What Could the Doha Round Mean for Africa?

The Doha Debates continued….

Recently, This is Africa held an exclusive interview with Mr Pascal Lamy, the Director General of the WTO, to discuss the status of the Doha Negotiations and Africa. Lamy said “What is on the table for Africa is huge,” referring to issues such as the possibility of duty free-quota free access to developed markets for Least Developed Countries, many of which are in sub-Saharan Africa.  He added that "the reduction of export subsidies by the EU, US, Japan and other developed economies, as well as reducing tariff escalation, both of which are often seen to stifle low income countries’ ability to compete on the export of manufactured goods, can also have a potentially significant impact on African trade".

However, according to a study by the Carnegie Endowment for International Peace entitled “What Could the Doha Round Mean for Africa?”, the actual benefits for low income African countries would be minimal, with the exception of South Africa.   In addition, the study found that, assuming FULL Duty Free Quota Free (DFQF) access to developed markets for LDCs was provided, this would allow Africa to benefit from the Doha Round. The estimate sees the region gaining $1.2bn or 0.63 percent of GDP, clearly highlighting the importance of this particular metric.

Indeed at the October 2009 Sixth LDC Ministerial meeting in Dar Es Salaam Tanzania, LDCs called on the WTO Membership to fully implement, the decision on DFQF market access for all products originating from all LDCs, as contained in Annex F of the Hong Kong Ministerial Declaration, accorded through Agricultural and Non-Agricultural Market Access modalities and ensure market access for at least 97 per cent of products originating from LDCs, at the tariff-line level.  Lamy reportedly attended this meeting and informed Ministers that there was no mandate for an early harvest and that LDCs would have to wait until the round was concluded to reap any benefits.

Meanwhile, products from LDCs have enjoyed DFQF access to the EU market since 2001 under the Everything But Arms initiative which gives the 49 LDCs duty free access to the EU for all products, except arms and ammunition.

Additionally,the Canadian Africa PACCIA/PACT program also implements DFQF for LDCs.

The US market benefits some African countries under the AGOA regime however it excludes other LDCs due to the eligibility criteria established in the Act.  For instance, of the 47 GSP eligible Sub-Saharan African countries, only 34 are AGOA eligible. A non discriminatory regime for LDCs would be ideal however, at the December 2009, 7th WTO Ministerial meeting in Geneva, the US Trade Representative Ambassador Ron Kirk instead called on major developing countries to offer DFQF access to LDCs and indeed Brazil and India have extended such offers.  China has extended a similar offer to African LDCs with diplomatic relations with China.

One could say Africa is already enjoying the huge benefits- ahead of the conclusion of the Doha round. However, recent DFQF offers do not immediately extend 100% market access.  In addition, most LDCs, exports to these markets have not materialized due to: the immediate exclusion of non commodity products they are able to produce competitively; the high costs of doing business; transport costs to distant markets; non-tariff barriers, and the lack of capacity to produce diversified exportables.   

The Africa-China Engagement

There has been considerable debate about the merits of China’s engagement in Africa, often with divergent views.  However the practical benefits for Africa are often welcome. 

For instance, according to the Africa Progress Report, recently presented by the Chair of the Africa Progress Panel, Mr Kofi Annan, China’s investment in Africa has doubled in the last decade (see chart) from about US$2billion in 2003 to over US$4billion in 2008. In addition Africa-China trade was estimated at US$6.5billion in 1999 but in 2008 was valued at US$107 billion, making China the second largest single country trading partner following the US. 
However China remains the regions largest source of imports and reportedly over 1600 Chinese companies are in operation in Africa, with the Chinese Government also investing in low cost industrial zones (e,g, Egypt) and in the agricultural sector (e.g. Ethiopia). 


Additionally, China also has targeted practical areas in which to focus its aid to Africa.  At 4th Ministerial Conference of the Forum on China-Africa Cooperation, Chinese Premier Wen Jiabao, announced eight (8) new measures to promote practical cooperation with Africa. The selected economic measures include:  Support to strengthen agricultural exchanges and cooperation in order to help Africa to increase food production capacity and increase the number of agricultural technology demonstration centers built by China in Africa to 20, and send 50 agricultural technology teams to Africa.

China has also pledged support to strengthen cooperation in education and human resources development; to build 50 China-Africa friendship schools; to train 20,000 personnel for Africa, including 1,500 school headmasters and teachers, 2,000 agricultural technology personnel, 3,000 doctors and nurses and to provide 1.5 million U.S. dollars in support of human resources training under New Partnership for Africa's Development (NEPAD).

Additionally, there will be support to strengthen cooperation in clean energy development and utilization, in clean drinking water technologies and to help Africa enhance capacity to adapt to climate change.

