UK freeports plan raises illicit trade fears

Sergio Souza, Unsplash

The UK government has promised that a plan to create eight freeports with low-tax zones will boost the post-Brexit economy, but has also sparked fears that they could allow flows of illicit trade into the country.

The designated free-trade zones (FTZs) – due to be created at Felixstowe/Harwich, Liverpool, Hull, Southampton, London Gateway, Plymouth, Teesside and East Midlands airport – will attract investment and job creation in some hard-hit areas of the country, say backers of the proposal, headed by Chancellor Rishi Sunak.

Goods can be landed, stored, handled, manufactured or reconfigured and re-exported at freeports without being subjected to customs tariffs. In addition, companies operating inside the sites will be offered temporary tax breaks, mostly lasting five years.

In the other camp are those who point to the experience with FTZs in other parts of the world in facilitating the trade in things like counterfeit goods and drug trafficking.

In 2018, a report by the Organisation for Economic Co-Operation and Development (OECD) and the EU Intellectual Property Office found that FTZs were linked to a 5.9 per cent rise in the value of counterfeit goods exported from hosting countries.

“These results confirm the anecdotal evidence pointing to the misuse of FTZs to conduct illicit trade, and they should be a prompt for future actions,” it concluded.

Since then, the EU has started to pay more attention to the activities of the 82 FTZs within its borders post-Brexit, launching new rules to crack down on what the European Commission says is a “high incidence of corruption, tax evasion, [and] criminal activity.”

The UK government reckons it can move ahead with its freeport plan without the risk of stimulating illicit trade, based in part on the findings of a report published last year by independent research body the Royal United Services Institute for Defence and Security Studies (RUSI).

That study acknowledges the evidence of criminal activity taking place at freeports around the world, saying it most commonly takes the form of counterfeit goods, drug trafficking, smuggling of untaxed goods or trade-based money laundering.

Those dangers may be mitigated, it says, through careful risk assessment at each geographical location where freeports are established, making sure crime prevention measures are proportional to those risks, and close vetting of businesses wishing to operate in them.

The freeport operators should also be regularly placed under scrutiny to assess their effectiveness in “discharging their security-related responsibilities,” and recommendations laid out by the OECD should also be adhered to.

The latter includes making sure the authorities have access to goods and related documentation, ideally digital, in addition to screening of businesses operating in the FTZ.

In its notice for the tender for freeport operators published last November, the government says operators “must adhere to the OECD code of conduct…and the specific anti-illicit trade and security measures therein,” as well as the UK’s obligations on money laundering, terrorist funding and transparent transfer of funds.

RUSI’s research has shown that a lack of oversight in freeports provides opportunities “to manufacture, assemble, tranship, relabel and repackage illegal goods, including counterfeit medicines, electronics and fashion items.”

It also notes that ‘leakage’ is common, where goods are smuggled from a freeport into a host economy, thus avoiding relevant checks on health and safety standards, import taxes and VAT.

At least seven freeports operated in the UK between 1984 and 2012, when the government stopped renewing freeport licenses and switched its attention to “enterprise zones”, which also provide tax breaks in a bid to encourage industrial growth and community regeneration.

RUSI notes that the US does seem to be able to operate FTZs without increasing the risk of illicit trade, and says it is “reassuring that, for some parts of government at least, tackling economic crime remains top of the agenda.

Critics of the UK plan, including the opposition Labour Party, think there are other downsides as well.

One viewpoint is that rather than growing the economy, the freeports will simply move it around the country, benefitting deprived areas but providing no net gain overall.

Some also argue that the net result will be even worse – a reduction in tax contributions from industry to the treasury – with businesses elsewhere undercut by those operating within freeport. Others meanwhile are concerned that the rights of people working within the FTZs will be diluted.

“If the government thinks freeports are a magic bullet that will create hundreds of thousands of new jobs, bring billions of additional pounds to the Exchequer and radically transform an area it is mistaken,” according to Professor Catherine Barnard, deputy director of UK in a Changing Europe.

“That is not to say they should not be created but the thought they’re going to transform the wealth and prosperity of this country is simply untrue. It will help the regions that get a freeport – but possibly to the detriment of those that don’t.”

