Why Africa must shift to industrial processing
Kenya-President Ruto: Why Africa must shift to industrial processing
By?Kang'ethe Njoroge June 13, 2023
Kenya’s President William Ruto is calling on the Common Market for Eastern and Southern Africa (COMESA) member-state to embrace industrial processing of to boost the value of exports and in turn enhance Africa’s share of global trade.?
In a radical shift that is also seeking to boost trade across Africa, Dr Ruto is also?calling for the consolidation of trading blocs Comesa, the East African Community, and the Southern African Development Community.
Industrial processing to boost Africa trade
By joining the neighbouring trading blocs, Dr Ruto said the move will help realise the economic aspirations and goals of the African Continental Free Trade Area (AfCFTA).
AfCFTA is seeking?to establish a single market for goods and services across Africa. It envisions elimination of tariffs on 90 percent of goods traded within Africa, within a phased approach to liberalisation. Policymakers project that AfCFTA will push up the continent’s income by $450 billion by 2035.
“It is also time we elevated the African Union to have the power to negotiate for the collective interests of Africa,” he added. Kenya’s president noted that the move will boost Africa’s bargaining power on the global scene.
He was speaking during the 22nd Comesa Summit of Heads of State and Government in Lusaka, Zambia. President Ruto said African countries must change tact in their approach to trade or lose out to the competition.
Dr Ruto noted that the Comesa bloc must embrace a systemic shift in areas of value addition, especially of agricultural commodities to exploit its untapped potential and enhance productivity.
Boost competitiveness, and create jobs
“The shift will also offer higher returns, incentivise industrialisation, boost our competitiveness and create employment,” he added.?
Established in 1994, Comesa is home to 21 member states with a population of over 583 million. The bloc was set up with the goal of promoting economic integration, trade, and development within the Eastern and Southern Africa region.
The member states of Comesa include Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eswatini, Ethiopia, and Kenya. Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Somalia, Tunisia, Uganda, Zambia, Zimbabwe, and Zambia are also members of the zone.
Comesa has implemented several trade facilitation measures, such as the elimination of tariffs and non-tariff barriers on trade among member states. There have also been plans harmonising customs procedures, and the development of regional trade policies and regulations.
The organisation also provides technical assistance and capacity building support to member states to enhance their competitiveness and promote sustainable economic growth
Comesa GDP estimated at $805 billion
The current estimated Gross Domestic Product of the region is $805 billion, and it has a global export/import trade in goods worth $324 billion.?
Statistics show that intra-Comesa exports increased from $1.5 billion in 2000 to $12.8 billion in 2021. Despite being a major marketplace for both internal and external trading, intra-Comesa exports accounts for about 8 percent of exports globally.?Additionally, Comesa has intra-export potential of over $101.1 billion.?
“Some of the constraints hindering exploitation of the export potential include weak productive capacities, poor infrastructure connectivity, high transport costs, non/slow implementation of Comesa FTA agreement, non-tariff barriers, and trading in similar products (Comesa, 2021),” the report stated.?
During his speech, President Ruto?urged Africa to move away from the export of raw materials to instead add value to through industrial processing.
“The potential for intra-Comesa trade is colossal; the demand for value-added products is bound to keep growing well into the future,” he explained.
He asked?Comesa?member States to take advantage of its domestic market estimated at over 583 million people to enhance trade.
Africa must advance industrial processing
The Head of State noted that Africa must utilise its rich, clean energy to advance its industrial processing capacity.
“We are championing for the radical repositioning of Africa as the clean, green continent of the future in order to exploit the opportunities arising from the transition to green industrialization,” he said.
Present at the Summit were Presidents Abdel Fattah El-Sisi (Egypt), Hakainde Hichilema (Zambia), Lazarus Chakwera (Malawi), évariste Ndayishimiye (Burundi), Comesa Secretary General Chileshe Kapwepwe, among others.
The Summit also marked the end of President El-Sisi’s chairmanship as he handed over to President Hichilema.
Other than trade, and economic integration, Comesa also focuses on other areas of cooperation. Some of the sectors it champions are agriculture, energy, transport, information and communication technology, and financial services.
