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issue 492 | 16 Apr 2023

World

Global economic recovery endures but the road is getting rocky

The global economy’s gradual recovery from both the pandemic and Russia’s invasion of Ukraine remains on track. China’s reopened economy is rebounding strongly. Supply chain disruptions are unwinding, while dislocations to energy and food markets caused by the war are receding. Simultaneously, the massive and synchronised tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back towards targets. The International Monetary Fund (IMF) forecasts in its latest World Economic Outlook that growth will bottom out at 2.8% this year before rising modestly to 3% next year – 0.1 percentage points below its January projections. Global inflation will fall, though more slowly than initially anticipated, from 8.7% last year to 7% this year and 4.9% in 2024. 

Source: IMF

Africa

World Bank warns of economic slump if sub-Saharan Africa does not cut trade costs

Sub-Saharan Africa will need to cut trade costs by at least half to reinvigorate global trade which has been in decline since mid-last year, the World Bank has warned. The lender said world economy growth rate is set to slump to a three-decade low if nothing is done urgently to boost productivity, labour supply, ramp up investment and trade, and harness the services sector. In a report assessing the long-term implications of the COVID-19 pandemic and the Russian invasion of Ukraine on the global economic growth rate, the World Bank said cutting trade costs in regions where they are highest could boost international trade and bolster the globe’s economic growth. And according to the report, sub-Saharan Africa has the highest trade costs globally with the total costs including shipping, logistics, and regulation charges, amounting to about 130% of actual tariffs levied on traded commodities. Specifically, sub-Saharan Africa has the highest trade costs for agricultural products which cost as much as 250% of actual tariff rates to trade. But besides the high trade costs, the region also has some of the highest tariffs on all goods compared to the rest of the globe. 

Source: The EastAfrican

Africa / United States

US invests USD7-billion to promote climate resilience, mitigation in Africa

United States (US) Vice President (VP) Kamala Harris announced USD7-billion in both private sector and government financing across 27 programmes to promote climate resilience and mitigation across Africa. The announcement was made in Zambia as part of (VP) Harris’ week-long Africa tour aimed at strengthening US-Africa relations, particularly across the climate, energy transition and financing sectors. The funding aims to improve access to climate information services, enhance resilience and adaption while advancing the continent’s energy transition through the provision of capital and knowledge sharing. In addition to energy-related goals, the funding is aimed at strengthening Africa’s ability to address key challenges associated with climate change including food security through the promotion of climate-smart agriculture. On the energy front, the private sector commitments aim to spur sustainability, clean energy development and the advancement of clean transportation. 

Source: Energy Capital & Power 

East Africa

Concern over East Africa manufacturing slide

Queries are being raised over the falling manufacturing value addition (MVA) in the East African Community (EAC) bloc. The trend fell short of the annual growth rate envisaged under the region’s industrialisation drive. “We are not doing well in meeting the aspirations of the regional industrial policy targets,” said Mr Jean Baptiste Havugimana, the EAC director of Productive Sectors. According to him, MVA growth has slowed down in recent years. The growth rate fell from 5.3% between 2005 and 2010 to 4.6% between 2010 and 2021. The fall, he further said, was short of the 10% annual growth rate envisaged in the EAC Industrialisation Policy (2008-2032). “This is nowhere near the double-digit growth envisioned,” Mr Havugimana told a meeting of the EAC Sectoral Council on Trade, Industry, Finance and Investment. He said that due to the slow pace of MVA growth, relative to GDP, the share of manufacturing in GDP has been contracting. Previously manufacturing contributed more than 10% of the region’s GDP but has now dropped to less than 8%. “This is raising doubts about structural transformation through industrialisation,” Mr Havugimana said at the meeting held in Moshi. He challenged the EAC partner states to adopt “revolutionary and innovative” approaches to implementing industrial policies.

Source: The Citizen

East Africa

Textiles in tough times as EAC proposes top taxes

Kenya’s textile industry will be hit hard following a proposal by the East African Community (EAC) Sectoral Council on Trade, Industry, Finance and Investment to move tax paid on imported apparel to the highest band in order to spur local production. The council, which is an apex organ for investment and trade in the region, wants the duty levied on textiles under the Common External Tariff (CET) to be moved to 35% – the highest tax band under the EAC. The council says the move is aimed at promoting production of cotton within the region and cutting overreliance on imports, which has hindered development of the sector in the region. Kenya produces less than 12 million square metres (msm) of woven fabric per year, against a market demand of approximately 171 msm, making the country a net importer of both cotton and textile. “The Sectoral Council made proposals on textile and textile articles to be moved to the maximum band to stimulate local production,” said the council during its 38th extra-ordinary meeting held in Kilimanjaro, Tanzania. Currently, finished goods imported into the regional bloc attract a duty of 25%, intermediate goods (10%) and raw materials (0%) under the EAC’s existing three-band tariff structure, which came into effect on 1 January 2005.

