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Living the FATCA life in Africa: New U.S. tax regulations add to burden of compliance on financial institutions across Africa

Posted on 21 May 2013 by Eugene Skrynnyk

Eugene Skrynnyk

Eugene Skrynnyk (CIPM, MILE, BComm) is a senior manager and specialist for the asset management industry in the Africa Sub-Area at Ernst & Young in Cape Town, South Africa.

Eugene Skrynnyk is the Ernst & Young Senior Manager and specialist for the asset management industry in the Africa Sub-Area.

Eugene holds a Certificate in Investment Performance Measurement (CIPM), Master of International Law and Economics (MILE) and Bachelor of Commerce and Finance (B.Comm.).

 

When the U.S. Department of the Treasury (“Treasury”) and Internal Revenue Service (“IRS”) issued final Foreign Account Tax Compliance Act (“FATCA”) regulations in January of this year, there was a sigh of relief that the financial services industry in Africa could begin to digest FATCA’s obligations. However, achieving FATCA compliance remains a challenge for banks operating across Africa.

FATCA is already law in the U.S. but negotiations are under way to enshrine it in national law of countries around the world via intergovernmental agreements (“IGAs”) with the U.S. While a variety of African jurisdictions will each face unique obstacles with FATCA compliance, many in the industry share a general unease with FATCA’s scope, as well as scepticism that FATCA’s rewards (an estimated US$1 billion in additional tax revenue annually) justify its expenses. Generally, FATCA attempts to combat U.S. tax evasion by requiring that non-U.S. financial institutions report the identities of U.S. shareholders or customers, or otherwise face a 30% withholding tax on their U.S. source income. Overwhelmingly, FATCA compliance obligations apply even where there is very little risk of U.S. tax evasion and it impacts all payers, including foreign payers of “withholdable payments” made to any foreign entities affecting deposit accounts, custody and investments.

General issues in Africa

Concerns about privacy abound. FATCA requires financial institutions to report to the IRS certain information about U.S. persons. For this reason, IGAs are being put in place so that institutions could instead report information to their local tax authority rather than the IRS. In some jurisdictions, investment funds and insurance companies are permitted to disclose information with client consent. In other jurisdictions, such disclosure is prohibited without further changes to domestic law. The process to make necessary changes locally involves time and effort.

Cultural differences in Africa need to be considered. In certain situations FATCA requires that financial institutions ask a customer who was born in the United States to submit documents explaining why the customer abandoned U.S. citizenship or did not obtain it at birth. African financial institutions never pose such a delicate and private question to their customers. Even apparently straight-forward requirements may pose challenges; for example, FATCA requires that customers make representations about their identities “under penalty of perjury” in certain situations. Few countries have a custom of making legal oaths, so it would not be surprising if African customers will be reluctant to give them.

FATCA contains partial exemptions (i.e., “deemed compliance”) and also exceptions for certain financial institutions and products that are less likely to be used by U.S. tax evaders. It still has to be seen to what extent these exemptions have utility for financial institutions in Africa. For example, the regulations include an exemption for retirement funds and also partially exempt “restricted funds” — funds that prohibit investment by U.S. persons. Although many non-U.S. funds have long restricted investment by U.S. persons because of the U.S. federal securities laws, this exemption could be less useful than it first appears. It should be pointed out that the exemption also requires that funds be sold exclusively to limited categories of FATCA-compliant or exempt institutions and distributors. These categories are themselves difficult for African institutions to qualify for. For example, a restricted fund may sell to certain distributors who agree not to sell to U.S. persons (“restricted distributors”). But restricted distributors must operate solely in the country of their incorporation, a true obstacle in smaller markets where many distributors must operate regionally to attain scale.

Other permitted distribution channels for restricted funds are “local banks,” which are not allowed to have any operations outside of their jurisdiction of incorporation and may not advertise the availability of U.S. dollar denominated investments.

Challenges and lessons learned – the African perspective

Financial institutions will have to consider what steps to take to prepare for FATCA compliance and take into account other FATCA obligations, such as account due diligence and withholding against non-compliant U.S. accountholders and/or financial institutions.

The core of FATCA is the process of reviewing customer records to search for “U.S. indicia” — that is, evidence that a customer might be a U.S. taxpayer. Under certain circumstances, FATCA requires financial institutions to look through their customers and counterparties’ ownership to find “substantial U.S. owners” (generally, certain U.S. persons holding more than 10% of an entity). In many countries the existing anti-money laundering legislation generally requires that financial institutions look through entities only when there is a 20% or 25% owner, leaving a gap between information that may be needed for FATCA compliance and existing procedures. Even how to deal with non-FATCA compliant financial institutions and whether to completely disengage business ties with them, remains open.

The following is an outline of some of the lessons learned in approaching FATCA compliance and the considerations financial institutions should make:

Focus on reducing the problem

Reducing the problem through the analysis and filtering of legal entities, products, customer types, distribution channels and account values, which may be prudently de-scoped, can enable financial institutions to address their distinct challenges and to identify areas of significant impact across their businesses. This quickly scopes the problem areas and focuses the resource and budget effort to where it is most necessary.

Select the most optimal design solution

FATCA legislation is complex and comprehensive as it attempts to counter various potential approaches to evade taxes. Therefore, understanding the complexities of FATCA and distilling its key implications is crucial in formulating a well rounded, easily executable FATCA compliance programme in the limited time left.

Selecting an option for compliance is dependent on the nature of the business and the impact of FATCA on the financial institution. However, due to compliance time constraints and the number of changes required by financial institutions, the solution design may well require tactical solutions with minimal business impact and investment. This will allow financial institutions to achieve compliance by applying low cost ‘work arounds’ and process changes. Strategic and long-term solutions can be better planned and phased-in with less disruption to the financial institution thereafter.

Concentrate on critical activities for 2014

FATCA has phased timelines, which run from 2014 to 2017 and beyond. By focusing on the “must-do” activities, which require compliance as of 1 January 2014 – such as appointing a Responsible Officer, registering with the IRS, and addressing new client on-boarding processes and systems – financial institutions can dedicate the necessary resources more efficiently and effectively to meet immediate deadlines.

Clear ownership – both centrally and within local subsidiaries

FATCA is a strategic issue for the business, requiring significant and widespread change. Typically it starts as a ‘tax issue’ but execution has impacts across IT, AML/KYC, operations, sales, distribution and client relationship management. It is imperative to get the right stakeholders and support onboard to ensure that the operational changes are being coordinated, managed and implemented by the necessary multidisciplinary teams across the organization. These include business operations, IT, marketing, and legal and compliance, to name but a few. Early involvement and clear ownership is key from the start.

Understand your footprint in Africa

Many African financial institutions have operations in various African countries and even overseas, and have strategically chosen to make further investments throughout Africa. The degree to which these African countries have exposure to the FATCA regulations needs to be understood. It is best to quickly engage with appropriate stakeholders, understand how FATCA impacts these African countries and the financial institutions’ foreign subsidiaries, and find solutions that enable pragmatic compliance.

