South African President Cyril Ramaphosa on Monday refuted allegations that a number of countries in Africa are being led into a debt trap as they take up loans to fund a number of projects.
Ramaphosa said in his weekly address from the Desk of the President in Cape Town, after returning from the Russia-Africa Summit held in Sochi last week.
“One need only look at initiatives such as the Forum on China-Africa Cooperation, which was last held in Beijing in 2018, to see that the focus is now on partnership for mutual benefit, on development, trade and investment cooperation and integration,” Ramaphosa said.
He lambasted remarks which label initiatives like the recent Russia-Africa Summit as an attempt by world powers to expand their geopolitical influence.
African countries had taken part in the summit to discuss ways of how to increase trade and cooperation between Russia and Africa.
He said the summit was a sign of the growing economic importance of Africa on the world stage.
“What we are witnessing is a dramatic rebalancing of the relationship between the world’s advanced economies and the African continent,” he said.
African countries have consistently affirmed that Africa no longer wants to be passive recipients of foreign aid, said Ramaphosa.
The president said African countries are developing and their economies are increasingly in need of foreign direct investment.
“We are ever mindful of our colonial history, where the economies of Europe were able to industrialise and develop by extracting resources from Africa, all the while leaving the colonies underdeveloped,” said Ramaphosa.
Even now, African countries are still trying to stop the extraction of its resources, this time in the form of illicit financial flows through commercial transactions, tax evasion, transfer pricing and illegal activities that cost the continent more than 50 billion dollars a year, according to Ramaphosa.
The age where “development” was imposed from outside without taking into account the material conditions and respective requirements of our countries is now past, the president said.
“China, Russia, Organisation for Economic Cooperation and Development (OECD) countries and other large economies are eager to forge greater economic ties with African countries.
“This is because they want to harness the current climate of reform, the deepening of good governance, macro-economic stability and the opening up of economies across the continent for mutual benefit,” the president said.
With the International Monetary Fund 2019 World Economic Outlook placing six of the fastest-growing economies in Africa.
These advanced economies want to take advantage of the many investment opportunities on offer, be they in infrastructure, energy, natural resource extraction, manufacturing or agriculture, and agribusiness, according to Ramaphosa.
The Central Bank of Nigeria (CBN) has given a tier 1 lender, Access Bank a “No Objection” approval for its proposed acquisition of controlling equity interest in Transnational Bank of Kenya (TNB) Plc.
This is coming barely seven months after its merger with Diamond Bank that saw its operations spanning three continents, 12 countries and 29 million customers. The bank is hoping to take over 93.57 percent of Transnational Bank equity interest.
Transnational Bank is a medium-sized commercial bank in Kenya with a focus on the country’s agricultural sector.
However, the transaction is still awaiting the Kenyan regulatory authorities and COMESA Competition Commission’s approval.
When this transaction is completed, Access Bank will join UBA and GTBank as the only Nigerian banks with operation in Kenya.
Access Bank is currently the biggest bank in Nigeria by assets. Its Q3 2019 financial statement showed that the bank’s asset now stands at N6.6 trillion from N4.95 trillion in 2018 before the merger with Diamond Bank.
Mozambique’s incumbent President Filipe Nyusi has won a landslide victory in an election it was hoped would calm tensions in a nation soon to become a top global gas exporter, but has instead stoked divisions as opposition parties cry foul.
Nyusi secured 73% of the vote in the presidential race, the National Election Commission (CNE) said on Sunday, while his party, the ruling Frelimo, also won big in the legislative and provincial contests.
His main rival Ossufo Momade, of former guerrilla movement turned main opposition party Renamo, trailed behind with 21.88% of the vote, CNE Chairman Abdul Carimo told a news conference.
During his second five-year term, Nyusi will be responsible for overseeing a gas boom led by oil giants such as Exxon Mobil Corp and Total, battling a festering Islamist insurgency and delivering on a peace deal signed two months ago.
It was hoped the Oct. 15 poll could set the seal on the fragile pact, designed to put a definitive end to four decades of violence between Frelimo and Renamo. The two fought a 16-year civil war that ended in a truce in 1992 but have clashed sporadically since.
Instead the deal is at risk of falling apart as opposition parties reject the results, claiming they were tarnished by fraud, violence and irregularities from the outset. Frelimo says the elections were free and fair.
Analysts say a return to all-out conflict is highly unlikely even if the deal collapses, but low-level violence, including from an armed group of breakaway former Renamo fighters, could worsen. That could suck the government’s focus and resources away from the insurgency in the gas-rich north.
Eight members of the CNE, which is made up of Frelimo and opposition party representatives, voted against accepting the results earlier this week, verses nine in favour.