China will further advance the sound development of China-Africa trade by phasing in zero-tariff treatment for 95 percent of the products from the Least Developed African countries (LDCs) having diplomatic relations with China. This will starting with 60 percent of the products within 2010. China has also pledged to set up African commodities trade center in China and adopt preferential policies such as fees reduction for participating African enterprises to promote export of African commodities to China. China will also establish three to five logistic centers in Africa and improve business facilities in African countries.

To address the financial crisis, China will provide Africa with 10 billion U.S. dollars in concessional loans, mainly for infrastructure and social development projects.  The government will also support Chinese financial institutions in setting up a 1 billion U.S. dollar special loan to grow African small and medium enterprises.

China will also continue to support poverty reduction efforts and cancel due debts of interest-free government loans that matured by the end of 2009 owed by all heavily-indebted poor countries and the LDCs in Africa having diplomatic relations with China.

Finally, China has promised to further fulfill the pledges made at the Beijing Summit and to increase the size of China-Africa Development Fund to 3 billion U.S. dollars and support Chinese enterprises to expand investment in Africa.

My view is that there is a lot we can learn from China.  For instance on average, China's economy grew 10 percent per year between 1980 and 2008, compared with only three percent in sub-Saharan Africa during the same period. These divergences in economic growth in general, and in agricultural development in particular, have led to noticeably different patterns in poverty reduction in both regions.

According to a study by the International Food Policy Research Institute (IFPRI), between 1980 and 2005, the number of poor people decreased in China by more than four times, from 835 million to 208 million. The researchers found that China's strong initial emphasis on agricultural growth was essential in reducing poverty in that country. Growth in agriculture in China is estimated to have contributed to poverty reduction four times more than growth in manufacturing and services. Meanwhile according to World Bank figures, the role of agriculture in Sub-Saharan Africa has fallen from 19 percent of the gross domestic product (GDP) in 1980 to 14 percent in 2008.

Is Sub Saharan Africa Positioned to be the Fifth BRIC-A?

Inspiring remarks by Ngozi Okonjo-Iweala, Managing Director of The World Bank can be found here .

new ideas include:

1. Infrastructure remains a major constraint in Africa and to finance infrastructure development projects, Africa should securitize development aid. Hence instead of donors disbursing small amounts of aid cyclically, they could  issue African Development Bonds in New York, with a yield that matches the US 30-year treasury bond rate, currently averaging around 4.5% per year.  excerpt "Infrastructure spending needs for Sub-Saharan Africa (capital plus operations and maintenance) are estimated at $93 billion per year; deducting the amount governments actually spend and raising efficiency leaves a net funding gap $31 billion a year, mostly in the power sector. Therefore, a $100 billion bond could go a long way in filling the gap for a few years. Most importantly, issuing a bond like this could change perceptions overnight about Africa as a place to do business. Faced with secure financing of $100 billion, private firms across the world would line up to provide infrastructure in Africa".

2. Volatility: Sub Saharan Africa suffers from domestic and external volatility with the former requiring rigorous internal governance systems in order to manage volatility emanating from bad policies, social conflict, institutional weaknesses in fiscal, financial, terms of trade and judicial sectors. excerpt" Two things can be done to cushion Africa against the harmful effects of externally-driven volatility. First, donor resources can be used more aggressively as countercyclical instruments—as indeed was done with IDA and IBRD resources during the global financial crisis, with IDA front-loading country allocations to help low-income countries. Second, steps can be taken to eliminate the costs associated with aid volatility".

3. Skills: Progress has been made in primary education however gross tertiary education has fallen short hence affecting the cognitive skills necessary for innovation and technology diffusion. excerpt "The finding on the importance of cognitive skills for long-run growth should be a wake-up call for Africa, with questions being raised about the quality of the education now being provided. New tests show that in Mali, 94 percent of Grade 2 students cannot read a single word; in Uganda, half of grade 3 students fail this simple test.  The good news is that rate of return to skills is high in Africa. What is therefore needed is a big push on quality education and skills, as Korea and other East Asian countries did to underpin their growth miracles. For this, partnerships among industry, government and perhaps even civil society in vocational and tertiary education should be formed".

In conclusion- Africa is one of the youngest continents with a population of 820 million in 2008, that will soon rival that of China and India. Therefore the youth especially need to seize the opportunity to change the destiny of this rapidly growing continent.  Hence its only a matter of time before Africa  will position itself as the fifth BRIC alongside Brazil, Russia, India and China.


