A successful African free trade area implementation could unlock major benefits for Africa in terms of income, jobs among other things, a report by IMF staff said.
The departmental paper published Friday (May 5) examined the prospects for African trade integration in the context of a changing world amid the climate crisis, risks of geopolitical fragmentation, technological progress, and the continent’s prospective demographic growth.
The 64-page document found that comprehensive reforms combined with the AfCFTA implementation could increase the median merchandise trade flow between African countries by 53 percent and with the rest of the world by 15%.
This would consequently raise the real per capita GDP of the median African country by over 10 percent.
Such performance resonates with findings in the literature that trade reforms could help reduce extreme poverty by an additional 30–50 million people across the continent.This result resonates with findings in the literature that trade reforms could help reduce extreme poverty by an additional 30–50 million people across the continent.
The authors of the report said these opportunities would require investment in physical and human capital, a macroeconomic and business environment conducive to private sector-led growth, and a modernized social safety net that supports the most vulnerable.
The Afcfta agreement entered into force in 2019 but is not yet effectively implemented.
Dollar drops as inflation comes in below economists’ expectations
By Rédaction Africanews with Agencies
The US dollar suffered a sharp decline on Wednesday following the release of data that revealed consumer prices in the United States rose less than anticipated in March.
The unexpected result has prompted experts to speculate that the Federal Reserve may halt its rate-hiking efforts, possibly after a rate increase in May.
The implications of this latest development are significant, as the Fed’s monetary policy decisions can have a major impact on the global economy.
Last month’s Consumer Price Index (CPI) only saw a 0.1% climb, falling short of economists’ forecasted 0.2% gain and marking a decrease from the 0.4% rise observed in February. Over the 12 months leading up to March, the CPI increased by 5.0%, which represents the smallest year-on-year gain since May 2021. By comparison, the CPI had risen by 6.0% on a year-on-year basis in February.
Excluding the volatile food and energy components, the CPI increased 0.4% last month after rising 0.5% in February. Sticky rents continued to drive core CPI.
“Headline inflation coming down more than expected is backing the view of the Fed being basically one more and done,” Reuters quoted Joe Manimbo, senior market analyst at Convera in Washington, D.C. in a report
The dollar index was last at 101.68, down 0.41% on the day and below the level of around 102.11 before the data. The euro reached $1.09900, the highest since Feb. 2, and was last at $1.0967, up 0.48% on the day. The dollar dipped to 133.04 Japanese yen , from around 133.85 before the data.
According to fed funds futures traders, there is a 69% chance that the Fed will increase rates by 25 basis points at its meeting on May 2-3. This probability has decreased from approximately 76% prior to the latest data.
Retail sales data on Friday will be analyzed next for how consumer spending is being affected by higher prices.
Prolonged high inflation dims economic outlook – IMF
The outlook for the world economy this year has dimmed in the face of chronically high inflation, rising interest rates and uncertainties resulting from the collapse of two big American banks.
That’s the view of the International Monetary Fund, which on Tuesday downgraded its outlook for global economic growth. The IMF now envisions growth this year of 2.8%, down from 3.4% in 2022 and from the 2.9% estimate for 2023 it made in its previous forecast in January.
The fund said the possibility of a “hard landing,” in which rising interest rates weaken growth so much as to cause a recession, has ”risen sharply,” especially in the world’s wealthiest countries. Those conditions are also increasing the risks to global financial stability, the fund warned.
“The situation remains fragile,” Pierre-Olivier Gourinchas, the IMF’s chief economist, told reporters Tuesday. ”Downside risks predominate.”
The IMF, a 190-country lending organization, is forecasting 7% global inflation this year, down from 8.7% in 2022 but up from its January forecast of 6.6% for 2023.
“Inflation is much stickier than anticipated even a few months ago,’’ Gourinchas wrote in the IMF’s latest World Economic Outlook.
Persistently high inflation is expected to force the Federal Reserve and other central banks to keep raising rates and to keep them at or near a peak longer to combat surging prices. Those ever-higher borrowing costs are expected to weaken economic growth and potentially destabilize banks that had come to rely on historically low rates.
Already, Gourinchas warned, higher rates are “starting to have serious side effects for the financial sector.’’
The fund’s annual Global Financial Stability Report, also released Tuesday, issued recommendations for international decisionmakers:
“Policymakers may need to adjust the stance of monetary policy to support financial stability” — that is, possibly rethink the pace of interest rate hikes that are intended to cool inflation.
