AfDB Group approves EUR50-million Trade Finance Risk Participation Partnership with Societe Generale to support local banks and SMEs in Africa
The Board of Directors of the African Development Bank (AfDB) Group on Wednesday, 13 July approved a EUR50-million unfunded risk-sharing facility partnership with Societe Generale to further support trade finance activities across Africa. The facility will contribute to reducing Africa’s trade finance gap by enhancing Societe Generale’s risk bearing capacity by up to 50%, enabling it to provide increased confirmation limits to local issuing banks on the continent. The parties will share the default risk on a portfolio of eligible trade transactions originated by African issuing banks and indemnified by Societe Generale. Beneficiaries of this facility will be issuing banks in Africa who will benefit from additional support from international banks to grow their trade finance business, as well as small and medium-sized enterprises (SMEs) and domestic firms who rely on these issuing banks to fulfill their trade finance commitments. Stefan Nalletamby, director for Financial Sector Development at the AfDB, said the partnership with Societe Generale will help support African small businesses and local corporates involved in international trade.
African airlines stare at USD4-billion loss over costly fuel
African airlines are expected to record USD4.1-billion loss this year on the back of expensive fuel that is eroding the gains made by a recovering business. African Airlines Association (AFRAA) says expensive jet fuel and other expenses involved in running the airlines will weigh down on profits. Kenyan airlines have had to adjust their fares upward because of a sharp rise in the cost of fuel, which accounts for a significant portion of the expenses involved in running the aircraft. The cost of jet fuel has hit a high of KES148 (USD1.25) per litre from KES100 (USD0.85) in January, piling pressure on airlines at a time when the demand for flying has remained low as the industry still recovers from the effects of COVID-19. “Full-year revenue loss for African airlines for 2022 is estimated at USD4.1-billion, equivalent to 23.4% of the 2019 revenues,” said AFRAA. International Air Transport Association had earlier warned that rising jet fuel prices were likely to cause airfares to increase this year, as airlines grapple with higher operating costs. “We have had to adjust our fares because of expensive fuel that has increased our operation cost,” said Jambojet CEO Ndegwa Karanja.
Source: The EastAfrican
Africa / China
China's trade ties with Africa continue to strengthen
Trade between China and Africa is growing. The General Administration of Customs of China recently noted that bilateral trade between China and Africa amounted to USD254.3-billion in 2021, an increase of 35.3% from 2020. In the first quarter of 2022, China's customs data confirmed that trade between the two regions increased by 23%, to USD64.8-billion. Africa exported goods worth USD105.9-billion to China, an increase of 43.7% from the previous year. China is increasingly importing agricultural products and manufacturing goods from Africa, in addition to its continued strong focus on oil, precious minerals and metals. Africa mainly imports manufactured goods such as electronics, clothing, appliances and technology from China. While COVID-19 lockdown in the large port city of Shanghai and other large Chinese cities resulted in logistics bottlenecks, trade with Africa has not been severely impacted. China continued to import African agricultural goods and raw materials, with food security and materials needed for the energy transition being prioritised. However, China's capacity to export products to Africa was temporarily affected by its strict lockdowns.
East / Southern Africa
AfDB approves USD175-million Regional Trade Finance Funded Risk Participation Agreement facility for Eastern and Southern African TDB
The Board of Directors of the African Development Bank (AfDB) Group has approved a USD175-million Trade Finance Funded Risk Participation Agreement facility between the AfDB and the Trade and Development Bank (TDB). The agreement is expected to boost intra-Africa trade, promote regional integration, and contribute to the reduction of the trade finance gap in Africa. The bank will provide liquidity of up to 50% (the other 50% to be matched by TDB), to issuing banks on a risk share basis, to support trade activities of local corporates and small and medium-sized enterprises in member countries of the Common Market for Eastern and Southern Africa. Together, the two institutions will provide a ticket size of USD350-million to support trade transactions. This is a strategic effort by the AfDB to support the Africa Continental Free Trade Area’s agenda of reshaping markets and economies across the region by helping to boost output in the services, trade, manufacturing and natural resources sectors.
SADC ministers of trade review progress on consolidation of the SADC FTA to liberalise intra-regional trade
Member states of the Southern African Development Community (SADC) need to step up efforts to accelerate intra-regional trade by addressing challenges affecting the region’s quest for increased trade in the SADC region. The Minister of Trade and Industry of Malawi and Chairperson of the 33rd Committee of Ministers of Trade, Mark Katsonga Phiri, has said this during the official opening of the 33rd meeting of the Committee of Ministers of Trade which was held in Lilongwe, Malawi on Friday, 8 July 2022. The minister urged member states to address issues that include low supply capacity, limited industrialisation, poor logistics for movement of goods and services, protectionism, poor infrastructure and non-harmonisation and cooperative mechanisms for cross-border infrastructure, imposition of non-tariff barriers including stringent rules of origin, and poor implementation of trade commitments, among others. SADC executive secretary, His Excellency Elias Mpedi Magosi underscored the importance of consolidating the SADC Free Trade Area (FTA) which is key to collective efforts to liberalise SADC intra-regional trade in goods and services.