My take: while the title sounds ambitious, there is concrete evidence that Africa has made great strides in recent years. However some of the proposed solutions are centred largely on donor funds, an aspect which is outside of the continent's control especially with the current financial crisis- most recently in Europe. According to Africa Economic Outlook, in the OECD/DAC report of February 2010,  expected overseas development aid levels to developing countries will reach record levels in 2010, in dollar terms, increasing by 35% since 2004.  Africa, however is likely to get only about USD 12 billion of the USD 25 billion increase envisaged at Gleneagles Summit in 2005. This shortfall is due in large part to the under-performance of some European donors who give large shares of ODA to Africa

The WEF 12 Pillars of Competitiveness

The World Economic Forum  (WEF)  Global Competitiveness Report 2009-2010 ranks Switzerland as the most competitive economy in the World, Tunisia as the most competitive in Africa and South Africa as the most competitive in Sub Saharan Africa. The Report provides benchmarking tools for business leaders and policymakers to identify obstacles to improved competitiveness, thus stimulating discussion on strategies to overcome them.

WEF defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of a country”. The level of productivity, in turn, sets the sustainable level of prosperity that can be earned by an economy.  In other words, more-competitive economies tend to be able to produce higher levels of income for their citizens. The productivity levels also determine the rates of return obtained by investments in an economy. Because the rates of return are the fundamental drivers of the growth rates in an economy, a more-competitive economy is one that is likely to grow faster in the medium to long run.

Since the determinants of competitiveness and the wealth of nations are many and complex, the WEF groups these determinants into 12 pillars which contribute to a nations competitiveness. These are:

Factor Driven 

1. Institutions

2. Infrastructure

3. Macroeconomic Stability

4. Health and Primary Education

Efficiency Enhancers

5. Higher Education and Training

6. Goods Market Efficiency

7. Labor Markets Efficiency

8. Financial market sophistication

9. Technological Readiness

10 Market Size

Innovation and Sophistication Factors

11. Business Sophistication

12. Innovation

The 12 pillars as shown above are then used to group economies into the 3 stages of competitive advancement which are: 1).  factor driven basic economies; 2).  efficiency driven economies and 3). innovation driven economies.

According to the Report, most Sub Saharan African countries are factor driven and still in the basic stage of development.  The challenges facing these countries include quality of institutions, infrastructure, macroeconomic stability, health and education.

Botswana, Egypt, Libya and Morocco are in transition from the factor driven stage to that of efficiency driven. 

Meanwhile, the Report finds that efficiency enhancers are Namibia, Mauritius, Tunisia and South Africa and the 4 countries are the most competitive African economies. The challenges facing these economies include Higher Education and Training; Goods Market Efficiency; Labour Market Efficiency; Financial Market Sophistication; Technological Readiness and Market Size.

For country by country analysis, the Africa Competitiveness Report 2009-2010 can be accessed here.

2010 Report on Doing Business in the East African Community

Rwanda is the most highly ranked economy to do business in the East African Community (EAC) region.  This is according to the Doing Business 2010 Report compiled by the World Bank and International Finance Corporation. The Report measures business regulatory reforms and this year  ranks Rwanda as the top reformer in the world, along with Egypt and Liberia, both in the top 10 global reformers list.  

The Report finds that the 5 EAC countries (Burundi, Kenya, Rwanda, Tanzania and Uganda) are undertaking regulatory reforms, even under the Common Market Protocol, but still have further to go and as such, no East African country makes it into the global top 30 economies. However Mauritius ranks no.17 globally and is the only African country in the world's top 30. 

Indeed, the average ranking for East African countries is 116th out of 183 economies overall. However performance varies across East Africa countries from Rwanda, which ranks 67th on the ease of doing business to Burundi, which ranks 176th.

What is interesting about the EAC report is that if each East African country were to adopt the region’s best practice for each Doing Business indicator, East Africa would rank 12th on the ease of doing business rather than 116th. In other words, if the best of East African regulations and procedures were implemented across the board, the business environment in East Africa, as measured by Doing Business, would be comparable to that in Thailand (12th in the 2010 global rankings on the ease of doing business). 

In recent years, EAC economies have intensified efforts to cooperate and learn from one another. They have also worked to harmonize legislation relating to the EAC Customs Union and even concluded Common Market Protocols.  Since a key objective of the EAC is to develop an effective common market, the Report provides a good basis for comparing regulatory performance across the region, and identifying how this can contribute to deeper regional integration.

The full EAC Doing Business report can be obtained here.

Trading the Nile River Rights

Following a decade of negotiations under the auspice of the Nile Basin Initiative, the Nile Basin States have opened an Agreement termed the Nile River Basin Cooperative Framework Agreement, for a period of one year. The Agreement is a landmark achievement given the decades of discontent over the inequitable sharing of the Nile River and will be open for signature until 13th May 2011. The organs consists of the Commission which is comprised of: (a) Conference of Heads of State and Government (b) Council of Ministers (c) Technical Advisory Committee (d) Sectoral Advisory Committees (e) Secretariat according to Article 17 of the Nile River Basin Cooperative Framework Agreement.

