African tourists emerge as powerhouse for tourism on the continent, says UNCTAD report

Four out of 10 international tourists in Africa come from the continent itself, according to the new UNCTAD Economic Development in Africa Report 2017: Tourism for Transformative and Inclusive Growth.

Pic Credit: Travel Noire

In sub-Saharan Africa, this number increases to two out of every three tourists whose travels originate on the continent. Data backing this key finding show that, contrary to perception, Africans themselves are increasingly driving tourism demand in Africa.

Tourism in Africa is a flourishing industry that supports more than 21 million jobs, or 1 in 14 jobs, on the continent. Over the last two decades, Africa has recorded robust growth, with international tourist arrivals and tourism revenues growing at 6 per cent and 9 per cent, respectively, each year between 1995 and 2014.

Focusing on tourism for transformative and inclusive growth, this year’s report encourages African countries to harness the dynamism of the tourism sector.

By collecting and comparing data from two different periods, 1995-1998 and 2011-2014, the report reveals that international tourist arrivals to Africa increased from 24 million to 56 million. Tourism export revenues more than tripled, increasing from $14 billion to approximately $47 billion. As a result, tourism now contributes about 8.5 per cent to the continent’s gross domestic product (GDP).

The First Ten-Year Implementation Plan of the African Union’s Agenda 2063 aims at doubling the contribution of tourism to the continent’s GDP. To meet this target, tourism needs to grow at a faster and stronger pace.

“Tourism is a dynamic sector with phenomenal potential in Africa. Properly managed, it can contribute immensely to diversification and inclusion for vulnerable communities,” said Mukhisa Kituyi, the Secretary-General of UNCTAD.

To realize the potential of intraregional tourism for the continent’s economic growth, African Governments should take steps to liberalize air transport, promote the free movement of persons, ensure currency convertibility and, crucially, recognize the value of African tourism and plan for it. These strategic measures can have relatively fast and tangible impacts. In Rwanda, the abolition of visa requirements for fellow members of the East African Community in 2011 helped increase intraregional tourists from 283,000 in 2010, to 478,000 in 2013.

Another important theme highlighted in the report is the mutually beneficial relationship between peace and tourism. Peace is of course fundamental for tourism. The mere appearance of instability in a region can deter tourists, leading to devastating, long-lasting economic consequences. However, the perception of danger does not always correspond with reality.

The 2014 Ebola outbreak in Western Africa had a very high cost in terms of tourism numbers and revenue lost across the entire continent. Despite being limited to relatively few countries in the western part of the continent, tourist arrivals and bookings fell in countries as far from the outbreak as South Africa and the United Republic of Tanzania.

The report notes that the economic impacts of political instability can be quite significant and long-lasting. For example, following political instability in Tunisia, total tourism receipts in 2009-2011 declined by 27 per cent on average, from $3.5 billion in 2009 to $2.5 billion in 2011.

Addressing safety and security concerns and swift responses to crises by African Governments and regional institutions are paramount to the growth of tourism in Africa. Promoting strategies aimed at improving Africa’s image in the global media are also critical in ensuring the sector’s recovery after conflict or political unrest.

During the next decade, tourism’s continued growth is expected to generate an additional 11.7 million jobs in Africa. Furthermore, where tourism thrives, women thrive. In Africa, more than 30 per cent of tourism businesses are run by women; and 36 per cent of its tourism ministers are women, which is the highest share in the world.

Pic Credit: UN Multimedia

Creating firm links between tourism, the agriculture and infrastructure sectors, ecotourism and the medical and cultural tourism market segments can foster diversification into higher value activities and distribute incomes more broadly. To unlock this potential, African Governments should adopt measures that support local sourcing, encourage local entities’ participation in the tourism value chain and boost infrastructure development. This continued investment into the tourism sector in Africa could lift millions out of poverty, while also contributing to peace and security in the region.

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Source: TRALAC

Investment policy reforms in Africa: How can they be synchronized?

Pic Credit: Africa start up Eco system

African countries are increasingly implementing investment policy reforms as part of their efforts to build policy frameworks that are development-oriented and that balance investor and state rights and obligations. Such reforms are currently being adopted at continental, regional, bilateral and national levels, and include the negotiation of new investment treaties or policies and improving the existing investment policies or laws. However, the United Nations Conference on Trade and Development (UNCTAD) World Investment Report (2017), notes that, if not carefully managed, the reforms ‘risk overlapping with one another, potentially diluting the impact of regional reform efforts and creating a more complex regime instead of harmonizing and consolidating it.’ This will result in unfavorable treaty multiplication as well as policy uncertainty and unpredictability and, ultimately, reduce investor confidence. Promoting investor confidence and policy certainty is key to Africa considering the continent’s desire to stimulate and expedite investment.

