AfCFTA timeline starts to count in July

That will be decided during the forthcoming African Union meeting slated to take place in the next three months, according to the officials who gathered in Arusha on Thursday 25th April, 2019.

The proposed African Continental Free Trade Area is not simply a `Free Trade Agreement` it is about establishing a unified continental market with 1.2 billion potential customers and where the private sector is the major engine to make it happen.

This was the tone from the discussions of the meeting held in Arusha about how the East African Private Sector including Small and Medium Enterprises (SMEs) could benefit from the African Continental Free Trading Area (AfCFTA)

The one-day meeting, organized jointly by the East African Business Council (EABC) and the United Nations Economic Commission for Africa (ECA), convened close to 40 key players from the region`s private sector. The office for Eastern Africa of ECA estimates large potential gains from the AfCFTA, including an increase in intra-African exports of Eastern Africa by nearly Tshs.2.3 trillion ($1 billion) and the job creation of 0.5 to 1.9 million.

`Together African economies have a collective GDP of $2.5 trillion, making it the eighth largest economy in the world. That makes the continent much more attractive to investment, both from within and from outside the continent, ` said Andrew Mold, acting Director of ECA in Eastern Africa. `This should encourage business people to take advantage of AfCFTA and make the investments necessary to sustain economic growth and create employment.`

Nick Nesbitt, Chairman of EABC, emphasized the importance of the continent having a clear vision to put an end to the fragmentation of the internal market. `I really applaud everybody who has been involved in creating the AfCFTA because their vision is the one of Pan-Africanism. It is something our founding fathers aspired for a long time. Our thanks to ECA for being at forefront of this conversation and pushing the agenda forward so that the continent becomes a single economic trading bloc, ` he said.

Kenneth Bagamuhunda, Director General of Customs and Trade at the East African Community Secretariat, cited the experience of Regional Economic Communities as the building blocks for the AfCFTA. `The AfCFTA should build on what has already been achieved in regional negotiations like the Tripartite Free Trade Area, as well as within our respective regional blocks,` he said. Bagamuhunda also highlighted governments need to set a conducive environment for the successful implementation of AfCFTA.

The AfCFTA was signed in March 2018, at a historic meeting of the African Union in Kigali. 52 of 55 African Union member states have so far signed the AfCFTA, 22 countries that have ratified the agreement, which was the minimum number for it to enter into force. It seeks to create the largest trade zone in the world, increase intra-African trade by 52% by the year 2022 and remove tariffs on 90% of goods.

A summary of AfCFTA’s progress

  • 52 countries have signed the AfCFTA agreement
  • 22 countries have ratified the agreement as of April 2,2019
  • 15 countries have deposited their instruments of AfCFTA ratification with the AU
  • 7 countries including Gambia have received parliamentary approval for ratification but are yet to deposit instruments with AU.
  • Eritrea, Nigeria and Benin are yet to sign the AfCFTA agreement
  • The AfCFTA Agreement will enter into force; 30 days after the required number of ratifications have been deposited with the AU.

Also read:Africa’s move to push for cheaper, faster trade

EAC to exploit the $1.2 billion continental market after AfCFTA ratification

Members of East Africa`s private sector including small and medium size enterprises are preparing to exploit the over Tshs.2.7 trillion ($1.2 billion) continental market after endorsement of African Continental Free Trade Area (AfCTA).

At their meeting in Arusha on Thursday 25th April,2019, members of East Africa Business Council (EABC) who teamed up with United Nations Economic Commission for Africa (ECA) said they foresee large potential gains from the AfCFTA, including an increase in intra-African exports of Eastern Africa by nearly Tshs.2.3 trillion ($1 billion) and job creation of 0.5 to 1.9 million

`Together African economies have a collective gross domestic product (GDP) of $2.5 trillion, making it the 8th largest economy in the world. That makes the continent much more attractive to investment, both from within and from outside the continent, ` said Andrew Mold, the acting Director of ECA in Eastern Africa.`This should encourage business people to take advantage of AfCFTA and make the investments necessary to sustain economic growth and create employment, ` Mold added.

EABC Chairman, Nick Nesbitt emphasized the importance of the continent having a clear vision to put an end to the fragmentation of the internal market. `I really applaud everybody who has been involved in creating the AfCFTA because their vision is the one of pan-Africanism,` Nesbitt said. `It is something our founding fathers aspired to. Our thanks to ECA for being at forefront of this conversation and pushing the agenda forward so that the continent becomes a single economic trading bloc, ` he added.

Speaking at the same gathering, Director General of Customs and Trade at the East African Community Secretariat, Kenneth Bagamuhunda cited the experience of regional economic communities as the building blocks for the AfCFTA.

`The AfCFTA should build on what has already been achieved in regional negotiations like the tripartite free trade area, as well as within our respective regional blocks, Bagamuhunda said. He also highlighted governments need to set a conducive environment for the successful implementation of AfCFTA.

The AfCFTA was signed in March 2018, at a historic meeting of the African Union in Kigali. 52 of 55 African Union member states have so far signed the AfCFTA (Eritrea, Nigeria and Benin are yet to sign the agreement) , 22 countries have ratified the agreement, which was the minimum number required for it to enter into force. Gambia`s parliament approved the AfCFTA on Tuesday 23rd April,2019, becoming the 22nd nation to do so, and effectively meeting the minimum threshold for the agreement to come into force.