What next for financial institutions in Africa?

Negotiations with the U.S. are under way with over 60 countries to enshrine FATCA in national law of countries around the world via IGAs. Implementation of FATCA is approaching on 1 January 2014 and many local financial institutions have either not started or are just at the early stages of addressing the potential impact of FATCA. In South Africa, only few of the leading banks are completing impact assessments and already optimizing solutions. Other financial services groups and asset management institutions are in the process of tackling the impact assessment. Industry representative in Ghana, Kenya, Mauritius, Namibia, Nigeria and Zimbabwe have started engaging relevant government and industry stakeholders, but the awareness is seemingly oblivious to date. In the rest of Africa, FATCA is mainly unheard of.

Financial institutions choosing to comply with FATCA will first need to appoint a responsible officer for FATCA and register with the IRS, ensure proper new client on-boarding procedures are in place, then identify and categorize all customers, and eventually report U.S. persons to the IRS (or local tax authorities in IGA jurisdictions). Institutions will also need to consider implementing a host of other time-consuming operational tasks, including revamping certain electronic systems to capture applicable accountholder information and/or to accommodate the new reporting and withholding requirements, enhancing customer on-boarding processes, and educating both customers and staff on the new regulations. Where possible, institutions should seek to achieve these tasks through enhancing existing initiations so as to minimise the cost and disruption to the business.

Conclusion

Financial institutions in Africa face tight FATCA compliance timelines with limited budgets, resources, time, and expertise available. This is coupled with having to fulfil multiple other regulatory requirements. To add to the burden, FATCA has given stimulus to several countries in the European Union to start discussing a multilateral effort against tax evasion. The support of other countries in the IGA process indicates that some of these countries will follow with their own FATCA-equivalent legislation in an attempt to increase local tax revenues at a time when economies around the world are under unprecedented pressure. The best approach for African financial services industry groups is to engage their local governments in dialogue with the IRS and Treasury, while for African financial institutions to pro-actively assess their FATCA strategic and operational burdens as they inevitably prepare for compliance.

 

About Ernst & Young

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

The Ernst & Young Africa Sub-Area consists of practices in 28 countries across the African continent. We pride ourselves in our integrated operating model which enables us to serve our clients on a seamless basis across the continent, as well as across the world.

Ernst & Young South Africa has a Level two, AAA B-BBEE rating. As a recognised value adding enterprise, our clients are able to claim B-BBEE recognition of 156.25%.

Ernst & Young refers to the global organisation of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. All Ernst & Young practices in the Africa Sub Area are members of Ernst & Young Africa Limited (NPC). Ernst & Young Africa Limited (NPC) in turn is a member firm of Ernst & Young Global Limited, a UK company limited by guarantee. Neither Ernst & Young Global Limited nor Ernst & Young Limited (NPC) provides services to clients.

For more information about our organisation, please visit www.ey.com/za

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Developing World’s Share of Global Investment to Triple by 2030, Says New World Bank Report

Posted on 18 May 2013 by Africa Business

Seventeen years from now, half the global stock of capital, totaling $158 trillion (in 2010 dollars), will reside in the developing world, compared to less than one-third today, with countries in East Asia and Latin America accounting for the largest shares of this stock, says the latest edition of the World Bank’s Global Development Horizons (GDH) report, which explores patterns of investment, saving and capital flows as they are likely to evolve over the next two decades.

Developing countries’ share in global investment is projected to triple by 2030 to three-fifths, from one-fifth in 2000, says the report, titled ‘Capital for the Future: Saving and Investment in an Interdependent World’. With world population set to rise from 7 billion in 2010 to 8.5 billion 2030 and rapid aging in the advanced countries, demographic changes will profoundly influence these structural shifts.

“GDH is one of the finest efforts at peering into the distant future. It does this by marshaling an amazing amount of statistical information,” said Kaushik Basu, the World Bank’s Senior Vice President and Chief Economist. “We know from the experience of countries as diverse as South Korea, Indonesia, Brazil, Turkey and South Africa the pivotal role investment plays in driving long-term growth. In less than a generation, global investment will be dominated by the developing countries. And among the developing countries, China and India are expected to be the largest investors, with the two countries together accounting for 38 percent of the global gross investment in 2030. All this will change the landscape of the global economy, and GDH analyzes how.”

Productivity catch-up, increasing integration into global markets, sound macroeconomic policies, and improved education and health are helping speed growth and create massive investment opportunities, which, in turn, are spurring a shift in global economic weight to developing countries. A further boost is being provided by the youth bulge. With developing countries on course to add more than 1.4 billion people to their combined population between now and 2030, the full benefit of the demographic dividend has yet to be reaped, particularly in the relatively younger regions of Sub-Saharan Africa and South Asia.

The good news is that, unlike in the past, developing countries will likely have the resources needed to finance these massive future investments for infrastructure and services, including in education and health care. Strong saving rates in developing countries are expected to peak at 34 percent of national income in 2014 and will average 32 percent annually until 2030. In aggregate terms, the developing world will account for 62-64 percent of global saving of $25-27 trillion by 2030, up from 45 percent in 2010.

“Despite strong saving levels to finance their massive investment needs in the future, developing countries will need to significantly improve their currently limited participation in international financial markets if they are to reap the benefits of the tectonic shifts taking place,” said Hans Timmer, Director of the Bank’s Development Prospects Group.

GDH paints two scenarios, based on the speed of convergence between the developed and developing worlds in per capita income levels, and the pace of structural transformations (such as financial development and improvements in institutional quality) in the two groups. Scenario one entails a gradual convergence between the developed and developing world while a much more rapid scenario is envisioned in the second.

The gradual and rapid scenarios predict average world economic growth of 2.6 percent and 3 percent per year, respectively, during the next two decades; the developing world’s growth will average an annual rate of 4.8 percent in the gradual convergence scenario and 5.5 percent in the rapid one.

In both scenarios, developing countries’ employment in services will account for more than 60 percent of their total employment by 2030 and they will account for more than 50 percent of global trade. This shift will occur alongside demographic changes that will increase demand for infrastructural services. Indeed, the report estimates the developing world’s infrastructure financing needs at $14.6 trillion between now and 2030.

The report also points to aging populations in East Asia, Eastern Europe and Central Asia, which will see the largest reductions in saving rates. Demographic change will test the sustainability of public finances and complex policy challenges will arise from efforts to reduce the burden of health care and pensions without imposing severe hardships on the old. In contrast, Sub-Saharan Africa, with its relatively young and rapidly growing population as well as robust economic growth, will be the only region not experiencing a decline in its saving rate.

In absolute terms, however, saving will continue to be dominated by Asia and the Middle East. In the gradual convergence scenario, in 2030, China will save far more than any other developing country — $9 trillion in 2010 dollars — with India a distant second with $1.7 trillion, surpassing the levels of Japan and the United States in the 2020s.