Source: Securing Industry, Phil Taylor, 10 March 2021

ICC – Controlling the zone: balancing facilitation and control to combat illicit trade in the world’s free trade zones

Photo by Noel Broda on Unsplash

Herewith a 2020 update of the ICC BASCAP report assessing the environment and highlighting trends in counterfeiting and other forms of illicit trade facilitated within free trade zones.

The Risks

Free Trade Zones (FTZs) provide significant opportunities for legitimate business and play a critical role in global trade as well as economic growth for the host nation.  However, our updated research has continued to confirm that insufficient oversight remains a major enabler of illicit activities.  Since the publication of our previous 2013 report, there have not been vast improvements in limiting criminal activities within FTZs.  In fact, the Covid-19 pandemic has increased vulnerability for abuses by criminal actors who take advantage of supply chain shortages and increased demands as well as relaxed oversight often because of such things as quarantines that have softened Customs control.

Counterfeiters use transit or transhipment of goods, through multiple, geographically diverse FTZs for no other purpose than to disguise the illicit nature of the products. Once introduced into an FTZ, counterfeit goods may undergo a series of economic operations, including assembly, manufacturing, processing, warehousing, re-packaging, and re-labelling. Once completed, the goods can be imported directly to the national territory of the hosting state or re-exported to another country for distribution or to another FTZ, where the process is repeated.

Key recommendations:

Our 2020 report promotes a set of specific policy and legislative recommendations on how to preserve and expand the benefits of FTZs for legitimate traders and protect the public and honest businesses from predatory practices. These recommendations are based on a review of the international and national legal frameworks governing FTZs, including how they are implemented and enforced.

Suggested recommendations include:

  • empowering Customs with jurisdiction over day-to-day operations within FTZs
  • strengthening relationship between Customs and FTZs
  • clarifying and declaring that FTZs remain under the jurisdiction of the national Customs authority
  • enhancing data sharing between Customs and the private sector
  • strengthening national government adherence to international conventions and implementation of international standards
  • legislatively ensuring that strict penalties are in place, including criminal sanctions where appropriate, against perpetrators of illegal activities in FTZs
  • that manufacturers and shippers recognize and use the ICC World Chambers Foundation’s International Certificates of Origin (COs) Accreditation Chain which is a program that accredits chambers of commerce issuing COs wishing to guarantee their commitment to the highest level of quality, implementing transparent and accountable issuance and verification procedures. Accredited chambers will receive a distinctive internationally recognized quality classification, reinforcing their integrity and credibility as competent trusted third parties in the issuance of COs.

Additionally, the new document also provides specific recommendations such as drawing on international agreements, lessons learned from effective and ineffective national legislation, the experience of IP rights holders, and legislative and regulatory measures to enforce intellectual property right protection in FTZs.  These specific recommendations are delineated in the report for action by the World Customs Organization, World Trade Organization, national governments, and FTZ operators. Effective implementation of the measures delineated for each of these bodies will go a long way in securing FTZs from illicit traders.

Download the Document via this hyperlink

Source: International Chamber of Commerce

DTIC Launches New Support System to Address SA’s Export Barriers

The Department of Trade, Industry and Competition (the dtic) launched the Export Barriers Monitoring Mechanism (EBMM) that will put South Africa in a strong position to provide the type of consistent, ongoing support that is needed to continuously improve the country’s export environment. The Department’s e Deputy Director-General of Export Development, Promotion and Outward Investments, Ms Lerato Mataboge said the fundamental aim of EBMM is to make the government’s support to exporters facing barriers more effective, more flexible, and more accessible.

By creating a systematic approach to monitoring these barriers, the government can develop a long-term agenda to target the most important export barriers. By addressing each individual barrier, government can begin to manage each problem with the level of nuance and detail needed for these complex challenges.

During an initial pilot project, 28 key export barriers were processed by the EBMM and during the initial phase of the national lockdown, the EBMM methodology was used to process 76 barriers related to COVID-19. From today, the EBMM is open to any firm that encounters an export barrier of any kind, whether locally or in any foreign market.

In 2018, South African exporters faced an estimated 154,571 unique customs requirements worldwide. Over the last ten years, 23,795 new or amended technical barriers to trade have been registered with the World Trade Organisation; while over the same period 13,364 sanitary and phytosanitary barriers were registered or amended.

