The United Kingdom (UK) and members of the Southern African Customs Union (SACU) have agreed to continue discussions to explore ways to ensure that the existing trade arrangement between the UK and SACU currently governed by the EU-SADC EPA will not be disrupted by the UK’s departure from the EU.
This effectively means almost all the terms and conditions of SACU’s current trade agreement with the EU – known as the SADC Economic Partnership Agreement (EPA) – would be adopted into a new trade arrangement with the UK. According to a statement signed by Botswana’s Minister of Trade Industry and Investment, Vincent Seretse and Minister of State at the Department for International Trade, United Kingdom, The Lord Price CVO, talks are likely to focus on steps to agree an arrangement that replicates the effects of the EPA once the UK has left the EU.
“This would be a technical exercise to ensure continuity in the trading relationship, rather than an opportunity to renegotiate existing terms,” reads the statement. Ministers responsible for Trade Policy in the United Kingdom (UK), the Lord Price; Botswana, V T Seretse; Namibia, I Ngatjizeko; South Africa, Dr. R Davies; Swaziland, J C Mabuza; Lesotho Permanent Secretary of Trade and Industry, Mr F Notoane, representing the Minister of Trade; and the High Commissioner of Mozambique to South Africa, Mr P Macaringue met in Johannesburg on Wednesday 19 July 2017, to discuss the trade relationship between the UK and the Southern African Customs Union (SACU) countries, post Brexit.
The Economic Partnership Agreement (EPA) between the SADC EPA countries (Botswana, Lesotho, Namibia, Mozambique, South Africa and Swaziland) and the European Union (EU) was signed on 10 June 2016 in Kasane, Botswana. The EU-SADC Economic Partnership Agreement (EU-SADC EPA) provisionally entered into force between the SACU countries and the EU on 10 October 2016. While the UK remains a member of the EU, the EU-SADC EPA will continue to apply to trade between the SADC EPA countries and the UK.
“The UK is in the process of exiting the EU. The SACU Ministers welcomed the UK’s intention to avoid disruption for its trading partners as it withdraws from the EU. The UK re-affirmed its commitment to the trade arrangement under the current EU-SADC EPA and to maintain current market access to the UK following its withdrawal from the EU, and to ensure continuity of the effects of the EU-SADC EPA,” reads Seretse and the Lord Mark Price.
The Brexit discussions officially began this week, amid scepticism by many Britons and others that the UK will in fact leave the EU. After last year’s referendum in favour of leaving, many Britons are believed to have had second thoughts, largely because of the negative impact the prospect of Brexit has already had on the country’s economy.
UK trade minister Mark Price today dismissed the possibility of a reverse on Brexit, noting that in the recent general election, 85% of Britons had voted for parties which supported a divorce from the EU. He added that many people thought Britain’s decision to leave the EU was a sign of an inward-looking and protectionist attitude. The truth was exactly the opposite, he insisted. “We want to use the opportunity of leaving the EU to become Global Britain,” he said. The UK would trade even more with the world, to help lift people from poverty. Once the UK had dealt with the business of leaving the EU, it would seek to negotiate even better trade deals with all its partners, including SACU and SADC.
Implications of Brexit
Gerhard Erasmus writing on ‘Some Implications of Brexit for Southern African Trade Relations’ in the Tralac Trade Brief notes that exit from the EU means that most aspects of secure international agreements, including the multilateral systems of the World Trade Organization (WTO), will now have to be renegotiated.
“Apart from the huge demands on national technical capacity (which is said to be lacking), most of these negotiations will involve unknown territory and will take a long time to complete. There has never been an exit from the EU before. The uncertainty will linger and cause considerable damage to domestic and international markets and commerce.”
Erasmus further states that an exit from the European Union would also have dire consequences for development assistance. In a recent article, Kevin Watkins, a Brookings nonresident senior fellow and executive director of the Overseas Development Institute (ODI)—an international development think tank based in London— highlights the consequences of the Brexit on development assistance.