The fund foresees a 25% likelihood that global growth will fall below 2% for 2023. That has happened only five times since 1970, most recently when COVID-19 derailed global commerce in 2020.
The IMF also envisions a 15% possibility of a “severe downside scenario,” often associated with a global recession, in which worldwide economic output per person would shrink.
The global economy, the fund warned in Tuesday’s report, is “entering a perilous phase during which economic growth remains low by historical standards and financial risks have risen, yet inflation has not yet decisively turned the corner.”
The IMF issued modest upgrades to the economies of the United States and Europe, which have proved more resilient than expected even with much higher interest rates and the shock of Russia’s invasion of Ukraine.
The fund now expects the United States, the world’s biggest economy, to grow 1.6% this year, down from 2.1% in 2022 but up from the 1.4% expansion that the IMF had predicted in January. A robust U.S. job market has supported steady consumer spending despite higher borrowing rates for homes, cars and other major purchases.
U.S. Treasury Secretary Janet Yellen gave an optimistic speech Tuesday about the state of the U.S. economy and the banking system, which she says “remains sound.”
For the 20 countries that share the euro currency, the IMF foresees lackluster growth of 0.8%. But that, too, marks a slight upgrade from its January forecast. Though Europe has suffered from the wartime cutoff of Russian natural gas, a surprisingly warm weather reduced demand for energy. And other countries, including the United States, were nimbler than expected in delivering natural gas to Europe to replace Russia’s.
China, the world’s second-biggest economy, is expected to grow 5.2% this year, unchanged from the IMF’s January forecast. China is rebounding from the end of a draconian zero-COVID policy that had kept people home and had hobbled economic activity.
In the United Kingdom, where double-digit inflation is straining household budgets, the economy is expected to contract 0.3% this year. But even that is an upgrade from the 0.6% drop that the IMF had predicted in January for the U.K.
In the developing world, the IMF downgraded growth prospects for India, Latin America, the Middle East, Sub-Saharan Africa and the less-developed countries of Europe. Ukraine’s war-ravaged economy is forecast to shrink by 3%.
The world economy has endured shock after shock in the past three years. First, COVID-19 brought global commerce to a near-standstill in 2020. Next came an unexpectedly strong recovery, fueled by vast government aid, especially in the United States. The surprisingly powerful rebound, however, triggered a resurgence of inflation, worsened after the Russian invasion of Ukraine drove up prices of energy and grain.
The Fed and other central banks responded by aggressively raising rates. Inflation has been easing, though it remains well above central banks’ targets. Inflation is especially intractable in services industries, where worker shortages are putting upward pressure on wages and prices.
Higher rates have caused problems for the financial system, which had grown used to extraordinarily low interest rates.
On March 10, Silicon Valley Bank failed after making a disastrous bet on falling rates and absorbing heavy losses in the bond market, news of which triggered a bank run. Two days later, regulators shut down New York-based Signature Bank. The failures were the second- and third-largest in U.S. history. In the wake of the troubles, U.S. banks are expected to cut back on lending, which could hurt economic growth.
Congo: Pointe-Noire welcomes its very first cruise ship
The port of Pointe-Noire, the economic and oil capital of Congo-Brazzaville, received on Wednesday its first cruise ship carrying foreign tourists, a sign of the economic diversification sought by the Congolese government.
Finnish flag floating in the air, 115 meters of steel carrying 150 tourists of various nationalities, the SH Vega cruise ship was welcomed in the port of the economic and oil capital of Pointe-Noire, in Congo-Brazzaville on Wednesday.
It is the first time in history that a cruise ship sweeps the coasts of the central African country. Some have declared it a true sign of a new era of economic diversification in the country.
According to Lydie Pongault, minister of tourism: the arrival of the cruise ship “inaugurates a new era in the history of tourism in our country. The concept of cruise tourism is now a reality in the Republic of Congo.”
The Swan Hellenic owned cruise ship offers different excursions on the continent, from exploring African crucibles to a visit of Africa’s Atlantic Islands of Empire.
The SH Vega “is practically going around the world (…). It comes from Angola, will stay three days with us and then it will continue to Sao Tome and Principe,” according to Alain Koua Ngoulou, port commander.
The port authorities have not given any details on the rate of passage of cruise ships. But to get the economy out of the oil patch, the Congolese government has included tourism among the six pillars of the National Development Plan along with agriculture, digital technology and crafts.