The AfCFTA seeks to create the largest trade zone in the world, increase intra-African trade by 52% by the year 2022 and remove tariffs on 90% of goods.

Also read: Africa’s move to push for cheaper, faster trade

Russia leads CIS towards Islamic banking and finance

While considerably new, Islamic Banking and Finance has now taken firm roots in Russia and other Commonwealth Independent States (CIS) countries are following suit.

The total volume of Islamic Banking and Finance has now exceeded $2.6 trillion globally. This amount represents transactions, assets and investments by over 2,500 Islamic banking and financial institutions around the global.

In the modern era, Islamic banking and finance can be traced back to the 1960s from Egypt and Malaysia and its dramatic spread over the Middle East, Africa and Europe. Interestingly, while Islamic banking and finance was slow to take foot in Commonwealth Independent States (CIS) countries, its unprecedented growth over the last few years indicates that CIS countries are the emerging Islamic banking and finance market for the future.

Some well known CIS countries include Russia, Armenia, Kazakhstan, Uzbekistan, Tajikistan, Kyrgyzstan, Turkmenistan and Azerbaijan.

“The delay for Islamic finance initiative in CIS countries may count in many folds, it would be due to Russian influence in CIS countries,” suggests the Islamic Banking guru Mr. Muhammad Zubair Mughal who is the Global CEO of AlHuda Center of Islamic Banking and Economics.

https://theexchange.africa/zubair-mughal-wins-the-islamic-finance-recognition-award/

According to the seasoned banker, the mind set of Russian block and limited relations with International Banking and Financial Markets hampered development of Islamic Banking and Finance in CIS.

However, owing to what he described as ‘unstable Russian relationship with Europe’ and the sharp decline of oil prices has now compelled Russia to seek better financial alternatives, Islamic banking and finance.

Effectively, Russia has gone ahead and instituted friendly Islamic Banking policies and as a result geared-up Islamic banking and finance industry in CIS countries. This opens doors for enormous investment opportunities given that the Muslim population of CIS countries is estimated to be 75 million not to mention the non-muslim bankers that, like Russia, will opt for better banking options.

Russia also has a significant Muslim population and is with the recent government led initiative to support Islamic Finance it is expected that various Islamic banking and finance products will take root like Sukuk and Takaful.

Promoting Islamic Banking in CIS

AlHuda Centre of Islamic Banking and Economics (CIBE), a pioneer organization started its efforts to promote Islamic Banking and Finance is holding an Islamic banking and finance conference in Tashkent, Uzbekistan on 2nd May 2019.

The CIS Islamic Banking and Finance Forum will gather the CIS Islamic finance industry specialists and stakeholders on a single platform to promote Islamic banking and finance in the region.

In CIS countries, the Islamic banking and finance market can be divided into three parts. At first, there are countries such as Kazakhstan, Uzbekistan, Kyrgyzstan and Azerbaijan where the pace of Islamic banking and finance can be described as is satisfactory and where it is promoted and considered the sustainable financial alternative.

Secondly, there is the second group of countries, the likes of Tajikistan, Turkmenistan and Russia where the growth rate of Islamic banking and finance is rather slow. And the third group consists of countries in which there is no initiative taken so far, these are like Armenia, Ukraine and Belarus.

Kazakhstan leads the CIS in the growth of Islamic banking and finance. Started only in 1992, Islamic financing has grown drastically. More so, the growth can be noted following the global financial crises that started in 2008.

In Kazakhstan there is also considerable appropriate support of government institutions. Currently it has one full-fledged Islamic bank and 4 Islamic banking windows. They offer Takaful, Islamic leasing (Ijarah) and Islamic micro-financial institutions among other Islamic banking and Finance products.

Kazakhstan also launched an Islamic Agricultural Finance product with the financial assistance of the Islamic Development Bank. Further still, the recent establishment of the Astana International Financial Center (AIFC) places Kazakhstan as the regional center for Islamic Banking.

Azerbaijan comes after Kazakhstan but with much less government involvement. There is also no full-fledged Islamic bank in the country but there are at least 4 Islamic banking windows operating with limited Islamic Banking Regulations.

Uzbekistan follows and credit can be given directly to its new president H.E. Shavkat Mirziyoyev who has spearheaded the growth of Islamic Banking. Three Islamic banking windows are currently operational and accept deposits on Shariah bases.

Few Islamic leasing companies also offer Ijarah services, but it is predicted that after proper Islamic Banking and Finance regulations, Uzbekistan can supersede other CIS countries.

Neighbouring Kyrgyzstan also takes precedence its parliament passing the Islamic banking law in 2011 making it the only country in CIS to do so. In fact, there is at least one conventional bank that is in the process of becoming a full-fledged Islamic bank.