IMF Executive Board approves USD638-million EFF and ECF for Benin and concludes 2022 Article IV consultation
On Friday, 8 July 2022, the Executive Board of the International Monetary Fund (IMF) approved 42-month arrangements under the Extended Fund Facility (EFF) and the Extended Credit Facility (ECF) for Benin in the amount of SDR484.058-million (equivalent of 391% of quota or USD638-million). The programme seeks to help address pressing financing needs (related to security, COVID-19 scars and the war in Ukraine), support the implementation of the country’s National Development Plan centred on achieving Sustainable Development Goals and catalyse donor support. The new programme is the first case under High Combined Credit Exposure (HCCE) since the IMF adopted the policy in 2020 to support member countries experiencing exceptional balance of payment needs and with institutional capacity to implement a programme in amounts exceeding the normal combined access limit for a blended EFF/ECF arrangement. The executive board’s decision enables an immediate disbursement of SDR108.3-million (USD143-million), which the Beninese authorities intend to use for budget support.
Burkina Faso’s first IPP inaugurates 30 MWp solar PV plant
GreenYellow has inaugurated its 30 megawatt peak (MWp) Nagréongo photovoltaic (PV) power plant in Burkina Faso, making it the first independent power producer (IPP) in the country. This project responds to the energy challenge facing Burkina Faso which possesses one of the weakest electricity networks in sub-Saharan Africa but a high energy demand. The inauguration of the 30 MWp power plant was driven by the Société de Production d’Energie Solaire de Ouagadougou, a subsidiary of GreenYellow and the result of a shareholding pact with the local Small and Medium-sized Enterprises Africa Energy Corporation, Burkina Faso’s level of sunshine makes it an ideal candidate to respond to this energy security challenge by developing PV solar energy. In addition, deploying a clean energy solution designed to last allows the country to be part of a long-term approach to combatting global warming. This project is part of a public-private partnership signed with the Burkinabè government in 2019. All the electricity produced by the solar power plant will be sold to the national company SONABEL.
Source: ESI Africa
The AfDB is supporting improvements to the power grid in Comoros
The Comoros Energy Sector Support Project has helped improve the country’s power grid. Approved in 2013, the project aims to respond to a twofold challenge in the energy sector in Comoros. At the time, electricity access was around 50% of the population, and unevenly split between the three islands (10% in Moheli, 50% in Anjouan and 60% in Grande Comore). In addition, the distribution networks were unreliable, with technical and commercial losses estimated at around 40%. These losses have been reduced to 30%, with a final target of 25%. A shortage of supply used to lead to frequent power cuts for around five hours every four days in rural areas, between eight and 12 hours a day in Grande Comore, and around 10 hours a day in Anjouan. Implementation of the project is scheduled to be completed in 2023. An African Development Bank (AfDB) report on the project’s progress and results, published in Abidjan on 30 May 2022, notes that the project has benefited from two tranches of funding: an initial tranche of USD8.06-million from the African Development Fund, the AfDB’s concessional window, and a second tranche of USD11.99-million from the AfDB’s Transition Support Facility.
Côte d'Ivoire / Ghana
Cocoa buyers back Côte d'Ivoire and Ghana's cocoa premium schemes
Major cocoa buyers have agreed to pay a premium and back a price floor on cocoa sold by Côte d'Ivoire and Ghana as part of an agreement reached on Friday, 8 July, to combat poverty among farmers. Cocoa industry players will back a fixed "living income differential" (LID) of USD400 a tonne on all cocoa contracts sold by Côte d'Ivoire or Ghana, two top global cocoa producers. Buyers will also pay a country premium that will enable cocoa regulators in both countries to reach a target floor price of USD2 600 per tonne which should allow farmers to earn a minimum of 70% of the target floor price. Signatories include Hershey, Mars, Blommer Chocolate, Nestle, Sucden, Mondelez, Touton, Barry Callebaut, Cargill, Ferrero, Olam and Ecom Trading. Both countries have struggled to achieve that price target, prompting the Côte d'Ivoire-Ghana Cocoa Initiative (CIGCI) to work with the industry on a price mechanism. "Companies in the cocoa value chain have met with the governments of Côte d'Ivoire and Ghana to renew support for the LID as a starting point towards the pathway to achieving living incomes for farmers," the CIGCI and both countries' cocoa regulators said in a joint statement.