“We are beginning to move gradually towards diversification of the economy” and “tourism is a sector in which we have comparative advantages”, said Didier Sylvestre Mavouenzela, President of the Chamber of Commerce of Pointe-Noire. “Tourism serves as a vector to boost all the other sectors: transport, the hotel industry, handicrafts,” he added.
Hosting high ranking establishments such as the Atlantic Palace, the Victory Palace, the Azur international, the Madiba Villa or the Palm beach, Pointe-Noire is no stranger to a certain type of tourism. A 2012 study shows that business tourism prevails in the Congolese economic capital, with businessmen accounting for 70% of customers.
However, Alain Koua Ngoudou thinks the country “still has a lot to do” from a tourism point of view.
Regardless of certain limitations, and considering its numerous transport infrastructures, the economic dynamism and cosmopolitanism of its actors, its coastline and its beaches, not forgetting small wonders such as Pointe-Indienne, Diosso, Conkouati-Douli National Park… Pointe-Noire is the gateway to Central Africa and therefore has everything it takes to become an increasingly popular seaside resort.
Congo is the third largest oil producer south of the Sahara, with an estimated production of 350,000 barrels per day.
Nigeria gets World Bank funding for social program ahead of fuel subsidy cut
By Felix Onuah
BUJA, April 5 (Reuters) – Nigeria has secured $800 million from the World Bank to scale up its national social program ahead of the removal of its costly but popular subsidies on petrol in June, Finance Minister Zainab Ahmed said on Wednesday.
Africa’s biggest economy set aside 3.36 trillion naira ($7.3 billion) this year to spend on petrol subsidies until mid-2023, after which it has made no provision for the expense, which cost more than its spending on healthcare and education.
Ahmed said the government was considering cash transfers and mass transit buses for workers to ease the pain of the subsidy removal on the most vulnerable segment of its population.
She added that the country has registered ten million households, which is equivalent to 50 million people on its vulnerable list.
“Several things are still on plan,” Ahmed told reporters in Abuja after the government’s cabinet meeting.
“Some we can start executing quickly while some are of long-term implementation.”
The World Bank said in 2021 it expected the COVID-19 crisis to push over 11 million Nigerians into poverty by 2022, taking the total number of people classified as poor in the country to over 100 million. The total population is estimated at 200 million.
Ahmed said discussions were going on at different levels of government and with members of the incoming administration of President-elect Bola Tinubu on the subsidy removal.
Last week, Labour Minister Chris Ngige recommended that Tinubu’s new administration give public sector workers pay rises after removing a fuel subsidy in June. Tinubu will take office in May, when Buhari steps down.
Many Nigerians regard cheap subsidised fuel as at least one benefit they receive from the state, which fails to deliver other basic services such as electricity and security despite receiving billions of dollars every year from oil exports.
Reporting by Felix Onuah; Writing by Chijioke Ohuocha; Editing by Jan Harvey, Mark Porter and Aurora Ellis
Airlines seek to unblock $1.6bln of funds in Africa
Tim Hepher, Reuters News
PARIS – Airlines warned on Monday that service to countries in Africa and elsewhere that block the repatriation of funds is likely to suffer if there is no progress in talks to unfreeze money owed.
About $1.6 billion of funds are being withheld in Africa for various reasons, representing two thirds of the global total, the International Air Transport Association said in a briefing on strong prospects for growth in the continent’s airline market.
(Reporting by Tim Hepher; Editing by David Goodman)
Africa Travel Market optimistic over new growth prospects
By Wandiswa Ntengento
Africa’s travel market is open and booming. This is a sentiment expressed by an estimated 600 exhibitors at this year’s World Travel Market Africa in Cape Town, South Africa. This after the industry sustained serious damage due to Covid-19.
The meeting saw a 35% increase compared to last year, said Carol Weaving, Director of Reed Exhibition Africa.
“This year we have 577 exhibitors which is a 35 per cent growth and what’s really exciting is that we are the only inbound show on the African continent and it goes to show that a lot of intra africa trade that is happening. Internationally you can see also that the Indian Ocean here, Seychelles, Reunion, Madagascar”
One of the hot topics on Africa’s growth is intra africa trade. For travel and tourism, destinations like Seychelles believes that it will act a catalyst to wider growth for expanding the country’s popularity.
“The new approach I would say which our Minister of a Tourism continues talk often about is to introduce our cultural activities in Seychelles to bring it more at the forefront. In other worlds, we have a story to tell about our food and music and us as a people,” David Germain, Seychelles Tourism Regional Director for Africa.
Meanwhile, Zimbabwe a destination known for diverse attractions like Victoria Falls predicts that by 2025 their tourism sector will reach a five billion US dollar growth mark.
