Current Trade News

The expansion of trade among sub-Saharan African nations holds the key to faster growth and development to the benefit of all its citizens. To unlock this potential, countries will have to focus more on trade facilitation, including the simplification and modernization of trade procedures.
Sub-Saharan African countries have the lowest trade among themselves compared with other regions. Intra-regional trade is estimated at about 10% compared with 40% in North America and 60% in Western Europe.
Among the factors holding back growth are non-tariff trade barriers. Excessive document requirements, burdensome customs procedures, inefficient ports and poor infrastructure add to the cost of exporting and importing goods. Firms benefit more from a 10% reduction of these costs than from a similar cut in tariffs.
This is why there has been a major focus on reducing red tape and other non-tariff trade barriers.
Implementation of trade facilitation measures can reduce the cost of moving of goods across borders by between 12.5% and 17%. It can boost exports too by making it cheaper for firms to import materials they can transform into finished products for sale in other countries.
Trade facilitation can also create an enabling environment for foreign direct investment. And red tape harms poor producers the most, so trade facilitation is especially beneficial for small- and medium-sized businesses. This is very important in the case of African countries.
A number of African countries have been implementing measures aimed at easing the flow of goods across borders. A guide to what needs to be done is set out in the Trade Facilitation Agreement earlier signed by World Trade Organization members in 2013. The agreement outlines measures for expediting the movement, release and clearance of goods at borders.
A few sub-Saharan Africa countries have started working towards the implementation of a "single window" system - a collaboration between all state entities involved in the regulation of international trade.
For example, Ghana initiated a single window operation in 2002 following concerns about slow and expensive border procedures. It standardized information through a single administrative document for all its customs operations though implementation is not yet fully functional and automated.
Another measure involves the creation of one-stop joint border posts. An example of this is the Chirundu border between Zambia and Zimbabwe. Since traffic only stops once for the country being entered, the time it takes to cross the border is greatly reduced.
A few sub-Saharan Africa countries have started working towards the implementation of a "single window" system - a collaboration between all state entities involved in the regulation of international trade.
After the implementation of the one-stop border post, trucks are electronically scanned - which takes much less time. Another initiative, the African Union Border Program, initiated in 2007 with the goal to have all borders in Africa delimited and demarcated by 2017, has also made progress. But there is more that countries can to do to ease the flow of goods across their borders.
They should harmonise procedures. These should be made simple and then they should be aligned - first within regions and then across the continent. The alignment should be backed by appropriate legal and institutional frameworks.
Countries should also be standardizing documents through a national and later regional single window system. This will resolve challenges with bureaucracy, corruption and delays in processing trade documents.
The capacity of customs should also be enhanced in terms of electronic data management. This will improve risk management and revenue generation. For example, the Philippines' computerized customs management systems reduced corruption in its bureau of customs.
Zimbabwe now has the capacity to produce enough fertilizer adequate to cover an annual cropping season. Over 100 000 tonnes of top dressing and basal fertilizer for 100 000 hectares of land under winter cropping is currently being manufactured. This manufacture of fertilizers is expected to significantly reduce the import bill.
Speaking during a tour of Zimphos and Chemplex yesterday, Industry and Commerce Minister Dr Sekai Nzenza said the visit was a clear testimony to local production which is in line with the Second Republic's thrust of local content policy and import substitution.
"Our objective is to increase local production therefore, creating employment. What has also happened is testimony to the effectiveness of the foreign currency auction system," she said.
"ZFC is now able to import the raw materials that they need to produce this fertilizer. There is also a synergy between the manufacturing sector and the agricultural recovery programme," said Minister Nzenza.
A study by UNECA on regional integration during COVID-19 says EU takes biggest share
African countries continue to trade more with the outside world than among themselves, according to findings of the UN Economic Commission for Africa (ECA) assessment report on progress made on regional integration in the context of the COVID-19 pandemic.
The report was presented during the 39th ECA Committee of Experts of the Conference of African Ministers of Finance, Planning and Economic Development that opened yesterday (17 March 2021) in Addis Ababa, Ethiopia.
The European Union, the report says, is taking the largest share of the market accounting for 29.8% of total trade in 2018. The trend is, however, changing following Brexit and also due to increasing trade between China and Africa.
Stephen Karingi, the director of Regional Integration and Trade Division at the ECA, while presenting the report findings said COVID-19 had severely disrupted the implementation of regional integration initiatives, including the African Continental Free Trade Area (AfCFTA), particularly trade through national border closures.
