Tax Deal Sets Ground to Collect at Least 15 Percent Tax on Online Sales
A new global tax agreement will allow low-income countries to collect taxes from multinational companies with a physical presence in foreign countries but whose products are sold in countries where such multinationals have no physical presence. Under the new arrangement, if a country has a physical presence in Europe or another country but sells its products through online platforms, such a company will be required to pay taxes in the country where its products have been sold. The agreement also introduces minimum tax rates of 15 percent below which no country will be allowed to charge tax rates.
This, the agreement says, will prevent multinational companies from migrating from countries with higher tax rates to countries with lower tax rates. Currently, it is estimated that between USD 100 billion and USD 240 billion about 4 percent to 10 percent of global corporate income taxes in revenue is lost each year because multinational companies take advantage of gaps and mismatches between different countries’ tax systems. Africa loses approximately USD 50 billion each year through illicit financial activities of multinationals and wealthy individuals, and approximately USD 88.9 billion in capital flight. Source: Monitor
Full Speed Ahead with Digital Connectivity and Equiano
Google’s state-of-the-art Equiano submarine cable is expected to be operational by end of 2022, as the infrastructure installation project proceeds. Equiano is Google’s 14 000 kilometre submarine cable that will run from London to Cape Town, with other confirmed landing points being Portugal, Nigeria, Namibia and St Helena. Other countries will be able to join the network in the future. The cable project was announced in 2019 and was originally scheduled to go into operation in 2021. The latest update is that the cable will probably be operational by year-end, and no doubt the delay is due to the long COVID-19 lockdowns.
Togo celebrated its landing recently – the first in Africa – while the Namibian landing station is ready and waiting, having been completed recently. Equiano is fully funded by Google and is part of its USD 1 billion investment in building digital capacity on the continent. It will provide fifth-generation 5G service and “20 times more network capacity” to West Africa and the Southern African Development Community than these regions currently enjoy. It will also ensure more available and more affordable broadband on the continent, reducing internet prices. It is the second submarine cable to run the length of western Africa, with the West Africa Cable System (WACS) running from London to South Africa and connecting 15 countries. Source: The Media Online
AfCFTA to Significantly Increase Traffic Flows on All Transport Modes
The African Continental Free Trade Area will boost intra-African trade by around 40 percent, with substantial benefits to the transport sectors, according to the latest estimates by the Economic Commission for Africa. If fully implemented the AfCFTA is therefore expected to significantly increase traffic flows on all transport modes: road, rail, maritime and air. It will also increase transport equipment needs significantly for all modes of transport.
The ECA’s estimates on investment opportunities in the transport sector as a result of full implementation of the AfCFTA were released by the African Centre for Statistics and Private Sector Development and Finance Division at the commission’s 6th webinar for ministers of Finance of African member states on 7 April in Addis Ababa, Ethiopia. While presenting the findings, Robert Lisinge, chief, Energy Infrastructure and Services Section in the Private Sector Development and Finance Division of the commission said if the AfCFTA is fully implemented intra-African trade in transport services has the potential to increase by nearly 50 percent. Source: ECA
AAAM, Afreximbank sign MoU to Boost Africa Automotive Investment
The African Export-Import Bank and the African Association of Automotive Manufacturers have signed a Memorandum of Understanding for the financing and promotion of Africa’s automotive industry. Afreximbank President Benedict Oramah and AAAM President Mike Whitfield signed the MoU in early February, formalising the basis for a partnership. It is aimed at boosting regional automotive value chains and financing for the automotive industry while supporting the development of enabling policies, technical assistance, and capacity building initiatives. Oramah said, “The strategic partnership with AAAM will facilitate the implementation of the Bank’s Automotive programme, which aims to catalyse the development of the automotive industry in Africa as the continent commences trade under the African Continental Free Trade Area (AfCFTA).” Source: DailyNewsEgypt
African Startups Drew Record USD 5.2 Billion in Venture Capital Last Year
African start-ups attracted a record USD 5.2 billion in venture capital last year, bouncing back from a pandemic-induced dip in 2020 with a nearly five-fold increase in investments, according to data released by an industry group on Tuesday. The success of companies like Nigeria’s Paystack, acquired in 2020 by U.S. payments firm Stripe, and fellow fintech Flutterwave, valued at over USD 3 billion, has fuelled international interest in up-and-coming businesses on the continent. “African startups raised more in 2021 alone than the preceding seven years combined,” the African Private Equity and Venture Capital Association, which promotes private investment on the continent, wrote in a report.