The most important factor of the growth of Islamic banking and finance industry in CIS countries is the Islamic Development Bank’s support.

https://theexchange.africa/emerging-trends-of-islamic-banking-and-finance-industry-in-cis-countries/

 

No loan? What Kenyatta secured at China Belt and Road Summit

Kenya has deferred extension of the SGR project, secures avocado deal

As global leaders and the business community met in Beijing, China, for the second Belt and Road Forum for International Cooperation (BRF), Kenyan’s were keenly watching to see what will unravel.

The forum which took place last week brought together about 37 Heads of States, top government officials and business leaders from over 100 countries, who met to discuss issues of inter-continental connectivity for global trade.

A project of President Xi Jinping, China is using the Belt and Road Initiative (BRI) to enhance both China’s development and its cooperation with global partners.

President Uhuru Kenyatta led a strong delegation from Kenya to the summit which also included High Level Heads of State Meetings and sideline business forums.

It had earlier been expected the government will use the Beijing meeting to secure additional funds from China for construction of Phase 2B of the Standard Gauge Railway (SGR).

As per earlier reports, including confirmations by government officials, Kenya had hoped to secure a Ksh370 billion (USD3.65 billion) loan for development of the project whose Phase One (472 kilometre Mombasa —Nairobi line) is currently operational.

It was constructed by China Road and Bridge Corporation (CRBC) on a Ksh327 billion (USD3.2 billion) loan from the Exim Bank of China, with operations commissioned by President Kenyatta on May 31, 2017.

Phase 2A is being developed by a sister company-China Communications Construction Company (CCCC), funded by the Chinese at a cost of Ksh150 billion (USD1.48 billion).

The 120-kilometre line which runs between Nairobi-Mai Mahu and -Duka Moja, a small centre between Suswa and Narok town, is 90 per cent complete.

READ:As SGR heads to Naivasha, Cargo to Nairobi still not off the ground

The government needs funds for Phase 2B (Duka Moja-Kisumu) and the final stretch (Phase 2C) connecting Kisumu to the Kenyan-Ugandan border of Malaba.

In a recent meeting at the Chinese Embassy in Nairobi (March 19), Kenya Railways acting Managing Director Philip Mainga had said the government  was keen to secure funds during the BRF meeting.

“We hope to sign phase 2B during the meeting,” Mainga said, “Kenya Railways is working with the Chinese government in achieving the commitment we have on the 974 kilometre Mombasa-Malaba SGR project.”

Loan or no loan?

Efforts by the government to secure the facility, however seems to have hit the rocks, with the government shifting its position on borrowing from the Chinese to fund the remaining parts of the project.

According to reports, China failed to agree on the terms of the loan that the Kenyan government had proposed.

It is said the government had asked for half of the money to be given as a grant and the remaining be a loan with more flexible terms.

The Chinese on the other hand are said to prefer collateral, something the Kenyan government is keen to avoid.

This is in the wake of a ballooning debt portfolio which hit USD53.3 billion (about Ksh5.406 trillion) in December, nearly double the country’s annual budget.

Kenya’s debt obligation to Beijing, mainly for infrastructure development, closed 2018 (December) at USD6.2 billion (Ksh628. 9 billion). This is up from USD5.3 billion (Sh537.6  billion) a year earlier.

READ:Is China setting a debt trap on Kenya?

Traditionally, the Chinese have used grants and interest-free loans to rope in least developed countries to its Belt and Road Initiative.

On Saturday,( March 27) the government dismissed claims that it had failed to secure funds for the extension of the SGR from Naivasha to Kisumu at the forum, where President Kenyatta met his host Xi Jinping.

“It is important to note that the question of funding for the extension of the Standard Gauge Railway from Naivasha to Kisumu was not on the agenda of the meeting between the two Presidents,” State House Chief of Staff Nzioka Waita said in a statement.

“Whilst making it clear that the Government of Kenya did not discuss any funding proposals for the extension of the SGR at this meeting, it is very critical to state at this point that the SGR project is a regional project and the complexities in negotiating its completion involve several countries and securing financing for its completion could take several years of intricate negotiations,” he added.

Transport Cabinet Secretary James Macharia has since said the SGR, which has reached Mai Mahiu, will now be linked to the old Meter Gauge Railway (MGR) to allow transportation (mainly cargo) into the hinterland mainly Uganda.

“We have about forty three kilometers between Naivasha SGR and Naivasha MGR. The meter gauge is an investment that was made many years ago, it is being used to transport goods to Uganda and therefore we have to make sure that that connectivity in Naivasha is quickly addressed,” Macharia said.

“One of the things we are discussing in this visit is how we can quickly close that gap in Naivasha and we have already good proposals to make sure that when we finish the SGR in August, we can  move goods from Naivasha SGR to Naivasha MGR. That way then we have a seamless movement of goods all the way from Mombasa to Kampala,” the CS added.

What President Kenyatta secured

Shifting focus from the SGR loan, the government has affirmed President Kenyatta did not return home empty handed.

The President who participated at both the Summit and High Level Heads of State Meetings oversaw the signing of a trade agreement for the export of frozen avocados from Kenya to China.

This follows the signing of an MoU on Sanitary and Phytosanitary Standards late last year for the export to China from Kenya of various horticultural products.

“The trade agreement on avocado which is a huge boost to our farmers marks the beginning of a new chapter in our relations with China that aims to address the trade imbalance and promote mutual economic benefit,” Waita said.