DTIC’s priority is to work progressively to smooth these barriers, the experience of the last decade of trade has demonstrated that we need to be prepared to manage this growing complexity. Increasingly, a key component of global competitiveness will be how we manage a constantly changing global trading environment. Managing this environment will only be possible through a close working partnership between the government and the private sector.

Speaking at the same launch, the Executive Director of the South African Electrotechnical Export Council, Ms Chiboni Evans, highlighted the importance of maximising content and projects in the African continent, and the important role played by export barriers in reducing competitiveness in the region.

Persistent logistics barriers meant that transporting goods by road took longer from all our major cities to mines in the Southern African Development Community (SADC) region. It was then easy for these countries to import goods from Asia, Americas and Europe rather than waiting on South Africa.

Highlighting previous experiences of partnering with the dtic to resolve export barriers, Ms Evans noted that a lot of the barriers to export can only be resolved by the private sector working together with government. She added that this new mechanism will assist greatly in opening up government support to a much broader spectrum of private sector individuals.

All export barrier queries can be reported to ExportBarriers@thedtic.gov.za or through the the dtic website.

Source: The Department of Trade, Industry and Competition, August 31, 2020

India revives Preferential Trade Agreement initiative with SACU

Discussions between Southern African Customs Union (SACU) [South Africa, Namibia, Botswana, Lesotho, Eswatini] and India to achieve a Preferential Trade Agreement (PTA) have been revived with the two sides holding a virtual meeting last week to discuss various aspects of the PTA. 

The Indian side at the dialogue was led by Srikar Reddy, Joint Secretary, Department of Commerce while SACU was led by Amb. Steve Katjiuanjo, Executive Director, Ministry of Industrialization,Trade and SME Development of Namibia. 

Reddy underlined India’s historically close ties with Southern Africa and its steadfast commitment to deepen economic engagement with this region. He informed that in 2019-20, trade between India and Africa as a whole stood at $ 66.7 billion, of which the India-SACU trade was $ 10.9 billion with an immense potential to expand further. 

Amb Katjiuanjo called India as a strategic partner for SACU. Trade is currently in SACU’s favour, thus showing that the region is benefiting from access to the vast Indian market. 

Prashant Agrawal, High Commissioner of India to Namibia, said on the occasion that in these unprecedented times of Covid-19 pandemic and its economic challenges, economies of the region, including of Namibia, could vastly benefit by enhanced trade and commercial links with India’s $ 2.9 trillion economy. 

India stood fully committed and ready to support manufacturing and industry in Namibia in areas such as agriculture, irrigation, renewables, ICT, pharma and medical supplies. Both sides reviewed the progress made and discussed steps to quickly move forward on the PTA. 

India-Namibia bilateral trade during 2018-19 was $ 135.92 million with India’s exports valued at $ 82.37 million, while India’s imports stood at $ 53.55 million. Mining sector is an area of mutual interest. Namibia is rich in uranium, diamonds, copper, phosphates and other minerals. Indian technological prowess in IT, engineering, pharmaceuticals, railways and SMEs is of interest to Namibia. Bilateral cooperation in the energy and agricultural sectors also has good prospects. 

Meanwhile exports from India to South Africa include vehicles and components thereof, transport equipment, drugs and pharmaceuticals, engineering goods, footwear, dyes and intermediates, chemicals, textiles, rice, gems and jewellery, etc. Imports from South Africa to India include gold, steam coal, copper ores & concentrates, phosphoric acid, manganese ore, aluminium ingots & other minerals. India-S Africa bilateral trade was $ 10,584.5 million during 2018-19. 

Source: India Times, 19 July 2020

Insight: Transnet import/ export delays harming SA’s competitiveness

The following article provides insight into prevailing problems concerning rail transport between Durban and Johannesburg, in particular containerised and bulk rail cargo. Again, private enterprise is ahead of the game, but must wait for the availability of reliable rail services to permit uninterrupted movement of goods. The bottom line – an under-performing and unreliable railway network to South Africa’s hinterland means the country’s road networks will remain under stress; and, will themselves fall into a state of disrepair. This contributes to the country’s lack of competitiveness. The article puts into perspective the announcement of the Distribution Junxion, Port of Gauteng which will be situated south of Ekurhuleni, where it borders conveniently on the Durban-Johannesburg railway line.