"Most of the communities are lagging in terms of intra-regional intermediate exports and imports." - Stephen Karingi, Director of Regional Integration and Trade Division at the ECA.
Importance of digitalization
"Implementation of regional integration continues to be hampered by governance, peace and security challenges," said Mr. Karingi, adding: "Digitalization is key in maintaining trade competitiveness and enabling effective participation in cross border e-commerce."
The report shows that in 2018, Africa accounted for only 2.6% of global trade which is a slight increase from 0.2% from 2017.
Intra-African trade increased to 16.1% in 2018 ($159.1bn), up from 15.5% in 2017. Globally, output slightly decreased to 3.6% in 2018 from 3.8% in 2017.
While progress continues to be made in pursuit of the continent's regional integration agenda throughout the eight Regional Economic Communities (RECs), challenges to the achievement of deeper integration remained. In particular, most RECs and member States are struggling to achieve progress in the area of productive integration.
Mr. Karingi noted that before the COVID-19 pandemic there was a rise in intra-trade in Africa, but compared to other regions, it remained low.
"Trade, economic movement of people and services, infrastructure, governance, peace and security are the key pillars of regional integration," he noted, adding that many countries were doing a lot to implement the ACFTA.
Mr. Karingi said peace and security "create environments conducive to the pursuit of regional integration and the attainment of broader continental development objectives," noting that progress on integration was uneven, adding the free movement of people was critical for the realization of the ACFTA.
The report presents an assessment of progress on regional integration in Africa with a particular focus on progress made by RECs in key dimensions of regional integration, including macroeconomic integration; productive integration; trade integration; infrastructure integration; the free movement of people; and governance, peace and security.
In all the RECs, Mr. Karingi said, productive integration was their poorest performing dimension of regional integration.
"Most of the communities are lagging in terms of intra-regional intermediate exports and imports, and are recording a very low merchandise trade complementarity index," he said, adding that productive integration was central to enhancing industrialization and trade. "Productive integration is also critical to integrating African economies into regional value chains and global value chains, as envisioned in Agenda 2063."
According to the report, the Arab Maghreb Union (AMU) and East African Community (EAC) are taking the lead in productive integration, with index scores of 0.449 and 0.434, respectively, while ECOWAS is the least integrated regional bloc in the productive integration dimension, with an index score of 0.220.
Despite the low performance of the majority of the RECs on productive integration, there were several initiatives being carried out to improve the situation, including some that are supported by ECA.
Economic Community of Central African States (ECCAS) and EAC are the highest-performing communities in terms of macroeconomic integration, with scores of 0.684 and 0.660, respectively, on the index
Mr. Karingi said the ECA would continue to support RECs in mainstreaming and boosting intra-African trade in their programmes and policies, building on the collaborative work on regional industrialization, as has already been initiated in SADC and ECOWAS; broaden its capacity-building programme on the use of macroeconomic and forecasting models in economic planning and development, to empower member States and RECs; support the AfCFTA ratification drive and implementation, including through awareness-raising programmes and developing national implementation strategies.
The East African Tea Trade Association (EATTA) has moved to court seeking suspension of more sections of the newly enacted Tea Act arguing that they are discriminatory and unconstitutional.
The association, which manages the weekly tea auction in Mombasa says implementation of the law will destabilize production and export of the beverage in Kenya.
The High Court has already issued orders suspending sections, which barred direct tea sales and implementation of the tea levy, following a petition by 15 tea estates.
In the EATTA petition, the association says tea sector accounts for 22 percent of the country's foreign exchange earnings, yet has been subjected to more taxes.
Among the sections targeted by the EATTA is 34(4), which it said is silent on the percentage of payments to be borne by tea buyers and factories to pay the brokerage commission.
The section caps brokerage fees but fails to indicate how the fees will be paid, EATTA argues.
The association wants the court to interpret and determine whether sections 5(l), 32(3)(b), 32(4), 34(3)(b), 34(4)(5)(6), 36(1),48 (1) and 53 of the Tea Act are constitutional.
The enactment of Section 53 of the Act on provision of tea levy, the association adds, shall be ultimately borne by the farmer or producer of tea.
"The provision is in utter contravention of the Constitution that provides for freedom from discrimination and equality before the law, which shows how the tea sector has been singled out and subjected to further taxes," said lawyer Maureen Cheruiyot.