As a result, under the gradual convergence scenario, China will account for 30 percent of global investment in 2030, with Brazil, India and Russia together accounting for another 13 percent. In terms of volumes, investment in the developing world will reach $15 trillion (in 2010 dollars), versus $10 trillion in high-income economies. China and India will account for almost half of all global manufacturing investment.

“GDH clearly highlights the increasing role developing countries will play in the global economy. This is undoubtedly a significant achievement. However, even if wealth will be more evenly distributed across countries, this does not mean that, within countries, everyone will equally benefit,” said Maurizio Bussolo, Lead Economist and lead author of the report.

The report finds that the least educated groups in a country have low or no saving, suggesting an inability to improve their earning capacity and, for the poorest, to escape a poverty trap.

“Policy makers in developing countries have a central role to play in boosting private saving through policies that raise human capital, especially for the poor,” concluded Bussolo.

Regional Highlights:

East Asia and the Pacific will see its saving rate fall and its investment rate will drop by even more, though they will still be high by international standards. Despite these lower rates, the region’s shares of global investment and saving will rise through 2030 due to robust economic growth. The region is experiencing a big demographic dividend, with fewer than 4 non-working age people for every 10 working age people, the lowest dependency ratio in the world. This dividend will end after reaching its peak in 2015. Labor force growth will slow, and by 2040 the region may have one of the highest dependency ratios of all developing regions (with more than 5.5 non-working age people for every 10 working age people). China, a big regional driver, is expected to continue to run substantial current account surpluses, due to large declines in its investment rate as it transitions to a lower level of public involvement in investment.

Eastern Europe and Central Asia is the furthest along in its demographic transition, and will be the only developing region to reach zero population growth by 2030. Aging is expected to moderate economic growth in the region, and also has the potential to bring down the saving rate more than any developing region, apart from East Asia. The region’s saving rate may decline more than its investment rate, in which case countries in the region will have to finance investment by attracting more capital flows. The region will also face significant fiscal pressure from aging. Turkey, for example, would see its public pension spending increase by more than 50 percent by 2030 under the current pension scheme. Several other countries in the region will also face large increases in pension and health care expenditures.

Latin America and the Caribbean, a historically low-saving region, may become the lowest-saving region by 2030. Although demographics will play a positive role, as dependency ratios are projected to fall through 2025, financial market development (which reduces precautionary saving) and a moderation in economic growth will play a counterbalancing role. Similarly, the rising and then falling impact of demography on labor force growth means that the investment rate is expected to rise in the short run, and then gradually fall. However, the relationship between inequality and saving in the region suggests an alternative scenario. As in other regions, poorer households tend to save much less; thus, improvements in earning capacity, rising incomes, and reduced inequality have the potential not only to boost national saving but, more importantly, to break poverty traps perpetuated by low saving by poor households.

The Middle East and North Africa has significant scope for financial market development, which has the potential to sustain investment but also, along with aging, to reduce saving. Thus, current account surpluses may also decline moderately up to 2030, depending on the pace of financial market development. The region is in a relatively early phase of its demographic transition: characterized by a still fast growing population and labor force, but also a rising share of elderly. Changes in household structure may also impact saving patterns, with a transition from intergenerational households and family-based old age support to smaller households and greater reliance on asset income in old age. The region has the lowest use of formal financial institutions for saving by low-income households, and scope for financial markets to play a significantly greater role in household saving.

South Asia will remain one of the highest saving and highest investing regions until 2030. However, with the scope for rapid economic growth and financial development, results for saving, investment, and capital flows will vary significantly: in a scenario of more rapid economic growth and financial market development, high investment rates will be sustained while saving falls significantly, implying large current account deficits. South Asia is a young region, and by about 2035 is likely to have the highest ratio of working- to nonworking-age people of any region in the world. The general shift in investment away from agriculture towards manufacturing and service sectors is likely to be especially pronounced in South Asia, with the region’s share of total investment in manufacturing expected to nearly double, and investment in the service sector to increase by more than 8 percentage points, to over two-thirds of total investment.

Sub-Saharan Africa’s investment rate will be steady due to robust labor force growth. It will be the only region to not see a decrease in its saving rate in a scenario of moderate financial market development, since aging will not be a significant factor. In a scenario of faster growth, poorer African countries will experience deeper financial market development, and foreign investors will become increasingly willing to finance investment in the region. Sub-Saharan Africa is currently the youngest of all regions, with the highest dependency ratio. This ratio will steadily decrease throughout the time horizon of this report and beyond, bringing a long lasting demographic dividend. The region will have the greatest infrastructure investment needs over the next two decades (relative to GDP). At the same time, there will likely be a shift in infrastructure investment financing toward greater participation by the private sector, and substantial increases in private capital inflows, particularly from other developing regions.

Source: WorldBank.org

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Developing countries to dominate global saving and investment, but the poor will not necessarily share the benefits, says report

Posted on 18 May 2013 by Africa Business

STORY HIGHLIGHTS
  • Developing world’s share of global investment to triple by 2030
  • China, India will be developing world’s largest investors
  • Boost to education needed so poor can improve their well-being

In less than a generation, global saving and investment will be dominated by the developing world, says the just-released Global Development Horizons (GDH) report.

By 2030, half the global stock of capital, totaling $158 trillion (in 2010 dollars), will reside in the developing world, compared to less than one-third today, with countries in East Asia and Latin America accounting for the largest shares of this stock, says the report, which explores patterns of investment, saving and capital flows as they are likely to evolve over the next two decades.

Titled ‘Capital for the Future: Saving and Investment in an Interdependent World’, GDH projects developing countries’ share in global investment to triple by 2030 to three-fifths, from one-fifth in 2000.

Productivity catch-up, increasing integration into global markets, sound macroeconomic policies, and improved education and health are helping speed growth and create massive investment opportunities, which, in turn, are spurring a shift in global economic weight to developing countries.

A further boost is being provided by the youth bulge. By 2020, less than 7 years from now, growth in world’s working-age population will be exclusively determined by developing countries. With developing countries on course to add more than 1.4 billion people to their combined population between now and 2030, the full benefit of the demographic dividend has yet to be reaped, particularly in the relatively younger regions of Sub-Saharan Africa and South Asia.

GDH paints two scenarios, based on the speed of convergence between the developed and developing worlds in per capita income levels, and the pace of structural transformations (such as financial development and improvements in institutional quality) in the two groups. Scenario one entails a gradual convergence between the developed and developing world while a much more rapid one is envisioned in the second.

In both scenarios, developing countries’ employment in services will account for more than 60 percent of their total employment by 2030 and they will account for more than 50 percent of global trade. This shift will occur alongside demographic changes that will increase demand for infrastructural services. Indeed, the report estimates the developing world’s infrastructure financing needs at $14.6 trillion between now and 2030.

