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African Economic Outlook 2019 Will Be Driven By These 5 Key Trade Policy Actions

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African economic outlook

African Economic Outlook 2019 report is out and the continent is doing just fine. The general economic performance in Africa has continued to make progress. This is because the Gross Domestic Product is to hit 4.0 percent this year. Additionally, this GDP will accelerate to 4.1 percent in 2020. However, to improve employment results and macroeconomics, industry will be required to take the front seat in the growth agenda.  This is captured in the recently released African Economic Outlook 2019 report by African Development Bank. As the African economic growth continues to remain stable, the report singles out five key trade policy actions that will make this dream a reality.

The report paints an exceptionally positive picture for Africa in terms of economic growth prospects. The continent was languishing at a GDP growth of 2.1 percent in 2016. But this shot to 3.6 percent in 2017 and about the same in 2018. The report also recognizes the fact that Africa has not still yet attained a fast enough economic growth rate. That is why it has provided the five key policy actions that could propel Africa’s total gains to 4.5 percent of its GDP, or US$134 billion a year.

African Economic Outlook Report Provides Useful Numbers

African Development Bank publishes African economic outlook report annually since the year 2003.  This flagship report is in order to provide the most important African economic growth statistics for policy formulations. The Bank’s African Economic Outlook 2019 report focused on Africa’s regional integration for prosperity in the continent. The was purpose was to highlight inclusion of trade, and economic collaboration, and the delivery of regional public goods.

People from different walks of life attended the launch of this year’s African Economic Outlook report. This is because there were diplomats, government official and even students in the Bank’s Babacar Ndiaye auditorium in Abidjan, Ivory Coast eager to receive the goodies. In his opening remarks, Charles Boamah, the Bank’s Senior Vice President concurred that “Africa has the means to overcome them by joining hands together and removing barriers to integration and drivers of migration,” even though the report presents overwhelming challenges.

While delivering the storyline of the report, Hanan Morsy, the ADB’s Director of Macroeconomic Policy Forecasting and Research Department, observed that “there is no systemic risk of debt crisis” despite the growing national debt across the continent. In order to curb unemployment, the report noted that Africa needs to create 12 additional jobs annually and increase its industrialization efforts.

5 Key Trade Policy Actions Needed as Per African Economic Outlook 2019 Report

If Africa is to increase its total gains up to 4.5 percent of its current GDP, it needs to focus on five important policy actions. These key actions that can raise the continent’s gains to US$ 134 billion annually and are as follows;

  • Abolishing all applied bilateral tariffs in the continent.
  • Keeping rules of origin simple, flexible, and transparent.
  • Eliminating all non-tariff barriers on goods and services.
  • Putting into action the Trade Facilitation Agreement according to World Trade Organization. This is in order to lessen cross-border time and transaction costs attached to non-tariff measures.
  • Bargaining with other developing countries to reduce their tariffs and non-tariff barriers, by 50%.

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Business and Development

Pan African eCommerce Giant Jumia Makes History with NYSE listing

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Jumia

Jumia Technologies made history on 10th April 2019 following the approval of the Securities and Exchange Commission (SEC) allowing the pan-African e-commerce giant to sell its shares on the New York Stock Exchange (NYSE). Consequently, Jumia started trading its shares at $14.50 using the ticker symbol JMIA. This makes Jumia Technologies the first African startup to secure major global exchange listing.

Jumia is currently active in fourteen African countries including Nigeria, Ivory Coast, and Tanzania. The e-commerce platform has 81,000 active sellers with over 5,000 direct employees. According to a statement contained in its recent SEC filing, Jumia Technologies added three hundred thousand new active customers in the first quarter of 2019.

Through the sale of its American Depositary Shares, the company can raise up to $316. According to the Corporate Communications officer, Lisette Kwong, Jumia initially set its IPO at $14.50 but it opened and closed at higher prices.

Jumia’s Brief History and Growth

Jumia was co-founded in 2012 by Sacha Poignonnec, Jeremy Hodara, Tunde Kehinde and Raphael Kofi Afaedor. The company was an outgrowth of the Rocket Internet Company. However, its rapid growth allowed it to secure funding from investors like Millicom group, MTN, Orange, Goldman Sachs, and CDC. According to The Guardian, MTN is the largest shareholder with 29.7%. Rocket Internet is second on the log with 20.6%. Other investors and their stake include AXA Africa holdings (5.8%), AEH New Africa eCommerce (8.4%), and Millicom (9.6%).

The two Nigerian co-founders, Raphael Afaedor and Tunde Kehinde are credited with the creation of some of the company’s components including JumiaPay. However, they left the company in 2015 to build other startups.

What Next For Jumia?

Jumia’s share price was up by 61% in early trade. Inasmuch as NASDAQ is traditionally for technology companies, Jumia decided to list on NYSE. The Head of International Capital Markets at the NYSE, Mr. Alex Ibrahim said the company did so because they saw the benefits. According to Ibrahim, the volatility of NYSE is higher than its competitors. Speaking on the listing of the company on NYSE, the co-founders said,

“This achievement has been made possible thanks to the hard work of our teams, the trust of our consumers, as well as the commitment of our sellers and partners. All stakeholders deserve credit for this milestone, and we are just at the beginning of a long and great journey. We are going to continue to focus on our mission and to work even harder to help consumers, sellers, partners, and all stakeholders benefit from this technological revolution.”