Source: Business Daily Africa

East / Southern Africa

Launched: New USD1.5-million AfDB-funded project to improve electricity regulation in COMESA

The African Development Bank (AfDB) and the Common Market for Eastern and Southern Africa (COMESA) have launched a new regional initiative to enhance the sustainability of the electricity sector in Eastern and Southern Africa through harmonised regulatory frameworks. The initiative, named Regional Harmonization of Regulatory Frameworks and Tools for Improved Electricity Regulation in COMESA, aims at effective, transparent, uniform, and enforceable regulatory frameworks in the region. The ultimate objective is to stimulate cross-border electricity trade and improve energy access in the COMESA region. The launch was conducted recently at the COMESA Secretariat in Lusaka, Zambia, jointly by the COMESA secretary general Chileshe Kapwepwe and the AfDB country manager Mr Raubil Durowoju. The project comprises three key components, including the Elaboration and Adoption of Regional Electricity Regulatory Principles, and Regulatory and Utility Key Performance Indicators based on the AfDB’s flagship Electricity Regulatory Index for Africa for the COMESA region; Harmonised Comparison of Electricity Tariffs and Cost Reflectivity Assessment Framework Tool; and the development of an Information and Database Management System.

Source: COMESA

West Africa

WAMI to receive USD8-million from ADF to support enhanced banking identification and financial sector efficiency in the West African Monetary Zone

The Board of Directors of the African Development Fund (ADF) has approved USD8-million in funding toward the establishment of a digitally interoperable unique bank identification system and harmonised customer identification framework for The Gambia, Guinea, Liberia and Sierra Leone. Implementation of the project will commence in July 2023, led by the West African Monetary Institute (WAMI), working with central banks of the participating countries and in close collaboration with banking and non-banking financial service providers. The project is expected to enhance financial sector efficiency within the participating countries, leading to increased access to finance and further regional integration efforts. Approval of funding from the bank’s concessional lending window was made on 29 March. The new bank identification system will link banking accounts of individuals across different financial service providers. Over 53 financial service providers across the participating countries will be included in the project. This will allow them to verify their clients’ identities on an on-going basis (Know-Your-Customer or KYC), combat fraud, discourage loan defaulting and strengthen correspondent banking relationships. 

Source: AfDB

Angola / Portugal

Angola, Portugal sign two bilateral cooperation agreements

Angola and Portugal signed two cooperation agreements focused on budgetary and fiscal matters that will allow the Angolan government to manage its treasury, national and international financing and contract public debt more effectively, and in accordance with the international standards practiced in the European Union. The agreements, signed by the Minister of Finance of Portugal, Fernando Medina, and his Angolan counterpart, Vera Daves, will see Portugal increase the flow of financing for Angola by another EUR500-million, now reaching EUR2-billion. In addition to the opportunities created by the two technical cooperation agreements, the increase in financing for projects defined by the Angolan government represents good news for entrepreneurs. Minister Medina, later received in audience by Angolan President João Lourenço, noted that the meeting was frank and very productive, highlighting that Portugal and Angola will develop financial instruments that allow a faster diversification of the Angolan economy. 

Source: Energy Capital & Power

Benin

IMF reaches staff-level agreement with Benin on the second review under the EFF and the ECF arrangements

An International Monetary Fund (IMF) team, led by Constant Lonkeng, visited Cotonou from 22 March–5 April to assess recent economic developments and Benin’s progress on commitments under its fund-supported programme. The IMF Executive Board approved, on 8 July 2022, a blended arrangement under the Extended Fund Facility (EFF) and Extended Credit Facility (ECF) for Benin in the amount of USD638-million, equivalent of 391% of quota, to help address pressing financing needs and support the country’s progress towards the Sustainable Development Goals. At the end of the mission, Mr Lonkeng issued the following statement, in part: “The Beninese economy is gaining strength. The authorities’ balanced policy response to external shocks, supported by frontloaded financing under the EEF/ECF, has boosted business confidence. Economic activity is estimated to have expanded by 6.3% in 2022, buoyed by construction and good harvest. While the outlook is favourable, supported by the expansion of the special economic zone and the modernisation of the Port of Cotonou, geoeconomics fragmentation poses an important risk, with the protracted war in Ukraine and the challenging regional security situation straining external accounts and threatening food security.”