Article: Hurry up/Wait: Transnet import and export delays harming SA’s competitiveness, authored by Sasha Planting, Daily Maverick, 16 February, 2020

Digital Counterfeits? Think again – new break-through in 3D printing

Rize one 3D print

Katrina Megget writing for securingindustry.com has penned the following article which describes the significant strides which the 3D printing has made in recent times. Fears of a proliferation in ‘counterfeit production’ may just be arrested given developments which envisage the ‘embedding of digital rights’ into the 3D printing process.

3D printing has received an upgrade – it can now 3D print secure digital information such as QR codes, which could be used in anti-counterfeiting.

Introduced by Boston-based additive manufacturing firm Rize Inc, the development is the first example of Digitally Augmented Parts; essentially the printing of physical parts with digital information.

3D printing (also known as additive manufacturing), which produces a 3D object by depositing successive layers of a material on top of each other as directed by a computer-generated model, has become one of the fastest growing industries, extending into the toy, automotive, aerospace and medical device sectors, among others.

However, there are concerns that 3D printing could be a threat to brands and businesses through counterfeiting.

Rize’s technology directly addresses this concern by enabling a link between the physical 3D printed product and digital information, thereby integrating Industry 4.0 technologies such as blockchain, augmented reality and virtual reality.

According to the company, the “immutable connection…bridges the gap between the virtual and real world”.

Julie Reece, VP of manufacturing at Rize, explained the technique as embedding ‘Digital Rights Management’ into the functional 3D printed parts “for compliance, authenticity and traceability”.

“A significant challenge in the additive manufacturing industry are parts that are non-compliant due to design changes, piracy, counterfeit and obsolescence, that adversely impact the user and customer experience and result in rework, recalls and loss of brand value,” Reece told 3DPrint.com.

The technology expands on the company’s hybrid 3D printer that it introduced about two years ago. This combines two types of printing to form a multi-material technology that is called Augmented Polymer Deposition (APD), which has been used to make industrial-strength parts such as system components and medical testing equipment.

The enhancement now means 3D printed products can be embedded with secure digital information, such as in the form of a QR code. The QR code can then be scanned and read by a smartphone app, which relays the digital information, such as product, manufacturing and supply chain details, to the user.

Rize said the development is important for 3D parts and components used in more complex, multi-part products because it secures the supply chain and ensures authenticity.

“Additive is a part of a bigger strategy for many companies, which is a digital strategy or an Industry 4.0 strategy but really that digital strategy is not fully realised because when you print the part, the digital link breaks,” Andy Kalambi, president and chief executive of Rize, told TCT Magazine. “The moment the part gets printed on the machine it’s a physical part and there is no digital element left in it. The break of the digital link is a big issue for this industry overall to realise the promise of what is called Industry 4.0.”

On Rize’s website, Kalambi said: “This is the first step towards embedding intelligent capabilities within the part and connecting them through a digital thread into the digital twin of the part. Rize is leading the integration of additive manufacturing into the digital ecosystem, which will redefine the user and customer and experience, and ultimately scale the technology to an entirely new segment of commercial and industrial users.”

The development is a significant breakthrough for industry, which has previously voiced concerns that 3D printing will herald the production of counterfeit copies, emphasising the need for anti-counterfeiting measures.

Last May, scientists from the mechanical and aerospace engineering department at New York University noted there was a need to have anti-counterfeiting features within the computer-aided design model. They suggested a unique combination of processing and printing parameters built into the product’s digital design, which if stolen, would produce a defective product.

Other anti-counterfeiting features suggested for 3D printing include novel material compositions that cannot be easily replicated, or quantum dots, which are nanoparticles embedded in the 3D-printed object that can emit different wavelengths of light and provide a unique manufacturing signature.

Source: securingindustry.com, authored by K. Megget, 10 April 2018, [Picture: TCT Magazine]

Britain – a Free Trade Zone?

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Forget increasing the number of Free Trade Zones at and around UK ports, real thought should be given to whether Britain could become a nationwide FTZ, a panel discussion at Multimodal heard today.

The discussion, organised by the Chartered Institute of Logistics and Transport, weighed the advantages and disadvantages of setting up more FTZs as Britain’s starts its exit journey from the European Union.

While Geoff Lippitt, business development director at PD Ports, said that there was no “desperation for the traditional type of FTZ”, he conceded that as UK ports enter a new post-EU member era, any method that could improve the competitiveness of the nation’s exports should be considered.

