G20 agreed at its summit in London in April last year to mobilise up to $250 billion to revive the sector.
But even as trade expands by an unprecedented 13.5 percent this year, banks are concentrating on the safest customers.
Countries finding it hard to access trade finance include Vietnam, Pakistan and Bangladesh in Asia, some 20 countries in Africa, 5 low-income states in central and southern America, and Ukraine and Kazakhstan, the trade finance expert told reporters.
WTO Director-General Pascal Lamy is likely to raise the issue at next month's G20 summit in Seoul and on October 27 when he attends a meeting of the African Development Bank in Tunis, trade sources said.
Current and proposed regulations are discouraging banks from providing trade finance to developing countries because they increase the amount of money banks must set aside to cover risks, making the low-margin transactions unprofitable.
"There comes a point at which the cost of doing business ... is just not worth it," said the trade finance expert.
Under current banking regulations, known as Basel II, banks must set aside capital according to the risk of the country they are lending to, not the corporate customer. In many developing countries, companies -- especially those selling commodities and raw materials -- have much better credit ratings than the state.
Proposed new rules known as Basel III, intended to prevent banks hiding toxic assets off their balance sheets -- one of the causes of the financial crisis -- also penalise trade finance because its traditionally safe instruments such as letters of credit are held off-balance-sheet.
The irony is, bankers argue, that trade finance is much safer than other forms of credit.
That was long a matter of faith and anecdote, but nine leading trade finance banks have now pooled data on trade finance to demonstrate to regulators just how safe it is and argue for a change in the rules.
A trade finance default register, set up by the International Chamber of Commerce (ICC) and Asian Development Bank, collected 5.2 million transactions over 5 years, worth $2.5 trillion.
The database shows only 1,140 transactions defaulted -- a default rate of 0.02 percent, compared with rates of several percentage points on real estate lending.
Even in those cases 60 percent of the money was recovered as trade finance lending is secured on the underlying shipment.
Banks attending the WTO meeting included BNP Paribas, Citibank, Commerzbank, HSBC, JPMorgan Chase , RBS, Standard Chartered and Tokyo-Mitsubishi.
Reuters
Building BRICs in Africa
Some eye-catching numbers from Standard Bank out in November on the influence of BRICs countries — Brazil, Russia, India and China — on Africa.
First off, the bank says the global recession and its recovery have been nourishing these so-called South-South ties. But it is all now ready to take off. The bank estimates:
– By 2015, BRIC-Africa trade will have incresed threefold, to $530 billion from $150 billion this year.
— BRICs share of Africa’s total trade will increase from one-fifth today to one-third in the next five years.
— BRICS foreign direct investment stock in Africa will swell to more than $150 billion from around $60 billion today.
Standard Bank bases these assertions partly on estimates for BRICs growth over the next five years — eg, domestic output, global output and a doubling of BRICs trade with the world in general. But it also sees Africa growing rapidly — for example, a per capita real annual growth rate of 5.7 percent between now and 2015, and a doubling of private consumption in Africa’s 10 largest economies. And it adds:
Crucially, a host of global-minded corporates is emerging from the BRICs. In 2010 231 (11.5 percent of the total) companies listed in the Forbes Global 2000 originated in the BRICs, up from only 83 companies (4 percent) in 2005. Recent trends are a harbinger of deeper potential.
Reuters
First off, the bank says the global recession and its recovery have been nourishing these so-called South-South ties. But it is all now ready to take off. The bank estimates:
– By 2015, BRIC-Africa trade will have incresed threefold, to $530 billion from $150 billion this year.
— BRICs share of Africa’s total trade will increase from one-fifth today to one-third in the next five years.
— BRICS foreign direct investment stock in Africa will swell to more than $150 billion from around $60 billion today.
Standard Bank bases these assertions partly on estimates for BRICs growth over the next five years — eg, domestic output, global output and a doubling of BRICs trade with the world in general. But it also sees Africa growing rapidly — for example, a per capita real annual growth rate of 5.7 percent between now and 2015, and a doubling of private consumption in Africa’s 10 largest economies. And it adds:
Crucially, a host of global-minded corporates is emerging from the BRICs. In 2010 231 (11.5 percent of the total) companies listed in the Forbes Global 2000 originated in the BRICs, up from only 83 companies (4 percent) in 2005. Recent trends are a harbinger of deeper potential.
