Current Trade News

Patchy rainfall in Malawi’s tobacco fields signals a difficult harvest season ahead for the farmers gathering the country’s “green gold”, but even greater storms could be about to break over an industry coming under increased international pressure to reform its child labour practices.
Tobacco accounts for 11% of the country’s GDP and more than 60% of its export earnings, but the low prices that farmers receive from dealers mean many are highly reliant on child labour, a practice that deprives children of their education and ultimately fuels the cycle of poverty. The International Labour Organisation (ILO) sets the minimum age for employment at 14 in less-developed countries.
On 1 November 2019, the US restricted imports of tobacco from Malawi. Its Customs and Border Protection (CBP) agency issued a withhold release order on tobacco and products containing tobacco from Malawi, meaning that the products will be detained at all US ports of entry. In a statement, the agency said that the action was taken on the basis of information that “reasonably indicates the tobacco from Malawi is produced using forced labor and forced child labor”.
Companies that can offer proof their products are not made in whole or part by child labour or other forced labour will still be able to import their produce, but such restrictions will undoubtedly have an impact on tobacco growing in Malawi.
Law firm threatens action
In a separate development at the end of October 2019, London-based law firm Leigh Day announced that it was preparing a class action on behalf of thousands of Malawian children and their families to demand compensation from British American Tobacco (BAT), one of the world’s largest cigarette makers, for “unjust enrichment” from the alleged use of child labour in the country.
In a statement, the firm said that it had sent a pre-action letter to BAT, and that if no satisfactory response were received it would take action in the High Court. It said that the children and their families accuse BAT of making huge profits from leaves picked by tenant farmers who are “effectively forced to work for very little pay under fear, duress and false pretences”.
Local dealers buy the tobacco and sell it on to the big firms such as BAT, and the latter, says Leigh Day, effectively determine the price. The law firm asserts that the tenant farmers receive so little for their produce that they have “no option but to rely on their children to work”. In the last season, it says, “total earnings were on average no more than £100 to £200 [$130-$262] for the work of a family of five for 10 months”.
The statement alleges that the children do “gruelling” work, often for 10-12 hours a day, which regularly prevents them from attending school. They do “much the same work as the adult farmers including building ridges for planting, harvesting tobacco leaves, applications of toxic pesticides and bundling tobacco leaves”.
Were the case to come to court and the judgment go against BAT, it would have a big impact on the situation in Malawi: “If a high court rules that BAT is responsible for the wages and conditions in their global supply chain, it will be forced to adopt higher standards and hopefully others will follow suit,” Human Rights Watch senior researcher Margaret Wurth told the Daily Telegraph of London in November.
Farmers too poor to hire workers
Farmers who spoke to African Business bear out Leigh Day’s assertion that they are too poor to hire extra hands due to the low selling prices of Malawi’s leading cash crop. But they are nonetheless apprehensive about the consequences of the international pressure.
A tenant farmer from a small district in the central region, Johnson, 53, fears lower selling prices as the industry comes under global scrutiny. Given the US restrictions, he is unsure of what price to expect from the local merchants. Low prices and tighter labour rules could dent his earnings when the main tobacco-marketing season begins in April.
“I have a target I can meet if we get more rains, but if the buyers want my tobacco for cheap it will be very hard. Farmers are always fighting for better prices, but now if buyers reduce the price of my product or they refuse it because of children working then how will I live? ””
Johnson works on a small plot with his wife and his five children, who work when they’re not in school. He says that he can’t afford to pay labourers for the 10 months of the year spent on farming tobacco so he relies on his family for support.
“This is how we survive as a family,” he says. “This is how my children go to school and I don’t think I could find the money to pay extra people to help me. The [selling] prices are low so if anybody was to dig my field, how much would I pay them?”
BAT rebuts allegations
London-listed BAT, which Leigh Day says acquires tobacco from between 20,000 to 35,000 farms in Malawi, says that it expects dealers from whom it buys tobacco to comply with an international code of conduct that prohibits the use of child labour and marketing tobacco to anyone under 18.
Simon Cleverly, group head of corporate affairs at BAT tells African Business that the company has a strict policy against forced and child labour which applies to employees and suppliers: “British American Tobacco takes the issue of child labour extremely seriously and strongly agrees that children must never be exploited, exposed to danger or denied an education. All our policies and standards on child labour are aligned with ILO convention 138 on minimum age.”
Towards a solution?
Malawi’s minister of agriculture, Kondwani Nankhumwa, says that the government is making efforts to eliminate child labour. “There are only pockets where this happens,” he tells African Business. “Government is making efforts to create some conformity and order.”
According to the 2015 National Labour Survey, child labour prevalence is at 38%, mainly in tobacco and tea farming. To curb the use of minors under 14, Malawi’s minister of labour, Martha Chanjo Mhone, says the government plans to increase its capacity in conducting routine inspections on tea and tobacco farms.
However, Sheila Chikonde, the wife of a tobacco farmer, doubts the effectiveness of the plans. “I don’t know how inspection will help us. If we could plant different crops so we have something to sell all year then maybe our children would not have to work so hard in the farms and get sick. It would be better,” she says.
Source: African Business