This Discussion Note briefly examines current examples of investment reforms in Africa and how they can be synchronized to bring about the intended reform without posing new challenges and jeopardizing investment promotion and protection. The Note significantly draws on insights from the 2017 UNCTAD World Investment (ibid).

Investment policy reforms in Africa

At the continental level, the fifty-five African Union member states anticipate to launch a continental free trade area (CFTA) by December this year which is expected to include an investment chapter. The chapter is scheduled to be negotiated in the second phase of the CFTA negotiations together with competition and intellectual property issues. Though too early to project, the investment chapter is to be aligned with the overall objective of the CFTA – to create a single continental market for goods and services, with free movement of business persons and investments. Considering that the CFTA will bring together all the AU countries, it is critical for African leaders to start thinking how to effect investment reforms within the CFTA in such a manner that will not cause the above mentioned challenges.

At the regional level, the South African Development Community (SADC) member states at the 36th SADC Summit in August 2016 adopted an agreement amending Annex 1 of the SADC Protocol on Finance and Investment (2006). The Annex was amended to remove fair and equitable treatment as well as investor-state dispute settlement provisions, to refine the definitions of investment and investors, and include public policy measures exceptions to expropriation as well as to include regulatory autonomy of host states and investor obligations. However, the amendments will come into effect upon ratification by three-quarters of the SADC member states.

Also important to mention here is investment issues in the Tripartite Free Trade Area (TFTA), which are scheduled to be negotiated in the second phase of the negotiations together with trade in services, competition policy and intellectual property rights.

At national levels, many countries including Botswana, Egypt, Nigeria, South Africa and Morocco are reforming their investment policies with a view to adopting ones that carve out policy space and are aligned to their national development objectives.

Moreover, African countries continue to conclude and negotiate bilateral investment treaties (BITs) or treaties with investment provisions with countries within and outside the continent. In 2016, for instance, Nigeria concluded BITs with Singapore and United Arab Emirates; Morocco concluded a BIT with Russia; and Rwanda concluded a BIT with Turkey.

In addition, six SADC member states (Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa) concluded, with the European Union (EU), the Economic Partnership Agreement in 2016 which contains provisions relevant to investment including market access, national treatment (NT) and most favoured nation (MFN) with respect to commercial presence, free movement of capital. The EU is negotiating similar agreements with Central African, East African, West Africa as well as Eastern and Southern African countries.

Furthermore, African countries are developing guiding principles for investment policy making with Caribbean and Pacific Group of States, and the EU.[5] These principles are developed in line with the ongoing relations between Africa and the EU, Caribbean and Pacific states and will be used to inform their investment relations and policies in the future.

Synchronizing the investment policy reforms

In investment policy reform processes, African countries must cooperate at continental, regional, bilateral and national (as well as multilateral) to avoid undesirable treaty disintegration, overlaps and multiplication. The UNCTAD (2017) has provided ten policy options to serve as important reference for countries reforming their investment policies, particularly those negotiating new treaties or adopting new laws.

 Among these options include: joint interpretation of treaty provisions; amending treaty provisions; replacing outdated treaties; consolidating treaties; managing relationships between co-existing treaties; referencing global standards; engaging multilaterally; abandoning unratified old treaties; terminating existing old treaties; withdrawing from multilateral treaties. Important to note is that each option has pros and cons, therefore determining the best option requires ‘a careful and facts- based cost-benefit analysis, while addressing many of broader challenges’. It is submitted that the best option is one which is balanced, predictable and suitable for sustainable development.

Joint interpretation of treaties includes shared government action of interpreting treaties without amending or re-negotiating (re-signing or re-ratifying) the treaty. This is probably the fastest and simplest way of treaty reform; and it brings clarity to treaty obligations or provisions for investors, host states and tribunals. Recent treaties including, for example, the EU-Canada Comprehensive Economic and Trade Agreement (2016), Trans-Pacific Partnership (TPP) Agreement, ASEAN Comprehensive Investment Agreement (2009) and even the Morocco-Nigeria BIT (2016) expressly address joint interpretations. However, this policy option may be difficult to negotiate in situation where there are pending disputes involving the application of provisions in question. It is also restricted in its effect in that it cannot wholly create a new meaning to the provision being interpreted.