Democratic Republic of the Congo
DRC cancels 14 customs levies in bid to smooth trade
The Democratic Republic of the Congo’s (DRC) Trade Ministry has ordered the cancellation of 14 levies on exports and imports and the reduction of 20 more duties at the borders in a bid to make trading smoother and stamp out “illegal” taxes. Africa’s biggest copper producer and the world’s biggest cobalt producer, DRC has battled with lengthy queues of trucks carrying metal at its borders, which mining companies blame on poor infrastructure and inefficient customs systems. The move aims to “rationalise import and export taxes and reduce costs and delays”, Trade Minister Jean-Lucien Bussa Tongba wrote in a letter to the prime minister dated 6 July and seen by Reuters recently. A tax on cobalt concentrate charged by Lualaba province was among the 14 levies the Trade Ministry said should be cut. The letter did not specify the rate. While 20 taxes would be reduced, the Trade Ministry said 33 duties - charged by 14 different government agencies - would be maintained at the same level. The tax cuts aim to improve the competitiveness of the DRC’s economy and make the country a more attractive place to do business, the letter said.
Source: The EastAfrican
Safaricom Ethiopia to start operations next month
The Safaricom-led consortium aims to start operations in Ethiopia next month but will stagger the rollout of the telecommunication services across various Ethiopian cities until next year, it said recently. The Safaricom consortium, which also includes British development finance agency CDC Group and Japan’s Sumitomo Corporation, won the licence with a bid of USD850-million (KES97.9-billion) last year. It had been tipped to launch commercial services on 9 April 2022, but this was delayed due to unexplained reasons. The first beneficiaries of the telecommunication services launch will be Dire Dawa - a city in eastern Ethiopia near the Oromia and Somali Region border - said Safaricom. “We will begin our phased launch in August 2022 in Dire Dawa and switch on the network in 24 cities across the country by April 2023,” Safaricom said during a media briefing with local journalists in Addis Ababa. “Presently, we’ve recruited 500 staff of which 320 are Ethiopians, continuing with a focus on recruitment throughout the country.”
Source: Business Daily
M-Pesa launches interest-free loans for buying goods
Safaricom has unveiled a zero-interest credit service that will allow millions of its customers to shop for goods up to KES100 000 and pay later in a move that is set to disrupt the mobile loans market. Users of the interest-free product to be known as Faraja will buy goods and services from as low as KES20 to a maximum of KES100 000 and pay the same amount without any extra fees witnessed on other credit products. However, only the normal M-Pesa transaction charges will apply at the point of sale on the product to be bankrolled by Equity Bank. Faraja is slightly similar to the Lipa Later service currently in the market, only that this time, shoppers will walk away with the goods from a list of selected merchants without being required to pay upfront in instalments. It will work like a digital credit card where a user will have a credit limit of up to KES100 000, depending on their credit score, to make purchases against and then repay at a later date within the 30-day window. “You will only be required to repay the outstanding facility amount as advanced to you by us (in whole or in part) using the designated Paybill number or such other channels as provided by us from time to time,” Safaricom says in a statement on its website.
Source: Business Daily
NSE waives 0.12% transaction fee on same day equity trades
The Nairobi Securities Exchange (NSE) Plc has waived the NSE transaction levy (0.12%) on all equity day trades for the next 30 days effective from 6 July 2022 to shore up activities and boost liquidity on the struggling exchange. This comes after the exchange launched day trading on equities in November of 2021 and reduced transaction fees by 5% for equity investors which adopt the same day trading model. As a result, the NSE levy of 0.12% reduced to 0.114% of the value of the transaction after the applicable rebate of 5%, while the Capital Markets Authority and Central Depository and Settlement Corporation levies of 0.12% and 0.08%, respectively remained unchanged. Recently, the bourse managers resolved to temporarily abolish the entire NSE levy of 0.12% for 30 days to boost activities on the exchange that has seen massive exit of foreign investors since the beginning of this year. Foreign investors are fleeing frontier and emerging markets in search of safer markets following a rise in interest rates in the United States and news about Sri Lanka’s default on its debt obligations for the first time in its history.