28/01/2020 - Kenya's tea export earnings drop 16% in 2019 on low prices
NAIROBI (Reuters) - Kenya's earnings from tea exports dropped by 16.4% last year to 117 billion shillings ($1.16 billion) as production edged down and average prices of the commodity slid, the industry regulator said on Friday.

The East African nation, which is the biggest exporter of black tea in the world, produced 458.85 million kilograms of the crop, down 6.95% from the previous year, the regulator Tea Directorate said in a report.

"Lower earnings were attributed to low auction prices," the regulator said. The average price of Kenyan tea fell to $2.21 per kilogramme during the period, from $2.58 per kg a year earlier, the Tea Directorate said, attributing the drop to an oversupply.

Production is likely to increase marginally this year along with export earnings, it said. Some of the main buyers of Kenyan tea include Pakistan, Egypt and Britain.
Source: Reuters.

MAIZE and groundnuts farmers have been warned on unsafe levels of aflatoxin in crops, a poisonous fungus that threatens their livelihoods and the health of consumers as it may cause cancer.
Addressing members of the Parliamentary Committee on Trade, Industry and Environment in Dodoma yesterday, Tanzania Trade Development Authority (TanTrade) Director-General Edwin Rutageruka said the country's export potential of groundnuts into European and Asian markets have been hampered by the deadly carcinogenic fungus found in the food crops.
Medical and expert studies have suggested that aflatoxin, a well-known toxic chemical produced by a common fungus in soils and crop debris, attacks maize and peanut crops in the field, during harvest and grows to the storage.
The food crops remain unsafe for consumption regardless of the volume of heat during cooking or roasting. Contaminated maize or groundnuts fall below the international market standards for food safety and consumers are prone to liver diseases, especially cancer and lethal poisoning.
At lower levels, it also causes lowered immunity and irreversible stunting in children.
Livestock that consume contaminated feed are also affected, and dairy animals consuming contaminated feed can pass aflatoxins in their milk to young animals or humans.
He said although the government had held some countless operations to train farmers and extension officers, locals still exercise traditional means of drying crops.
"Even if we are to go to Kibaigwa International Grain Markets you will find people drying their crops on the bare ground," Rutegeruka said. It is believed that when farmers dry their foods on the bare ground it increases the risk of moulds.
Experts suggest that mould species like Aspergillus Flavus and Aspergillus parasiticus grow on foods producing aflatoxins to contaminate the crops.
"We can only say we have effective immune but results from global laboratories shows the crops are unacceptable and unsafe."
He said the authority has recruited over 30 personnel charged with market intelligence to guide farmers and businessmen to produce based on market quality and quantity demands.
Deputy Chairperson of the Committee, Rtd Col Masoud Ali Khamis wanted the authority and the government to resolve challenges limiting local manufacturers from accessing foreign markets.
The committee observed that a number of industries have a large stock with no hope for the domestic market. He said this requires appropriate actions to ensure producers get a permit for exports.
"We are also urging the government to consider such products that are not within the regional market integration to impose such heavy import duties as an alternative to allow a conducive market for locally produced goods," he said.
Last year, scientists at the International Institute of Tropical Agriculture (IITA) announced their breakthrough of Aflasafe, a natural solution of four fungal strains to fight aflatoxin.
They had commissioned trials in Morogoro, Dodoma, Mtwara and Manyara regions with support from the US department of agriculture at the USAID-Tanzania.
It is estimated that about 670million US dollars are lost annually in Africa to Aflatoxin infections on cereals, grains, and legumes.