The River Nile is the longest river in the world with three main tributaries which reach ten African countries.  However the resource has been almost exclusively utilized by Egypt and Sudan by virtue of a 80 year old governing legal framework on the utilization of the waters.  The May 7, 1929 agreement between the United Kingdom (on behalf of its colonies) and Egypt, was in the form of exchange notes and the colonial-era “treaty” gave Egypt sole property rights to the Nile's waters, up until 1959 when Sudan formalized a partial-sharing agreement with Egypt.  Meanwhile the sources of the 6695 km Nile river consist of the White Nile which flows from Uganda (Lake Victoria) into Sudan, and Egypt, and the Blue Nile which starts in Ethiopia (Lake Tana) with tributaries in DRC, Kenya, Tanzania, Rwanda, Eritrea and Burundi, which flow into the Nile or into Lake Victoria.

Recently, a framework agreement has been agreed upon by Ethiopia, Tanzania, Rwanda, Uganda and Kenya who seek to alter the rivers’ water-sharing arrangements, with Burundi and the DRC promising to sign the landmark agreement in the course of the year. The upstream countries want to be able to implement irrigation and hydropower projects in consultation with Egypt and Sudan, but without Egypt being able to exercise the veto power it was given by the 1929 colonial-era treaty with Britain.  Meanwhile Egypt has reportedly rejected the agreement along with Sudan, however with the new Southern Sudan Government, its not clear how this matter will be handled by the latter.

I suppose the key issues in the newly concluded agreement are those of equity and sustainability. Consider for instance the riparian state of Ethiopia whose Blue Nile tributaries, highlands and lakes are estimated to supply about 86 percent of the total waters of the Nile River, however the country currently only uses about one percent of the Nile’s resources.  Ethiopia unlike most Sub Saharan African countries was not colonized and reportedly does not recognize the 1929 Nile River agreement between the UK and Egypt. Simultaneously the country is faced with grave development needs and challenges, and according to the World Bank 2008, Ethiopia has a real per capita GDP of US$280 (which is below the Sub Saharan Africa average) and a population of about 81 million making her the second-most populous country in sub-Saharan Africa. 

One could say that Ethiopia should view the Nile the same way other sovereign nations view their oil resources or mineral wealth; as a valuable source of foreign currency, development and national pride.  Along these lines, Ethiopia sees a huge potential in the export of electricity and is reportedly constructing a network of mega dams on the web of Nile rivers that tumble down from its highland such as the controversial 243 metres high Gibe III Dam (shown above) at a cost of 1.4 billion euros, which will be the highest dam on the African continent.  This is expected to meet the needs of the rural areas, where the bulk of the 80 million Ethiopians live and where only 2% of households get access to electricity.  Beyond hydroelectric power, agriculture and irrigation are other critical issues also relevant to the utilization of the Nile waters.

This is a complex and historic issue with many facets hence more can be said however, that would the subject of a thesis and not suitable for a blog.  To conclude, let me welcome this new Nile Cooperative Framework Agreement which is expected to formalize the transformation of the Nile Basin Initiative (NBI) into a permanent Nile River Basin Commission and facilitate its legal recognition in the member countries as well as regional and international organizations. 

NBI was formed in 1999 by its Members, who recognized their common concerns and interests, and whose vision is “to achieve sustainable socio-economic development through the equitable utilization of, and benefit from, the common Nile Basin water resources.” 

For a captivating analysis on this issue click here

World Bank's Open Data Initiative

The World Bank's new open data initiative can be accessed here.  The initiative is bringing global economic and development data to the web for the world to use.  As we all know, statistics are a key part of knowledge based decision making and thankfully comprehensive data about development indicators in countries around the globe is now easily accessible.

Africa Development Indicators can be obtained here.

World Bank Trade Website can be accessed here.

2010 Economic Report on Africa Places Priority on Employment Creation

According to the UNECA Economic Report on Africa 2010, African countries must prioritize the creation of decent jobs as a central pillar of macroeconomic policy in order to attain the millennium development goals and eradicate poverty.  Few countries for instance have a ministry of job creation like Jamaica. For most people, gainful employment is the only way out of poverty. This is especially the case for youth and other disadvantaged groups. Unfortunately, unemployment and underemployment rates in Africa are high and continued to rise even during the period of rapid economic growth that came to an end with the global economic crisis in 2008.  In addition, Africa’s growth rates have not been accompanied by employment growth and as a result unemployment rates have remained stubbornly high and in double digits.

The Report also calls for appropriate investment in infrastructure and human capital, renewed and creative efforts at domestic resource mobilization, factor market reforms, incentives to support private-sector employment and efforts to increase productivity and incomes in the informal sector.

The full report can be obtained here