The report also points to aging populations in East Asia, Eastern Europe and Central Asia, which will see the largest reductions in private saving rates. Demographic change will test the sustainability of public finances and complex policy challenges will arise from efforts to reduce the burden of health care and pensions without imposing severe hardships on the old. In contrast, Sub-Saharan Africa, with its relatively young and rapidly growing population as well as robust economic growth, will be the only region not experiencing a decline in its saving rate.

Open Quotes

Policy makers in developing countries have a central role to play in boosting private saving through policies that raise human capital, especially for the poor. Close Quotes

Maurizio Bussolo
Lead Author, Global Development Horizons 2013

In absolute terms, however, saving will continue to be dominated by Asia and the Middle East. In the gradual convergence scenario, in 2030, China will save far more than any other developing country — $9 trillion in 2010 dollars — with India a distant second with $1.7 trillion, surpassing the levels of Japan and the United States in the 2020s.

As a result, under the gradual convergence scenario, China will account for 30 percent of global investment in 2030, with Brazil, India and Russia together accounting for another 13 percent. In terms of volumes, investment in the developing world will reach $15 trillion (in 2010 dollars), versus $10 trillion in high-income economies. Again, China and India will be the largest investors among developing countries, with the two countries combined representing 38 percent of the global gross investment in 2030, and they will account for almost half of all global manufacturing investment.

“GDH clearly highlights the increasing role developing countries will play in the global economy. This is undoubtedly a significant achievement. However, even if wealth will be more evenly distributed across countries, this does not mean that, within countries, everyone will equally benefit,” said Maurizio Bussolo, Lead Economist and lead author of the report.

The report finds that the least educated groups in a country have low or no saving, suggesting an inability to improve their earning capacity and, for the poorest, to escape a poverty trap.

“Policy makers in developing countries have a central role to play in boosting private saving through policies that raise human capital, especially for the poor,” concluded Bussolo.

Regional Highlights:

East Asia and the Pacific will see its saving rate fall and its investment rate will drop by even more, though they will still be high by international standards. Despite these lower rates, the region’s shares of global investment and saving will rise through 2030 due to robust economic growth. The region is experiencing a big demographic dividend, with fewer than 4 non-working age people for every 10 working age people, the lowest dependency ratio in the world. This dividend will end after reaching its peak in 2015. Labor force growth will slow, and by 2040 the region may have one of the highest dependency ratios of all developing regions (with more than 5.5 non-working age people for every 10 working age people). China, a big regional driver, is expected to continue to run substantial current account surpluses, due to large declines in its investment rate as it transitions to a lower level of public involvement in investment.

Eastern Europe and Central Asia is the furthest along in its demographic transition, and will be the only developing region to reach zero population growth by 2030. Aging is expected to moderate economic growth in the region, and also has the potential to bring down the saving rate more than any developing region, apart from East Asia. The region’s saving rate may decline more than its investment rate, in which case countries in the region will have to finance investment by attracting more capital flows. The region will also face significant fiscal pressure from aging. Turkey, for example, would see its public pension spending increase by more than 50 percent by 2030 under the current pension scheme. Several other countries in the region will also face large increases in pension and health care expenditures.

Latin America and the Caribbean, a historically low-saving region, may become the lowest-saving region by 2030. Although demographics will play a positive role, as dependency ratios are projected to fall through 2025, financial market development (which reduces precautionary saving) and a moderation in economic growth will play a counterbalancing role. Similarly, the rising and then falling impact of demography on labor force growth means that the investment rate is expected to rise in the short run, and then gradually fall. However, the relationship between inequality and saving in the region suggests an alternative scenario. As in other regions, poorer households tend to save much less; thus, improvements in earning capacity, rising incomes, and reduced inequality have the potential not only to boost national saving but, more importantly, to break poverty traps perpetuated by low saving by poor households.

The Middle East and North Africa has significant scope for financial market development, which has the potential to sustain investment but also, along with aging, to reduce saving. Thus, current account surpluses may also decline moderately up to 2030, depending on the pace of financial market development. The region is in a relatively early phase of its demographic transition: characterized by a still fast growing population and labor force, but also a rising share of elderly. Changes in household structure may also impact saving patterns, with a transition from intergenerational households and family-based old age support to smaller households and greater reliance on asset income in old age. The region has the lowest use of formal financial institutions for saving by low-income households, and scope for financial markets to play a significantly greater role in household saving.

South Asia will remain one of the highest saving and highest investing regions until 2030. However, with the scope for rapid economic growth and financial development, results for saving, investment, and capital flows will vary significantly: in a scenario of more rapid economic growth and financial market development, high investment rates will be sustained while saving falls significantly, implying large current account deficits. South Asia is a young region, and by about 2035 is likely to have the highest ratio of working- to nonworking-age people of any region in the world. The general shift in investment away from agriculture towards manufacturing and service sectors is likely to be especially pronounced in South Asia, with the region’s share of total investment in manufacturing expected to nearly double, and investment in the service sector to increase by more than 8 percentage points, to over two-thirds of total investment.

Sub-Saharan Africa’s investment rate will be steady due to robust labor force growth. It will be the only region to not see a decrease in its saving rate in a scenario of moderate financial market development, since aging will not be a significant factor. In a scenario of faster growth, poorer African countries will experience deeper financial market development, and foreign investors will become increasingly willing to finance investment in the region. Sub-Saharan Africa is currently the youngest of all regions, with the highest dependency ratio. This ratio will steadily decrease throughout the time horizon of this report and beyond, bringing a long lasting demographic dividend. The region will have the greatest infrastructure investment needs over the next two decades (relative to GDP). At the same time, there will likely be a shift in infrastructure investment financing toward greater participation by the private sector, and substantial increases in private capital inflows, particularly from other developing regions.

 

Source: WorldBank.org

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South Africa’s Professor Jonathan Jansen To Be Honored At Awards Gala In New York City, June 3, 2013

Posted on 18 May 2013 by Africa Business

NEW YORK /PRNewswire/ — Professor Jonathan Jansen , the Vice-Chancellor and Rector of the University of the Free State in South Africa who helped turn the university away from its apartheid legacy into an institution that is truly representative of what South Africa stands for, is set to receive the Education Africa Lifetime Achievement Award for Africa at a gala by the same name on Monday, June 3, 2013, at the Mandarin Oriental Hotel in New York City.

South Africa's Professor Jonathan Jansen To Be Honored At Awards Gala In New York City, June 3, 2013. (PRNewsFoto/Education Africa)

Jansen is being recognized for the great strides he has taken in ensuring integration at a university that once threatened to implode with racial tension and for his continued work towards the transformation of education in South Africa. In 2010, just two short years after Jansen joined the institution as its Vice-Chancellor, it was awarded the World Universities Forum Award for Best Practice in Higher Education for the racial integration and harmonisation of the student community.