Current trade is in favour of China. According to the Kenya Economic Survey 2019, released last week, imports from china were valued at Ksh370.8 billion (USD3.65 billion) in 2018, against Ksh11.1 billion (USD 109.4 million) worth of exports.

READ:Kenya’s biggest trading partners, Uganda tops EAC

The second item on the agenda was the signing of a Framework Agreement between the Kenya National Highways Authority and the China Road and Bridge Cooperation, for the construction of Kenya’s first expressway from Jomo Kenyatta International Airport (JKIA) to Westlands.

This landmark project aimed at decongesting Nairobi City is privately funded through the Public Private Partnerships legal framework.

The third item was the signing of a financing agreement valued at Ksh17 billion (USD 167.6 million) between the government of Kenya and China EXIM Bank, for the construction of the Konza Technopolis Data Center and IT infrastructure.

“Construction of basic infrastructure at the Konza Technopolis is in the final stages of completion and this IT project will enable the special zone to be operational by 2020. This is a huge milestone for the project conceived over 10 years ago and will be a significant source of jobs in the technology sphere,” State House said.

President Kenyatta also highlighted to his counterpart plans by the government to break ground on the Industrial Park and Dry Port to be constructed at the Naivasha Special Economic Zone by June 2019.

He has since welcomed Chinese companies interested in establishing industries in Kenya’s Special Economic Zones to visit the site.

The Industrial Park and Dry Port are expected to serve the country and neighbouring states of Uganda, Democratic Republic of Congo, Rwanda and South Sudan.

The Kenyan government shared its short term plans to rehabilitate the existing meter gauge railway to the Port of Kisumu “to ensure seamless interconnection with the SGR at the Naivasha facilities.

“SGR remains an essential project of Kenya’s Vision 2030 strategy and a key enabler of regional economic growth within East and Central Africa. As a Pan-Africanist, President Kenyatta remains committed to laying the necessary foundation for the trans-African rail and road infrastructure that will transform intra-African Connectivity and Trade for the economic benefit of over a billion Africans,” Waita noted in his statement.

During the summit, President Kenyatta called for the full participation of the private sector in the Digital Silk Road Initiative, “for seamless connectivity to be attained as envisioned by the BRI.”

As global leaders and the business community met in Beijing, China, for the second Belt and Road Forum for International Cooperation (BRF), Kenya was keen to secure a Ksh370 billion (USD3.65 billion) loan from China for extension of its Standard Gauge Railway to its border with Uganda. President Uhuru Kenyatta however oversaw the signing of a trade agreement for the export of frozen avocados from Kenya to China among other deals.
Presidents Uhuru Kenyatta and Xi Jinping.

According to Kenyatta, it is important to strengthen connectivity, open up markets, commit to rule based international trade, strengthen multilateral cooperation and ensure that development pursued is people centered, sustainable and ensures shared prosperity.

Chinese President Xi Jinping said USD64 billion in deals were signed at a summit on his Belt and Road Initiative and more nations would join the global infrastructure programme as he sought to ease concerns over the colossal project, Agence France-Presse reported. The US did not send any representatives to the meeting.

Beijing has pledged to ensure that projects on the new Silk Road are green and financially sustainable following concerns about debt and environmental damage.

“We are committed to supporting open, clean and green development and rejecting protectionism,” Xi told journalists at the end of the forum.

Washington, India and some European states have looked at the project with suspicion even as China continues to work around strengthening its global influence with a keen eye on Africa.

READ:How China plans to beat US in capturing Africa

ALSO READ:US-China rivalry to shape Kenya, Africa’s foreign policy in 2019

President Jinping’s foreign policy is said to focus on re-inventing the ancient Silk Road to connect Asia to Europe and Africa through massive investments in maritime, road and rail projects, with hundreds of billions of dollars in financing from Chinese banks.

READ:How Trump will beat China in Africa

 

How Kenya managed to grow its economy by 6.3%

The economy generated 840,600 new jobs compared to 787,800 in 2017

Kenya’s economy expanded by 6.3 per cent in 2018, the economic survey released on Thursday indicates, a notable comeback from a 4.6 per cent growth recorded the previous year.

This came as the country recovered from the effects of the persistent drought experienced in 2017, coupled with uncertainties associated with general elections held in the same year.

READ:Kenya’s economy falls below Tanzania and Rwanda, records 4.9% growth

The growth has principally been attributed to increased agricultural production, accelerated manufacturing activities, sustained growth in transportation and vibrant service sector activities.

“Agricultural activities benefited from sufficient rains that were well spread throughout the country,” Kenya National Bureau of Statistics (KNBS) Director General Zachary Mwangi said during the launch of the Economic Survey (2019) in Nairobi.

Similarly, the increased precipitation was a significant boost to electricity generation and consequently favourable to growth during the review period.

During the year, the growth realized was anchored on a relatively stable macroeconomic environment with the various macroeconomic fundamentals remaining supportive of growth for the better of the year.

Inflation remained low at 4.7 per cent compared to 8.0 per cent in 2017, majorly as a result of considerable declines in prices of food after the shortage experienced in 2017.

