Africa Headed for Increased Infections
As at the time of this write-up , the Covid-19 pandemic is just settling in in the African continent. with the numbers expected to rise dramatically in the coming weeks. A continent a few weeks ago that was ‘boasting’ of being blessed just as the World Health Organization (WHO) was declaring Coronavirus a global pandemic, could now be well on the precipice of a full-blown catastrophe. Indeed, according to WHO Africa now has over 3000 confirmed Covid- 19 cases and at least 77 deaths. In Kenya, for instance, the cases have been rising steadily since the first case was reported on 13th March, 2020 and the country’s Ministry of Health has warned that unless drastic containment measures of are taken, there could be as much as 10,000 infections by the end of April , 2020. The fear therefore, is that as the curves in China , Europe and USA will start to flatten, African countries could experience dramatic surges.
Africa’s Health Care Systems Among the Weakest in the World
The expected huge infections will obviously put unimaginable strain in the healthcare system in virtually all African countries and, sadly, lead to more deaths. We need to remember that presently, Africa has one of the weakest healthcare structures in the world. In fact, most countries on the continent can barely effectively address the health needs of the citizenry, even during normal times! And we are taking about not only needs the patients but also of health workers.
Health Workers in Dire Need of Personal Protective Equipment
One cannot belabor the dangers the health workers and first responders dealing the victims of Covid 19 face every time they are in touch with the patients. As WHO aptly puts it,“Health workers are at the front line of any outbreak response and as such are exposed to hazards that put them at risk of infection with an outbreak pathogen (in this case COVID-19). Hazards include pathogen exposure, long working hours, psychological distress, fatigue, occupational burnout, stigma, and physical and psychological violence. This document highlights the rights and responsibilities of health workers, including specific measures needed to protect occupational safety and health.”
Because the pandemic ravaging the world currently is highly infectious, it is crucial that the health workers have access , at all times, to adequate PPE. The products in question are reportedly in very short supply globally and we are likely to witness even more severe shortages as leadings exporters are not restricting exportation.
Is an African Ready for Trade Restrictions on PPEs during [Covid-19] Pandemic?
While addressing the press on 30th March, 2020, Kenya’s Cabinet Secretary (CS) for Trade confidently talked of Kenya being in the process of engaging local [ Kenyan] industries with a who can make some of the components of the PPEs namely surgical masks, face masks, gloves etc. This is welcome news for the companies involved but as we shall see later, this is something that should have been actualized much earlier had Kenya and its neighbours been more serious with implementation of their industrial policies.
Earlier, there had been reports the Kenya had banned exportation of face masks as a way of stocking up in readiness for the infections. By the same token we have seen Tanzania bans export of ethanol to Kenya to enable its industries be in a position to make hand sanitizers and disinfectants. However given the projections of the infections, Africa could certainly require more PPEs, and disinfectants than its manufacturers can produce even if it includes the now famous Jack Ma Foundation donations and other philanthropic ventures that could come in.
The international Trade Centre ( ITC) in its latest Trade and Market Intelligence notes that some of the main suppliers of personal protective equipment have recently introduced export bans or restrictions. That whereas the total supply of personal protective equipment products is highly concentrated, five countries alone (China, United States, Germany, Malaysia and Viet Nam) account for almost two thirds of global exports. Four of these countries have introduced new export measures on at least one product.
It is also apparent that Turkey, Switzerland and the European Union have introduced a license and permission scheme to protect the availability of supplies of PPE, by requiring that exports of such equipment outside of the European Union are subject to an export authorization by Member States.
ITC further notes that, in fact, 21 other countries have entirely banned the exports of these products. And as a result of this , it would appear that almost three quarters of world imports originate from the countries that currently ban or restrict exports. It is clear from the above picture that at the moment no African country is engaged in the manufacture of PPEs on a significant scale. Hence the enthusiasm with which any donations in the form of PPEs is welcome here [in Africa]!
Countries Relying on Importation of PPEs Could suffer greatly.
Access to medical supplies by the African countries is obviously in great jeopardy. This is because according to available data , up to 50% of these medical imports particularly surgical masks as well as marks with filters originate from the countries that, out of self-preservation have put in place export restrictions. Of course there have been calls for ” solidarity” by the WHO who has discouraged exports restrictions but hey ,which country will freely export masks to Africa when its citizens also need it? We are simply resorting to self-preservation days and herein lies the greatest lesson for African; It is time to build regional value chains!
