44 of 2021

Newsletter No 44 / 19 November 2021                           

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Donald MacKay: No hope for free trade if Africa countries don’t pull together

Announcing the death of the African Continental Free Trade Area (AfCFTA) may be premature, but the patient is in the ICU. On a ventilator. With barely a pulse. Yet manically preaching like a faith-healer on tik. But it’s all noise and no substance.

SA’s uneven application of rebates on textiles used to manufacture clothing is deliberately designed to keep clothing produced in other Southern African Customs Union (Sacu) countries out of SA.

A similar principle applies to the proposed elimination of imports of sugar from Eswatini to replace the volume lost to our health promotion levy, and the department of transport’s proposed change to the National Traffic Act to prohibit foreigners from driving SA trucks if they do not hold an SA-issued professional driving permit.

Both the Sacu and the Southern African Development Community (Sadc) agreements provide for mutual recognition of professional driving permits to avoid exactly this problem.

But the insanity does not stop at our borders. Namibia is proposing a quota on foreign drivers, and Botswana is moving to restrict foreign participation in certain business activities. Has Sacu, the world’s oldest customs union, outlived its usefulness?

Though I disagree with the idea, it is not without support or merit. There is a perfectly rational lobby that wants to see this happen, and their thoughts are not the African version of Q-Anon.

Is SA simply paying off the other five states by sharing customs and excise revenue with them? What happens if all five countries keep up their protectionist actions and the union stops functioning, even superficially? Aside from the immediate collapse of Lesotho and Eswatini, the AfCFTA dream would truly die on the vine.

If you wonder why Africa suffers from a chronic shortage of trade and investment, then look no further than this behaviour. These policies are all less than a year old, but they come on the back of an almost uncountable number of other African anti-investment, antitrade policies.

Consider the old trope of Zimbabwe, which moved swiftly from breadbasket to basket case, with nary a glance from the rest of the continent or from the Sadc. SA still refuses to enforce the terms of the Sadc agreement with Zimbabwe when it breaches the agreement (or when Zanu-PF steals elections).

As we try to create an African free trade area we should not expect the whole of Africa to behave substantially differently to its constituent parts, yet that seems to be exactly the expectation.

There is no evidence that the Sadc agreement has worked well for any of the 16 member states, yet we feel we can miraculously raise investment and improve trade between all of Africa. None of the regional economic clusters (the Sadc, Economic Community of West African States, East African Community, Common Market for Eastern and Southern Africa, and so on) is functioning well, but the assumption seems to be that it will all be OK when we supersize this up to continent level. We are so busy talking up the agreement that we seem to have stopped all analysis of what is required to make it work.

The AfCFTA matters, but like a neglectful parent who tells everyone how their children are the most important thing in the world while locking them in a car parked in the sun, there is no effort to make the agreement work. We seem to be having a conversation with the world about how great Africa will be, while doing all we can to ensure that outcome is never achieved.

This is of course not new behaviour, but it does remain as self-destructive as it has always has been. Look at what is happening in Africa right now. The continent’s most important air connection hub in Ethiopia (also home to the continent’s most profitable airline — not SAA, minister Gordhan), is imploding as Tigrayan fighters progress south against the rag-tag army of Abiy Ahmed, the Ethiopian president and premature recipient of the Nobel peace prize.

This is happening in a region of incredible instability (think about having Sudan, South Sudan and Somalia as neighbours) when just a short while ago Ethiopia, with its more than 100-million population, was one of the fastest-growing economies in Africa. This same Ethiopia is about to lose its preferential access to the US under the African Growth & Opportunity Act (about $200m worth of exports per year) and might see its government overthrown by the Tigrayans.

The one country on the continent never colonised by a European power — though Italy tried and failed twice — now imploding under the weight of its own, very local, chaos. And for the past year, while the conflict bubbled up, the rest of Africa stood by and watched. Only recently, as other countries in the region realise this could spill over into their backyards, have we seen any action.

There is no trade or investment without the primacy of the rule of law, let alone war. You don’t need democracy, but you do need predictability, which is something the continent lacks. Ask anyone who invested in Ethiopia two years ago.

Europe moved from being one of the most violent continents in the world to one of the most peaceful by dealing with this issue. It used trade and cross investment to help keep the peace. Not always perfectly (think the Balkans), but certainly substantially. The French are not about to invade the UK over fishing rights, a war that would have been quite possible just a few decades ago, and for less provocation.

But the EU did not arrive here overnight. This has been a long slog, from the formation of the European Coal & Steel Community in 1951 to the recent peaceful, though painful, exit of the UK from the EU. Importantly, when you invest in the EU now you can be sure your investment will be there tomorrow. You don’t have to worry about being able to drive your truck from Estonia to the Netherlands. When investors decide where to place their capital, this kind of certainty matters, something the UK is rediscovering for the first time in 50 years and something that was not true for the first half of the 20th century in Europe.

We don’t have a clear plan for achieving a functional continentwide trade agreement, despite how important this is. And there is little indication we care. If AfCFTA is important, we need to treat it as such. If business values this market as much as it says, then business needs to begin owning this discussion.

If we are going to see Africa thrive, then best we not leave this to belligerent, rapacious politicians.   BL

• MacKay is founder and director at XA International Trade Advisors.

New Procurement Bill to be passed in 2022

By Gerrit Davids

Treasury has indicated that the Public Procurement Bill will be submitted to Parliament early next year, with the Minister of Finance, Enoch Godongwana, announcing last week, that it is in its final stages, to be tabled before Parliament in the 2022/23 financial year.