Intra-African trade relatively low
The organisation promotes collaboration and coordination among member states to address common challenges and leverage shared opportunities.
The AfCFTA agreement is expected to bring significant economic benefits to participating countries, including increased trade, job creation, and improved living standards. It has the potential to boost intra-African trade, which has historically been relatively low compared to trade with other regions.
The agreement recognizes the importance of SMEs in driving economic growth and job creation. It includes provisions to support and facilitate the participation of SMEs in regional trade, such as capacity building, access to finance, and technical assistance.
About: Kang'ethe Njoroge
A communication expert with over 10 years’ in journalism and public relations. My ability to organize, coordinate and follow through assignments has enabled me to excel in media. I have a passion for business in Africa and of course business in Kenya
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Why South Africa’s power crisis could last a long time
By?Maingi Gichuku - June 13, 2023
An ominous cloud hangs over South Africa economy, which dodged recession in the three months to March, as experts say the roiling electricity crisis will persist until 2025. As if that is not enough bad news to the industry, it will take about five years to eliminate power outages in the country.
Currently, South Africa is paying a huge price following utility, Eskom’s overreliance on ailing coal power plants to supply electricity. These coal power plants account for over three quarters of South Africa’s electricity generation capacity.
At current searing energy crisis level, energy experts are estimating that the country requires injection of no less than 6,000MW to plug the deficit. From giant manufacturers to residential homes, South Africans have grappling with worsening power cuts.?In some areas, outages are running for up to 10 hours a day.
While improving the performance and reliability of the existing coal plants may seem like a viable solution, it is a complex and expensive undertaking. Nearly all these plants would require extensive overhauls. These works are not only time-consuming, but also very costly for a country stretched thin by inflationary pressures.
South Africa’s 6,000MW electricity shortfall
It is predicted that it will take up to five years to generate the current shortfall, 6000MW, but the industry can expect mild relief by the end of next year.
Authorities are considering the set up of new coal, nuclear, or gas plants to significantly increase power supply. However, the typical construction time for these plants is around 10 years. This implies that plants will not plug the short- to medium-term power deficit dealing a gut punch to thousands of businesses.
As new plants are set up, South Africa is also fixing the existing power stations. And this will take time. Take the Kusile and Medupi power stations for instance. With a combined capacity of 4,800MW, these are the largest coal plants in South Africa and among the biggest globally.
The construction of Kusile and Medupi plants began in 2007. Back then, the expectation was they will be providing ample electricity supply and help in retiring older plants.
However, their construction hit a brick wall. Costs escalated significantly, and the progress assumed a snail speed. At the monet, one of Kusile’s six units remains unfinished.
Explosion at Medupi, Kusile power plants
What’s more, calamities struck during the early years of their operation.?In 2021, an explosion at Medupi’s Unit 4 caused extensive damage, leaving engineers unable to bring it back online. In addition, Kusile’s three units were closed following the collapse of its a chimney. These incidents have been holding South Africa’s firmly in a protracted power crisis.
The Koeberg nuclear power plant, which has contributed about 5 per cent of South Africa’s electricity, is approaching the end of its projected 40-year lifespan in 2024. To extend its operating license for another 20 years, specific part replacements and upgrades, including new steam generators, are critical.
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However, these operations plunged into delays and complications. The upgrade of the first unit was abandoned due to incomplete project preparations. The second attempt was stuck in inordinate delays. This situation has resulted in Koeberg effectively running at half-power, and it is projected to run like that unto 2025.
In an effort to address the deepening power crisis, the minister of mineral resources and energy announced bids to supply 2,000MW of emergency power in 2021. The bulk of the job went to?Turkey’s Karpowership, a firm that operates floating gas plants.
Emergency power plan a year behind schedule
These plants would be shipped in and moored at three ports in South Africa. However, the deal faced controversy and legal challenges. It was seen as a long-term arrangement for what was an otherwise temporary emergency power need. Due to opposition and delays in other projects, the emergency program is at least a year behind schedule. If it were in place, the additional capacity would only moderately alleviate the electricity shortfall.
Investments to tap into solar and wind power are being pursued under Renewable Energy Independent Power Producer Procurement Programme. Private developers produce solar and wind energy, which is then sold to Eskom.
