We would like to welcome you to tralac’s first newsletter for 2023. For tralac, there will be several critical developments to monitor, analyse and to discuss.
The global economic outlook remains gloomy. The International Monetary Fund (IMF) has warned that economic growth will slow down in 2023, that inflationary pressures, geopolitical instabilities and rising interest rates could push the world to the brink of recession, but at the World Economic Forum, IMF boss Kristalina Georgieva, said that the global outlook looked ‘less bad’ than a few months ago. Recent indications suggest that the Chinese economy may be recovering more rapidly now that the restrictions to cope with COVID-19 are being lifted. Demand for commodities, including from Africa, may improve, although it will take time before some African economies reap the benefits. The main engines of global growth – and key trade and investment partners for Africa – the economies of the United States, Europe, and China, do still face challenges.
The war in Ukraine will become nastier and the consequences more devastating. Russia is stepping up its military campaign, while NATO countries are sending more sophisticated weapons to Ukraine to defend itself, including the German-made Leopard tanks. This war has upset Africa’s promising recovery from the COVID-19 pandemic by raising food and fuel prices, disrupting trade in goods and services, tightening fiscal space, constraining green transitions, and reducing the flow of development finance to the continent.
Another consequence of this war is that Africa may become a theatre of contest for political influence and to bypass the sanctions that have been imposed on Russia. In this Newsletter, we discuss the recent visits to South Africa by the Russian Foreign Minister Sergei Lavrov, the US Treasury Secretary Janet Yellen, and the European Union High Representative for Foreign Affairs and Security Policy Josep Borrell during the final week of January. Other African states too were on their itinerary. The South African visits took place against the backdrop of a recent visit by a Russian naval vessel to Simonstown (South Africa’s main naval base) and an announcement that South Africa will conduct joint naval exercises with Russia and China in February.
African governments are expected to take sides in this dispute, which many of them refuse to do. And China will make sure that its influence in Africa will not be diminished. This may require new responses from Beijing in respect of, inter alia, the debt crisis faced by countries such as Zambia. US Treasury Secretary Yellen also visited Zambia and Senegal as part of her recent African tour. In Lusaka, she called on China to agree to a rapid restructuring of loans to Zambia and pointed out that many African countries are plagued by unsustainable debt, much of which is related to Chinese investments in Africa. China wants the international community to tackle this problem.
Another reason why Africa will remain on the international radar is that this continent remains the source of many essential minerals needed in the domestic economies of the rest of the world, especially now that the US and European countries are embarking on policies to reduce vulnerabilities to external disruptions of supplies. The war in Ukraine and tensions with China have convinced them that the production of vital goods and sophisticated technologies must be under national control. In some ways, the world seems to be drifting to a new cold war and new forms of protectionism. Africa will not escape the consequences.
In this Newsletter, we also write about challenges in the World Trade Organisation (WTO) and list some of them. This organisation remains of vital importance to multilateral trade governance. Most African member states are active participants in deliberations in Geneva. In new deliberations, such as the efforts to agree on regulating digital trade, we are less involved, even though we are negotiating an African Continental Free Trade Area (AfCFTA) Protocol on digital trade. For many African states, their economic development remains their core focus at the WTO, and this has informed their negotiation strategy there. The survival of the WTO and its continued involvement in global trade is indispensable for African states’ economic development. It is here that new multilateral agreements can be concluded and the needs of Africa be factored in.
The AfCFTA continues to generate high levels of interest and of hope. Many international research institutions and organisations view the AfCFTA as an all-encompassing new model which will provide the answer to the continent’s long-standing trade governance and economic integration problems. We do not believe this will happen automatically. Trade in goods and services under AfCFTA rules has not yet started, and for understandable reasons. Getting 54 countries at very different levels of development to agree on rules of origin, tariff reductions for 90 percent of the goods traded amongst them (while exclusions are unilaterally determined), and on the extent of liberalising trade in services involve very complex issues. We must wait and see what is finally agreed and how trade governance and trade facilitation will then be pursued across the continent. The scope of the AfCFTA is expanding, as it should to reflect the reality of a modern trade governance agenda – but what are the implications of this?
Africa does not and cannot speak with one voice on all policy issues. The 55 member states of the AU face diverse economic challenges, and have different historical backgrounds and foreign policy preferences. These countries treasure their sovereignty, as reflected in the fact that the AfCFTA is a member-driven arrangement, that all decisions will be taken based on consensus, and that the AfCFTA Agreement does not provide for supranational bodies. We do believe the AfCFTA’s main contribution can be in respect of better trade governance, effectiveness, and the rule of law. In this pursuit, the Regional Economic Communities (some have regional Courts of Justice and allow private parties’ standing) can be of assistance. We hope that trade under complete AfCFTA rules will begin in 2023 and that the serious issue of better trade governance will then be prioritised.
We’re pleased to share with you recent publications, presenting our work on value chains in the AfCFTA, trade data updates, and infographics, notably one on Women’s Economic Participation in Sub-Saharan Africa. A new set of AfCFTA Factsheets, including an updated infographic of the AfCFTA Institutions, is also available. Our AGOA update is presented here too; do look out for news, keeping in mind that this year’s AGOA Forum is to take place in South Africa.
We’re also very pleased to let you know that this year’s training programmes and events will be more in-person than virtual. We look forward to meeting soon.
The tralac Team