As Africa’s free trade area takes effect, focus is now shifting to how Kenya can strategically angle itself in order to reap maximum benefits.
The African Continental Free Trade Agreement (AfCFTA), which will allow free movement of goods from one country to another, was signed by 44 African states including Kenya in Kigali earlier this year.
The agreement, said to be the largest since the creation of the World Trade Organisation (WTO), aims at boosting intra-Africa trade by making Africa a single market of 1.2 billion people with a cumulative gross domestic product of more than $3.4 trillion.
For businesses, the CFTA commits governments to remove tariffs on 90 per cent of goods produced within the continent and phase out the levy in the future.
President of the African Export-Import Bank (Afreximbank), Benedict Oramah says Kenya and other African nations must implement initiatives that will add meaning to the free trade agreement.
“We need to implement initiatives that will add meaning to that singular event, initiatives that will catalyse a strong production and industrial base for production of export manufacturing, initiatives that will improve our knowledge of, and access to, trade and investment information and initiatives that will facilitate movement of goods across borders in competitive terms,” Prof Oramah said.
The regional pact aims to also establish a single market that will spur industrialisation, infrastructural development, economic diversification and trade.
The new agreement is expected to increase intra-Africa trade beyond the current 13 per cent and improve the prospects of the African continent to attract huge investments.
Kenya has already embraced the free trade pact with the government indicating the creation of the AfCFTA provides new export opportunities for African products whose combined GDP stands at $3 trillion (about Sh300 trillion), covering over 1.2 billion people.
In May this year, President Uhuru Kenyatta urged African countries to relax rules on movement of people and goods between member states to increase trade. Only 12 per cent of Africa’s trade is between countries.
President Kenyatta would later in June join other African heads of state and government in Kigali, Rwanda, to sign the agreement to create the regional trade pact.
“The agreement also covers issues on non-tariff barriers, technical barriers to trade, customs procedures and a framework on transit issues between countries,” said the Kenyan Presidency in a statement by the PSCU then.
Kenyan firms expect the local manufacturing sector to get a new growth stimulus when the Africa-wide trade pact that provides access to a big market is implemented. Countries under the new trading bloc boast a combined GDP of over $1-trillion in the new bloc.
“The Continental Free Trade Area agreement provides an opportunity for Kenya to become a manufacturing hub for Africa and this needs to be harnessed,” said Kenya Association of Manufacturers (KAM) chief executive Phyllis Wakiaga earlier.
The new agreement creates a borderless Africa in terms of trade in goods, services, jobs, investment, free movement of people, intellectual property rights and competitiveness.
A massive gap in trade finance amounting to $90 billion (Sh9.1 trillion) is however among the major limitations of realising the full impact of the free-trade area in Africa, global ratings agency Moody’s warned earlier in a report.
Other factors that could limit the accomplishment of the objectives of the African Continental Free Trade Area are the continent’s under-developed infrastructure and non-tariff barriers.
But according to Prof Oramah the signing of the AfCFTA has sent a strong message to the world that Africa is ready to chart “a new path, a path to economic independence and a willingness to look inward for industrial growth.”
He says that Afreximbank was working to promote the emergence of robust continental supply chains and expressed confidence that the networking opportunities at the IATF would become a “potent force to begin to dismantle the well laid colonial structures that have disintegrated Africa for close to a century.”
Prof Oramah spoke at the first-ever Intra-African Trade Fair (IATF) held in Cairo, Egypt.
The IATF, organised by Afreximbank, in collaboration with the African Union, and hosted by the Government of Egypt, attracted about 70,000 visitors.
Former Nigerian President Olusegun Obasanjo, who is also chairman of the IATF advisory council, described the trade fair as a crucial instrument in making the AfCFTA work.
He says that Africa should focus on “what trade is needed, where the markets are, the size of, and the standards in, those markets, and how to join the value chains that serve them”.
“It is our duty to create the environment where the entrepreneurial spirit of Africans can succeed,” he said.
“Stronger economies yield the rewards of better health, education, improved employment opportunities and prosperity for all. I want our future generations to have greater expectations, greater choices and greater opportunities to succeed. It should be their right and I want this to become the norm rather than the exception.”
Moody’s says the regional pact which aims to create a single African market for goods and services, could boost intra-regional trade, which remains far lower than in developing Asian countries.
“There is significant potential for further trade integration in Africa, which the AfCFTA could stimulate,” said Colin Ellis, Moody’s managing director, credit strategy.
“This could improve the region’s credit profiles, given the greater stability and sophistication that intra-regional trade could offer compared with traditional commodity exports to the rest of the world.”
According to the Oxford Business Group, Kenya’s exports are projected to increase by over Sh10.2 billion ($100 million) following full implementation of the free trade pact.
The group notes that with 41.2 per cent of Kenya’s exports destined for free trade pact member states in 2011, compared to the 13.4 per cent share of imports from the same zone, Kenya enters the bloc from a position of relative strength.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.