The association said it runs and conducts the weekly Mombasa Tea auction from 10 countries. Its interests include tea producers, buyers (exporters), brokers, packers, and warehousemen and tea producers in Kenya, Uganda, Tanzania, Burundi, Rwanda, DRC, Ethiopia, Madagascar and Malawi.
On Monday, the High Court temporarily suspended collection of tea levy and sections of the Tea Act, which compels processors and manufacturers of tea, save for orthodox and specialty, from direct sales.
The case will be heard on February 22.
As part of its post-Brexit global vision, Britain is hosting a UK-Africa trade conference. But its new trade deals fail to offer African nations much extra as Britain falls behind as a trading partner on the continent.
The United Kingdom on Wednesday will host a virtual UK-Africa conference to promote trade and investment opportunities in African markets.
The meeting takes place on the anniversary of the inaugural 2020 UK-Africa summit hosted with great fanfare by Britain's prime minister, Boris Johnson, who famously skipped the World Economic Forum in Davos to lead the event.
At last year's summit, Johnson said Britain had all it took to become Africa's "obvious partner of choice" for doing business post-Brexit when it was no longer tethered to European Union trade agreements with the continent.
The British government promised it would improve on the EU-Africa trade model and better protect the interests of African nations.
But the post-Brexit trade deals between the UK and African nations aren't much different to the old EU ones.
At the same time, Britain -- despite its post-Brexit vision for a "Global Britain" and its long history in Africa as a former colonial power -- is further falling behind as a trading partner and investor on the continent.
New trade deals basically the same as the old ones
Leaving the EU theoretically allows the UK to make independent trade agreements better tailored to individual African nations.
So far, UK has inked post-Brexit trade deals with 13 African countries. But these new agreements, which offer duty-free and quota free-access to British markets, aren't much different to the old ones.
That's because they are primarily so-called rollover agreements -- that is, they simply transfer the conditions in the EU deals into bilateral agreements between the UK and the African nation, or blocs.
The members of the Southern African Customs Union (SACU) -- which includes Botswana, Eswatini, Lesotho, Namibia and South Africa, along with Mozambique -- have signed one such agreement.
A similar deal was rolled over for Ivory Coast and Cameroon, as well as for the Eastern and Southern Africa bloc, covering Madagascar, Mauritius, Seychelles and Zimbabwe.
Kenya's trade deal drives a rift through East African trade bloc
Kenya has also signed a continuity trade deal with Britain, one of its top five trading partners in 2019. This allows Kenya to continue to export tea, coffee and spices, as well as vegetables and flowers to the UK without paying duties.
But the agreement has been harshly criticized for risking the integration of the East Africa Community (EAC), a trading bloc which is also working to negotiate a post-Brexit deal with the UK.
There's concern Kenya's go-it-alone deal will escalate trade tension within the EAC, which also includes Uganda, Rwanda, Tanzania, Burundi and South Sudan.
The agreement could push the different trade tensions between the EAC's partner states over the edge, Ugandan-based policy analyst Africa Kiiza told Politico EU.
That's because the group's members are already blocking goods from each other.
"When you analyze the integration of the EAC, the EAC is shaky," Kiiza said. "It is disintegrating."
Least-developed countries enjoy preferential trade
Post-Brexit Britain has adopted the EU's 'Everything But Arms' trade preferences. This means least developed countries in Africa exporting to Britain enjoy "quota-free access and nil rates of import duty on all goods other than arms and ammunition," according to
Developing nations such as Ghana -- and more importantly Nigeria, Africa's largest economy -- are excluded from this preferential trade treatment, however.
Both Ghana and Nigeria failed to seal an agreement with the UK before the end of the Brexit transition period of December 31, 2020.
Nigeria is probably unwilling to maintain the old trade status quo of exporting crude oil and agricultural raw materials to Britain and importing machinery and technology goods from the UK, according to economist Dirk Kohnert.
"Nigeria increasingly gets its industrial goods from Asian countries such as China and India," said Kohnert, who formerly researched Africa economies at Germany's GIGA Institute.
"Global trade is shifting from the Atlantic to the Pacific, and the concept of 'Global Britain' will be difficult to implement in Nigeria."
Long live the Commonwealth
Britain has long come under fire for favoring the 19 African Commonwealth nations, most of which are former British colonies or have historical ties to the UK. (The only two which don't are Rwanda and Mozambique.)
With Prime Minister Boris Johnson and his allies promising post-Brexit Britain will occupy a bold new place on the world stage in a vision called 'Global Britain', it was thought that this might change.
