12 February 2016

Ambitious energy plans launched in Davos

Ambitious plans to power Africa were inaugurated at the World Economic Forum (WEF) in Davos, Switzerland by the African Development Bank Group on 21 January. The New Deal on Energy for Africa will unite the private sector and local governments on energy capacity building projects to achieve universal access to energy in Africa by 2025.

Plans of action under the New Deal will rely on a platform, the Transformative Partnership on Energy for Africa, to coordinate energy generation and transmission projects across private-public partnerships and existing African energy programmes. 

The current lack of electricity on the continent holds African economies back. The AfDB estimates that energy-sector bottlenecks and power shortages are estimated to cost African countries some 2-4 percent of GDP annually. 

Harnessing Africa’s untapped renewable energy resources will require energy infrastructure investments of US$40-70 billion annually. Between 2016 and 2020, the African Development Bank alone will invest about US$12 billion and leverage about US$50 billion in public and private financing for investments in the energy sector. 

Investments to Africa fall sharply in 2015

Foreign direct investment (FDI) flows towards Africa have experienced a sharp decline in 2015, according to the United Nations Conference on Trade and Development (UNCTAD). 

On the global scale, investments stood well during the past year with FDI flows reaching an estimated total value of US$1.7 trillion, the highest level since the 2008-2009 economic and fiscal crisis. However, the situation has deteriorated in Africa in 2015, with a general decrease by 31.4 percent of investment flows from abroad, falling from US$55 billion in 2014 to US$38 billion last year. According to UNCTAD, the main cause of this contraction is the end of the "super-cycle" of raw materials, which reduced investments to the natural resources sector.

In regional terms, while FDI experienced a rise in North Africa, the continental average was pulled down by sub-Saharan Africa. Central Africa and South Africa saw the sharpest falls, with a collapse of 74 percent in FDI to South Africa. Investment flows to Nigeria fell by 27 percent due to the sharp drop in oil prices.

In Africa mergers and acquisitions have greatly increased (+ 304 percent) during the past year, to a total of US$5 billion in 2014. Investment flows into new projects have fallen sharply, from US$88 billion during the 2014 year to US$71 billion in 2015. 

Africa exports to China drop 40 percent in 2015

Overthe course of 2015, commercial relations between China and Africa contracted by 18.3 percent, reaching only about US$170 billion, according to information provided by the General Administration of Customs. In 2015, African exports to China amounted to about US$67 billion, representing a decrease of nearly 40 percent from the previous year.

In 2009, China became the largest trading partner of Africa, but weakening Chinese economic growth has now resulted in decreased in Chinese demand for raw materials and a weakening of prices in recent world markets. According to data published by the Financial Times in October, Chinese investment in Africa also plunged 84 percent in the first half of 2015, compared to the same period in 2014. 

The implementation of the Johannesburg Action Plan—adopted at the Summit of the Forum on China-Africa Cooperation (FOCAC) in which China announced over US$60 billion of financial support for the African continent—could help to revitalise economic relations between the Asian giant and its African partners.  The implementation of the initiatives has already begun, with the entry into force at the beginning of January of the China-Africa cooperation fund for industrial capacity.

South Africa, US avert AGOA poultry suspension 

South Africa and the US reached an agreement last month on the technical issues which have been blocking US meat—essentially poultry, pork and beef—imports into the African country. The US has set a 15 March 2016 deadline for functional implementation of the deal. Otherwise duty-free treatment for South Africa’s AGOA-eligible agricultural products will be suspended.

In December 2014, South Africa raised sanitary concerns about US poultry over an avian influenza outbreak in 15 US states. Last year, the US set 31 December 2015 as a deadline for South Africa to comply with AGOA eligibility requirements. With the country failing to conclude the negotiations on this issue by the set deadline, South Africa faced the risk of its agricultural products being suspended from AGOA. While agreements were reached on time for on a poultry trade protocol in the case of avian influenza, issues related to salmonella testing of US poultry imports that arose after the deadline remained outstanding.

In the final agreement, South Africa will permit the unrestricted importation of “shoulder cuts”. With regards to beef, the US has guaranteed that such products will comply with US domestic requirements for human consumption. Both countries have agreed on a protocol to control the risk of transmission of Highly Pathogenic Avian Influenza (HPAI).

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