The current account deficit narrowed to stand at Sh441.8 billion(USD 4.3 billion ) compared to Sh503.4 billion(USD4.9 billion ) in 2017, mainly due to a faster growth of imports of goods and services.

In the markets, the Nairobi Securities Exchange (NSE) 20-Share index dropped to 2,834 points in December 2018 from 3,712 points in December 2017. The performance was also manifested in the increased uptake of credit facilities across most sectors of the economy during the year.

Agriculture

Activities of agriculture, forestry and fishing were vibrant in 2018 mainly on account of favourable weather conditions . The sector’s growth accelerated from a revised growth of 1.9 per cent in 2017 to 6.4 per cent in 2018.

The growth was mainly driven by marked improvement in crops and animal production that benefited significantly from the sufficient rains during the period under review.

Increased supply of food crops was mirrored in significant drop in prices of key food crops during the review period. The quantities of key food crops such as maize, irish potatoes and vegetables increased notably in 2018 compared to depressed performances reported in 2017.

Performance of the sector was further supported by significantly improved performances in other agricultural subsectors. Production of tea grew by 12.1 per cent to stand at 493,000 tonnes in 2018 compared to a 7.0 per cent decline recorded in 2017.

Similarly, the sector’s performance was buoyed by increased production of coffee from 38,600 tonnes in 2017 to 41,400 tonnes in 2018.

Manufacturing

Activities in the manufacturing sector were robust in the year compared to the constrained performance in 2017 when elections fever and uncertainty rocked the industry.

The sector grew by 4.2 per cent compared to a revised growth of 0.5 per cent in 2017. In contrast with 2017, strong performances were recorded in most activities in the sector in 2018.

The sector’s performance was largely supported by agro-processing activities and production of beverages that recovered from considerable declines in 2017 ,to grow remarkably in the period under review.

Under manufacture of food and beverages, improved growths were recorded in manufacture of sugar (30.3 per cent); processing of liquid milk (18.5 per cent); processing of black tea (12.1 per cent); manufacture of beer and stout (6.3 per cent); manufacture of bread (5.8 per cent) and soft drinks (4.2 per cent).

Other sub-sectors that showed better performance in 2018, albeit in smaller magnitudes, included manufacture of maize meal products (0.4 per cent); edible oils (2.1 per cent) and manufacture of wheat flour (1.1 per cent).

Similarly, the sector’s performance was enhanced by increased manufacture of non-food products, although some declines in production of some products were reported in 2018.

However, manufacture of cement and that of clinker declined by 2.6 and 2.5 per cent, respectively.

Credit to manufacturing activities increased from Ksh315.5 billion (USD3.1 billion )in 2017 to Ksh336 billion(USD3.3 billion ) in 2018.

READ:How Kenyan manufacturers will grow sector by 2022

Transport sector

The transportation and storage sector expanded by 8.8 per cent compared to 7.2 per cent in 2017. The growth realized in the sector emanated from notable growths in most of the transportation sub-sectors.

The sector’s growth was considerably supported by increased activity in railway transport that has flourished since the introduction of the Standard Gauge Railway (SGR) train services between Mombasa and Nairobi.

ICT

The Information and Communication Technology (ICT) sector expanded by 12.9 per cent to Sh390.2 billion(USD 3.8 billion) , from Sh345.6 billion (USD 3.4 billion)  in 2017, driven mainly by growth in the digital economy.

Another key sector which contributed to growth of the  economy was the tourism sector which registered an improved performance in 2018 compared to 2017, as the number of international visitor arrivals increased by 14.0 per cent from 1.778 million to 2.027 million.

“The improved performance may be attributed to stable political environment, withdrawal of travel advisories, improved security and investor confidence in the country,” Mwangi said.

The construction sector however recorded a slower growth of 6.6 per cent compared to a 8.5 per cent growth in 2017, despite an increase in loans and advances to the sector which increased by 1.8 per cent to Ksh114 billion(USD1.12 billion).

This was also at the  back of a vibrant real estate sector which has gone hand in hand with infrastructure development.

Job creation

Last year, the economy generated 840,600 new jobs compared to 787,800 jobs created in 2017.

The informal sector which accounted for 83.6 per cent of the total employment created 762,100 new jobs. This is despite the credit crunch which continues to hit  Small and Medium Enterprises (SMEs) since the law capping interest rates came into place in 2016.

Banks have been shying off  the private sector mainly individuals whom are perceived high risk borrowers. Instead, banks have been investing heavily in government securities where they are assured of returns.

During the year, employment in the public sector went up from 833,100 in 2017 to 842,900. The private sector which accounted for 69.5 per cent of the total employment grew by 3.0 per cent.

The World Bank and the International Monetary Fund (IMF) had projected growths of  4.9 per cent and 5.5 per cent respective .The National Treasury had projected a six per cent growth.

2019 outlook

The government has projected an even stronger growth in 2019, expected to be driven by growth in manufacturing, tourism sector and a fast expanding SME sector.

“With continued government strategies, we will achieve a better growth in this coming year,” National Treasury Cabinet Secretary Henry Rotich said during the report launch. He has projected a growth of above xsix per cent.