Tony Shally, managing director of Espace Europe, added that FTZs would give the UK a great opportunity to bring manufacturing back to the country.

Bibby International Logistics’ managing director Neil Gould went a step further, calling for the creation of a ‘UK FTZ’, to facilitate a joined up environment in which it is easier to move trade. “We need to think how we work together as an industry and how we join everything up to make the UK more competitive,” he said.

However, Barbara Buczek, director of corporate development at Port of Dover, sounded a word of caution, warning that FTZs could actually be detrimental for ro-ros, an important cargo mode for the south UK port. “It’s a great concept, but we also have to be mindful of the guys on the other side who we have to ‘play’ with,” she said, adding that she is “a bit sceptical” about how an FTZ plan could pan out. Originally published by Port strategy.com

DHL’s Trend Report on 3D Printing and Future Supply Chains

dhl-3d-printing-study3D Printing is an interesting invention which foresees some radical developments in the manufacturing and logistics space in years to come. It also suggests that Customs administrators need to monitor these developments as they may likewise have a profound effect on how the actors in this space operate, including possible changes to legislative and compliance models.

DHL has released its latest Trend Report – 3D Printing and the Future of Supply Chains. DHL has been testing a variety of both 3D printing hardware and techniques for several years and has identified applications that have potential to redefine manufacturing and supply chain strategies. While the 3D printing market is estimated to grow between US$180 billion and US$490 billion by 2025, the report however finds it will not become a substitute for mass-production but a complementary process.

Ther report recognizes 3D printing as a transformative technology. However, it is not a magic bullet that will render factory mass production and manufacturing obsolete. Its exciting potential lies more in its capability to simplify the production of highly complex and customizable products and spare parts – and this could bring logistics and manufacturing closer together than ever before.

Also known as additive technology, 3D printing involves manufacturing products by layering heated plastic or metal injected from the nozzle of a 3D printer onto a plate to create a three-dimensional object, potentially replacing processes such as forging and molding at a fraction of the cost. It can lead to improved product quality, multiple products being made by a single printer, new types of products – and new supply chain strategies and models.

Factors currently limiting more widespread adoption of 3D printing – around since the 1980s – include lack of management knowledge, economic and technological issues. Many printers can use only one material and costs are still high for industrial-grade 3D printer. As well as facing warranty, liability and intellectual property issues, 3D printing needs to become faster, more agile and more advanced before it can become a core production technology.

Ther report highlights opportunities for companies to team up with logistics providers offering 3D printing. These areas include ‘spare parts on demand’, a model that would cut enterprise storage costs; ‘end-of-runway services’ for fast production of time-sensitive parts, and ‘product postponement services’ to increase customization options and simultaneously reduce lead time to the customer. Source: DHL

WCO Workshop on Inland Depots in Lao PDR

inland-port-7The World Customs Organization (WCO) organized a National Workshop on Inland Depots under the sponsorship of the Customs Cooperation Fund (CCF)/Japan and the Japan International Cooperation Agency (JICA). It was held from 20 to 22 September 2016 in Savannakhet Province, Lao People’s Democratic Republic.

Twenty six Customs officers from the Lao Customs Administration participated in the workshop, along with guest Customs experts from The Former Yugoslav Republic of Macedonia, Japan and JICA. Mr. Somphit Sengmanivong, Deputy Director General of the Lao Customs Administration, opened the workshop. He highlighted the importance of Inland Depots as a national strategy to secure his country’s economic growth and sought participants’ active participation in the discussions on this topic.

Presently, there is no clear definition of “Inland Depot” and many similar terms, such as Dry Port, Inland Terminal, Free Trade Zone and Special Economic Zones, are used in the international logistics. During the three-day workshop, participants discussed the functions and a possible definition of Inland Depot from a Customs perspective.

AmatiComment – Inland container terminals serve as important hubs or nodes for the distribution and consolidation of imported and export destined cargoes. There are 16 Landlocked countries in Africa, which signifies the importance of hinterland logistics development and its consequential impact on regional trade groupings. Consequentially, it behooves governments to understand and support the logistics supply chain industry in maximizing inland transportation (multi-modal) infrastructures to achieve a common and mutually beneficial economic environment. Furthermore, the more facilitative these arrangements, the better opportunity there is for success and longer-term economic sustainability.