But the new trade deals reinforce the UK's bias towards Africa's English-speaking nations, criticizes trade economist Rolf Langhammer from the Kiel Institute for the World Economy in Germany.
"The countries with which Great Britain has already concluded rollover agreements are almost without exception English speaking," Langhammer told DW. "So far Britain has hardly concluded any agreements with the large French-speaking countries in West Africa."
"It looks as if the British are now strengthening their old colonial relations and have no regard for the French- or Portuguese-speaking countries."
Top export nation
When it comes to buying products from the continent, Britain isn't that important for many African nations.
Goods and services from Africa make up just a tiny share of the UK's imports, accounting for 2.5% of the total goods imported into Britain.
Only eight nations from sub-Saharan Africa -- mostly former colonies -- count the UK in their top ten export destinations, including Rwanda, Mauritius, Seychelles, Sierra Leone, Ghana, Mozambique, Kenya and South Africa.
The UK is South Africa's fourth biggest market for exports, after China, the US, and Germany, accounting more than 5% of South Africa's exports. These are primarily previous gold, diamonds and precious metals, followed by vehicles, and fruit and nuts.
Trade expert Langhammer believes that the UK could become even less important.
"Trade and direct investment depend on economic conditions. The UK will in all likelihood suffer large losses due to leaving the EU," Langhammer told DW. "Import demand will be negative and that will have a negative impact on demand for African products."
Britain faces stiff competition on the continent
Britain has been long criticized for undervaluing trade with Africa. The amount of products Britain sends to Africa isn't just small, it's also shrinking.
UK goods imported to the whole of Africa in 2019 was only 2.6% of the total. These were mainly commodities, including motor cars, petroleum oils, turbojets, aircraft and aircraft parts, pharmaceuticals, used clothing and electric generators.
France and Italy -- whose economies are around the size as Britain's -- export considerably more to sub-Saharan Africa than the UK.
Even Sweden, Belgium and Portugal, whose economies are considerably smaller than the UK, send more goods to the continent.
"As it stands, the UK has not demonstrated enough vigor and commitment to improving its bilateral trade relationships with key trading partners in the African continent post Brexit," warn Dele Bello-Williams and Kieran Davis in an article on the future of UK-Africa trade relations.
British investment in Africa could fall
Britain plays more of a role in Africa when it comes to investment, however. It's the continent's fifth source of direct foreign investment after China, France, the United States and the United Arab Emirates, according to the Africa Attractiveness Report.
Currently, this investment is heavily focused on extractives, and on South Africa.
But the dual shock of the coronavirus pandemic and Brexit means the investment sentiment in Britain is low, said economist Dirk Kohnert.
"My guess: The UK, under the current coronavirus terms, won't be able to deliver on its generous investment promises for Africa," he told DW.
The adverse effects of the Covid-19 pandemic are trickling down to major sectors of Rwanda's economy with tourism and hospitality, aviation, retail, and manufacturing bearing the brunt of the strict measures the government has put in place.
That has essentially affected the growing digital payments, which are linked to the same sectors that were hit. But if there's one thing to thank for 2020 is the fact that the outbreak also accelerated adoption of digital payments in many other sectors.
Many experts now agree that online grocery stores, online pharmacies, telecommunication players, education technology platforms, online gaming, and those that facilitate recharges, and bill payments saw an uptick in digital payments.
Lucy Mbabazi, who's in charge of advocacy and partnerships at Better than Cash Alliance, a UN-led initiative, says Covid-19 showed the value of digital payments in keeping the economy going while shut down.
"The lockdowns showed there's still a lot of work to do in getting businesses to accept and utilize digital payments when serving customers. Those without digital payments struggled most," she says.
In any way, she adds, the pandemic highlighted the value in swift growth of volumes of transactions and value of transactions.
That is true for the most part because data shows that there was a significant increase in the uptake of digital payments.
The volume and value of transactions in mobile payments, mobile banking, and internet banking, all increased significantly during the first half of 2020 when the pandemic hit.
A passenger uses Tap&Go card to pay for transport fee as he boards a bus in Kigali. / Photo: Craish Bahizi
The volume of mobile payment increased by 51 per cent in the first half of 2020 to 503,781,913 from the previous year, while the volume of mobile banking increased by 29.1 per cent to 4,897,019.
In the same period, the volume of internet banking went up by 71.2 per cent and the value of transactions increased by 48.8 per cent to Rwf3,024 billion.