The results of the survey will inform policy formulation and implementation of various government initiatives targeted for economic growth, as the government moves implement the Big Four Agenda.

READ:Uhuru’s Big Four Agenda takes shape

”The big Four agenda does require statistics so that we can be able to monitor and evaluate the progress,” Principal Secretary-State Department for Planning Julius Muia said.

CS Rotich on the other has said the government will continue to put in place incentives which will make it easier to do business in the country.

READ ALSO:Kenya lures Private Equity, Venture Capital entities to fund Big 4

Why Tanzanian government disputed the IMF report

The International Monetary Fund’s (IMF) report on Tanzania’s economic status was one-sided.

Finance and Planning Minister, Dr Phillip Mpango opened up on April 23, 2019 detailing why the government did not give IMF the green light to publish the content.

Responding after the matter was raised in the National Assembly, Dr Mpango said that the go-ahead was not given because opinions given by government experts after reading the first draft were not included in the final report.

“The IMF team was in the country from November 26 to December 7 last year. After preparing the draft I received on March 18 and we gave opinions that should have been accommodated in the final report but that did not happen,” the minister said.

Dr Mpango noted that during his recent visit to Washington DC for the 2019 spring meetings organized by the World Bank and IMF, he held talks on the subject with Abebe Selassie, who is the director of the Africa Department at the IMF.

“Even today we are continuing with discussions on the subject. After the executive board of IMF received the final report, the government had 14 days to go through it and sanction its publication or not,” he said.

Under Chapter IV of its Articles of Agreement, the IMF has the mandate to exercise surveillance over the economic, financial and exchange rate policies of member states in order to ensure the effective operation of the international monetary system.

The executive board of IMF announced last week that it had concluded the consideration of the 2019 Article IV Consultation with the government but was not allowed to make the report public. `The authorities have not consented to publication of the staff report or related press release,` the IMF statement reads.

The IMF said in a notice published on its website that appraisal of its members’ economic, financial and exchange rate policies involves a comprehensive analysis of the general economic situation and policy strategy of each member country.

“IMF economists visit the member country, usually once a year, to collect and analyse data and hold discussions with government and central bank officials. Upon its return, the staff submit a report to the IMF Executive Board for discussion. The Board’s views are subsequently summarized and transmitted to the country`s authorities,” the notice intoned.

However, in a leaked report last week in which the IMF said was not made public because after Tanzanian authorities did not consent to its publication, the Fund said a weak business environment and the implementation of projects that may not have high rates of return were likely to constrain annual GDP growth.

Tanzania has of recent undertaken multiple projects that are aimed at making the country a middle-income economy by 2025.

Some of these projects include the Tshs.8.2 trillion ($3.6 billion) Rufiji Hydropower project which is expected to add 2,115 MegaWatts to the national grid and the purchase of aircraft for the national carrier that cost over Tshs.1 trillion ($500 million).

Earlier this month, the IMF lowered its forecast for Tanzania’s economic growth for 2019 and in 2020 to around 4 per cent from a previous forecast of 6.6 per cent in 2018.

In it’s World Economic Outlook, released on Tuesday, April 9, 2019, the Fund also predicted Tanzania’s consumer price inflation will reach 3.5 per cent this year and edge up to 4.5 per cent in 2020.

In January last year, the IMF said it expected Tanzania’s economy to grow at 6–7 per cent over the medium term if the country hiked capital spending and improved its business environment.

Also read: World Bank advises Tanzania on how to achieve middle-class economy

Infrastructure Development will open Africa’s job opportunities

The Belt and Road Initiative is a China-led strategy to strengthen global trade links across the world, in particular between Asia, Africa and Europe

African governments should create an enabling environment for the private sector to participate more in the development of critical infrastructure on the continent.

Public-private partnerships supported by robust national institutions to ensure accountability and transparency hold the key to closing the prevailing infrastructure gap on the continent.

This came out at the inaugural AfroChampions Boma forum on African Infrastructure Financing and Delivery organized by the AfroChampions Initiative.

Competitive production for domestic and international markets

President Uhuru Kenyatta who spoke at the closing event said that Africa must work to address the insufficient stock of functional and quality infrastructure in energy, water and transport services.

This is to enable companies to produce competitively for both domestic and international markets.

He said that he was convinced that good infrastructure is the backbone upon which African nations will achieve economic growth that will, in turn, create the much-needed jobs for the youth as well as generate wealth to deal with the challenge of poverty.

“High-quality infrastructure reduces transactional and other costs; enabling efficient use of labour and capital, but more importantly, enhancing connectivity between production points and market points,” Kenyatta said.

The success of Africa’s private sector globally

The AfroChampions Initiative is driven by prominent private and public sector players in Africa.

The initiative is a set of innovative public-private partnerships and flagship programmes designed to galvanize African resources and institutions to support the emergence and success of African private sector in the regional and global spheres.

Kenyatta said the dream of connecting the continent cannot be realized unless viable solutions to mobilise the required infrastructure financing are found.

“African economies must also be diversified by promoting value addition and manufacturing to create job opportunities for the more than ten million young people joining the labour market each year. Industrialization is the way to go if we are to achieve and sustain shared prosperity and job creation for our peoples,” he added.