Source: IMF

Cameroon

Cameroon seeks to rejoin AGOA amid slowing export revenues

Cameroon is looking to rejoin the United States’ (US) trade initiative for Africa, as the country works to boost export revenues amid falling foreign exchange earnings. Cameroon's economy Minister Alamine Ousmane Mey said his country has started talks with Washington for admission back into the African Growth and Opportunity Act (AGOA), which grants African countries tariff-free access to the US market. The fallout from the COVID-19 pandemic, and global shocks triggered by the conflict in Ukraine have hit Cameroon hard, denting economic growth and undermined its ability to repay debt. The International Monetary Fund (IMF) forecasts that Cameroon, a Central African oil producer, will record 4.3% economic growth this year. The fund has classified Cameroon as being at high risk of debt distress. But the fund added, that Yaounde's debt could still be sustainable with sound fiscal reforms and management. In 2019, the US kicked Cameroon out of the AGOA programme for rights violations by security forces in the restive southwest and northwest regions.

Source: Africanews

Côte d’Ivoire

IMF reaches staff level agreement with Côte d’Ivoire on a USD3.5-billion EFF/ECF arrangement

An International Monetary Fund (IMF) staff team, led by Mr Olaf Unteroberdoerster, visited Abidjan from 1-14 Marchand agreed with the Ivorian authorities on all policy objectives and reforms for an economic reform programme that could be supported by an IMF financial arrangement under the Extended Fund Facility (EFF) / Extended Credit Facility (ECF). A staff-level agreement has now been reached, including on the level of access to fund resources of 400% of quota (equivalent to about USD3.5-billion) under the EFF/ECF. Mr Unteroberdoerster issued the following statement, in part: “The Ivorian economy proved resilient to the [COVID-19] pandemic, but the economic rebound has softened in the face of adverse spillovers from the Russia’s war in Ukraine and global monetary tightening. Indirect and direct subsidies to curb price pressures, higher security spending, and worsening terms-of-trade amid robust domestic demand have led to a widening of macroeconomic imbalances in 2022. Against this challenging backdrop, the authorities have requested fund support under a blended EFF/ECF arrangement for their economic programme.”

Source: IMF

Eritrea

USD49-million from AfDB for 30 MWp solar park with storage in Dekemhare

The African Development Bank (AfDB) is providing USD49.92-million in financing to Eritrea. The funds are for the construction of a 30 megawatt peak (MWp) solar photovoltaic (PV) power plant with storage near the town of Dekemhare. It will be financed with USD49.92-million by the AfDB. Of this funding, USD30.42-million is allocated under the Transition Support Facility (TSF) and USD19.5-million from the African Development Fund (ADF). The project will increase Eritrea’s installed power capacity from 185 megawatts (MW) to 365 MW. The Eritrean government is also planning to build a 33/66 kilovolt (kV) substation and a 66 kV transmission line to connect to the existing line between East Asmara and Dekemhare, located about 1 km from the project site. According to the AfDB, the project is expected to contribute to closing the energy gap while reducing emissions by 42 910 tonnes of carbon dioxide (CO2) equivalent per year, and reducing the cost of electricity generation to 18.5 cents per kilowatt hour (kWh). 

Source: AFRIK 21

Gabon

The gas game: Gabon seeks to exploit its commercial gas potential

A long-standing oil giant of sub-Saharan Africa, Gabon is embracing its potential as a natural gas producer and emerging with revitalised plans for sustainable, energy-led growth. To date, reliance on large, easily accessible, low-sulfur oil reserves has dampened enthusiasm for the development of other sources of energy in the country. But with oil production and government revenues on the wane, attention is turning to the untapped potential of natural gas – of which Gabon is thought to hold anywhere from three to five trillion cubic feet (tcf) – and its ability to advance regional cooperation, relieve energy insecurity and lower carbon emissions. The road to diversifying Gabon’s economy has spanned more than a decade. Supported by the United Nations (UN) Development Program and the UN Economic Commission for Africa (UNECA), the Emerging Gabon Strategic Plan (Plan Strategique Gabon Emergent) was launched in 2009. It aimed to bolster sustainable economic growth while preserving the environment, in part through the adoption of clean fuels such as natural gas. Notably, the World Bank has praised Gabon as one of the few countries in the region to have demonstrably committed to preserving biodiversity and taking action on climate change.