That is partly because payment system service providers offered cost incentives at the onset of the pandemic. In March, the payment industry agreed to zero charges on all transactions between bank accounts and mobile wallets.
They also agreed on zero charges on all mobile transfers, zero merchant fees on payments for all contactless point of sale transactions, and increased the limit for individual transfers.
The measures went along to incentivize people and businesses to adopt digital payments, according to the National Bank of Rwanda.
Mbabazi asserts that the outbreak highlighted that the cost of transactions has something to do with how quickly digital payments are adopted.
"When Central bank ordered zero fees and cash was discouraged, more people took up digital payments," she notes. "The good news is merchant payments remain free for consumers, with or without the pandemic, therefore every business can and must offer digital payments."
Still, she says there are big businesses that reject digital payments.
"There were businesses selling mask-making materials who categorically refused digital payments, demanded cash. And if you didn't get an EBM receipt, you got a discount," she says.
Therefore, she insists that more policy mandates and enforcement are needed.
It is not yet clear whether the positive trend that Covid has promoted is a short-lived experience or whether the momentum of accelerated digital payments are likely to continue.
Eric Rwigamba, the Director-General of the Financial Sector Development at the Ministry of Finance and Economic Planning, strongly believes that is likely to be the case through 2021.
That is because consumers have understood the value of using digital payments.
"Any rational consumer looks at two things - convenience and cost. We are not doing well with cost (of transacting), but digital avenues bring about convenience," he notes.
The optimism is also based on the ongoing conversation to incentivize cashless payments, either through tax refunds or tax rebates both to businesses that accept digital payments and consumers that prefer digital avenues.
Other developments
The value of funds transferred via Mobile Money grew by 450 per cent between January and April this year to reach Rwf40 billion (over $ $42 million), according to data from Rwanda Utilities Regulation Authority.
This means that there was a sharp decline in the use of cash in payment of goods and services, a development that the government has been pursuing for years.
The development was among other things a result of a move by Central Bank and local telecoms to temporarily remove charges on transfers.
Analysis by Insight2Impact showed that with zero fees more people switched to mobile money transfers. With the number of unique subscribers, sending money virtually doubled from 600,000 in the week before lockdown to 1.2 million in the week after lockdown and 1.8 million people in the final week of April.
The weekly value of money spent digitally from mid-February to mid-April at merchant outlets increased 700 per cent further driving the uptake of cashless payments.
Cashless penetration is measured by aspects such as volume of transactions, usage, footprint of infrastructure such as point of sale machines, value of e-payments to Gross Domestic Product which as of October 2019 stood at 34.6 per cent.
The dominance of cash costs the government millions of dollars.
The cost of producing currency in Rwanda is estimated at $1.5 million annually while Rwandan banks spend between Rwf18 billion and Rwf20 billion annually handling cash.
Taxi-motos go digital
The pandemic pushed the government's plan to digitalise public transport, particularly for taxi-motos.
All taxi-moto businesses were directed by the regulator to acquire metres that allow passengers to pay digitally without exchange of cash in people's hands, a move that could have increased the uptake of cashless payment for transport.
For public buses, it has already proved that it works following the introduction of Tap&Go system. Previously, to secure a trip by bus out of the city involved making a prior trip to the bus park to book and pay a ticket. This was time-consuming and drove up costs for passengers involved.
At the end of 2019, AC Group, a Rwandan tech firm enabling payment in public transport introduced an intervention to improve convenience through their Tap&Go intra-city solution.
The firm, which commenced digitizing payments in public transport buses in 2015, rolled out an inter-city solution at the end of 2019 to create a convenient way to book and pay for travel across the country as they do for city transport on public transport.
This allows users to book their tickets for inter-city travels from wherever they are using the Tap&Go Application.
With an estimated over 300,000 daily users of public transport in intercity routes, the system aims at improving efficiency and quality of services without driving up costs of operation.
Using the Tap&Go app, passengers do not have to make unnecessary trips to the bus park to book their tickets and can book their travels on their mobile phones from anywhere and just go when the time of departure comes.
This year, AC Group upgraded the system to taxi motos.
A passenger is now able to get information on current and upcoming trips, get on Tap&Go Ride (taxi moto), to get to the bus park and pay for all the options with one Tap&Go card.
The solution allows for consistent scheduling for every departure as well as real-time information on availability schedules per route and respective bus companies.
The solution also has options for booking a ticket online via the Tap&Go app or web as well as paying for tickets using cashless payment platforms.
Source: The New Times