Much of the investor focus has been on fintech start-ups seeking to meet the needs of the continent’s largely unbanked population. The data compiled by AVCA showed the financial sector accounted for 60 percent of the investments by value and nearly a third of deals by volume. Nigeria, a hotbed of new fintech firms, was the leading destination for venture capital in Africa last year, surpassing South Africa, the continent’s most developed economy. Source: Reuters
Afreximbank Launches USD 4 Billion Ukraine Crisis Adjustment
Trade Financing Programme for Africa The Board of Directors of African Export-Import Bank approved the launch of the Ukraine Crisis Adjustment Trade Financing Programme for Africa, a programme of credit facilities that the Bank has developed to manage the impacts of the Ukraine crisis on African economies and businesses. The programme amounts to USD 4 billion.
The Russia-Ukraine crisis which escalated on 24 February 2022 has had a significant effect on the global economy. Given the importance of both Russia and Ukraine as sources of crude oil and gas, raw materials and grains, the outbreak of the conflict has wider repercussions on a global scale, including adversely affecting African economies, especially those that rely heavily on grain, fertilizer and fuel imports. Source: Afriexim Bank
The 1 000 Km Road that will Reshape the African Economy
Africa is ramping up efforts to upgrade connections between its main cities and hubs, through ambitious infrastructure projects led by regional blocs, with the latest project due to reach completion in 2025. The African Development Bank recently announced it had secured the USD 15.6 billion necessary to fund a “game-changing” West African highway. The East African Community has six cross-border road projects, totalling 1504 km, while the Central African Economic and Monetary Community and the Southern African Development Community also have similar programmes.
Meanwhile, West Africa is gaining momentum thanks to the 1 081km highway that will soon link Abidjan and Lagos. Bingerville in Abidjan and Mile 2 in Lagos will be the locations for the two ends of the large dual, 3-lane road. The highway has three parts, the Abidjan – Takoradi section of 295km; the Takoradi – Akanu (both in Ghana) section of 466km; and the Noepe (in Togo) – Cotonou – Lagos section, of 320km. The facility will ease transportation between the most dynamic seaport cities and most populated hubs of the West African part of the Gulf of Guinea, including Abidjan, Takoradi, Accra, Cotonou and Lagos. The five countries that the highway passes through have a combined GDP of USD 589 billion and a population of 284 million, according to World Bank figures. Source: Mail & Guardian
Google Opens First In Africa Tech Hub In Nairobi
California-based tech giant Google is opening its first-ever African development centre in Nairobi. This is part of the company’s plan to expand its base in the continent through a USD 1 billion investment over the next five years. According to Google vice president for products Suzanne Frey, the new product development centre will help to create “transformative” products and services for people in Africa and around the world and will offer job opportunities “to visionary engineers, product managers, UX designers and researchers to lay the foundation for significant growth in the coming years”. The American company had in October last year revealed plans to invest USD 1 billion (KES 116 billion) over the next five years as part of its Africa digital transformation programme. This will be Google’s second major research and development investment in Africa after the company set up an AI and research centre in Ghana in 2019. Source: Citizen Digital Tanzania Tanzania, US Sign Investment Agreements Worth USD 5 Billion Tanzania and the US have signed seven agreements for business projects which are set to be implemented in Tanzania by investors and companies from the United States of America. The signing of the agreement was witnessed by President Samia Suluhu Hassan who is in the United States for a two-week official trip. According to a statement issued by the directorate of presidential communications, the deals with key private sector companies are worth a total of USD 5.04 billion (TSh 11.3 trillion) and are expected to create an estimated 301, 110 jobs in agriculture, tourism, trade and other sectors of the economy. The statement further adds: Other projects will target maximization of value chain activities within the Northern Circuit or Tanzania’s tourism industry by modernizing the promotion, services and diversification of tourism products. Source: The Citizen
NEPZA Eyes Opportunities in Crypto Trading to Grow FTZ
The Nigeria Export Processing Zones Authority has promised that the ongoing digital technology policy being developed by the agency will open the free trade zones to multi-trillion-dollar blockchain technology businesses, including leading cryptocurrency exchanges such as Binance and Kucoin. NEPZA managing director, Prof Adesoji Adesugba, said this recently when he paid a courtesy visit to the executive chairperson of the Federal Revenue Inland Services, Mohammed Nami, in Abuja. He said the government must explore new technology to grow the economy. The NEPZA chief executive also assured that the agency is determined to open the country’s FTZ corridor for global competitiveness. “As we speak, FTZs are springing up everywhere in Africa. Nigeria must be concerned about competition from Egypt, South Africa, Kenya, Benin, Ghana and Togo where huge investments have been committed to FTZ development. We are doing well with about 500 enterprises operating in 42 zones across the country. But we must expand the investment corridor to magnet operators of blockchain technology, which remains the future of the global economy. Source: The Guardian
Africa Lens on Ukraine Crisis
African Union Divisions over War in Ukraine could Impact EU Aid to the Continent