Oprah Winfrey , who was awarded an honorary doctorate by the university in 2011, said at the time: “What has happened here at Free State in terms of racial reconciliation, of peace, of harmony, of one heart understanding and opening itself to another heart is nothing short of a miracle. It is truly what the new South Africa is all about.”

South Africa's Professor Jonathan Jansen To Be Honored At Awards Gala In New York City, June 3, 2013. (PRNewsFoto/Education Africa)

Grammy Award winning Roberta Flack , who is best known for a string of hits like Killing Me Softly With His Song; Set the Night to Music and The First Time Ever I Saw Your Face, inter alia, will give a special live performance at the event.

The awards are being hosted by Education Africa and Brand South Africa . Education Africa is a 501 (c) (3) non-profit tax exempt organization which is headquartered in Johannesburg, South Africa and has registered offices in the USA, Austria and the UK. Brand South Africa is a publicly funded trust with trustees appointed by South Africa’s president. It works with partners in and out of government to see that South Africa’s value proposition as a place to do business, invest in and visit – and from which to source products, ideas and inspiration – is fully appreciated.

For more information on this event and sponsorship opportunities, please visit:  http://www.educationafrica.org/documents/DIGITAL_INVITE_2013_June.pdf

SOURCE Education Africa

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Binghamton researcher studies oldest fossil hominin ear bones ever recovered

Posted on 15 May 2013 by Africa Business

Recently published paper indicates discovery could yield important clues on origins of humankind

 

BINGHAMTON, N.Y. /PRNewswire-USNewswire/ – A new study, led by a Binghamton University anthropologist and published this week by the National Academy of Sciences, could shed new light on the earliest existence of humans. The study analyzed the tiny ear bones, the malleus, incus and stapes, from two species of early human ancestor in South Africa. The ear ossicles are the smallest bones in the human body and are among the rarest of human fossils recovered. Unlike other bones of the skeleton, the ossicles are already fully formed and adult-sized at birth. This indicates that their size and shape is under very strong genetic control and, despite their small size, they hold a wealth of evolutionary information.

The skull of Paranthropus robustus (SKW 18 SK 52) from the site of Swartkrans (South Africa). The specimen dates to approximately two million years ago and has yielded the oldest complete ossicular chain (malleus, incus and stapes) of a fossil hominin discovered to date. (PRNewsFoto/Binghamton University)

The study, led by Binghamton University anthropologist Rolf Quam , was carried out by an international team of researchers from institutions in the US, Italy and Spain. They analyzed several auditory ossicles representing the early hominin species Paranthropus robustus and Australopithecus africanus. The new study includes the oldest complete ossicular chain (i.e. all three ear bones) of a fossil hominin ever recovered. The bones date to around two million years ago and come from the well-known South African cave sites of Swartkrans and Sterkfontein, which have yielded abundant fossils of these early human ancestors.

The researchers report several significant findings from the study. The malleus is clearly human-like, and its size and shape can be easily distinguished from our closest living relatives, chimpanzees, gorillas and orangutans. Many aspects of the skull, teeth and skeleton in these early human ancestors remain quite primitive and ape-like, but the malleus is one of the very few features of these early hominins that is similar to our own species, Homo sapiens. Since both the early hominin species share this human-like malleus, the anatomical changes in this bone must have occurred very early in our evolutionary history. Says Quam, “Bipedalism (walking on two feet) and a reduction in the size of the canine teeth have long been held up as the ‘hallmark of humanity’ since they seem to be present in the earliest human fossils recovered to date. Our study suggests that the list may need to be updated to include changes in the malleus as well.” More fossils from even earlier time periods are needed to corroborate this assertion, says Quam. In contrast to the malleus, the two other ear ossicles, the incus and stapes, appear more similar to chimpanzees, gorillas and orangutans. The ossicles, then, show an interesting mixture of ape-like and human-like features.

The anatomical differences from humans found in the ossicles, along with other differences in the outer, middle and inner ear, are consistent with different hearing capacities in these early hominin taxa compared to modern humans. Although the current study does not demonstrate this conclusively, the team plans on studying the functional aspects of the ear in these early hominins relying on 3D virtual reconstructions based on high resolution CT scans. The team has already applied this approach previously to the 500,000 year-old human fossils from the Sierra de Atapuerca in northern Spain. The fossils from this site represent the ancestors of the Neandertals, but the results suggested their hearing pattern already resembled Homo sapiens. Extending this type of analysis to Australopithecus and Paranthropus should provide new insight into when our modern human pattern of hearing may have evolved. The study has just been published in the Proceedings of the National Academy of Sciences.

SOURCE Binghamton University

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GSMA Establishes Office In Nairobi To Support Burgeoning African Telecoms Market

Posted on 15 May 2013 by Africa Business

Mobile Connections in Sub-Saharan Africa Increase 20 Per Cent to 500 Million in 2013 and Are Expected to Increase by an Additional 50 Per Cent by 2018

iHub is Nairobi‘s Innovation Hub for the technology community, which is an open space for the technologists, investors, tech companies and hackers in the area. This space is a tech community facility with a focus on young entrepreneurs, web and mobile phone programmers, designers and researchers. It is part open community workspace (co-working), part vector for investors and VCs and part incubator. More information can be found here: http://www.ihub.co.ke/about

About the GSMA
The GSMA represents the interests of mobile operators worldwide. Spanning more than 220 countries, the GSMA unites nearly 800 of the world’s mobile operators with more than 230 companies in the broader mobile ecosystem, including handset makers, software companies, equipment providers and Internet companies, as well as organisations in industry sectors such as financial services, healthcare, media, transport and utilities. The GSMA also produces industry-leading events such as the Mobile World Congress and Mobile Asia Expo.


NAIROBI, Kenya, May 15, 2013 /PRNewswire/ – The GSMA today announced that it has opened a permanent office in Nairobi, Kenya. The office will be based in the heart of Nairobi‘s Innovation Hub (iHub) for the technology community and will enable the GSMA to work even more closely with its members and other industry stakeholders to extend the reach and socio-economic benefits of mobile throughout Africa.

“It is an exciting time to launch our new office in Africa, as the region is an increasingly vibrant and critical market for the mobile industry, representing over 10 per cent of the global market,” said Anne Bouverot , Director General, GSMA. “The rapid pace of mobile adoption has delivered an explosion of innovation and huge economic benefits in the region, directly contributing US$ 32 billion to the Sub-Saharan African economy, or 4.4 per cent of GDP. With necessary spectrum allocations and transparent regulation, the mobile industry could also fuel the creation of 14.9 million new jobs in the region between 2015 and 2020.”

According to the latest GSMA’s Wireless Intelligence data, total mobile connections in Sub-Saharan Africa passed the 500 million mark in Q1 2013, increasing by about 20 per cent year-on-year. Connections are expected to grow by a further 50 per cent, or 250 million connections, over the next five years which requires greater regulatory certainty to foster investment and release of additional harmonised spectrum for mobile.