Speaking after the conference, Fernando Mazanga, a Renamo member of the CNE, said they distanced themselves from the results because of irregularities.
“It is shameful and a disgrace what we are witnessing here,” he said.
Daviz Simango, of the third largest party the Mozambique Democratic Movement (MDM), secured just over 4% of the presidential vote
Earlier on Sunday, he said MDM saw the election outcome as “null and void”. Renamo has also already rejected the results, and a number of observer groups have raised concerns.
Frelimo won 184 out of 250 seats in parliament, verses 60 for Renamo and 6 for MDM, Carimo said.
Frelimo also won a majority in all 10 of Mozambique’s provinces in the provincial poll - a contest seen as central to the survival of the peace pact.
For the first time, provincial governors will be appointed by the majority party in each province rather than the government - a key demand of Renamo during peace talks.
The party had wanted to win control of a number of provinces in Mozambique’s centre and north to achieve this long-thwarted ambition for influence, but has instead come away empty handed.
The Office of the United States Trade Representative (USTR) is reviewing its current dealings with South Africa based on intellectual property concerns.
In a statement on Friday (25 October), the group said that it would review South Africa’s eligibility to participate in its Generalized System of Preferences (GSP) based on a petition it had received.
The GSP is the largest and oldest US trade preference program.
It is designed to promote economic development by allowing duty-free entry into the United States for 3,500 products from the 119 designated beneficiary countries and territories.
To remain eligible for these advantages, beneficiary countries must comply with 15 statutory eligibility criteria that are important to US interests, including taking steps to afford internationally recognized labour rights, providing adequate and effective protection of intellectual property rights, and assuring equitable and reasonable access to its markets.
Why South Africa is being reviewed
The USTR said it is reviewing South Africa after accepting a petition from the International Intellectual Property Alliance.
The petition outlines concerns with South Africa’s compliance with the GSP’s intellectual property criteria in the area of copyright protection and enforcement.
While the USTR did not comment on the contents of the petition, the International Intellectual Property Alliance has previously raised concerns about the Copyright & Performers’ Protection Amendment Bill which is awaiting presidential approval before being signed into law.
The bill’s primary aim is to provide fair compensation to publishers, artists and film producers.
However, the bill has also come under intense scrutiny as some provisions allow for the ‘free use’ of certain copyrighted material.
In an August 2019 letter – signed by the Motion Picture Association (MPA) and the International Confederation of Music Publishers (ICMP) among others – a number of international bodies asked that Ramaphosa take the bill back to Parliament for a ‘proper, sector-specific impact assessment and meaningful consultation with affected stakeholders’.
“The South African Government has committed itself to modernising South African copyright law to bring it into line with the WIPO Internet and Beijing treaties, which South Africa intends to ratify,” it states.
“Our communities fully support these policy aims. Regrettably, the Copyright Amendment Bill and the Performers’ Protection Amendment Bill, as currently drafted, would not only fail to achieve these stated aims but they would instead undermine South Africa’s creative communities.
“The proposals contained in the bills would, if adopted, limit the creative sectors’ ability to protect their rights and invest in South Africa, substantially weakening the South African internal and export markets for creative content.
“This would harm South Africa’s creators, its strong creative culture and, ultimately, its citizens.”
Warning signs were there
Copyright lawyer Carlo Scollo Lavizzari has previously warned that the bill will lead to South Africa breaching its international obligations, causing unnecessary diplomatic stress and damage to the economy.
“(The bill) translated into the real world, will damage filmmakers, musicians, authors, TV productions and software businesses by diminishing access to publishing for authors locally, forcing them to publish for overseas audiences,” he said.
He said that this would decimate the local film and music industries.
“For South Africa to come ‘first’ the country needs to have a first-rate, up-to-date copyright act that benefits the creative sector.
“Today, having sound laws on copyright is simply the price of entry a nation pays to compete for talent.
“Respecting world standards of copyright protection in the digital world is no contradiction to offering world-class opportunities for creators and knowledge workers — it is actually a pre-condition.”
Nigeria recently partially closed its border with Benin in an effort to stem the smuggling of rice. It then went on to close its land borders to the movement of all goods from Benin, Niger and Cameroon, effectively banning trade flows with its neighbours.
Border closures are not new in Africa. But Nigeria’s actions raise important concerns about the seriousness and prospects of regional integration in Africa.
Nigeria acted just three months after it had signed the African Continental Free Trade Agreement. With 55 member countries, a combined GDP of $2.4 trillion and a total population of 1.2 billion, the agreement will create the world’s largest free trade area. Its aim is to promote intra-Africa trade, which is abysmally low at 16%.
