At least 53 African Heads of State have gathered in Kigali for the 10th Extraordinary Summit of the AU to consider the legal instruments of AfCTA. As all eyes on the African continent on Wednesday are firmly fixed at the African Union (AU) Summit in Kigali where a crucial free-trade treaty is expected to be signed, rating agency Moody’s Investor Services said the African Continental Free Trade Area (AfCFTA) could improve the region’s credit profile although obstacles such as Africa’s under-developed infrastructure, non-tariff barriers and finance constraints could also limit its potential benefits. In its report titled “Sovereigns – Africa, Intra-regional trade can promote growth, but infrastructure and non-tariff barriers limit upside”, Moody’s managing director for credit strategy and the report’s co-author Colin Ellis said countries with larger manufacturing bases, such as South Africa, Kenya and Egypt, were more likely to benefit. “There is significant potential for further trade integration in Africa, which the AfCFTA could stimulate. This could improve the region’s credit profiles, given the greater stability and sophistication that intra-regional trade could offer compared with traditional commodity exports to the rest of the world,” Ellis said. “That said, countries with larger manufacturing bases and better infrastructure, such as South Africa and Kenya, are most likely to benefit from further integration. For others, poor infrastructure and non-tariff barriers will continue to restrict the trade sector’s development and long-term growth potential.” At least 53 African Heads of State have gathered in Kigali for the 10th Extraordinary Summit of the AU to consider...

This week marks the launch of the African Continental Free Trade Agreement (CFTA), which sets out to create a single market for goods and services, free movement of people, and expand intra-Africa trade.  In addition to promoting intra-Africa trade, the CFTA has the potential to promote regional value chains. In this post, we explore the lessons learned from highly integrated global trade and production networks. Challenge of integration Current interlinkages between African economies are insufficient to accelerate economic growth among regional economic communities including the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), and Southern African Development Community (SADC). Extra-regional trade has historically outpaced intra-regional trade, often by 90 percent. Similarly, Africa lags behind much of the world in intra-regional integration. As seen in Table 1 below, the share of trade with countries within regional economic communities in Africa lies well below that of regional economic communities in Europe or Asia. Nevertheless, there exists variations in relation to trade integration across African countries. At the low end of the spectrum stands the Economic Community of Central African States (ECCAS), which only sourced 3.6 percent of imports from within. At the high end of the spectrum lies the Southern African Development Community, with 21 percent of exports and 22 percent of imports exchanged within the regional economic community. Putting regional value creation in a global perspective In recent years, countries have become increasingly integrated in global value chains (GVCs). Global production networks are made up of two...

African countries are set to put their signature to an agreement that will launch the African Continental Free Trade Area (AfCFTA) in Kigali, Rwanda, on Wednesday. The UN Economic Commission for Africa (UNECA) has estimated the agreement's implementation could increase intra-African trade by 52 percent by 2022, compared with trade levels in 2010. Here's what you need to know about the biggest trade agreement signed since the World Trade Organisation (WTO) was established. What is AfCFTA? African heads of government agreed to establish a continental free trade area in 2012 and started negotiations in 2015. The agreement is set to be signed by all 55 member states of the African Union, bringing together 1.2 billion people with a combined gross domestic product (GDP) of more than $2 trillion. The draft agreement commits countries to removing tariffs on 90 percent of goods, with 10 percent of "sensitive items" to be phased in later. The agreement will also liberalise services and aims to tackle so-called "non-tariff barriers" which hamper trade between African countries, such as long delays at the border. Eventually, free movement of people and even a single currency could become part of the free trade area. Why a single market for Africa? By creating a single continental market for goods and services, the member states of the African Union hope to boost trade between African countries. Intra-African trade is relatively limited; UNCTAD, the main UN body dealing with trade, said it made up only 10.2 percent of the continent's total...