The region currently accounts for about two-thirds of connections in Africa but the amount of spectrum allocated to mobile services in Africa is among the lowest worldwide. Governments in Sub-Saharan Africa risk undermining their broadband and development goals unless more spectrum is made available. In particular, the release of the Digital Dividend spectrum – which has the ideal characteristics for delivering mobile broadband, particularly to rural populations – should be a priority.

The region also has some of the highest levels of mobile internet usage globally. In Zimbabwe and Nigeria, mobile accounts for over half of all web traffic at 58.1 per cent and 57.9 per cent respectively, compared to a 10 per cent global average. 3G penetration levels are forecast to reach a quarter of the population in Sub-Saharan Africa by 2017 (from six per cent in 2012) as the use of mobile-specific services develops.

However, despite the high number of connections, rapid growth and mobile internet usage, mobile penetration among individuals remains relatively low. Fewer than 250 million people had subscribed to a mobile service in the region, putting unique subscriber penetration at 30 per cent, meaning that more than two-thirds of the population have yet to acquire their first mobile phone. Clearly, there is an important opportunity for the mobile industry to bring connectivity, access to information and services to the people in this region.

The mobile industry contributes approximately 3.5 million full-time jobs in the region. This has also spurred a wave of technology and content innovation with more than 50 ‘innovation hubs’ created to develop local skills and content in the field of ICT services, including the Limbe Labs in Cameroon, the iHub in Kenya and Hive Colab in Uganda.

Of particular note is the role of Kenya as the global leader in mobile money transfer services via M-PESA, a service launched by the country’s largest mobile operator Safaricom in 2007. What started as a simple way to extend banking services to the unbanked citizens of Kenya has now evolved into a mobile payment system based on accounts held by the operator, with transactions authorised and recorded in real time using secure SMS. Since its launch, M-PESA has grown to reach 15 million registered users and contributes 18 per cent of Safaricom’s total revenue.

To support this huge increase in innovation, the mobile industry has invested around US$ 16.5 billion over the past five years (US$ 2.8 billion in 2011 alone) across the five key countries in the region, mainly directed towards the expansion of network capacity. At the same time, given the exponential growth, Sub-Saharan Africa faces a looming ‘capacity and coverage crunch’ in terms of available mobile spectrum and the GSMA is working with operators and governments to address this critical issue.

GSMA research has found that by releasing the Digital Dividend and 2.6GHz spectrum by 2015, the governments of Sub-Saharan Africa could increase annual GDP by US$82 billion by 2025 and annual government tax revenues by US$18 billion and add up to 27 million jobs by 2025. In many Sub-Saharan African countries, mobile broadband is the only possible route to deliver the Internet to citizens and the current spectrum allocations across the region generally lag behind those of other countries.

“A positive and supportive regulatory environment and sufficient spectrum allocation is critical to the further growth of mobile in Africa,” continued Ms. Bouverot. “I am confident that now that we have a physical presence in Africa, we will be able to work together with our members to put the conditions in place that will facilitate the expansion of mobile, bringing important connectivity and services to all in the region.”

For more information, please visit the GSMA corporate website at www.gsma.com or Mobile World Live, the online portal for the mobile communications industry, at www.mobileworldlive.com.

SOURCE GSMA

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Morningstar Announces Findings from Third Global Fund Investor Experience Report; United States Scores the Best and South Africa the Worst

Posted on 15 May 2013 by Africa Business

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions.

 

CHICAGO, May 15, 2013 /PRNewswire/ — Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today released its Global Fund Investor Experience report, which assesses the experiences of mutual fund investors in 24 countries across North America, Europe, Asia, and Africa. Morningstar’s evaluation of investor-friendly practices in fund markets worldwide identified the United States as the best market for fund investors based on criteria such as investor protection, transparency, fees, taxation, and investment distribution, while South Africa scored the worst. This year’s report also includes first-time reviews of fund investor experiences in Korea and Denmark.

“We launched the first Global Fund Investor Experience report in 2009 to examine the treatment of mutual fund shareholders in 16 countries with the goal of advancing a dialogue about best practices worldwide. Since that time we’ve had numerous conversations with regulators and investment companies in multiple countries about their existing policies and ways to improve,” John Rekenthaler , vice president of research for Morningstar, said. “Working with our analysts around the world, we expanded our survey to 24 countries this year. We hope our survey findings will help investment companies, distributors, and regulatory bodies around the globe continue to focus on improving the environment for investors.”

Morningstar researchers evaluated countries in four categories: Regulation and Taxation, Disclosure, Fees and Expenses, and Sales and Media. Morningstar weighted the questions and answers to give greater importance to factual, empirical answers as well as the high-priority issues of fees, taxes, and transparency. Morningstar assigned countries a letter grade for each category and then added the category scores to produce an overall country grade. The report’s authors gathered information from available public data and from Morningstar analysts. Below are the overall country grades, from highest to lowest scores and then in alphabetical order:

United States:  A

Sweden: B-

Korea:  B+

Switzerland: B-

Netherlands:  B

United Kingdom: B-

Singapore:  B

Australia: C+

Taiwan:  B

Belgium: C+

Thailand:  B

Canada: C+

China:  B-

France: C+

Denmark:  B-

Italy: C+

Germany:  B-

Japan: C

India:  B-

Hong Kong: C-

Norway:  B-

New Zealand: C-

Spain:  B-

South Africa: D

The United States garnered the highest score for the third time with a top grade of A. While the United States is not a leader in the area of Regulation and Taxes, it has the world’s best disclosure and lowest expenses. South Africa, in contrast, received the lowest grade largely because of poor disclosure practices. The new countries reviewed in this year’s report—Korea and Denmark—earned grades of B+ and B-, respectively.

New Zealand showed the largest improvement from the 2011 study rising to a C- from a D- because of positive regulatory changes and an encouraging expansion of disclosure requirements. Morningstar anticipates that the New Zealand government’s ongoing review of all fund regulations will result in even more improvements and investor-friendly practices in the years to come.

Among the key findings of the study:

  • Bans on advisor commissions are spreading around the world. In the UK, the Retail Distribution Review (RDR) has already brought such a ban into effect, while similar moves are underway in Australia and the Netherlands.
  • While the U.S. and European fund markets are roughly similar in size, U.S. investors pay significantly lower fees than European investors.
  • Fund companies in most countries continue to treat the names of portfolio managers as trade secrets, leaving investors no way to determine who is responsible for a fund’s success or failure.
  • Australia and New Zealand do not require funds to publicly disclose full portfolio holdings, while France, South Africa, Korea, and the UK only disclose holdings to current owners.

To read Morningstar’s complete Global Fund Investor Experience report, click here.

SOURCE Morningstar, Inc.