Amending treaty provisions involves making changes or improvements to specific clauses of existing treaties. It allows states to expressly carve out their intended policy objectives and priorities. However, amendments of treaty provisions require agreement among and subsequent ratification by contracting parties, and this may be difficult to achieve if they are multiple contracting parties with contrasting views. For instance, the SADC member states amended Annex I of the SADC FIP in August 2016 and the amendments are yet to be ratified.

Replacing or substituting outdated treaties with new ones is another policy option and has been used by Morocco recently. Per UNCTAD (2017), ‘approaching the treaty afresh enables the parties to achieve a higher degree of change (vis-à-vis selective amendments) and to be more rigorous and conceptual in designing an IIA that reflects their contemporary shared vision’. However, this process ‘can be cost- and time-intensive, as it involves the negotiation of the treaty from scratch, does not guarantee inclusion of reform-oriented elements (depends on the negotiated outcome), and requires effective transition between the old and the new treaties’. To safeguard smooth transition, it is important to include explicit transition clauses clearly defining the time-period for applying old BITs.

Consolidating the investment treaty network means replacing pre-existing treaties by signing a regional/plurilateral agreement. For example, Australia agreed to terminate its BITs with Mexico, Peru and Vietnam on entry into force of the TPP. This is a holistic and comprehensive approach to investment reform and can reduce the risk of fragmentation and overlaps. But, this can be more difficult to achieve particularly in plurilateral negotiations and requires the consent of all contracting parties. As TFTA and CFTA have the potential to replace existing BITs between the contracting parties (intra-African investment agreements), the question is will the African countries agree to terminate their existing intra-Africa investment treaties? To overcome these challenges, it may be appealing to grant flexibility to the parties to decide their preferences.

Another policy option is to manage the relationships of co-existing (old and new) treaties. This is mostly possible when the new treaties are plurilateral or regional free trade agreements with an investment chapter and the old treaties are BITs. However, this policy option is not conducive for investment reform specifically in cases where the treaties differ in content and scope. To overcome these challenges, countries need to include specific provisions clarifying how the treaties will interact – for instance, in situations of conflict, the new treaties will override the old ones.

Referencing global standards relates to mentioning globally agreed best practices or instruments (e.g. UN Sustainable Development Goals, UNCTAD Investment Policy Framework for Sustainable Development, the ILO Tripartite MNE Declaration and the UN Guiding Principles on Business and Human Rights). In the African context, it may also be important to mention relevant continental initiatives (e.g. Agenda 2063, Accelerated Industrial Development for Africa and Programme for Infrastructure Development in Africa). This is cost-effective and time-efficient in that countries will make use of previously agreed instruments. However, this option provides wide interpretive discretion for the arbitrators, and parties will not have control over future developments of the agreed instruments.

Engaging multilaterally is the most effective way to address the inconsistencies, overlaps arising from individual countries’ reforms and it is more likely to result in uniform, binding and comprehensive investment standards at global level. But is also the most difficult as obtaining the consensus of many countries is hard to achieve. The failure of the multilateral agreement on investment in 1995 is a point of reference here.

Abandoning unratified old treaties is another way of synchronising investment reform. A country can simply abandon unratified treaties (not ratifying them) or expressly take a decision not to be bound in order to negotiate new treaties – for instance, the US publicly announced its intention not to be party to the TPP early this year. As of December 2016, 165 intra-African BITs have been signed and only 38 are in force, according to UNCTAD.

Another option available for countries is to unilaterally or mutually terminate existing old treaties. For instance, South Africa unilaterally terminated its old BITs with nine EU member states between 2013 and 2014 with a view to signing new ones preserving regulatory autonomy. Quite often rules for the termination of treaties are set out in the treaty. The termination of old treaties could result in situations where investors of one party no longer have legal protection in the host state.

Lastly, withdrawal from multilateral treaties is another policy option for countries to consolidate investment reforms. According to UNCTAD, the ‘unilateral withdrawal from an investment-related multilateral treaty releases the withdrawing party from the instrument’s obligations and – depending on the treaty at issue – can help minimise a country’s exposure to investor claims. Unilateral withdrawal can also signal the country’s apparent loss of faith in the system and a desire to exit from it (rather than reform it)’. However, withdrawal from could negatively affect the country’s cooperation with other countries.

Conclusion

While African countries are (individually or cooperatively) transforming their investment laws and engaging in new investment policy making negotiations, it is crucial for policymakers to consider harmonizing or consolidating these reforms at all (continental, regional and national) levels to avoid undesirable fragmentation and overlaps of investment regimes. It is also important to consider the countries’ investment agreements with external partners. More importantly, policymakers should carefully consider facts-based cost-benefit analysis of a particular policy choice that will reflect the aspired reforms, while addressing many of broader challenges.