Source: The EastAfrican
Kenya / Uganda
Kenya and Uganda cry foul as reality of new taxes checks in
Just a week after the new East African Community common external tariff (CET) band came into force, businesses are already feeling the pinch and crying foul over the “unintended consequences” of the regime. Kenya and Uganda have filed complaints to the East African Business Council (EABC), the regional lobby, over the law that raised import taxes on goods from non-East African Community (EAC) countries to 35%. They say that some basic commodities outside the band have also been affected. The bloc’s Trade and Finance ministers in May adopted 35% as the maximum rate for products classified under the 4th band of the EAC CET. The CET, one of the key instruments of the customs union, is meant to foster regional integration through uniform treatment of goods imported from third parties. It also seeks to protect local manufacturers against competition from similar goods imported from outside the region. According to experts, a 35% duty on imported finished products has the potential of growing intra-EAC trade by USD18.9-million. In addition, the region’s industrial production will increase by 0.04% to USD12.1-million and tax revenues by 5.5%. It also has the potential to create an additional 6 781 jobs.
Source: The EastAfrican
Private sector launches an online platform to ease visa processes for visitors
The Tour and Safari Association of Namibia (TASA) has officially launched its online visa application platform to ease visa processes for visitors to the country. Founded in 1989, the TASA is a voluntary private-sector body that acts on behalf of its members to encourage the development of responsible tourism in Namibia and further the common interests of Namibian Tour Operators. TASA office manager, Mureal van Rooyen said the platform streamlines the process of the different kinds of visa and permit applications that are handled by the TASA for processing at the country’s Ministry of Home Affairs on behalf of the applicant. “This new platform which [recently went] live will ease the process and is not time-consuming,” she said, adding that, the online application portal can be accessed via portal.tasa.na. In addition to the portal and to guide users through the process there is also an online tutorial available on the portal, she said. “Clients will be notified by email about the status or progress of their visa application. Once they receive an email notification they would need to login and check on the status,” she added.
Source: Namibia Economist
Rwanda SMEs set to access Egyptian market
Rwanda’s small and medium-sized enterprises (SMEs) engaged in horticulture and agro-processing are set to access the Egyptian market following a successful trade mission facilitated by the Common Market for Eastern and Southern Africa (COMESA) Regional Enterprise Competitiveness and Access to Markets Programme (RECAMP). Fourteen SMEs from the Private Sector Federation accompanied by two officials from the Ministry of Trade and Industry of Rwanda, participated in the four-day trade mission to Egypt from 16-19 May 2022 and explored trade and investment opportunities. Rwanda qualified for this support after meeting the criteria set under the Technical Assistance Facility (TAF) in which the RECAMP is funded. The TAF is funded by the European Union under the 11th European Development Fund. TAF is designed to provide additional support to COMESA countries to implement activities, focusing on national level commitments related to Result Area 1 of the RECAMP, which is; competitiveness and market access of SMEs and other firms in the targeted value chains/sectors are sustainably enhanced.
Zambia plans to cancel over USD2-billion projects to rein in debt
Zambia is cancelling more than USD2-billion worth of projects financed by commercial loans to reduce the risk of accumulating more non-concessional debt, the Ministry of Finance said. In 2020, Zambia became the first nation to default in the COVID-19 era. At the end of 2021, its external debt stood at USD17.27-billion, of which China held USD5.78-billion, and it is in negotiations with creditors and the International Monetary Fund (IMF) to lift itself out of this debt hole. Zambia was in the process of cancelling projects worth an estimated USD2.1-billion, the medium-term budget plan published by the Ministry of Finance recently, showed, although it gave no details. Zambia's economic growth in 2022 is expected to slow down to 3.1% from 3.6% recorded in 2021 mainly due to the expected reduced output from the agricultural sector. The economy of Africa's second-largest copper producer is forecast to grow 4%, 4.1% and 4.4% in 2023, 2024 and 2025, respectively, the ministry's plan showed. The decision to axe the projects is part of a broader debt-restructuring process, it said, adding that it expected bilateral creditors would provide adequate financing assurances for approval of an IMF programme being discussed.
AfDB and partners to work together on Zimbabwe’s debt action plan
Zimbabwe has received reassurance of support for a strong push to help it clear its debt arrears. The African Development Bank (AfDB) Group president Dr Akinwumi Adesina, representatives of multilateral finance institutions, the Zimbabwean government, and other partners have agreed to work together to develop an action plan that will resolve the country’s debt arrears. Zimbabwe owes USD13.5-billion to multilateral financial institutions, bilateral partners, and other creditors. President Mnangagwa thanked Adesina for accepting to be the champion for the arrears clearance and debt resolution process. He also commended the AfDB for standing by Zimbabwe through difficult circumstances. “During the COVID-19 pandemic, Zimbabwe received no external help except from the AfDB. The AfDB was quick to respond to Zimbabwe’s needs. We had to re-prioritise our budget and, ultimately, we managed the situation against all odds,” Mnangagwa said. The AfDB supported Zimbabwe with USD13.8-million under the bank’s COVID-19 Response Facility. The AfDB has focused on strengthening the country’s public finance management capacity through a Transition Support Facility.