Source: Energy Capital & Power

Kenya

Kenya and the World Bank Group provide USD390-million to boost the digital economy

The World Bank Group Board of Directors approved USD390-million in financing for the first phase of a programme that aims to expand access to high-speed internet, improve the quality and delivery of education and selected government services, and build skills for the regional digital economy. The Kenya Digital Economy Acceleration Project will use a multi-phase programmatic approach (MPA) with two phases where phase one will run from 2023-2028, focusing on expanding access to high-speed internet, improving the quality and delivery of education and selected government services, and building skills for the regional digital economy. Phase two will run from 2026-2030, concentrating on building a data driven and secure environment for enhanced digital service delivery and innovation for the regional digital economy. The project will also mobilise an estimated USD100-million in private capital by crowding-in the private sector for broadband infrastructure development.  

Source: World Bank

Madagascar

Madagascar set to expand access to renewable energy and digital services thanks to USD400-million credit

The World Bank approved a USD400-million credit for the Digital and Energy Connectivity for Inclusion in Madagascar Project (DECIM) that will contribute to doubling energy access from 33.7% to 67% in Madagascar and add an additional 3.4 million internet users to promote socio-economic inclusion. This will be achieved by targeted investments exploring synergies between the two sectors, enabled by critical reforms. At least 10 million people including 2 million households and more than 150 villages from underserved communities will gain access to electricity. The project will also enable 3.4 million new internet users and connect some 2 000 health centres and schools to renewable energy and digital services. “Access to energy and telecommunications are top priorities for our government. This project is fully aligned with our vision for the development of Madagascar. It will allow a significant increase in our access to energy and digital services,” said Andry Rajoelina, President of Madagascar. “We are grateful that the World Bank has demonstrated once again its willingness to support us in order to meet our numerous challenges.” 

Source: World Bank

Nigeria

Boost for intra-African trade as Prudential Bank completes first live PAPSS transaction to Nigeria

Prudential Bank Limited (PBL), an indigenous financial institution, has successfully completed its first live Pan-African Payment and Settlement System (PAPSS) transaction to Nigeria. The transaction was initiated in Ghana cedis on behalf of an individual customer of the bank, which was instantly received by the beneficiary in Nigeria in naira. The PAPSS platform serves as an enabler of the African Continental Free Trade Area (AfCFTA) by providing African businesses and individuals with the opportunity to initiate payments in their respective local currencies, with recipients also receiving funds in their local currencies. This innovative solution will enable businesses to effect cross-border payments in a more efficient, affordable, and transparent manner in line with the operational objective of the AfCFTA, which is expected to create the largest free trade area in the world. PAPSS eliminates the over-reliance on foreign currencies with its attendant economic woes.

Source: Ghanaian Times

Tanzania / Burundi

East Africa’s cross-border electric trains set to speed up intra-African trade

Tanzania and Burundi have floated a tender for designing and constructing an electrified railway that will initially connect the two countries and pass through the Democratic Republic of the Congo (DRC), as the countries look to tap the African Continental Free Trade Area (AfCFTA), and create the continent’s second multinational electrified railway. About 282 km of an electrified Standard Gauge Railway (SGR) line will be built from Uvinza in Tanzania (off the Tabora – Kigoma SGR line), across the international border along Malagarasi river to Musongati and onwards to Gitega, both in Burundi. “The two Governments of Tanzania and Burundi have entered into a bilateral agreement to implement this multinational project as a single project within Tanzania and Burundi territories,” according to the tender document. The project will be implemented for a period of five years. Upon completion, it is set to become Africa’s second cross-border electrified rail after Ethiopia and Djibouti launched the continent’s first fully electric multinational railway line, in 2016.

Source: The Independent

Zambia

IMF reaches staff-level agreement on the first review of the ECF and conducts discussions on the 2023 Article IV consultation with Zambia

An International Monetary Fund (IMF) staff team, led by Ms Allison Holland, Mission Chief for Zambia, held meetings in Lusaka from 22 March to 5 April 2023, to discuss progress on reforms and the authorities’ policy priorities in the context of the first review of Zambia’s 38-month programme under the Extended Credit Facility (ECF)-supported programme. The arrangement was approved by the IMF Executive Board for a total amount of SDR978-million (USD1.3-billion) on 31 August 2022. The team also conducted the 2023 Article IV consultation. At the conclusion of the visit, Ms Holland issued the following statement, in part: “The Zambian authorities and IMF staff team have reached a staff-level agreement on the first review of Zambia’s economic programme under the ECF arrangement. The staff-level agreement is subject to IMF Management approval and Executive Board consideration once the necessary financing assurances have been received. An agreement with official creditors on a debt treatment in line with programme parameters would provide the needed financing assurances. Upon completion of the executive board review, Zambia would have access to SDR140-million (about USD188-million), bringing the total IMF financial support disbursed under the arrangement to SDR280-million (about USD376-million).”

Source: IMF