Reuters
Africa now major hub for drug smuggling
Nigeria, Africa's most populous nation, isn't considered a major narcotics consumer but like several other states along the coast of West Africa it is a key transit point for drugs shipped from Asia and Latin America destined for the West. This is largely because of lax customs controls and endemic corruption. Still, more than 300 tons of narcotics were seized in Nigeria in 2009.
In early May, Nigerian narcotics agents arrested politician Eme Zuru Ayortor at Murtala Mohammed International Airport in Lagos after body scanners detected 100 packets of cocaine in his stomach. He claimed he needed money because his 2007 election campaign had bankrupted him. Authorities claim Ayortor was part of a wider drugs network and had probably smuggled cocaine into the country before.
West African nations lying along the Atlantic seaboard have become one of the main conduits for Latin American narcotics, mainly cocaine, destined for the European markets after U.S. Drug Enforcement Administration operations blocked the Caribbean and Mexican routes.
In July, Nigerian agents, operating on a tip from an undercover operative, intercepted nearly half a ton of cocaine from Chile in a shipping container at Lagos' port. The counter-narcotics agency said it was the second largest seizure since one in 2006 that netted 14.2 tons of cocaine.
Drugs smuggling is the main economic activity in Guinea-Bissau, a former Portuguese colony that is the world's fifth poorest country and now known as Africa's first narco-state. The ramshackle country of 1.5 million people, is the nearest landfall in Africa for cartel shipments carried by aircraft and fast boats from Venezuela, the South American hub for trans-Atlantic smuggling.
Since 2003, this clandestine trade has mushroomed. Counter-narcotics agencies recently estimated one-quarter of the cocaine used in Western Europe passed through West Africa.
Antonio Mario Cost of the U.N. Office on Drugs and Crime draws a parallel between the cocaine trade and the slave trade that drew the European powers to the region two centuries ago.
"In the 19th century, Europe's hunger for slaves devastated West Africa," he said. "Two hundred years later, its growing appetite for cocaine could so the same."
On the eastern edge of the continent, British navy ships operating in the Gulf of Aden seized a dhow loaded with about 10 tons of hashish bound for Africa July 7, 2009. The drugs, worth $70 million, were destroyed.
Three months later, on Oct. 15, the U.S. Navy guided missile cruiser USS Anzio intercepted a boat carrying 4 tons of hashish worth around $28 million in the same waters while on anti-piracy patrol.
U.S. forces have dubbed that stretch of ocean the "Hash Highway" and say much of the smuggling is done by al-Qaida to fill its war chest.
Costa estimated 30-35 tons of Afghan heroin is smuggled into East Africa every year.
The vast ungoverned spaces of the Sahara Desert and the semi-arid Sahel region in northern Africa has also become a key narcotics smuggling route used by al-Qaida in the Islamic Maghreb.
The drugs, largely originating in Latin America, are smuggled north from West African states such as Nigeria, Guinea-Bissau and Senegal for shipping to Spain, Portugal, France and Italy. These activities represent one of AQIM's main sources of funds in Algeria, Morocco, Mauritania and other states across the poorly policed desert wastes.
Costa says his agents have "acquired evidence" of new trafficking routes opening across Chad, Niger and Mali, where AQIM and the criminal gangs associated with it also operate. He said trafficking was taking on "a whole new dimension" with traditional camel caravans being replaced with aircraft flying the narcotics north.
On Nov. 2, 2009, agents found a crashed Boeing cargo aircraft in the Gao sector of Mali, a region afflicted by terrorism and insurgency, and found traces of cocaine in the wreckage.
"It's scary that this new example of the links between drugs, crime and terrorism was discovered by chance following the plane crash," Costa said.
UPI
In early May, Nigerian narcotics agents arrested politician Eme Zuru Ayortor at Murtala Mohammed International Airport in Lagos after body scanners detected 100 packets of cocaine in his stomach. He claimed he needed money because his 2007 election campaign had bankrupted him. Authorities claim Ayortor was part of a wider drugs network and had probably smuggled cocaine into the country before.