But, due to the intermittent nature of sunshine and wind, these technologies can only generate a fraction of their capacity.
Economic sectors affected by load shedding
The economic impact of load shedding
Electricity crisis in South Africa has left the economy limping. In the three months to June 2022, South Africa’s GDP decreased by 0.7 per cent, indicating a slowing?economy. In the first quarter this year, the country escaped recession by a whisker. And economists predict that 2023 GDP will drop further to 1.2 per cent from 2.3 per cent last year. What’s more, policymakers are staring at a 45 percent likelihood of recession.
Load shedding, in particular, has been detrimental to smallscale traders. The investors have had to adjust their operating hours to align with the load-shedding schedule. The strategy is not only disrupting planning, but also causing low staff morale. Further, without lighting, increased theft, internet outages, payment processing disruptions, and damaged equipment are order of the day.
Companies forced to lay off staff
The increased cost of doing business has forced some companies to lay off staff. A survey by the Small Enterprise Finance Agency (Sefa) and the Ministry of Small Business Development revealed that 71 percent of businesses have been negatively affected by load shedding.
The mining sector has also been one of the worst hit. Statistics show?mining?production fell by 3.7 per cent in the fourth quarter of 2022. Already, representatives from the platinum sector are expressing concerns about potential shaft closures and job losses if?load shedding continues.
Heavy rains have compounded the challenges faced by mining firms. Although the sector managed the current load-shedding crisis relatively well by curtailing electricity demand by 15 percent, further escalation could pose serious problems.
Agriculture
Load shedding poses risks to South Africa’s agriculture sector, affecting food production, transportation, and storage. Irrigation-dependent crops such as maize, soybean, sugarcane, and wheat are at risk.
Livestock production, including red meat, poultry, piggery, wool, and dairy, requires continuous power for their usual activities. Downstream activities such as milling, bakeries, abattoirs, wine processing, packaging, and animal vaccine production face similar challenges.
Exporting agribusinesses are concerned about potential delays in port activities and the subsequent impact on sensitive products like fruits, red meat, and wine. Food security concerns arise as the effects of load shedding may lead to reduced volumes of harvested/produced products in the coming months.
The retail sector is significantly impacted by load shedding, with companies such as Shoprite spending large sums on diesel to sustain operations. Retail profits could decline by approximately 10 per cent if the current load-shedding patterns persist.
Real Estate
Likewise, property companies, particularly those heavily reliant on the retail sector, encounter similar challenges during load shedding. These companies often face increased costs, just like retailers. For instance, Attacq, the owner of the Waterfall precinct, reports that its average daily diesel cost surges to R511,500 during Stage 6 load shedding, compared to R170,526 during Stage 2 load shedding.
Healthcare facilities
Hospital groups, in the midst of load shedding, also experience escalating costs. According to Life Healthcare’s latest trading update, their diesel expenses during the four-month period ending in January surged to R25 million, compared to R5 million in the previous comparable period. However, Life Healthcare clarifies that these increased costs do not have a significant impact on their overall cost structure.
About: Maingi Gichuku
Maingi Gichuku is passionate about helping African businesses grow by offering technology solutions. With a BSC in Zoology and biochemistry, Gichuku yearns for an Africa that can find solutions to its challenges. My drive is to see an economically dynamic Africa and embrace its populations by creating opportunities cutting across the social and economic strata.
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Europe Props Up Tunisia’s Undemocratic Status Quo
By JUDY DEMPSEY
Pouring money into Kais Saied’s increasingly repressive regime will not solve Tunisia’s migration problem. Rather, it could lead to instability and a further exodus of people to Europe.
This blog is part of?ENGAGE, a project that examines challenges to global governance and EU external action. A consortium of thirteen academic institutions and think tanks seeks to assess the EU’s ability to harness all its foreign policy tools and identify ways to strengthen the EU as a global actor.
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They keep trying to leave. In small boats they make their way across the Mediterranean. Their first stop is either Malta or Italy, if they are lucky.