China’s “Belt and Road Initiative”

Already, the Chinese have looped in Kenya and other African countries in the “Belt and Road Initiative”.

The initiative is meant to boost trade and investment opportunities between China and Africa.

It is also hailed as a project that will provide economic development opportunities between China and various African countries.

The Belt and Road Initiative is a China-led strategy to strengthen global trade links across the world, in particular between Asia, Africa and Europe.

This initiative comes with an array of large-scale infrastructure projects along these two land and sea corridors.

China has gone off the rails in connecting Africa

In September and October 2013 during visits to Kazakhstan and Indonesia, Chinese President Xi Jinping unveiled the Silk Road Economic Belt and the 21st-century Maritime Silk Road popularly known as the One Belt One Road (OBOR).

The ‘Belt’ was to connect the three continents of Africa, Asia and Europe in an ambitious plan China says it is to ‘enhance regional connectivity and embrace a brighter future’.

African players in infrastructure development

The AfroChampions Initiative is important as it presents an exceptional opportunity for stakeholders in infrastructure development to provide solutions to the challenges in financing and implementing world-class infrastructure systems in Africa.

Government agencies, private financiers and other stakeholders can come together to share their knowledge, expertise and experience to create innovative solutions for infrastructural challenges.

Nairobi is home to over 50 international development organizations and several global multinationals.

Kenyatta hailed Pan-Africanism saying the continent is brimming with promise and it should find its stand in the modern world, striding confidently into a future of peace, prosperity and unity.

With the coming into force the Africa Continental Free Trade Agreement (AfCFTA), Africa becomes the world’s largest free trade zone, essentially.

AfCFTA is expected to increase intra-African trade by 52 per cent by the year 2022 and remove tariffs on 90 per cent of goods.

The UN Economic Commission for Africa (ECA) says the AfCFTA will be the world’s largest free trade zone by the number of countries if ratified by all the 55 African countries.

“The Pan-African dream of peace, prosperity and unity is set to be spurred by the imminent entry into force of the African Continental Free Trade Area Agreement.  This continental feat presents an extraordinary opportunity for Africa to become the single largest market in the world,” Kenyatta said.

The African Union’s (AU) High Representative for Infrastructure Development and former Prime Minister Raila Odinga called on African countries to remove barriers that hinder the free movement of people, goods and services by abolishing policies that curtail the involvement of the private sector in infrastructure development.

He says that Africa is capable of addressing its infrastructure needs.

You can also read about why Central Africa is dragging Africa’s growth, why trade in East Africa will be simpler and sectors that will grow West Africa’s 15 economies.

Gold leading in export value in Tanzania

The Bank of Tanzania (BoT) has said that in February this year the value of export of goods and services increased to Tshs.2.04 trillion ($890 million) from Tshs.1.6 trillion ($698 million) in the preceding month.

According to the BoT`s monthly economic review (MER) for March, an increase is owing to good performance recorded in export of goods particularly gold.

The review said likewise, the value of exports of goods and services increased to Tshs.19.6 trillion ($8.5 billion) in the year ending February 2019 from Tshs.19.3 trillion ($8.4 billion) in the corresponding period in 2018, owing to good performance recorded from non-traditional exports and services receipt.

It added that the value of traditional goods exports increased to 161.9 billion ($70.4 million) in February 2019 from Tshs.88.3 billion ($38.4 million) in January 2019 with cotton and tobacco recording the highest growths.

According to the review, the value of coffee and tea exports increased due to increase in volume, while that of other traditional goods exports was on account of both volume and unit price in global market.

The price movements of traditional exports were broadly consistent with the developments in world markets prices, the review said.

Meanwhile, on an annual basis, the value of traditional goods exports decreased to Tshs1.3 trillion ($601.8 million) in February 2019 from Tshs.2.4 trillion ($1.07 billion) in February 2018.

Export value of non-traditional exports increased to Tshs.1 trillion ($438 million) from Tshs.622 billion ($270.8 million) in January 2019, with all sub-categories recording growth.

Significant performance was registered in manufactured goods and gold exports.

The good performance in gold exports, which accounts for about 52 per cent of total non traditional exports, was explained by the increase in volume and world market prices.

Similarly, the annual export value of non-traditional exports increased to Tshs.7.9 trillion ($3.4 million) in the year ending February 2019 from Tshs.7.1 trillion ($3.09 billion) in February 2018, driven by manufacturing , gold, re-exports and exports.

In the meantime, foreign exchange receipt from services was Tshs.400.6 billion ($172.4 million) in February 2019 compared to Tshs429.4 billion ($186.7 million) in the preceding month, largely driven by travel receipts.

Annually, the receipt from services increased to Tshs.9.3 trillion ($4.07 billion) from Tshs.8.8 trillion ($3.8 billion) in the year ending February 2018, on account of travel and transport receipts.

Receipts from transport related activities increased due to growth in volume of transit goods to-and-from neighboring countries particularly Zambia, Democratic Republic of Congo (DRC), Rwanda and Burundi.

Also read:Tanzania moves to curb gold smuggling

First gold bullion in East Africa launched in Tanzania

 

IMF projects Tanzania`s economy to grow by 4 per cent in 2019

The International Monetary Fund (IMF), the international economic advisory body, has cut its forecast for Tanzania’s economic growth for this year and 2020 to four percent, down from previous expectations.