He notes that the U.K. is one of the biggest contributors to the European Development Fund, the EU’s development assistance arm, which provides funds to developing countries and regions. The U.K. currently contributes £409 million—$585 million— making up 14.8 percent of contributions to the fund (Figure 1). The fund is one of the world’s largest providers of multilateral concessional aid, with disbursements exceeding ones channeled through the World Bank’s International Development Association (IDA).
Speaking at an investment symposium on the future of Botswana exports to EU markets post Brexit and implications for trade relations earlier this year, the EU head of delegation to Botswana and SADC, Mr Alexander Baum observed that Botswana’s priority area should be to increase investments in Botswana in non-mining production. Baum noted that the economic implications of the Brexit, for the UK, EU and all third countries were difficult to assess as long as details of the exit agreement were unknown.
According to the EU Head of Delegation, the EU without the UK would contain 445 million consumers and a GDP of 16.6 trillion USD, which still made it the second largest economy after the US. Even without the UK, EU imports US$ 6.7 trillion in goods and services, which made it the largest export market for a larger number of countries. Baum had said the trade statistic for Botswana and the EU was by itself not easy to read.
"Notably many products that come to Botswana through South Africa are not recorded as trade between the EU and Botswana. The current trade flows and notably the exports are also not diversified. Botswana imports from Europe mainly semi-manufactured and manufactured goods, transport equipment and machinery including electrical machinery and chemicals including pharmaceuticals.
Botswana exports essentially diamonds, other mining products and beef. Beef represents by itself only 1.7 per cent of Botswana's exports in 2015 according to Bank of Botswana data and is exported to Europe mainly via the UK and Norway," he concluded. The same case applies for the UK, as Botswana exports mainly diamonds and beef.
Strategic partnership offers inherent benefits of global knowledge, African insights, and local expertise and commitment
Minet Group and Africa Lighthouse Capital today announced that they have received regulatory approval and fulfilled all requirements to acquire Aon’s shareholding in Aon Botswana, and consequently will begin the process to rebrand to Minet Botswana.
Minet Group is a well-known and trusted pan-African risk advisory firm and Aon’s largest Global Network Correspondent and has been rapidly expanding its African footprint since 2017 through the acquisition of operations from global professional services firm Aon in Kenya, Lesotho, Malawi, Mozambique, Namibia, Tanzania, Uganda, and Zambia. Minet has been delivering world class products and services across Africa for over 70 years.
Africa Lighthouse Capital (ALC) is a leading Botswana citizen-owned private equity firm focused on investing in Botswana companies and propelling them into regional champions, with over BWP 500 million in funds under management.
The new entity will be rebranded to Minet and will inherit deeply rooted respect by its clients for their innovative and locally relevant solutions, responsiveness, and efficient processes. Furthermore, it shall have the benefit of consistency in leadership and staffing, with Barnabas Mavuma, previously Managing Director of Aon Botswana, continuing to lead the business as the MD supported by the local management team.
“The addition of Minet Botswana to our growing African network affirms our belief in the great opportunities for growth that Africa offers, driven by rising consumer demand, huge investment in infrastructure and quick adoption of new technology,” says Joe Onsando, CEO at Minet Group.
“This transaction significantly adds to the diversity and skills base of our team and will have a positive impact on the range of products and services we provide. Our Correspondent agreement with Aon gives us access to global expertise and data driven insights and uniquely positions us to deliver risk advisory solutions that reduce volatility, thus driving improved performance for our clients. This is a very exciting time to be Minet in Africa.”
“The significantly increased Botswana citizen shareholding effected by this transaction gives rise to an exciting era of local market focus and growth for Minet Botswana,” says Bame Pule, Founder and CEO of Africa Lighthouse Capital. “We intend to work with Minet Botswana’s local management team to further localise the business in terms of product development, while at the same time investing in local skills development and business development. We look forward to this exciting journey, which will result in a significantly enhanced service offering for Minet Botswana’s clients.”