To restrict trade flows so shortly after this momentous feat is a major blow to integration efforts. It also shows how unprepared African countries might be for free trade. It’s hard to see how the free trade deal can increase intra-Africa trade to 60% by 2022, as projected , when it is being undermined from the start.
These early trade tensions between Nigeria and its neighbours are hardly surprising. They underlie some of the fundamental problems that must be addressed before cordial free trade can succeed on the continent.
In the case of Nigeria, Africa accounts for only 13% of its exports and 4% of its imports. These statistics probably underestimate the true volume of trade between Nigeria and its neighbours. But they show that Africa is a dispensable market.
Nigeria’s economy declined in 2015 and further contracted by 1.6% in 2016 . This was largely due to a worldwide drop in the price of crude oil in 2014. The country has since fallen on hard times. Foreign direct investment inflows have plunged by 55% . There have also been shortages of foreign exchange which have put the Naira in a tailspin, causing the government to implement stringent foreign exchange controls.
The recent oil crisis highlighted the need for the country to diversify and restructure its economy. The result was increased attention being accorded the agriculture sector, which had declined significantly since the late 1960s.
Nigeria’s 2017 Economic Recovery and Growth Plan aimed to deepen investments in agriculture and increase the sector’s contribution to economic growth from 5% in 2017 to 8.4% by 2020. The idea is to revive domestic farming and save on food imports (over $22 billion a year).
It is this national plan that precipitated the border closure. The government wants to protect domestic farmers from cheap imported foodstuff.
While Nigerian rice farmers are happy about their government’s actions, there are concerns about whether domestic food production can meet domestic demand. In 2017, demand for rice in Nigeria reached 6.7 million tons, almost double the 3.7 million tons produced domestically.
Since the border closure, the price of a 50 kilogram bag of rice has increased from 9,000 naira ($24) to 22,000 naira ($61).
This is good for the farmers. But it is hurting consumers.
Oil exports and fuel imports
Then there is the bigger problem of government-subsidised petroleum being smuggled out of Nigeria and sold in neighbouring countries.
World Bank data show that between 2010 and 2016, the average pump price of petrol was $0.52 per litre in Nigeria, $1.01 in Benin, $1.14 in Cameroun and 1.04 in Niger. Current data show that petrol is sold at $0.40 per litre in Nigeria and at $0.91 and $1.07 in Benin and Cameroon respectively.
The price difference creates the incentive to smuggle petrol out of Nigeria.
Nigeria’s largest export is crude oil, and its largest import is refined oil. Domestic refineries are reportedly operating well below their capacity, causing fuel imports to average 29% of total imports over the past three years. Roughly 90% of fuel in Nigeria is imported, and all of it is subsidised. Last year, the subsidy bill was estimated to reach $3.85 billion.
Smuggling fuel out amounts to the use of public resources to subsidise neighbouring countries. Since the border closure, reports suggest that the delivery of fuel in Nigeria has dropped by 20% and sales by 12.7%.
This suggests that the demand for fuel in Nigeria is high because some of it is bought and smuggled out.
Why the border closure is worrying
African countries have different economic configurations and strategic priorities. The huge number of diverse countries within the free trade area isn’t going to make things easy.
Indeed, free trade has its benefits, but it also has costs. Nigeria’s bid to protect a declining rice farming industry and save foreign exchange has led to protectionism that defies the principles of a free trade area.
The African Union (AU) has been muted on the issue of the border closures. This might be because it does not yet have detailed institutional arrangements for settling disputes within the free trade area.
Another factor might be that it has been quiet because Nigeria is involved. As Africa’s largest economy, the AU courted it earnestly to sign. The agreement needs Nigeria, arguably at whatever cost.
The regional trade bloc ECOWAS has also failed to bring Nigeria to heel. Both Nigeria and Benin are members of the bloc, created in 1975. All it has done so far is to appeal for the borders to be opened. It clearly has no enforcement power.
Nigeria’s border closure may be a precursor. More incidents like this can be expected as the realities of free trade kick in. Some countries will lose, others will gain.
The AU needs protocols and measures to manage free trade, as well as programmes to prepare political leaders for the realities that will follow.
The free trade area should not be a mere symbol. It must be fully understood and appreciated for it to succeed.
The Nigeria border closure must be resolved as soon as possible. It is diverting attention and positive energy from matters that can promote the free trade area, such as investments in transport infrastructure, trade data capture and border protection.
More importantly, it is a bad precedent that could reduce other countries’ commitments to economic integration in Africa. The AU must act now, or prepare to bury the free trade deal.