The WCO Secretariat made presentations on international standards for relevant procedures, including Customs warehouses, free zones, Customs transit, inward processing, clearance for home use and temporary admission. Experts from The Former Yugoslav Republic of Macedonia and Japan described their national and regional experience of Customs warehousing, and Customs transit procedures. The JICA expert presented the bonded procedures applied by neighbouring countries to Lao People’s Democratic Republic. Lao Customs administration explained their national system for Inland Depots and a logistics company of Lao PDR shared its expectations on inland depots.

On the last day, participants discussed the challenges and possible solutions to enhance the functional and efficiency of Lao’s Inland Depots. Possible solutions, such as the use of modern information technology, further cooperation with the private sector, clear regulations on relevant procedures, coordinated border management and international cooperation were considered. Source: WCO

Recommended reading

Transnet Seeks Private Sector Participation for new Inland Terminal

Tambo SpringsSouth Africa’s freight and logistics company Transnet this week launched its massive drive to bring private sector operators into the country’s freight system.

The company has issued a request for proposals inviting suitably qualified global logistics service providers to design, build, operate, maintain and eventually hand over its proposed inland container terminal in Tambo Springs, East of Johannesburg – a 630ha site located on land originally known as Tamboekiesfontein farm.

The concession will be over a 20-year period and will be Transnet’s biggest private sector participation project to date.

The proposed terminal is in line with Transnet’s drive to migrate rail friendly cargo off the country’s road network.

The terminal is expected to be in operation by 2019 and will have an initial capacity of 144 000 TEUs per annum, with an option to ramp it up to 560 000 TEUs, depending on demand.

The project entails the following:

  • Arrival and departure yard for handling cargo trains
  • Terminal infrastructure;
  • Terminal equipment;
  • Stacking area;
  • Warehousing space
  • Distribution centre
  • Inland Reefer facilities

Transnet Freight Rail will be responsible for the operation of the arrival and departure yard required to service the terminal.

The operator will be responsible for loading and offloading of containers and marketing of the facility. The winning bidder is expected to introduce new entrants – particularly black players – must have demonstrated technical expertise, a minimum of level 4 BBBEE status with a commitment to reach level 2 by the third year of operation.

Transnet currently operates 5 inland terminals in Gauteng, including the City Deep Container Terminal in Johannesburg, Africa’s largest inland port.

The proposed terminal is an integral part of the Presidential Infrastructure Co-ordinating Committee’s SIP 2, aimed at unlocking the country’s industrial development while boosting export capability. It is designed to complement Transnet’s container-handling capacity in the province.

This is the culmination of years of hard work and a demonstration of cooperative governance between Transnet, representing the national competence, and both the Gauteng Provincial Government and the Ekurhuleni Municipality.

The Tambo Springs terminal is one of three mega terminals that Transnet is planning to build in Gauteng over the next 20 years. It will be located in Ekurhuleni along the N3, just off the Natal Corridor.

The project is expected to create 50 000 jobs, and has stringent requirements for supplier development and skills transfer. Source: Transnet

Zimbabwe’s manufacturing firms insist on ban of import of second hand clothes

2nd hand clothingZimbabwe’s manufacturing firms want government to consider banning the import of second-hand clothes as part of reforms to protect the local industry, Parliament heard on Tuesday.

Used clothes have flooded the domestic market, compounding the woes of a local textile industry on the verge of collapse. Industry experts say Zimbabwe has a market for 80 million garments but only 20 million of those are locally manufactured. Almost 90 percent of imported new clothes are exempt from duty because of regional trade agreements, analysts noted.

Confederation of Zimbabwe Industries (CZI) national council member Jeremy Youmans told a parliamentary portfolio committee on industry and commerce that industry requires access to long-term capital, as well as clarity on the indigenization and empowerment law among other measures to compete on the same terms with foreign companies that have established a foothold in the country.

“Second hand clothing in South Africa is banned, if they catch (anyone selling) they will burn it. Maybe that is something we need to consider,” Youmans said.

“As a clothing industry certainly, we have always said we don’t want to stop it because that clothing is being donated to some people who cannot buy clothes themselves.

“The problem is that they are not going to those people, they are going into our markets and somebody is buying those clothes, it’s a very difficult situation.”