Consequently, and similar to the other members of the Minet Group, Minet Botswana becomes an Aon Global Network Correspondent, retaining its access to Aon’s resources, technology, and best practises, combined with the benefit of independent, local agility. This transaction furthermore significantly increases local shareholding, enabling operations to become even nimbler and better positioned to unlock new and existing growth opportunities.
Clients of Minet Botswana will experience continuity of product and service delivery standards in the short term. In the near future, they can expect an enhanced offering that combines agility with technology and product innovation, tailormade for their specific needs.
Together, Minet and ALC bring a sound understanding of local market conditions, strong governance, and an established track record in the region. These qualities, combined with Aon’s global capabilities and expertise, will bring clear benefits for clients.
This transaction vastly increases citizen ownership with shareholders who are going to be active in the business. The transfer of equity interests in Botswana to investors with local and regional expertise, presence and commitment will allow the businesses to move quickly in line with market movements, and to introduce products that are tailored to the local market.
“Minet’s commitment and drive to incessantly adapt to changing market conditions, and to innovate to meet the unique insurance demands of the African continent, while maintaining the high standards customers have come to expect – Onsando concludes – will continue to grow and give Minet a powerful competitive edge within the African market”.
French President Emmanuel Macron received 21 Heads of state and government officials from Africa during the recent summit on the Financing of African Economies that focused on Africa to take full advantage of the tectonic shifts in the global economy and the call for a joint effort for financial and vaccination support for the continent.
President Emmanuel Macron stressed that “Most regions of the world are now launching massive post-pandemic recovery plans, using their huge monetary and fiscal instruments. But most African economies suffer the lack of adequate capacities and such instruments to do the same. We cannot afford leaving the African economies behind.
We, the Leaders participating to the Summit, in the presence of international organizations, share the responsibility to act together and fight the great divergence that is happening between countries and within countries.
This requires collective action to build a very substantial financial package, to provide a much-needed economic stimulus as well as the means to invest for a better future. Our ambition is to address immediate financing needs, to strengthen the capacity of African governments to support a strong and sustainable economic recovery and to reinforce the vibrant African private sector, as a long-term growth driver for Africa.”
For her part, International Monetary Fund (IMF) Managing Director Kristalina Georgieva highlighted that “there is urgency to focus on financing Africa. Last year, the pandemic-caused recession shrank the GDP of the Continent by 1.9 percent – the worst performance on record. This year, we project global growth at 6 percent, but only half that 3.2 percent for Africa.” Adding that Africa needs to grow faster than the world at 7 to 10 percent to meet the aspirations of its youthful populations, and become more prosperous and more secure.
Georgieva revealed that the price tag on the shot is estimated to be “$285 billion through 2025. Of this $135 billion is for low-income countries. This is the bare minimum. To do more – to get African nations back on their previous path of catching up with wealthy countries – will cost roughly twice as much. These are large numbers. They may seem out of reach. But to quote Nelson Mandela: impossible until it is done.”
The main areas of interest to achieve this include; first, end the pandemic everywhere, 40 percent of the population of all countries is targeted to get vaccinated by the end of 2021, and at least 60 percent by mid-2022.
Second, bilateral and multilateral developmentfinancing grants and concessional loans ought to go up. Over the last year, the IMF have swiftly ramped their financing for the Continent, including providing 13 timestheir average annual lending to sub-Saharan Africa. And are working to do much more. The IMF has also received support to increase access limits so they can scale up their zero-interest lending capacity through the Poverty Reduction and Growth Trust.
The IMF has also devised exceptional measures. Their membership backs an unprecedented new allocation of Special Drawing Rights (SDR) of $650 billion, by far the largest in their history.Once approved, which is intended to be achieved by the end of August, it will directly and immediately make about $33 billionavailable to African members. It will boost their reserves and liquidity, without adding to their debt burden.