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African Development Fund: Governors support a successful ADF replenishment

Posted on 15 May 2013 by Africa Business

ABIDJAN, Côte d’Ivoire, May 15, 2013/African Press Organization (APO)/ We, the African Development Fund’s Governors, Planning and Finance Ministers from Côte d’Ivoire, Ghana, Guinea, Liberia, Senegal and Sierra Leone attended the ADF-13 Presentation Workshop on the Fund’s Priorities and Operational Strategies, in Abidjan, May 14, 2013.

During this important meeting, many issues were raised concerning the impact the ADF is having in our countries and its role in the transformation of our economies. The Bank (http://www.afdb.org) for instance, has delivered rapid budget supports to maintain and restore core basic services to the people in the region, at a time when some countries needed it most.

We noted that the ADF is indeed a relevant channel of development financing. The Bank Group also plays an important role as the convener and voice of Africa. The ADF strategic orientation and operational priorities are aligned with the Continent’s development agenda and countries’ needs. Successive institutional reforms have strengthened the Bank Group’s Delivery capacity, Responsiveness and Results-focus.

The Bank’s work in the field of infrastructure is very important, given Africa’s huge infrastructure potential. We appreciate the establishment and augmenting of the ADF Regional Operations envelope, which is critical in supporting the Bank’s ambitious regional integration agenda. For many African countries, regional solutions to the provision of public services, such as regional power grids and transportation networks, are more cost effective and provide better services and complement national programs.

We support the building of capacity in the fields of public procurement, internal and external audits, managing revenues from natural resources, and enhancing domestic resource mobilization as they are important for resource rich countries in the region. We, therefore, are appreciative of the Bank’s work and interventions in these areas.

However, we do believe that the Bank Group could do more to support economic diversification and job creation, for the Youth especially, by helping to improve the productivity of private enterprises and micro, small and medium-sized agribusinesses as well as supporting economic and structural reforms with the highest impact on improving the business environment.

Finally, we recognize that there are major challenges for the Bank and the Fund to mobilize resources at a time when many donor countries are facing some economic constraints. Nevertheless, we think that we need to keep the momentum and focus on the big picture, which is to help the Bank’s Regional Member Countries transform their economies, create jobs, and reduce poverty. We hope the ADF-13′s replenishment will meet our needs.

Signed in Abidjan: 14 may, 2013

Monsieur Albert TOIKEUSSE MABRI

Gouverneur du Groupe de la BAD et Ministre du Plan et du Développement de la République de Côte d’Ivoire.

Mr. Mohammed M. SHEIRF

Chief economist, Ministry of Finance of the Republic of Liberia


HON. Seth TERKPER

Governor for the AfDB Group and Minister of Finance and Economic Planning of the Republic of Ghana

Mr. Ngouda Fall Kane

Secrétaire général du Ministère de l’Économie et des Finances, Représentant le Gouverneur Amadou Kane, Ministre de l’Economie et des Finances du Sénégal


Monsieur Kerfalla YANSANE

Gouverneur du Groupe de la BAD et Ministre d’Etat chargé de l’Economie et des Finances de la République de Guinée

Mr. Foday MANSARAY

Temporary Governor for the AfDB Group and Minister of State, Ministry of Finance and Economic Development, Republic of Sierra Leone


Distributed by the African Press Organization on behalf of the African Development Bank (AfDB).

SOURCE

African Development Bank (AfDB)

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Global Trade Partners in the 21st Century

Posted on 15 May 2013 by Africa Business

WASHINGTON, May 15, 2013/African Press Organization (APO)/ — Remarks

Robert D. Hormats

Under Secretary for Economic Growth, Energy, and the Environment

World Economic Forum

Pretoria, South Africa

May 14, 2013

 

 

As Prepared

 

Thank you Lyal for the kind introduction.

I am delighted to be in South Africa again. I visited last fall with Secretary of State Hillary Clinton.

What was most striking then, and continues to be the case today, is the extent to which the image of Africa has changed. According to the IMF, growth in sub-Saharan Africa will surge to 6.1% next year, well ahead of the global average of 4%.

Africa is booming in nearly every sector, ranging from massive energy developments in Mozambique, Tanzania, Ghana, and other countries; to the growth of Rwanda and Kenya’s information and communications technology sectors; to South Africa’s thriving auto industry. And, though far from declaring victory, Africa is reaching a turning point in its hard-fought battles against poverty and corruption.

Today’s Africa looks nothing like what, in 2000, The Economist referred to as the “Hopeless Continent.” It is critical that we concentrate the world’s eyes on the new image of Africa, that of progress and promise. Perspectives are evolving—in 2011, The Economist referred to Africa as the “Rising Continent” and, last March, as the “Hopeful Continent.”

Trade is at the heart of Africa’s economic resurgence. So, in this context, I will speak first about America’s vision for global trade in the 21st century and then, focus on implications and, indeed, opportunities for Africa. America’s global trade agenda in the 21st century is shaped by a foundation laid, in large part, in the mid-20th century. After World War II, American and European policymakers worked together to build a set of international institutions that embodied democratic and free market principles.

The GATT—which led to the WTO—World Bank, IMF, and the OECD were designed to foster international economic cooperation. These institutions were vital to the economic prosperity of the United States, and to the success of America’s foreign policy and national security for the next three generations.

As we move into the 21st century, a new multi-polar global economy has surfaced. The emergence of a new group of economic powerhouses—Brazil, Russia, India, and China, of course, but also countries in Africa—has created momentum (if not necessity) for greater inclusiveness in the global trading system.

At the same time, these new players must assume responsibilities for the international economic system commensurate with the increasing benefits they derive from the global economy. In addition to the geography of international trade, the nature of trade and investment has evolved to include previously unimaginable issues such as e-commerce and sustainability.

So, part of our vision for trade in the 21st century is to build a system that is more inclusive, recognizes the new realities of economic interdependence, and matches increased participation in the global trading system with increased responsibility for the global trading system.

We are making progress with bringing new players into the global trading system as equal partners. Free Trade Agreements with Korea, Colombia, and Panama entered into force last year.

And, we are continuing negotiations on the Trans-Pacific Partnership—or TPP as it is more widely known. With Japan’s anticipated entry into the negotiations, TPP will grow to include 12 countries of different size, background, and levels of development. The agreement, when finalized, will encompass nearly 40% of global GDP and one-third of global trade.

In addition to TPP, we are embarking on a Transatlantic Trade and Investment Partnership with the European Union. TTIP—as it is being called—will strengthen economic ties between the United States and Europe, and enhance our ability to build stronger relationships with emerging economies in Asia, Africa, and other parts of the world.

TPP and TTIP are truly historic undertakings. Our objective is not only to strengthen economic ties with the Asia-Pacific and Europe, but also to pioneer approaches to trade and investment issues that have grown in importance in recent years.

These agreements will seek to break new ground by addressing a multitude of heretofore unaddressed non-tariff barriers, setting the stage for convergence on key standards and regulations, and establishing high quality norms and practices that can spread to other markets. TPP, for example, will raise standards on investment and electronic commerce, and afford protections for labor and the environment.