West African nations lying along the Atlantic seaboard have become one of the main conduits for Latin American narcotics, mainly cocaine, destined for the European markets after U.S. Drug Enforcement Administration operations blocked the Caribbean and Mexican routes.
In July, Nigerian agents, operating on a tip from an undercover operative, intercepted nearly half a ton of cocaine from Chile in a shipping container at Lagos' port. The counter-narcotics agency said it was the second largest seizure since one in 2006 that netted 14.2 tons of cocaine.
Drugs smuggling is the main economic activity in Guinea-Bissau, a former Portuguese colony that is the world's fifth poorest country and now known as Africa's first narco-state. The ramshackle country of 1.5 million people, is the nearest landfall in Africa for cartel shipments carried by aircraft and fast boats from Venezuela, the South American hub for trans-Atlantic smuggling.
Since 2003, this clandestine trade has mushroomed. Counter-narcotics agencies recently estimated one-quarter of the cocaine used in Western Europe passed through West Africa.
Antonio Mario Cost of the U.N. Office on Drugs and Crime draws a parallel between the cocaine trade and the slave trade that drew the European powers to the region two centuries ago.
"In the 19th century, Europe's hunger for slaves devastated West Africa," he said. "Two hundred years later, its growing appetite for cocaine could so the same."
On the eastern edge of the continent, British navy ships operating in the Gulf of Aden seized a dhow loaded with about 10 tons of hashish bound for Africa July 7, 2009. The drugs, worth $70 million, were destroyed.
Three months later, on Oct. 15, the U.S. Navy guided missile cruiser USS Anzio intercepted a boat carrying 4 tons of hashish worth around $28 million in the same waters while on anti-piracy patrol.
U.S. forces have dubbed that stretch of ocean the "Hash Highway" and say much of the smuggling is done by al-Qaida to fill its war chest.
Costa estimated 30-35 tons of Afghan heroin is smuggled into East Africa every year.
The vast ungoverned spaces of the Sahara Desert and the semi-arid Sahel region in northern Africa has also become a key narcotics smuggling route used by al-Qaida in the Islamic Maghreb.
The drugs, largely originating in Latin America, are smuggled north from West African states such as Nigeria, Guinea-Bissau and Senegal for shipping to Spain, Portugal, France and Italy. These activities represent one of AQIM's main sources of funds in Algeria, Morocco, Mauritania and other states across the poorly policed desert wastes.
Costa says his agents have "acquired evidence" of new trafficking routes opening across Chad, Niger and Mali, where AQIM and the criminal gangs associated with it also operate. He said trafficking was taking on "a whole new dimension" with traditional camel caravans being replaced with aircraft flying the narcotics north.
On Nov. 2, 2009, agents found a crashed Boeing cargo aircraft in the Gao sector of Mali, a region afflicted by terrorism and insurgency, and found traces of cocaine in the wreckage.
"It's scary that this new example of the links between drugs, crime and terrorism was discovered by chance following the plane crash," Costa said.
UPI
Kenyan exports denied entry into Tanzania
by Rawlings Otini
Changes in the Kenya Bureau of Standards mark of quality have led to some Kenyan goods being denied entry into Tanzania on suspicion that they may be counterfeits.
Kenyan exports bearing the old mark of quality have been held at Namanga border over what Tanzanian officials said was varying quality emblems on goods from the same country.
Among the blocked goods are two trucks of margarine, maize flour, 800 bags of sugar, and detergents, a Kebs official told East Africa Community ministry PS David Nalo.Mr Nalo was among EAC ministry officials who were on an official trip to Namanga.
The maize flour is worth Sh4.8 million and the Sugar Sh8 million.
“Kenya Bureau of Standards changed its mark of quality, but companies whose stock still has the old mark are being denied entry as the goods are suspected to be fake. Both marks are genuine,” said Richard Sindiga, the director of Economic Affairs at the EAC ministry.
Officials at the ministry said the issue arose from the fact that Tanzania Bureau of Standards does not enforce the standards, instead a different body is charged with the mandate.
The mishap was blamed on lack of communication between the two bodies.
The region has been awaiting the implementation of a uniform mark of quality which is yet to be realised.