A week before Russia invaded Ukraine on 24 February, Africa and Europe agreed on a ‘joint vision’ spanning economic growth, security and climate change. War in Ukraine may not directly influence continental relations but could damage bilateral ties. The agreements could also be affected by the global economic impact of the crisis. The African Union may face a tough task in ensuring that international partners stick to their commitments, including those made at other summits such as the November 2021 Forum on China-Africa Cooperation in Dakar. At the AU–European Union summit in Brussels on 16 and 17 February, the two organisations committed to equitable access to Covid-19 vaccines, ensuring Africa’s economic recovery and combating illicit financial flows. They also agreed on the mitigation of climate change and cooperation on matters of peace and security. The first in five years, the summit included promises of a EUR 150 billion investment for Africa against the background of fierce global competition for economic influence on the continent. Source: Daily Maverick
EU Plans to Counter Russia With Food Diplomacy in North Africa, Balkans
The EU aims to address rising wheat and fertilizer prices and expected shortages in the Balkans, North Africa and the Middle East with “food diplomacy” to counter Russia’s narrative on the impact of its Ukraine invasion, EU diplomats and officials say. Food insecurity was causing “resentment” in vulnerable countries in these regions, while Moscow was portraying the crisis as a consequence of Western sanctions on Russia, one European Union diplomat said. This posed a potential threat to EU influence, the diplomat said, which it plans to tackle with “food diplomacy and a battle of narratives”. Russian President Vladimir Putin said last week that the West’s sanctions had fomented a global food crisis and spiralling energy prices. EU neighbours, particularly Egypt and Lebanon, are highly dependent on wheat and fertilizers from Ukraine and Russia. They face a price spike after a drop in supplies since Moscow began what it calls a “special military operation” in Ukraine. Source: US News & World Report
Russia-Ukraine Conflict Affects Africa’s Wheat, Oil Importing Countries Most
The impact of the Russia-Ukraine conflict is felt internationally, but it affects wheat and oil importing African countries worst, a business leader has said. “The Russia-Ukraine conflict has a very significant, a very immediate impact on many African economies that import wheat and other food products from Russia and Ukraine,” said Zemedeneh Negatu, chairman of Fairfax Africa Fund, a Washington-based global investment firm, in a recent interview with Xinhua. The sanctions by the United States and its allies against Russia have worsened food inflation across the African continent, where the prices of fuel and other commodities are rising rapidly, according to Negatu. In its latest report, the United Nations Conference on Trade and Development revealed that Somalia, Benin, Egypt, Sudan, the Democratic Republic of Congo, Senegal and Tanzania are the African countries most affected by the market disruptions caused by the sanctions and the conflict in Ukraine. Source: Xinhua
The Impact of Russia’s Invasion of Ukraine in the Middle East and North Africa
The war in Ukraine that followed the Russian invasion is still in its early stages. While it is too soon to measure the war’s full impact on crises in the Middle East and North Africa, it is clear that the repercussions will be multidimensional. For now, its effects are limited in the military sphere, but noticeable in the political realm as conflict actors reposition themselves vis-à-vis one another and the outside world. For the region’s economies and its already strained social contracts, the consequences may be devastating. Some Middle Eastern and North African countries are heavily dependent on food and energy imports, leaving them particularly vulnerable to economic shocks as a result of the Ukraine crisis. Several countries buy large amounts of wheat from Ukraine and Russia. While some, like the Gulf Arab states, have ample reserves, others, like Lebanon, have none, making the prospect of shortages very real. While, for now, no one has imposed sanctions on imports of Russian grain, importers are finding it increasingly difficult to purchase grain from Russia due to difficulties in transferring funds to Russian companies and insuring ships. Source: Intenational Crisis Group
Global Impact of War in Ukraine on Food, Energy and Finance Systems
In line with our top story, this report released by the United Nations delves on the global impact of the War in Ukraine on the pillars of global society and economy. The impacts have had a domino effect on many countries such as those in Africa that have been affected in regard to their food systems. The European and Asian countries have felt the brunt of the conflict in respect to their energy sources which has seen scarcity of fuel and natural gas in a number of European states. The Financial systems have also been affected and disruptions in trade and transport also not falling far behind.
Click here to download the report.
Africa’s Pulse is a biannual analysis of the near-term macroeconomic outlook for the region, published around the World Bank/IMF Spring and Annual meetings each April and October. Each issue also includes a special focus on a particular development challenge that is shaping Africa’s economic future.
Click here to download the report.
Equiano Subsea Cable: Togo Economic Impact Assessment
In Africa there is an increasing need for people and countries to be connected through the internet. A number of submarine cable have been able to penetrate the African continent, the latest one being the Google Equiano Sea Cable. This report focuses on the economic impact of the regions where the sea cable has been able to land in Africa such as West Africa.