When the sun sets on Kigali today, March 21, 2018, it will signal a new dawn for Africa. A new chapter in our continent’s history that will be remembered by future generations as the onset of Africa’s economic liberation struggle. The imminent signing of the African Continental Free Trade Area was described by President Paul Kagame and many other speakers at the African Continental Free Trade Area (CFTA) Business Forum yesterday, as the best thing that has happened to Africa in the last five decades. In his closing line, however, President Kagame decried the slow pace at which we, Africans, are embracing the tremendous opportunities that are associated with Africa’s integration. He said that we seem to enjoy problems while solutions are also around. The purpose of this piece is to call on Africa, to embrace one such solution that will solve the “speed” problem – Digital. The internet (of people and things), big data analytics, artificial intelligence, Blockchain, autonomous cars, drones, robotics, 3D printing, biotechnology, quantum computing, etc have the potential of transforming governments and businesses at an exponential rate. Provided that we embrace the digital revolution instead of pushing back, the CFTA won’t be a dream to be realised by the next generation as it was often said. We can deliver it and enjoy its fruits while we are still with this generation of leaders that has taken up the challenge left by Africa’s forefathers who won the political liberation during the 60ies. As I sat in the...

South Africa's tax chief has been suspended, just days before ratings agency Moody's announces its decision of the rainbow nation's severeign credit status. Zimbabwe's president says Chinese mining firms owe Harare a lot. Uganda's president becomes the latest African leader to defect from the planned signing of a continental free trade deal. And the east African economy is doing very nicely, thank you. South African President Cyril Ramaphosa has suspended the country's top taxman with immediate effect. That's the top story in this morning's Johannesburg-based paper BusinessDay. It's also top of the front page of the Mail & Guardian and tabloid the Sowetan. According to the reports, Tom Moyane, the chairman of the South African Revenue Service, refused to step down after he was asked to resign by the president. According to the presidency, Ramaphosa explained his decision on the basis of a deterioration in public confidence in the South African Revenue Service and the compromising of public finances due to the ongoing controversy at the tax agency under Moyane's leadership. Ramaphosa said it was in the public interest to restore the credibility of the revenue service without delay. The Finance Ministry is to name an acting commissioner. Pressure has been building for Moyane to quit, says BusinessDay. Factors include a 48-billion-rand hole in revenue collection and Moyane's handling of conflict of interest allegations against senior members of his staff. The international ratings agency Moody's will make an announcement later this week on a possible downgrade of South Africa's sovereign...

I recently asked a business acquaintance how long it took to travel by road between DR Congo’s two biggest cities, Kinshasa to Lubumbashi. There was a long sigh, a pained look, then a helpless shrug. “It could take a week or two.” DRC is Sub Saharan Africa’s largest country but this seemed remarkable. A Google Maps search tells you the 1,451 miles (2,335 kilometers) between both cities should take 36 hours, but as my contact noted, it’s not quite that straightforward. A similar distance in the US, from New York to Oklahoma City, (2,373 km), would take take 22 hours, says Google. The DRC conversation came to mind while reading a report (pdf) from London School of Economics’ International Growth Centre, which argues that despite years of trade liberalization and tariff reductions across Africa, the impact has been significantly limited by the internal costs of moving goods within African countries and between neighbors. The high cost of moving goods from or to ports eats into the benefits of free or lower tariff trade. Research shows a one-day reduction in inland travel times could lead to a 7% increase in exports, the equivalent to a 1.5 percentage point reduction on importing country tariffs. Other research shows a 10% drop in transport costs could increase trade by 25%. As is likely in the case of DRC, 2015 research estimated the cost of transporting goods could be up to five times higher (per unit distance) in some sub-Saharan African countries when compared to...

A trio of recent lateral hires indicates that law firms in London are keeping a close eye on African energy and infrastructure opportunities, with US law firms at the vanguard of such interest. Recent announcements by the London offices of Covington & Burling, Akin Gump Strauss Hauer & Feld, and McCarthy Denning, show that partners with project finance, infrastructure and energy backgrounds are in demand in London’s busy lateral law firm hires market. That reflects increasing confidence by banks and sovereigns in financing energy developments, the impact of gradually rising oil and gas prices and increasing activity, recently valued at USD 21.2 billion, in oil and gas mergers and acquisitions, alongside increased infrastructure activity associated with gradually increasing confidence in the mining sector. There is a clear mandate from development banks and African institutions alike to encourage investment in both conventional and renewable energy projects, especially with the prospect of greater investment as a result of China’s Belt and Road infrastructure intensifying around African maritime routes, and London remaining a hub for lawyers working in, and for, the infrastructure industry. COVINGTON BUILDS STRENGTH IN LONDON Covington & Burling was the most recent to announce hires, both individuals possessing extensive skills in project finance particularly in the power and renewable energy, transportation, mining, natural resources and water sectors, following last year’s opening of offices in Johannesburg and Dubai. Robin Mizrahi, a partner, and Laure Berthelot, a special counsel, joined from leading United States energy law firm Baker Botts. Both lawyers advise sponsors, lenders...