Tanzania is forecast for economic growth of 4 percent in 2019 before accelerating modestly to 4.2 percent in 2020 – a drop from an estimated 6.6 percent in 2018. In January last year, the IMF said it expected Tanzania’s economy to grow between six and seven percent over the medium term, provided the country increased capital spending and improved its business environment. However, the organization has drastically cut its outlook for the country, predicting growth of four percent in 2019 and a minor increase for 2020.

The Fund also predicts Tanzania’s consumer price inflation will reach 3.5 percent this year and rise to 4.5 percent in 2020.

The IMF’s revised forecast contradicts government estimates that predict the economy will grow by 7.3 percent in 2019 off the back of an estimated 7.2 percent expansion last year.

In its World Economic Outlook (WEO), the IMF warned against compounding more debts, with emphasis on developing nations to avert derailing their sustainable goals.

“Growth for 2018 was revised down by 0.1 percentage point relative to the October 2018 World Economic Outlook, reflecting weakness in the second half of the year, and the forecasts for 2019 and 2020, are now marked down by 0.4 percentage point and 0.1 percentage point, respectively,” the Fund said in its revised new World Economic Outlook for 2019 released in Washington, at the on-going 2019 Spring IMF/ World Bank Meetings.

It explained that the revised growth projection followed a confluence of factors, which affected major economies, including China’s growth decline following a combination of needed regulatory tightening to rein in shadow banking and an increase in trade tensions with the United States. The Euro area economy also lost more momentum than expected as consumer and business confidence weakened.

For sub-Saharan Africa, the new revised outlook said: “The outlook is surrounded by significant downside risks, particularly considering the elevated policy uncertainty in the global economy.

Shielding the recovery and raising medium-term growth would require reducing debt vulnerabilities and creating fiscal space through more progress on domestic revenue mobilization, and policies to achieve strong sustainable and inclusive growth.”

Also read: Tanzania Economy Resilient Amid High NPLs, Lower Donor Budget Aid

 

 

Will digital economy in Africa just remain a myth?

World Bank has projected that by the year 2060, Africa’s population will be as much as 2.7 billion people; Sub-Saharan Africa’s population is estimated to be at 860 million.

At the moment, at least 60 percent of Africa’s population is under the age of 25. This figure also indicates that Africa has one of the largest youth populations in the world.

Africa’s economy has to be in proportional progression to keep up with the ever-rising population. Needless to say, the digital economy is indispensable as it intertwines creative and innovative technological solutions that not only reshape traditional marketing endeavors but also changes people’s lives completely.

It is not surprising to see that there is very little understanding of the digital economy in some African countries. Youth are most likely victims in less democratized regimes as such systems impede democracy by limiting active digital spaces for public participation through constructive dialogue on areas such as: investment, free trade, business, and so many others. To overcome this, it is imperative for governments to decentralize their policy formulating processes by opening up to the public in the digital sphere.

The time is also reasonable for African educational institutions to redesign their curriculum by establishing new marketing disciplines that reflect the new digital age. Incorporating this new intellectual development can help youth acquire technological experiences that will dictate how they can participate and benefit in the digital economy, for instance, the evolution of Artificial Intelligence (AI) which has started to replace thousands of workers across the globe. Africa has to put in place viable policies and plans to co-exist with this new development.

Africa must scale up youth-based enterprises by nurturing and empowering their creativity in innovation in areas such as: health, education, industry, agriculture, fishing, forestry, and other crucial sectors. This will create a resourceful pool of vibrant entrepreneurs and new business ventures.

Meanwhile, African nations should look to diversifying traditional markets to e-trade for small and medium-sized enterprises (SMEs). Environments should be favorable for African businesses to leapfrog from local/physical transactions to the international e-transactions which are more frictionless and convenient.

Africa MUST connect. Data, information, and communication are pivotal to transform into the digital economy. Therefore, there is an urgent need to re-examine how smooth internet experience is in Africa if we are ever to allow easy accessibility. According to the Alliance for Affordable Internet (A4AI), in 60 low and middle income economies surveyed, it was found that, ‘at the end of 2017, only 24 met the UN Broadband Commission’s target of affordable cost of a gigabyte of data not costing more than 2% of average monthly income’.

This actually means users were to pay an average of 5.5% of their monthly income for one gigabyte. This should not be a heavy burden. On the contrary, telecoms should lower their network costs to allow more involvement of people especially those in suburbs and rural areas. If they can tailor special/regional packages it would be a strategic maneuver.

There is more to be done.  African governments, the private sector, and relevant stakeholders ought to invest in resilient ICT infrastructures such as: land-based fiber networks and wireless last-mile connections to ensure each individual gains access.

Africa needs an inclusive digital economy such as in the mobile money revolution— a digital economy that lowers inequality and poverty. It should be a digital economy for all, not for the wealthy or literates. Despite the fact that new technology might overthrow existing development initiatives it suffices to suggest it should also be tailored along pre-existing ideas.

Benson Mambosho is a digital supervisor for Tecno Mobile Tanzania