He added that the revival of the cotton industry would be key in boosting capacity of the country’s textile industry.CZI vice-president Sifelani Jabangwe said Zimbabwe should improve its business climate to become competitive by doing away with bureaucracy which drives the cost of doing business.

“One of the challenges is that in order to comply with being formally registered, we have to be registered with a number of bodies depending with the nature of the business and they charge licence fees,” he said.

“When you add up these costs, individually they seem to be so low but when you add them up just to be formally operational it is actually a significant cost to the extent that this causing other businesses to close down.”

South Africa Economic Update – Focus on Export Competitiveness

WB-South Africa-Export CompetitivenessThe report, South Africa Economic Update 5: Focus on Export Competitiveness, examines the performance of South Africa’s export firms against that of peers in other emerging markets— and analyzes the challenges. It assesses South Africa’s economic prospects in the context of the global economic environment and prospects.

With this Economic Update, we hope to enrich the on-going debate on growing a sector critical for South Africa’s economic growth. As with previous editions, this report is intended not to be prescriptive but to offer evidence-based analysis that will help bring South Africa’s policymakers, researchers, and export stakeholders closer to finding innovative and sustainable ways to grow the sector. The report highlights opportunities for growth, particularly with Sub-Saharan Africa being the largest market for non-mineral exports. It also explores strategic directions that can ignite export growth and help South Africa realize its goals of creating jobs and reducing poverty and inequality.

The report identifies three areas that present opportunities to promote the competitiveness and spur the growth in South Africa’s export sector:

  • Boosting domestic competition would increase efficiency and productivity. By opening local markets to domestic and foreign entry, South Africa would enable new, more productive firms to enter and place downward pressure on high markups. This would lower input costs and tip incentives in favor of exporting by reducing excess returns in domestic markets. Competition would also stimulate investment in innovation and, over time, condition the market to ensure that firms entering competitive global markets have reached the productivity threshold to support their survival and growth.
  • Alleviating infrastructure bottlenecks, especially in power, and removing distortions in access to and pricing of trade logistics in rail, port, and information and communication technologies would reduce overall domestic prices and further enhance competitiveness. It would be especially beneficial for small and medium-size exporters and non-traditional export sectors, which these costs tend to hit harder.
  • Promoting deeper regional integration in goods and services within Africa would generate the right conditions for the emergence of Factory Southern Africa, a regional value chain that could feed into global production networks. South Africa could play a central role in such a chain, leveraging the scale of the regional market, exploiting sources of comparative advantage across Africa to reduce production costs, and providing other countries in the region a  platform for reaching global markets. Progress on all three fronts would help catapult South Africa toward faster-growing exports, allowing it to realize the higher, more inclusive, job-intensive growth articulated in the National Development Plan.

Source: World Bank

The Material Footprint of Nations and ‘True’ Material Cost of Development

High Density Container Terminal  (Picture credit - Getty Images)

High Density Container Terminal (Picture credit – BBC News/Getty Images)

Thanks to the kind reader who passed me this story. BBC News Environment correspondent, Matt McGrath, reports that current methods of measuring the full material cost of imported goods are highly inaccurate. In a new study, researchers have found that three times as many raw materials are used to process and export traded goods than are used in their manufacture.

Richer countries who believe they have succeeded in developing sustainably are mistaken say the authors. The research has been published  (click hyperlink to access the report) in the Proceedings of the National Academy of Sciences.

Many developed nations believe they are on a path to sustainable development, as their economic growth has risen over the past 20 years but the level of raw materials they are consuming has declined.

According to  Dr Tommy Wiedmann University of New South Wales “We are saying there is something missing, if we only look at the one indicator we get the wrong information”. This new study indicates that these countries are not including the use of raw materials that never leave their country of origin.

The researchers used a new model that looked at metal ores, biomass, fossil fuels and construction materials to produce what they say is a more comprehensive picture of the “material footprint” of 186 countries over a 20 year period.

“The trade figure just looks at the physical amounts of material traded, but it doesn’t take into account the materials that are used to produce these goods that are traded – so for something like fertiliser, you need to mine phosphate rocks, you need machinery, so you need extra materials.”

In this analysis, the Chinese economy had the largest material footprint, twice as large as the US and four times that of Japan and India. The majority comes from construction minerals, reflecting the rapid industrialisation and urbanisation in China over the past 20 years.