The European Union and its free trade agreement took decades to establish. Africa is now hoping it can achieve the same in a fraction of the time. But with Nigeria pulling out, questions are being raised over just how achievable it really is. It's a great idea and a desirable future. A free trade deal encompassing 1.2 billion people stretching from Cape Town to Cairo. Goods, services and perhaps labour, flowing freely in and out of more than 50 African countries. It could create tens of thousands of jobs and significantly reduce unemployment among the continent's youthful population. It'll boost trade between African countries and would be instrumental in moving the whole continent away from the narrative of simply being a place where the powerhouse economies of the West and East come to get their raw materials. Fears Many African governments, naturally, are keen. So, expect lots of fanfare when African leaders gather in the Rwandan capital, Kigali this week to sign the agreement. The South African department of trade and industry says it's "committed to a co-ordinated strategy to boost intra-Africa trade and to build an integrated market in Africa that will see a market of over a billion people with a GDP of approximately $2.6 trillion (£1.85tn) ". And Kenya's trade ministry says it'll not only create a massive liberalised market, but will also "enhance competitiveness at the industry and enterprise level, enhance value addition of products and exploit economies of scale and optimum utilization of resource". But...

More than two years after the signing of the Sharm-el-Sheikh Tripartite Free Trade Area (TFTA) agreement in June 2015 – which brought together member states of the Southern African Development Community (SADC), East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA) – trade ministers from all of Africa’s 54 countries, including those of the Economic Community of West African States (ECOWAS), which already have a common external tariff, met in Niamey, the capital of Niger, in early December last year to agree final terms for the African Union’s Continental Free Trade Area (CFTA). By and large, they made good progress. However, there are still issues to iron out. Member states have yet to agree on tariffs on all goods, for instance although on services, they successfully closed the book. "Intra-African trade grew by 8% in the first nine months of 2017, with Guinea, Ethiopia, Burkina Faso, Equatorial Guinea, and Sierra Leone in the lead." In order to make a meaningful impact, the CFTA will have to improve the quality as well as the quantity of intra-African trade. The objective of the CFTA is primarily to engender more intra-African trade, which currently comprises just 15% of the continent’s total merchandise trade. When compared with intra-regional trade in other continents – 67% in Europe, 58% in Asia and 48% in North America – this is quite low. Efforts, thus far, at improving the low trade interactions within the continent, have clearly not been very effective. There are signs...

Regional and international partnerships will be crucial in ensuring that East African countries leave no one behind with respect to access to clean energy, a senior East African Community official said Monday. Speaking at the opening of the first Sustainable Energy Forum for East Africa 2018, in Kigali, Christophe Bazivamo, the EAC deputy secretary-general in charge of productive and social sectors, called for collaborations among sector players, including between governments, private sector and developing partners. Nearly 80 per cent of east Africans, he said, live in rural areas and their main source of energy is traditional biomass consisting of fuel wood, charcoal and agricultural waste. According to the East African Industrialisation Strategy (2012-2032), the EAC seeks to diversify the manufacturing base and raise local value-added content of resource-based exports to at least 40 percent by 2032. “To achieve our industrialisation targets, we need to accelerate access to sustainable energy and promote energy production for productive uses. We realise that we cannot do this single-handedly. We need to revitalise our regional cooperation and partnership with development partners around the globe,” Bazivamo said at the opening of the three-day forum. Energy is a key priority for the six-nation bloc, he said, adding that ensuring availability of sufficient, reliable, cost effective and environmentally friendly energy sources in the region would facilitate achievement of broader EAC objectives, including attracting investments and promoting regional competitiveness. In 2013, EAC government ministries in charge of energy directed the bloc’s secretariat to seek support from the United Nations...