Tanzanian officials at the border point said the new quality mark was yet to be communicated to them and that they did not recognise it. They also said that the absence of expiry dates on detergents raised eyebrows since they expected every commodity to have an expiry date, which is not the case in Kenya.
The officials spoke as obstacles to cross border trade have emerged since the coming into effect of the EAC common market in July. Despite growing revenues collected by customs officials, cross border trade between Kenya and Tanzania has met resistance.
Kenya Revenue Authority officials said duty on Tanzanian goods grew by more than 40 per cent this year alone.
“We are now receiving over Sh150 million in duty per month, up from Sh80 million last year. While duty on all imports now stands at Sh17 billion per month from all entry points including Mombasa port,” said Getau wa Getau, a Senior Assistant Commissioner of Customs at Namanga border.
Officials at the border said they were installing an information communication system that would enable them to run a one-stop border station in a move meant to reduce time spent on inspection.
Mr Sindiga said the matter concerning the barred exports had been resolved, however border officials were not available to confirm whether the consignment of goods had been allowed into Tanzania.
The gradual knock-down of cross-border administrative barriers under the newly created regional common market arrangement has triggered a fresh rally in illegal trade, leading to rapid loss of market share among manufacturers.
A recent Kenya Institute of Public Policy, Research and Analysis study put the annual cost of trade in counterfeits and substandard goods in the region at Sh180 billion.
The Kenya Association of Manufacturers, in a 2009 report, estimated that the country loses about Sh50billion a year through trade in counterfeits.
Business Daily Africa
Changes in the Kenya Bureau of Standards mark of quality have led to some Kenyan goods being denied entry into Tanzania on suspicion that they may be counterfeits.
Kenyan exports bearing the old mark of quality have been held at Namanga border over what Tanzanian officials said was varying quality emblems on goods from the same country.
Among the blocked goods are two trucks of margarine, maize flour, 800 bags of sugar, and detergents, a Kebs official told East Africa Community ministry PS David Nalo.Mr Nalo was among EAC ministry officials who were on an official trip to Namanga.
The maize flour is worth Sh4.8 million and the Sugar Sh8 million.
“Kenya Bureau of Standards changed its mark of quality, but companies whose stock still has the old mark are being denied entry as the goods are suspected to be fake. Both marks are genuine,” said Richard Sindiga, the director of Economic Affairs at the EAC ministry.
Officials at the ministry said the issue arose from the fact that Tanzania Bureau of Standards does not enforce the standards, instead a different body is charged with the mandate.
The mishap was blamed on lack of communication between the two bodies.
The region has been awaiting the implementation of a uniform mark of quality which is yet to be realised.
Tanzanian officials at the border point said the new quality mark was yet to be communicated to them and that they did not recognise it. They also said that the absence of expiry dates on detergents raised eyebrows since they expected every commodity to have an expiry date, which is not the case in Kenya.
The officials spoke as obstacles to cross border trade have emerged since the coming into effect of the EAC common market in July. Despite growing revenues collected by customs officials, cross border trade between Kenya and Tanzania has met resistance.
Kenya Revenue Authority officials said duty on Tanzanian goods grew by more than 40 per cent this year alone.
“We are now receiving over Sh150 million in duty per month, up from Sh80 million last year. While duty on all imports now stands at Sh17 billion per month from all entry points including Mombasa port,” said Getau wa Getau, a Senior Assistant Commissioner of Customs at Namanga border.
Officials at the border said they were installing an information communication system that would enable them to run a one-stop border station in a move meant to reduce time spent on inspection.
Mr Sindiga said the matter concerning the barred exports had been resolved, however border officials were not available to confirm whether the consignment of goods had been allowed into Tanzania.
The gradual knock-down of cross-border administrative barriers under the newly created regional common market arrangement has triggered a fresh rally in illegal trade, leading to rapid loss of market share among manufacturers.
A recent Kenya Institute of Public Policy, Research and Analysis study put the annual cost of trade in counterfeits and substandard goods in the region at Sh180 billion.
The Kenya Association of Manufacturers, in a 2009 report, estimated that the country loses about Sh50billion a year through trade in counterfeits.
Business Daily Africa
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