Jeffreys Manjengwa is the Zimbabwe Tourism Authority Executive Director International Marketing:
“Our projection under our national tourism recovery growth strategy is to reach a USD five billion tourism economy by 2025.”
The UN’s World Tourism Organization latest data shows that more than 900 million tourists travelled internationally in 2022. These businesses behind are some of the of the foot soldiers behind the promotion of the continent and driving growth to Africa’s travel and tourism market.
Kenya is considering tax reforms to entice American investors
Chinedu Okafor April 1, 2023
Kenya is exploring tax breaks to entice reluctant Western investors. Nairobi threw out the red carpet for US investors this week, despite the US administration complaining that corruption and a lack of transparency in tax policy inhibited investment in Kenya.
These concerns were raised at the American Chamber of Commerce (AmCham) meeting in Nairobi, where President William Ruto was among the prominent speakers.
My government is finalizing new tax policy guidelines that have gone through various stakeholder consultations, including inputs from AmCham. This policy that will enhance transparency in our tax regime will take effect by June and will be in place for at least three years,” President Ruto said.
He also announced the government’s intention to repeal a 1.5 percent fee on digital services in exchange for the disputed global framework suggested by the Organization for Economic Cooperation and Development (OECD) on taxing multinational corporations, which includes a minimum rate of 15%.
While Kenya had previously rejected the framework, which proposed a 15% minimum tax rate on global corporations, President Ruto has changed his tone, and Kenya will now sign on to the OECD deal ahead of its implementation on January 1, 2024.
“The growth of digital commerce has forced many countries to impose Digital Services Tax measures on income derived in their jurisdictions. Kenya has also done the same. Following discussions with players in this sector, we have committed to review this tax regime and align it with the two-pillar solution currently being developed by the OECD inclusive framework,” he said.
At the event, US Ambassador Meg Whitman expressed worry about a fractured tax framework that discouraged US investment. She noted numerous tax regimes administered by several entities as barriers to conducting business.
“Kenya must have a consistent, transparent, and fairly administered national tax policy to attract and retain foreign direct investment and accelerate economic development,” she said.
US VP Harris seeks billions for climate resilience across Africa
AP , Saturday 1 Apr 2023
Vice President Kamala Harris is pushing for $7 billion in private-sector investments to help Africa prepare for the effects of climate change.
The announcement comes as she wraps up her weeklong trip to the continent on Saturday.
Harris plans to visit a farm outside Lusaka, Zambia’s capital, where workers are using new techniques and technology to grow more produce, part of her effort to demonstrate ways to secure food supplies despite global warming.
“The United States is committed to these types of innovative solutions to support climate adaptation, mitigation, and resilience,” she said Friday during a news conference with President Hakainde Hichilema.
Harris’ trip, which included stops in Ghana and Tanzania, is intended to advance U.S. efforts to make inroads in Africa, where China’s influence runs deep.
The $7 billion announcement is the biggest-ticket item that Harris has announced, but more work will be needed to follow through.
For example, African Parks, a nonprofit group, has committed to raising $1.25 billion over the next seven years in order to expand its conservation program. Another organization, One Acre Fund, plans to raise $100 million to plant 1 billion trees by the end of the decade.
The politics of climate change are complicated in Africa, which has contributed far less to overall greenhouse gas emissions than richer corners of the world such as the United States.
According to the International Energy Agency, 43% of Africans didn’t have access to electricity in 2021, and recent outages have sparked frustration.
In Ghana, Harris was questioned at a news conference about how the West can demand that Africa go green and forgo using its natural resources.
She also was pressed on whether wealthy nations would supply $100 billion annually to help poor countries cope with climate change, a commitment made under the Paris climate accord.
Harris said it is “critically important that, as global leaders, we all speak truth about the disparities that exist in terms of cause and effect and that we address those disparities.” She said there were opportunities in the “clean energy economy” that could help generate growth in Africa.
As for the money, President Joe Biden has requested $11 billion in his proposed budget to meet its international commitments.
“We are waiting for Congress to do its work,” Harris said.
Millions in African countries need power: ‘What can we do?’
AP , Saturday 25 Mar 2023
From Zimbabwe, where many must work at night because it’s the only time there is power, to Nigeria where collapses of the grid are frequent, the reliable supply of electricity remains elusive across Africa.
The electricity shortages that plague many of Africa’s 54 countries are a serious drain on the continent’s economic growth, energy experts warn.