Source: TRALAC

Draft Kenya Investment Policy: Investment growth for sustainable development

Through the leadership of the Ministry of Industry, Trade and Cooperatives (MITC), an inter-ministerial task force has developed a draft Kenya Investment Policy. The policy is aimed at enhancing the conduciveness of the environment for investment growth, though a harmonized approach to investment promotion, facilitation and retention. In addition, the policy provides for revision of legislations affecting the overall investment network.

 

Pic Credit: Mutua Matheka

The development of the Kenya Investment Policy has involved a consultative process covering the national and county governments, including the private sector stakeholders.

Executive summary

To achieve the twin targets of Kenya’s Vision 2030 – 10% growth per annum and middle income industrializing country status – the Government of Kenya recognizes the critical role played by private investment and has put measures in place to attract and retain foreign investment while encouraging the expansion of domestic investment, with the aim of increasing private investment to 24 per cent of GDP by 2030.

Up to now, Kenya has not had a single and clearly defined policy solely focusing on investment generation and retention. The Government of Kenya has however formulated various strategies and policies that focus on investment growth and support, stipulated in various policy documents such as National Development Plans, Sessional Papers and Master Plans, including the new Constitution 2010. These programs and initiatives have had limited impact. They also led to the adoption of various fiscal and non-fiscal incentives, changes in investment related regulations and the creation of several government agencies tasked with responsibility for investment promotion and facilitation, some with overlapping mandates leading to duplication of efforts and unnecessary strain on limited government resources.

To address the limited impact of investment and a number of other challenges relating to the entry and treatment of investment, the Government developed the Kenya Investment Policy. The policy development process took a holistic approach to gain an understanding of Kenya’s context as well as international best practices to inform the policy’s proposals. The policy is guided by six core principles, which emphasise the need for openness and transparency, inclusivity, sustainable development, economic diversification, domestic empowerment, and global integration.

The KIP addresses private investments at the national and county levels. It is a comprehensive and harmonized policy to guide attraction, facilitation, retention, monitoring and evaluation of private investment. The KIP further recognizes the central role of Kenya’s Constitution (2010) which clearly delineates the complementary roles that national and county governments play in investment promotion. The KIP also creates an institutional framework that fosters coordination for efficient investment attraction, facilitation, and a favourable investment climate. The policy actions proposed in the KIP are designed to support and stimulate private sector development and improve the overall ease of doing business and competitiveness in the economy, with the ambition that Kenya becomes the premier destination for at least 50% of multinationals establishing their continental headquarters in Africa.

The KIP addresses some of the fundamental requirements for establishing a well-coordinated investment environment that will attract high-quality FDI into the country while upscaling local SME capacity. These include: a harmonized regulatory and institutional framework for investment; an effective investment promotion and facilitation government function; an active focus on attracting beneficial, high quality foreign investment; building a critical mass of domestic investors including strengthening their capacities; a targeted approach to offering incentives by aligning them to development priorities; significant resources devoted to investor aftercare and increasing national savings.

These objectives are to be achieved through the implementation of critical measures stated by this Policy, including the following:

Investment oversight. Operationalization of the National Investment Council, which will be responsible for formulating the country’s overall investment strategy and implementing the KIP to ensure that investment contributes to the country’s development goals, and approving Bilateral Investment Treaties and investment related chapters in treaties.

Investment promotion and facilitation. The primary responsibility of investment promotion and facilitation falls on the Investment Promotion Agency. Counties, through County Investment Units play a major role by developing bankable projects, outlining their competitive positions, and preparing marketing materials aligned to their areas of strategic focus. Officials at the county level also play an important role in investment facilitation, including securing community approval, providing land where needed, and participating in investment promotion activities for specific investment projects in collaboration with the IPA.

Investment entry and establishment. Various government agencies are involved at different levels along the investment entry and establishment process. The IPA plays a facilitation role among these entities through the One-Stop Centre to minimize the administrative burden on investors and government agencies.

Investment retention and aftercare. Counties play a major role in ensuring that investments located within their territory are given the highest level of attention. The Government is responsible for ensuring that the overall investment climate remains attractive to potential and existing investors. The IPA is responsible for taking the lead to provide effective aftercare services by working with counties and national government actors.

Investment assessment. Ensuring that investments are contributing to the country’s economic, social and environment sustainability objectives is important. Measuring investment impact with respect to community engagement, development objectives, and supplier linkages between investors and small and medium sized enterprises is a shared responsibility among the different actors. While the NIC will spearhead this process, it must work closely with other national and county institutions to ensure that the country continues to target and attract beneficial investment.