Kenya stands to gain considerably from the UK-Africa Summit both financially and in development projects.

On matters trade, it may go some way to close the negative trade balance between Kenya and the UK. In 2018, Kenya exported £237.5 million worth of goods to the UK and imported goods worth £303.6 million.

If the country can secure markets for Kenyan cotton and textiles and incite an appetite for its minerals it could be possible to close this trade gap.

Other direct investments could boost the economy and create job opportunities in pharmaceuticals and service industries.

The largest tax paying company in Kenya, Safaricom PLC, also enjoys a large UK investment from Vodacom.

Increased investment from a pharmaceutical company such as Glaxo-SmithKline for research into tropical diseases and development of new medicine could result in job creation.

One of the areas where UK expertise is being highly sought in Kenya is the energy sector, especially in renewable and green energy.

Kenya has made major investments in solar, wind and geothermal energy, but more needs to be done in order to reduce reliance on fossil fuels and hydroelectricity to run the industrial sector.

As the Brexit deadline looms large for the UK government and British businesses, new markets for UK goods and sources of raw material for its manufacturers have become a priority.

As new tariffs could be placed on goods leaving and entering the UK, cheaper and more business-friendly environments are becoming important for the survival of the UK post-Brexit.

UK banks could also see limited freedom of operations in Europe in a few months. Kenya could be the likely base for experimenting with financial service trade between the UK and Africa.

The success of mobile-money platforms such as M-Pesa adds credence to its claim as the first stop for investment and operations of these services by UK-owned banks some of which already enjoy stable operations in Kenya.


The agreement, which entered into force in May, could be a major step for Africa's role in international trade, if the continent can overcome barriers to implementation.
The entry into force of the African Continental Free Trade Area (AfCFTA) on 30 May, after only three years of negotiations, is as an economic, political and diplomatic milestone for the African Union (AU) and its member states, crucial for economic growth, job creation, and making Africa a meaningful player in international trade. But the continent will have to work together to ensure that the potential benefits are fully realized.
A necessary innovation
With its advances in maintaining peace and security, abundant natural resources, high growth rates, improved linkages to global supply chains and a youthful population, Africa is emerging as a new global centre of economic growth, increasingly sought after as a partner by the world's biggest economies. Governments from across Africa have been taking a more assertive role in international markets, including through proactive diversification of trading partners, and the continent remains a strong advocate for the multilateral trading system.
However, this is not yet reflected in outcomes. The African Union does not have observer status at the World Trade Organization, despite diplomatic efforts in the past decade. Africa has less than a three per cent share of global trade, and the growing trend towards protectionism across the global economy may only increase the vulnerability of a disunited Africa. Its fractured internal market means that trade within Africa is lower than for any other region on the globe, with intra-African trade just 18 per cent of overall exports, as compared to 70 per cent in Europe.
The AfCFTA is the continent's tool to address the disparity between Africa's growing economic significance and its peripheral place in the global trade system, to build a bridge between present fragmentation and future prosperity. It is an ambitious, comprehensive agreement covering trade in goods, services, investment, intellectual property rights and competition policy. It has been signed by all of Africa's states with the exception of Eritrea.
It is the AU's Agenda 2063 flagship project, brought about by the decisions taken at the January 2012 African Union Summit to boost intra-African trade and to fast track the establishment of the Continental Free Trade Area. It builds upon ambitions enshrined in successive agreements including the Lagos Plan of Action and the Abuja Treaty. Access to new regional markets and reduced non-tariff barriers are intended to help companies scale up, driving job creation and poverty reduction, as well as attracting inward investment to even Africa's smaller economies.
The signing in 2018 of the instruments governing the Single Air Transport Market and the Protocol on Free Movement of Persons, Right of Residence and Right of Establishment provided another step towards the gradual elimination of barriers to the movement of goods, services and people within the continent.
Tests to come
However, while progress is being made towards the ratification of the AfCFTA, much remains to be done before African countries can fully trade under its terms. The framework for implementation is still under development, and the creation of enabling infrastructure that is critical for connectivity will take time to develop and requires extensive investment.
So, the first test for the AfCFTA will be the level to which Africa's leaders make it a domestic priority, and whether a consensus can be maintained across the AU's member states as the costs of implementation become clear.
There is no guarantee that the gains of free trade will be evenly distributed. They will mainly depend on the extent to which countries embrace industrialization, liberalization of their markets and opening of their borders for free movement of goods and people - policies that some incumbent leaders may be reluctant to implement. Political will to maintain a unified negotiating position with diverse stakeholders, including the private sector, will come under increasing stress.
A second challenge is how the AfCFTA relates to already existing trade arrangements, notably with the EU. The AU has long preferred to pursue a continent-to-continent trading arrangement instead of the bilateral Economic Partnership Agreements being sought by the EU under the African, Caribbean and Pacific (ACP) framework to which, with the exception of Algeria, Egypt, Libya, Morocco, Tunisia and South Africa, all African states belong. The signing of the AfCFTA is one important step towards making this possible.
But there are currently negotiations under the ACP to replace the Cotonou Accord (the framework governing trade between ACP members and the EU, including Economic Partnership Agreements [EPAs], that is due to expire in 2020). Negotiations on the African pillar of the accord are due to take place after the AfCFTA has entered into force. So African states and the AU will face the challenge of balancing their commitment to the ACP bloc with pursuing their own interests.
And though the AfCFTA should supersede any other agreements, the EPAs or their successors, will continue to govern day-to-day trading, in parallel to the new pan-African market. It is not yet clear how these contradictions will be reconciled.
A new role for the AU?
The AU will need to play an active role as the main interlocutor with Africa´s international trading partners, with the AfCFTA secretariat being the arbiter of internal tensions and trade disputes. The AU´s engagement at continental level has to date revolved mainly around headline political diplomacy, security and peacekeeping. With the continental free market becoming a reality, an effective pivot to economic diplomacy will be critical for growth and development.
With the AfCFTA, the AU has endeavoured to address Africa's unsustainable position in global trade, to stimulate growth, economic diversification and jobs for its growing population. Much will depend on the commitment of African leaders to maintaining a unified negotiating position to implement the agreement and the AU's capacity to effectively move from political to economic diplomacy.