Previous Awards

Jumia is attracting lots of attention but the pan-African eCommerce giant is not a stranger to accolades. Some of the awards on Jumia’s archive include;

  • Best New Retail (World Retail Awards 2013)
  • Online Retail Brand of the year (Brand Journalists Association of Nigeria (2013)
  • The innovative business of the year (Success Digest 2013)
  • Leadership ICT company of the year (2013)
  • Best use of Mobile App (Rima Awards)

E-commerce website of the year (Beacon of ICT Award)

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Business and Development

Gambia’s AfCFTA Ratification Means Africa Will Soon Become The Largest Free Trade Area In The World

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Gambia President Adama Barrow

The dream for a Continental Free Trade area in Africa became a reality when Gambia ratified the agreement. Initially, prospects of the agreement becoming a reality were hindered by a lack of numbers—falling short on the minimum threshold. With Gambia ratifying the agreement, the bill can now be actualized.

Gambia became the 22nd African country to approve the African Continental Free Trade Area Agreement—AfCFTA. Ethiopia was the 21st country to ratify AfCFTA when it approved the agreement on March 21, 2019. Gambia parliament ratified the agreement on April 2 2019.

African Continental Free Trade Area Agreement

The African Union brokered the agreement in 2018. The agreement was then signed by 44 countries on March 21 2018 in Kigali, Rwanda—out of a total of 55 member states. Among other provisions, the agreement requires member states to remove tariffs from 90 percent of goods. In addition, member countries will be required to allow free access of goods and services across the continent.

From March 17 to March 21, 2018, an Extraordinary Summit on AfCFTA was held in Kigali, Rwanda. During the summit, the agreement establishing AfCFTA was presented to African leaders for signatures. The agreement was framed such that it goes into force 30 days after 22 countries have ratified the agreement instruments. Furthermore, ratifying states are required to deposit the instruments with the Chairperson of AUC—African Union Commission.

Gambia’s ratification and completion of all due processes satisfy this constitutional requirement to bring the agreement into effect.

Required Instruments

Only 20 countries have ratified and deposited the required instruments with the AUC Chairperson—as of April 16, 2019.  Two countries, Zimbabwe and Sierra Leone, have obtained parliamentary approval but have not deposited the instruments.

The 20 countries that have already deposited the instruments of ratification include The Gambia, Ethiopia, Egypt, Togo, Senegal, Ivory Coast, Uganda, South Africa, Namibia, Mauritania, Mali, eSwatini (former Swaziland), Guinea, Djibouti, Congo Republic, Chad, Niger, Rwanda, Kenya, and Ghana.

Notable Non Signatory

The AfCFTA is moving forward, however, Nigeria’s lack of commitment to the agreement is a big blow. Nigeria is Africa’s largest economy but only an estimated 10% of its trade volume is done with other African countries. Nigeria’s hold out has been blamed primarily on influential Labor Unions

During the 2019 African CEO Forum in Kagali last month, President Kagame of Rwanda who had championed the AfCFTA during his tenure as the African Union Chairperson shared that he had reached out to Nigerian president Muhammadu Buhari to sign the deal.

There are still concerns however about how the agreement will be executed. At the same event, African billionaire Naguib Sawiris said: “The challenges are going to be in the implementation.”

Impact of the Agreement

The AfCFTA is expected to boost free trade and investment across Africa. Once it comes into effect, the African Continental Free Trade Area Agreement area will create the largest free trade area in the world. The agreement will bring together all the 55 member states of the AU. This means the agreement will cover a market of over 1.2 billion people. The Economic Commission for Africa estimates that this agreement has the potential of boosting intra-African trade by 52.3 percent.

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Mauritius and Kenya Sign New Deal. Ban Lifted on Kenya’s Produce

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Kenya’s president and Mauritius Prime Minister witness the signing of the deal

Kenya and Mauritius signed a new deal that saw Mauritius lifting a ban on Kenyan farm produce. The new agreement enhances trade between the two African countries. Mauritius had initially banned baby beans, baby carrots, broccoli, and avocados from Kenya. Bilateral talks between Mauritius Prime Minister Pravind Jugnauth and Kenya President Uhuru Kenya culminated in the lifting of the ban on these products.

Agreements

The bilateral talks also saw the signing of the Double Taxation Avoidance Agreement—DTAA. In addition, the two leaders signed a memorandum of understanding on cooperation for the development of an Export Processing Zone in Kenya.

Kenya and Mauritius also signed an Investment Promotion and Protection Agreement. Other agreements signed include MOU in the field of arts and culture, an MOU in the field of higher education and scientific research, and an MOU on tourism.

Impact of the Deal

The signed agreements will boost Kenya’s ambitions to reach its development goals. According to President Kenyatta, the agreements will particularly boost Kenya’s manufacturing sector and create employment opportunities.

The new deal will further foster cooperation between Mauritius and Kenya. This means that the cordial relationship between the two countries is enhanced. This relationship will boost trade and investment opportunities in both countries.

Both Kenya and Mauritius have long coastlines, and more benefits can be derived in their blue economies through cooperation. President Kenyatta stated that there is a need for the two countries to look for ways of enhancing maritime transport by linking the Port of Mombasa to Port Louis. An established link is considered a catalyst for growing trade and businesses in the two countries.

The key benefit to Kenya from the deal is the promotion of its agricultural produce. Mauritius lifted a three-year ban on Kenyan avocado. Kenya lost the avocado market in Mauritius in 2015. The ban was due to the Mauritian National Plant Protection Office citing low hygiene standards of the Kenyan avocados. Lifting of the ban will now see more exports of avocados to Mauritius, along with other farm produce such as baby carrots and broccoli.

Kenya’s deal with Mauritius follows an initial pact with China. In 2018, Kenya signed deals with China and the Republic of Korea that opened opportunities for farmers to export more agriculture products to the two countries. The Kenya-China agreement opened opportunities for Kenya to export meat, flowers, and a selection of fruits and vegetables to China.

Kenyatta’s visit to Mauritius for the deal makes him the first Kenyan president to visit Mauritius.

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