Many don’t make the crossing. Between April 19 and 24 alone, Tunisia’s coastguard found?seventy?dead bodies in the sea. The week before,?twenty-five?migrants were drowned.
It is not only migrants from other North African countries that are trying to make their way to Europe while the EU in response tries to strengthen the border controls in Libya.
Increasingly, the migrants are Tunisians. Back in 2016, they made up 4 percent of arrivals reaching Europe. By last year, their share had jumped to 18 percent. The main reasons are economic and political. Tunisia’s complicated and ambitious transition to democracy has been diverted if not hijacked by President Kais Saied. Young people, facing growing unemployment and diminishing civil rights, are leaving.
Italy’s prime minister, Giorgia Meloni, wants this migration flow to end. She has taken the lead in adopting a tougher EU policy against illegal migration and in pushing the EU into establishing a coherent strategy on migration, refugees, and asylum. These three issues have divided the bloc for decades.
Meanwhile, far-right, anti-immigration, and populist movements have been able to profit from the absence of any clear EU line. The union has only itself to blame for the inability to tackle issues that have domestic political repercussions and negative consequences for the Middle East and North Africa (MENA).
Curbing migration was Meloni’s big election promise. She has stuck to it. On June 11, European Commission President Ursula von der Leyen, flanked by Meloni, Dutch Prime Minister Mark Rutte, and President Saied put together an?economic package?aimed at stopping or at least curbing migration.
Von der Leyen’s statement reflects the technocratic and realpolitik view of most member states.
She spelt out how the EU would help Tunisia’s ailing economy. Investment and trade would be increased, especially in energy and renewables. The?total package?will amount to €1 billion ($1.1 billion). The EU will also reach out to the younger generation, providing €10 million ($10.8 million)—a miniscule amount—for student exchanges via the bloc’s Erasmus program. But the primary aim of the package is curbing migration. Money would be poured into border management to stop smugglers taking people across the Mediterranean.
“This year, the EU will provide €100 million to Tunisia for border management, but also search and rescue, anti-smuggling and return,” von der Leyen?said?during her visit to Tunis. “The objective is to support a holistic migration policy rooted in the respect of human rights,” she added.
Rooted in human rights? Really?
It is the erosion of human rights combined with the rapid deterioration of the economy that is driving Tunisians to leave the country. Since Saied became president two years ago through what has been described as a power grab, he has silenced the opposition, quashed the media freedom, undermined the rule of law, and almost destroyed the independent judiciary. His critics are either behind bars, in interna exile, or have left the country. And all this is happening at a time when the economy is rapidly declining. What a change from the heady days of 2011.
Once considered the great hope of the 2011 Arab Spring uprisings as new parties and leaders tried to build democratic institutions, Tunisia under Saied is reverting to the kind of authoritarian system that prevailed under the dictatorship of Zine El Abidine?Ben Ali.
Ben Ali was toppled following massive protests spearheaded by young people. Then, the deteriorating economy, the lack of human rights and any perspective drove the population onto the streets.
Over the past several years, Tunisia embarked on a difficult path toward transformation. Politically and economically, the EU invested heavily in the country—though it could have done more to strengthen trade ties. Saied’s rise to power showed the vulnerability of the institutions and the fragility of the transition from autocracy to democracy.
The EU should have been far more outspoken from day one, when Saied’s intentions became clear. Words about “deep concern” are no longer enough. What Europe as a whole is doing in MENA is reminiscent of the policies it pursued before the Arab Spring. Then, the EU supported the authoritarian status quo. Stability was preferable to openly supporting independent human rights movements and independent non-governmental organizations.
Yet that kind of stability breeds its own instability. That was one of the main features of the Arab Spring. There was a spontaneous outbreak of pro-democracy movements. The protestors wanted fundamental change.
That change tried to take root in just one or two countries. But today, MENA states are either plagued by conflict and instability, such as Libya, or have reverted to authoritarian rule, such as Egypt.
Despite Egypt’s appalling human rights record, the sad erosion of Tunisia’s democracy, not to mention the political and economic destruction of war-torn Syria, the EU’s role remains reactive. It carries little standing and influence in a region whose current and future conditions fundamentally affect what happens in the Mediterranean and in Europe.
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