Our agenda also includes strengthening the multilateral trading system through the World Trade Organization. For example, the United States would like to see a multilateral Trade Facilitation Agreement, which would commit WTO Members to expedite the movement, release, and clearance of goods, and improve cooperation on customs matters. A Trade Facilitation Agreement would be a win-win for all parties—Africa especially.

Cross-border trade in Africa is hindered by what the World Bank calls “Thick Borders.” According to the latest Doing Business Report, it takes up to 35 days to clear exports and 44 days to clear imports in Africa. Clearing goods in OECD countries, in contrast, takes only 10 days on average and costs nearly half as much. Countries like Ghana and Rwanda have benefited tremendously from the introduction of trade facilitation tools and policies.

Ghana, for instance, introduced reforms in 2003 that decreased the cost and time of trading across borders by 60%, and increased customs revenue by 50%. A multilateral Trade Facilitation Agreement will create a glide path for increased trade with and within Africa.

Our views for 21st century global trade partnerships go beyond Europe and the Asia-Pacific, and efforts at the WTO. We are committed to supporting Africa’s integration into the global trading system. The cornerstone of our trade relationship with sub-Saharan Africa is the African Growth and Opportunity Act—known as AGOA. Of all of our trade preference programs, AGOA provides the most liberal trade access to the U.S. market.

Exports from Africa to the United States under the AGOA have grown to $34.9 billion in 2012. While oil and gas still represent a large portion of Africa’s exports, it is important to recognize that non-petroleum exports under AGOA have tripled to nearly $5 billion since 2001, when AGOA went into effect. And, compared to a decade ago, more than twice the number of eligible countries are exporting non-petroleum goods under AGOA.

South Africa, in particular, has made great strides in diversifying its exports to the United States. Thanks to AGOA, the United States is now South Africa’s main export market for passenger cars, representing more than 50% of exported value in 2012. Because AGOA is such an important mechanism for African countries to gain access to the U.S. market, the Administration is committed to working with Congress on an early, seamless renewal of AGOA. Our trade relationship with Africa goes beyond AGOA. For instance, AGOA represents only one-quarter of South African exports to the United States. The composition of South Africa’s exports to the United States, moreover, reflects complex interdependencies and industrial goods.

And, our trade relationship with Africa is not just about one-way trade. There is an immense opportunity for U.S. companies to do business on the continent.

We recently launched the “Doing Business in Africa Campaign” to help American businesses identify and seize upon trade and investment opportunities in Africa. The campaign was announced in Johannesburg, in part, because South Africa can play a prominent role in directing U.S. investment into other parts of the continent.

Although progress has been made on diversifying exports beyond energy, there is much more to be done. African ingenuity and entrepreneurship must be unleashed to drive innovation and growth throughout the continent. This requires closer integration to share ideas, transfer knowledge, and partner on solutions. Through AGOA and the “Doing Business in Africa Campaign”, we are promoting a business climate in Africa that enables and encourages trade and investment. However, realizing these goals is goes beyond trade preferences and commercial linkages.

Africa is also featured in America’s vision for global trade in the 21st century.

For example, we recently launched the U.S.-East African Community Trade and Investment Partnership—the first of its kind—to expand two-way trade and investment. The Partnership is designed to build confidence among the private sector by building a more open and predictable business climate in East Africa. We are considering a variety of mechanisms to accomplish this, including a regional investment treaty and trade facilitation agreement. The Partnership highlights our desire to help Africa integrate and compete in today’s global economy.

I will conclude with one final point. I began by saying that trade is at the heart of Africa’s economic resurgence. Trade is also at the heart of America’s economic recovery. We have a common interest and a common goal.

When it comes to enhanced trade, what is good for Africa is good for America. And what is good for America is good for Africa.

Thank you.


SOURCE

US Department of State

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IMF Concludes Article IV Mission to Cameroon

Posted on 15 May 2013 by Africa Business

YAOUNDE, Cameroon, May 15, 2013/African Press Organization (APO)/ An International Monetary Fund (IMF) mission, led by Mr. Mario de Zamaróczy, visited Cameroon during April 29–May 14, 2013 to conduct the 2013 Article IV Consultation. The mission met with Prime Minister Philémon Yang, Minister Secretary General at the Presidency Ferdinand Ngoh Ngoh, Minister of Finance Alamine Ousmane Mey, Minister of Economy, Planning, and Territorial Development Emmanuel Nganou Djoumessi, several other ministers, the Vice Governor and the National Director of the Bank of Central African States (BEAC), other senior officials, and representatives of the private sector, labor unions, civil society organizations, and development partners. The discussions focused on recent economic and financial developments, the 2013 budget, and the economic outlook for 2013 and beyond. At the end of the mission, Mr. de Zamaróczy issued the following statement:

“Recent macroeconomic developments were broadly in line with the projections made at the time of the previous mission in fall 2012. Growth reached 4.4 percent in 2012 (from 4.1 percent in 2011), thanks to a rebound in oil production. Inflation has been moderate, with a 2.4 percent consumer price increase in 2012. Credit to the economy remained subdued and rose by about 2.6 percent.

“Looking ahead, gross domestic product (GDP) growth is projected to accelerate to about 4.8 percent in 2013 and to rise to 5.5 percent a year in the medium term, fuelled by an expected rise in oil production and projected increases in public investment in infrastructure. However, growth would need to be sustained at a higher level for Cameroon to reach its objective of becoming an upper-middle income country by 2035.

“The discussions between the authorities and the mission focused on efforts to spur reforms and set Cameroon on a higher growth path, while mitigating risks to macroeconomic and financial sector stability. The mission recommended closely monitoring public investment in infrastructure to improve its effectiveness and governance. At the same time, the business climate needs to be improved to promote private sector involvement. The mission was encouraged by steps taken to set up the National Public Debt Committee to oversee the financing strategy of public investment plans.

“The mission recommended better allocation of public spending to help close the financing gap in 2013, and improved public finance management to preserve medium-term sustainability and rebuild fiscal space.

“The mission expressed its concern regarding fuel price subsidies. The mission believes that those subsidies are excessively costly and hard to justify, given that only a small share of these subsidies actually benefits the poor. Consequently, the mission encouraged the authorities to phase out these subsidies and replace them with better-targeted social transfer programs.

“The Cameroonian financial sector is saddled with some smaller-size banks that require prompt resolution. The mission encouraged the authorities to move swiftly in cooperation with the regional supervisor, the Commission Bancaire d’Afrique Centrale (COBAC), to protect depositors while minimizing the fiscal cost. The mission encouraged the authorities to accelerate reforms to improve the lending climate. The mission was heartened by the creation of a credit assessment database that will be available in June.

“The IMF’s Executive Board is expected to examine the report on the 2013 Article IV Consultation with Cameroon in June 2013. The mission would like to thank the authorities for their warm hospitality, excellent cooperation, and constructive dialogue.”

 

SOURCE

International Monetary Fund (IMF)

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