Over the course of the last year, the IMF has built experience in facilitating the on lending of SDRs – thus managing to triple their concessional lending capacity as a result.
The Third being, actions at home. According to Georgieva “a crisis is an opportunity for transformational domestic reforms that increase domestic revenue, improve public services, and strengthen governance. For instance, digitalization can improve tax administration and revenue collection, and the quality of public spending. And with radical transparency, Africa can tap into new sources of finance – such as carbon offsets.
There is ample scope for countries to encourage private investment, including in social and physical infrastructure. New IMF research, published today, highlights that domestic and international investors could provide at least 3 percent of GDP per yearof additional financing by the end of this decade.”
Reforms of international taxation can also support Africa’s growth. For a long time, the IMF has been in favor of minimum corporate tax rates to reduce the race to the bottom and tax avoidance. And they strongly support an international agreement on digital tax, something France has been a leading voice for. It is important to secure fair distribution of tax revenues, so they can contribute to closing Africa’s financial gap.
Georgieva called on to each and every one to step up. Reminding the attendees that from history they are all familiar with what a shock of this magnitude can do if not countered forcefully and effectively.
De Beers’ Group, the world’s number one diamond producer by value, this week attributed the downfall of its sales for the fourth cycle week to the second wave of the Covid-19 variant (B.1.617.2) which was first discovered in India.
Diamond trading conditions have been hit by the Covid-19 crisis in India which is a major cutting and polishing centre for the world’s diamond trade.
The outbreak of the new variant has led to a humanitarian crisis with 280, 284 fatalities of the disease reported.
The London headquartered company said the sales in its fourth cycle fell to $380m (about P4.1 billion) down from $450m (about P4.8 billion) in the third cycle though it was higher than the fifth cycles of last year when the group shifted only $56m (P600 million).
De Beers emphasized that they continued to implement a more flexible approach to rough diamond sales during the fourth sales cycle of 2021, with the Sight event extended beyond its normal week-long duration.
The De Beers group Chief Executive Officer (CEO), Bruce Cleaver said the company continues to see robust demand for diamond jewellery in the key US and China consumer markets.
“However, the scale of the second wave of Covid-19 in India, where the majority of the world’s diamonds are cut and polished, has led to reduced midstream capacity and subsequently lower rough diamond demand, during what is already a seasonally slower time of year for midstream purchases,” said Cleaver.
Meanwhile Botswana health officials have confirmed the new Covid-19 variant in Botswana. The Ministry of Health and Wellness -through a press statement- informed members of the public that the variant (B.1.617), was confirmed in Botswana on 13th May 2021.
According to Christopher Nyanga, spokesperson at the Ministry, this followed a case investigation within Greater Gaborone, involving people of Indian origin who arrived in the country on the 24th April 2021.
Moreover the World Health Organization (WHO) recently announced that the Indian Covid-19 variant was a global concern, with some data suggesting that the variant has “increased transmissibility” compared with other strains.
The India variant (B.1.617.2) – is one of four mutated versions of the coronavirus which has been designated as being “of concern” by transitional public health bodies, with others first being identified in Kent, South Africa and Brazil.
Nevertheless when speaking at Bank of America Global Metals and Mining conference, Anglo American Chief Executive Officer, Mark Cutifani said the company portfolio is increasingly tilted towards future enabling products and those that need to decarbonise energy and transport in order to meet consumers’ needs – from home appliances, electronics and infrastructure, to food and luxury goods.
“We see material opportunity for Anglo American to continue to set itself apart in terms of the performance of our diversified business, further enhanced through sector-leading 25% volume growth over the next four years, led by copper and the platinum group metals,” said Cutifani.
“Most importantly, as the supplier of such critical materials, it is the duty of our industry to ensure that in everything we do, we act responsibly and deliver enduring value for our full breadth of stakeholders, including our planet.”