11/ 12/ 2019 - South Africa Power Crisis - Severe Blackouts Shut Down Mines
South Africa is facing severe electricity crisis, causing power cuts and mine closures. President Cyril Ramaphosa has had to cut short his official visit to Egypt and come home to deal with the problem.

South Africa's state-owned energy company Eskom has been struggling to keep the lights on in the country. For the past six days, Eskom has been implementing "load-shedding," whereby power is cut for anything from two to four hours to businesses and households across the country in a bid to relieve pressure on the national grid.
On Monday, the energy firm said it was cutting up to 6,000 megawatts (MW) of power from the national grid after heavy rain and flooding triggered failures at its Medupi coal-fired plant. The problem is not new, as the company has been forced to enforce such power outages intermittently over the past decade.
On Tuesday, South African President Cyril Ramaphosa had to cut short his official visit to Egypt and head back home to deal with the power crisis.
"The ongoing load shedding is devastating," Ramaphosa said in a statement earlier on Tuesday. "The energy challenges in this country will not be resolved overnight." Presidential spokesperson Khusela Diko said Ramaphosa would meet with Eskom executives on Wednesday to be briefed on plans to resolve the crisis.
Loss-making Eskom generates over 90% of the nation's electricity.
Aggravating economic woes
The electricity problems have dealt a blow to the nation's already slowing economy and transportation, among other things. The mining sector, a key part of the nation's economy, has been hit hard, with companies shutting down mines across the country.
Harmony Gold, Impala Platinum and Sibanye-Stillwater all said they had been forced to cut production since Monday because of power shortages.
"There are very few underground mines that operated overnight and will be operating normally today," said a spokesman for the Minerals Council industry body. The mining industry contributed 351 billion rand ($24 billion, €21.65 billion) to the South African economy in 2018, the Minerals Council says, equating to about 7% of gross domestic product (GDP).
John Steenhuisen, leader of the main opposition Democratic Alliance, led a picket outside Eskom headquarters in Johannesburg on Tuesday, saying the "rolling blackouts" threaten to "throw the country's economy over a precipice."
Source: DW