In recent years South Africa’s power generation has become so inadequate that the continent’s most developed economy must cope with rolling power blackouts of eight to 10 hours per day.
Africa’s sprawling cities have erratic supplies of electricity but large swaths of the continent’s rural areas have no power at all. In 2021, 43% of Africans — about 600 million people — lacked access to electricity with 590 million of them in sub‐Saharan Africa, according to the International Energy Agency.
Investments of nearly $20 billion are required annually to achieve universal electrification across sub-Saharan Africa, according to World Bank estimates. Of that figure nearly $10 billion is needed annually bring power and keep it on in West and Central Africa.
There are many reasons for Africa’s dire delivery of electricity including ageing infrastructure, lack of government oversight and a shortage of skills to maintain the national grids, according to Andrew Lawrence, an energy expert at the Witwatersrand University Business School in Johannesburg.
A historical problem is that many colonial regimes built electrical systems largely reserved for the minority white population and which excluded large parts of the Black population.
Today many African countries rely on state-owned power utilities.
Much attention has focused in the past two years on the Western-funded “Just Energy Transition,” in which France, Germany, the United Kingdom, the United States and the European Union are offering funds to help poorer countries move from highly polluting coal-fired power generation to renewable, environmentally-friendly sources of power. Africa as a region should be among the major beneficiaries in order to expand electricity access on the continent and improve the struggling power grids, said Lawrence.
“The transition should target rural access and place at the forefront the electrification of the continent as a whole. This is something that is technically possible,” he said.
The Western powers vowed to make $8.5 billion available to help South Africa move away from its coal-fired power plants, which produce 80% of the country’s power.
As a result of its dependence upon coal, South Africa is among the top 20 highest emitters of planet-warming greenhouse gases in the world and accounts for nearly a third of all of Africa’s emissions, according to experts.
South Africa’s plan to move away from coal, however, is hampered by its pressing need to produce as much power as possible each day.
The East African nation of Uganda for years has also grappled with power cuts despite massive investment in electricity generation.
Nigeria, Africa’s most populous country, has grappled with an inadequate power supply for many years, generating just 4,000 megawatts though the population of more than 210 million people needs 30,000 megawatts, say experts. The oil-rich but energy-poor West African nation has ramped up investments in the power sector but endemic corruption and mismanagement have resulted in little gains.
In Zimbabwe, electricity shortages that have plagued the country for years have worsened as the state authority that manages Kariba, the country’s biggest dam, has limited power generation due to low water levels.
Successive droughts have reduced Lake Kariba’s level so much that the Kariba South Hydro Power Station, which provides Zimbabwe with about 70% of its electricity, is currently producing just 300 megawatts, far less than its capacity of 1,050 megawatts.
Zimbabwe’s coal-fired power stations that also provide some electricity have become unreliable due to aging infrastructure marked by frequent breakdowns. The country’s solar potential is yet to be fully developed to meaningfully augment supply.
This means that Harare barber Omar Chienda never knows when he’ll have the power needed to run his electric clippers.
“What can we do? We just have to wait until electricity is back but most of the time it comes back at night,” said Chienda, a 39-year-old father of three. “That means I can’t work, my family goes hungry.”
In Nigeria’s capital city of Abuja, restaurant owner Favour Ben, 29, said she spends a large part of her monthly budget on electricity bills and on petrol for her generator, but adds that she gets only an average of 7 hours of power daily.
“It has been very difficult, especially after paying your electricity bill and they don’t give you light.” said Ben. “Most times, I prepare customers’ orders but if there is no light (power for a refrigerator), it turns bad the next day (and) I have lost money for that.”
Businesses in Nigeria suffer an annual loss of $29 billion as a result of unreliable electricity, the World Bank said, with providers of essential services often struggling to keep their operations afloat on generators.
As delegates gathered in Cape Town this month to discuss Africa’s energy challenges, there was a resounding sentiment that drawn-out power shortages on the continent had to be addressed urgently. There was some hope that the Western-funded “Just Energy Transition” would create some opportunities, but many remained skeptical.
Among the biggest critics of efforts to have countries like South Africa to transition quickly from the use of coal to cleaner energy is South Africa’s Minister of Mineral Resources and Energy Gwede Mantashe.
He is among those advocating that Africa use all sources available to it to produce adequate power for the continent, including natural gas, solar, wind, hydropower and especially coal.
“Coal will be with us for many years to come. Those who see it as corruption or a road to whatever, they are going to be disappointed for many, many years,” said Mantashe. “Coal is going to outlive many of us.”