Establish a promotion and facilitation fund resourced by both the exchequer and grants from development partners, to be used for the purposes of targeted investment promotion and facilitation.

Establish land banks which could be used for large projects, including encouraging counties to establish a savings scheme where a percentage part of their budget allocation goes to purchasing land to be set aside for investment purposes.

» Download: Kenya Investment Policy, revised draft June 2017 (PDF, 1.08 MB)

 

Source: KEPSA

How Kenya can industrialise in 5 years — anzetsewere

This article first appeared in my weekly column with the Business Daily on June 18, 2017 — Manufacturing can play a crucial role in Kenya’s inclusive growth by absorbing large numbers of workers, creating jobs indirectly through forward and backward linkages to agriculture, raising exports and transforming the economy through technological innovation. It is with […]

via How Kenya can industrialise in 5 years — anzetsewere

Foresight Africa: Top priorities for Africa in 2016

Photo: Mutua Matheka Photography

Africa is at a tipping point in 2016. Despite all the success the continent has achieved in recent years, new and old dangers—economic, political, and security-related—threaten to derail its progress. With sound policymaking, effective leadership, and enough foresight, however—Africa can meet and defeat these challenges as well as the many more to come.

In this year’s Foresight Africa, the Africa Growth Initiative and its colleagues discuss six overarching themes that place Africa at this tipping point and give their view on what they perceive to be key areas for intervention to keep Africa on its current rising trajectory. This year’s format is different from years past, encompassing viewpoints from high-level policymakers, academics, and practitioners, as well as utilizing visuals to better illustrate the paths behind and now in front of Africa.

 Explore the full report »

In this chapter, Amadou Sy explores the recent external economic shocks to African economies—including the economic slowdown in China, declines in commodity prices, and the likely continued U.S. Federal Reserve interest rate hikes—that have affected and will continue to affect growth trajectories in the region. With growth slowing across the continent in 2016, policymakers must take this opportunity to discuss and enact economic policy reform for both the short and long terms.

 Read chapter 1 »

Growth in Asia and elsewhere has shown that industrialization is crucial to job creation, a value that is enshrined in the new Sustainable Development Goals. In this chapter, John Page provides recommendations on how African governments and their international partners can revitalize the region’s stagnating industrial development and spur structural transformation.

 Read chapter 2 »

The region has witnessed remarkable improvements in poverty reduction in recent years, but persistent challenges in inequality, education, health, and violence, among others, still plague it. As the first year of the Sustainable Development Goals, 2016 provides the opportunity to be a jumping-off point for strong policies and efforts to accomplish these goals. In this chapter, Kathleen G. Beegle and Luc Christiaensen cover the assortment of opportunities 2016 provides for supporting human development efforts and argues for the central role that better data plays in addressing them.

 Read chapter 3 »

With Habitat III in 2016, Jérôme Chenal takes the opportunity in this chapter to explore the consequences of Africa’s rapid urbanization. Africa is the second-fastest urbanizing region in the world, which historically has facilitated other regions’ transition from a reliance on agriculture to industry and jobs. However, without strong policies to deliver services, finance and build infrastructure, and support the urban poor, Africa’s rapidly growing megacities and intermediate cities cannot deliver on their potential.

 Read chapter 4 »

2016 sees a number of governance milestones and obstacles, including elections across the continent (particularly in Uganda, in the Democratic Republic of the Congo, and for the African Union chairperson), as well as increasing regional integration and a seemingly stalled march towards good governance. In this chapter, Richard Joseph reflects on the region’s growth-governance puzzle and the complex institutional changes necessary to move from economic growth to economic transformation.

 Read chapter 5 »

In this chapter, Joshua P. Meltzer explores the impacts on Africa of the changing global trade environment. In particular, the Trans-Pacific Partnership Agreement will transform global trade architecture, likely to the disadvantage of Africa. However, our viewpoint contributors believe that, if African countries can successfully leverage regional integration and better utilize the African Growth and Opportunity Act, they might be able to maintain global competitiveness.

 Read chapter 6 »

Article Source: Brookings Africa Growth Initiative

About Foresight Africa

The Foresight Africa project is a series of reports, commentaries and events that aim to help policymakers and Africa watchers stay ahead of the trends and developments impacting the continent. Since 2011, the Brookings Africa Growth Initiative has used the occasion of the new year to assess Africa’s top priorities for the year.