The US is by far the largest importer of these primary resources when they are included in trade. Per capita, the picture is different, with the largest exporters of embodied raw materials being Australia and Chile.

According to the model, South Africa was the only country which had increased growth and decreased consumption of materials.

The researchers believe their analysis shows that the pressure on raw materials doesn’t necessarily decline as affluence grows. They argue that humanity is using natural materials at a level never seen before, with far-reaching environmental consequences.

They hope the new material footprint model will inform the sustainable management of resources such as water. The authors believe it could lead to fairer and more effective climate agreements.

“Countries could think about agreements where they help reduce the emissions at that point of material use,” said Dr Wiedmann. “That’s where it is cheapest to do, where it is most efficient, where it makes more sense.” Source: BBC News

Why Do We Import Cure-Dent From China?

The following article is a lesson for all aspiring enterpeneurs on the African continent.

I got curious about the small, mostly unnoticed item in Kigali, what we like to call ‘cure-dent’, the tooth pick. This is how I stumbled onto the fact that we import toothpicks. Yes we import toothpicks from China. Toothpicks here are a symbol for all the things we could make ourselves but import.

toothpicksIt got me wondering – just how complicated is it to make a toothpick? Firstly, toothpicks are made from bamboo and we have plenty of that in Musanze. In any case bamboo can be cultivated. It grows fast and there are new genetically modified reach heights of over 15 metres. A little time on Google showed me that it does not take very much to make them. Indeed the whole process can be done in a woodwork workshop. The process from splitting the bamboo to sharpening the toothpicks takes less than half an hour. That is about 100 packets of toothpicks.

The reason we give for imported stuff is supposedly because we do not have the technology required to make it. This is clearly not true in this case, and, I bet, in the case of a lot of other imports.

Toothpicks are very cheap. They go for between Rwf100 and Rwf500 for each small packet. This is after all the manufacture, freight, taxes and, of course, the shopkeeper’s profits have been considered. Maybe this is why we consider it not to be a profitable venture. Would making toothpicks be profitable? The answer is yes. Let us consider two reasons.

One – the Chinese are not known for time wasting. If they would engage in this enterprise to this extent, they must be something in it. Two – consider being able to make 100 packs of toothpicks in half an hour.

That makes 200 per hour and 1600 per eight hour day (you are by no means tied to this. If you sell them at Rwf50 per pack, you will be grossing Rwf80,000 per day. Now that is profit!

Where is the market? Are we not in the East African Community? We have to start exporting beyond the agricultural produce. Why is urwagwa and akabanga not on the shelves of Kenyan, Ugandan, Tanzanian and Burundian shops?

Why are we always importing? If we are importing toothpicks what do we not import? Unfair Balance of Trade and its accompanying Balance of Payments in addition to aid dependency are the main propagators of poverty in our country. They give us aid… .we use it to buy their products, down to toothpicks!

If we are to make it to self-sufficiency we have to manufacture and export. The journey to self-sufficiency must precede self-reliance. As Bob Marley would say, “We gotta be conscious”.

Article by Sam Kebongo writing for the Rwanda New Times.

Free zones – the potential pitfalls

sezFree zones are often seen as a cure-all remedy to the problems developing economies encounter when trying to attract FDI. However, the reality is that such projects need careful planning and long-term support if they are to fulfil such wishes. A report published by fDI Magazine, and featured online – fdiintelligence.com – covers the topic quite comprehensively. While the article it is titled ‘Free Zones’ it’s not quite certain whether all developments sited follow the same business model. Nonetheless it provides some interesting insight to developments across the globe. Of particular interest for Africa are references to developments in Rwanda, Botswana, and the Gambia. In the case of the latter, the Gambian government’s decision to legally enable companies to operate as standalone zones, whereby businesses are permitted to enjoy the benefits of being a ‘free zone’ entity without having to establish in the country’s business park, could enable Gambia to attract investors who wish to have a greater degree of choice over the location of their premises.

Some of the key messages of the article come in the form of cautionary’s –

“the ‘build it and they will come’ assumption over SEZs will not guarantee investor interest”

“while governments are quick to launch them with great fanfare, a lack of on-going support afterwards hinders the zone from developing to a competitive and world-class standard…many projects remain just that – a project”

“while the idea of clustering several companies from a few specific sectors sounds promising on paper, in practice this can be detrimental to foreign enterprises”.

Read the full report here!