The Draft Bill was recently further debated by key stakeholders including Nedlac and the target date for submission to Parliament is April 2022.

The Bill will replace the current Preferential Procurement Policy Framework Act of 2000 (PPPFA) and amend some other related legislation, once adopted by Parliament.

Under the PPPFA, the Minister is empowered to make regulations and the Draft Bill proposes that he creates preferences for people who were previously marginalized in public sector procurement.

In addition, the Minister may also create a framework for a preference point system with thresholds as well as measures to promote certain categories of people or business sectors in government tenders.

The contentious issue of set-asides, is included in the Draft Bill and it aims to create a bias for-

(i) a category or categories of persons or businesses or a sector;

(ii) goods that are manufactured in the Republic;

(iii) local technology and its commercialisation;

(iv) services that are provided by a citizen or citizens of the Republic;

(v) the creation of jobs or intensification of labour absorption;

(vi) enterprises based in townships, rural or underdeveloped areas;

(vii) enterprises based in a particular province or municipality for goods, services or infrastructure based in that province or municipality; etc.

The Bill also aims, to create measures regarding the participation of manufacturers in a tender, as well as, promoting SMMEs, businesses owned by women, youth and people with disabilities and industrial development, respectively.

According to Gerrit Davids, Lead Advisor at TaranisCo Advisory, tendering agency, “It is essential for those bidding for public sector contracts, to follow the parliamentary process around the Bill, especially where it may provide for a transition period to prepare for compliance by both organs of state and bidders, alike. It is advised that bidders become proactive in their approach towards the elements listed above since these aspects will be key measures, which will determine in future, as to who will be allowed to participate in a government tender.”

To read a synopsis of the Draft Bill, visit www.taranis.co.za and you will find it at the bottom of the home page.

Contact: Gerrit Davids. Lead Advisor | TaranisCo Advisory CC Mobile. +27 (0) 82 496 1657 E-mail:  gerrit@taranisco.co.za

Global demand for CmiA cotton grows: new partners join

BRAX from Germany, Jolo Fashion Group from the Netherlands and Shinsegae International from South Korea have joined the Cotton made in Africa (CmiA) initiative. They aim to promote sustainable cultivation, protect the environment and improve the working and living conditions of small-scale farmers and their families, currently numbering around 1 million.

“Only with committed partners at our side can we advocate together for small-scale farmers in Africa, their families, and the responsible production of our raw materials now and in the future. Our recent growth shows that companies from around the world, whether small brands or global enterprises, can achieve their own sustainability goals through Cotton made in Africa and make them visible to their customers,” said Tina Stridde, the managing director of the Aid by Trade Foundation and of its CmiA initiative.

As one of the world’s leading initiatives for sustainably produced cotton in Africa, CmiA represents a socially and environmentally responsible basis for the global textile chain. It gives a face to the small-scale farmers who form the bedrock of the fashion industry. Working in accordance with the CmiA standard, some one million small-scale farmers from ten countries in Sub-Saharan Africa currently account for around 30 per cent of African cotton production, CmiA said in a press release.

“Cotton made in Africa has impressed us. The standard addresses both social and ecological aspects of sustainable cotton production. This allows us to source our textiles sustainably and to offer our customers what they are increasingly looking for: a sustainable alternative to conventional goods,” said Shinsegae International Co-CEO and head of jaju division Lee Seock-koo.

According to the most recent study results, CmiA cotton has a significantly smaller ecological footprint than the global average. With greenhouse gas emissions at 13 per cent below the global average for cotton cultivation, CmiA cotton also contributes less to climate change.

Small-scale farmers benefit from agricultural and business training that enables them to improve their yields and cultivation methods. Beyond sustainable cotton production, CmiA actively advocates for issues like healthcare, respect for children’s rights, and equal rights for men and women. This directly contributes to improved awareness of social issues in village communities. Factory workers in the ginneries, where cotton seeds are separated from the fibres by machine, benefit from improved working conditions. Consumers can identify these products through the CmiA label. Each purchase represents a direct investment in improving living conditions and protecting our environment, the release added.  F2F

Woolies – trading update and trading statement

Trading update

Group turnover and concession sales for the 20 weeks ended 14 November 2021 (‘current period’) decreased by 4.5%, compared to the 20 weeks ended 15 November 2020 (‘prior period’), and by 2.1% in constant currency terms. Online sales grew by 26.4%, contributing 14.7% to the Group’s total turnover and concession sales for the period.

Trade during the current period has been severely impacted by the extended lockdowns in Australia, where we have been unable to trade in the majority of our stores. In South Africa, our business operations were disrupted by a number of factors, including the civil unrest and rioting in KwaZulu Natal (‘KZN’) and parts of Gauteng in July. As a consequence, the trading results for the current period are not directly comparable to that of the prior period.

Trading statement

Shareholders and noteholders are advised that earnings per share (‘EPS’), headline EPS (‘HEPS’) and adjusted diluted HEPS (‘adHEPS’) for the 26 weeks ending 26 December 2021 are expected to be more than 20% (more than 57.8 cents, 52.2 cents and 38.7 cents, respectively) lower than the reported EPS, HEPS and adHEPS for the 26 weeks ended 27 December 2020 (288.8 cents, 261.1 cents and 193.7 cents, respectively).

The company will issue a further trading statement in order to provide specific guidance once the Group is reasonably certain regarding the EPS, HEPS and adHEPS ranges for the 26 weeks ending 26 December 2021.

                                                                                                                 Did you know……..

The most talked about Oscars dresses of all time

Cher, 1986

Designer Bob Mackie didn’t hold back making this legendary sequined ensemble complete with a sky-high feathered headdress.

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