Trade Restrictions and The World Trade Organization
Earlier on, we saw how the WHO has called for solidarity in terms of ensuring that the medical supplies are available globally to the countries that need them most. With the current pandemic, it would appear that every country on the planet would, at some point, need these supplies hence the export restrictions being implemented by the countries that manufacture this equipment.
There have been similar calls for “Maintaining open Trade” by other global leaders in the Multilateral Trading System. For instance, Ursula von der Leyen, President of the European Commission (EC) on 26th March , 2020 states that; The free movement of goods and services is our strongest, and frankly, our only asset to ensure supplies can go to where they are needed most…. It is why we are calling for priority ‘green lanes’ for essential freight transport;
Alexander De Croo, Belgium’s Deputy Prime Minister and Finance Minister has pointed out that whereas there are negative effects of globalization, but this also shows that we’re all in this [ global health crisis] together and we have everything to lose if we roll back globalization.
Finally, the Association of German Chambers of Industry and Commerce has called for had noted that, “ In order to facilitate international trade, we advocate a simultaneous agreement between the G20 states on a crisis moratorium for new tariffs — on all goods”.
The tone set above is encouraging all the stakeholders to simply keep the trading lines especially for essential goods and services open more so now that there is a global pandemic. But will the world listen? And more fundamentally, are trade restrictions encouraged in the Multilateral Trading System (MTS).?
Export Restrictions at the Multilateral Trading System
Article XI of the General Agreement on Trade and Tariffs (GATT) provides for the general elimination of quantitative restrictions. However, there are instances where the restrictions are allowed. To this end Article XI(1) states that ,“ No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party”
The special circumstances where the restrictions are allowed are in Article XI(2)(b) which is to the effect Export prohibitions or restrictions could be temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party.
By dint of the above, the countries that are currently employing the export restrictions can and will easily argue that these [medical] products cannot be exported as before are they are critical for their health sectors. This is as sensible as it is legitimate and it is indeed within the GATT provisions.
Can Africa Develop Its Value Chains At the Continental Level and Regionally?
Global value chains (GVCs) refer to international production sharing, a phenomenon where production is broken into activities and tasks carried out in different countries. They can be thought of a large-scale extension of division of labour.
GVC differ from Regional Value Chains ( RVCs) in that in RVCs, the finished product is exported by a country within the region, either globally or regionally. Accordingly, they offer opportunities to the countries in the region to climb up the value chains by using the region to boost their competitiveness and produce and export higher value-added products.
According to UNCTAD, RVCs in Africa can also provide an opportunity to the countries in the region to link gainfully into the GVCs and increase their bargaining power with the lead firms. Africa therefore needs to thinks seriously about RVCs.
Article 3 of the Treaty Establishing the African Continental Free Trade Area (AfCFTA) describers that objects of the AfCFTA to include the enhancement of competitiveness of the economies of state parties within the continent and the global market (3b). It also addresses industrialization object in Article 3(b)which talks of promotion of industrial development through diversification and regional value chains.
Africa has several Regional Economic Communities (RECs) which are indeed the building blocs of the AfCFTA . This is a realization that is embodied in the Article of the Article 3(c) of AfCFTA Treaty which states that one of the objectives of the AfCFTA is to contribute to the movement of capital and natural persons and facilitate investments building on the initiatives and developments in the State Parties and RECs.
Further pursuant to Article 5 of the Treaty, the AfCFTA is to governed by RECs’ Free Trade Areas (FTAs) as building blocs for the AfCFTA. Accordingly, the principles of these REC such as developing the Regional Value Chains has been espoused by the Continental free trade body.
Regional Value Chains and the East African Community
Regionally the East African Community (EAC) encourages the development of regional value chains. One of the sectors the EAC focuses on is Industrialization and SME development which aims at “Improving the competitiveness of the industrial sector so as to enhance the expansion of trade in industrial goods within the Community and the export of industrial goods from the Partner States.
A cursory look at the sector’s expected outcomes include Streamlined and coherent policy framework to support deepening of regional production systems and business linkages;Harmonised policies, strategies and business climate regarding Small and Medium-sized Enterprise (SME) activities in the region and Enhanced exports capacities and imports substitution and stronger linkages across the priority value chains and many other fanciful aspirations.
Interestingly , most of these aspirations remain just on paper. There are no industries set up at the regional level to address strategic needs such as manufacture of medical equipment. The situation is the same with regard to other RECs. Yet the Kenya Trade Minister has recently been on record stating that Kenya could in fact be a regional supplier of the components needed for the PPEs.
If the EAC members states were focused on realizing the objects of EAC these industries would be up and running. Instead, we have seen increased importation of products that can be made regionally, including sanitizers! We also are witnessing instances of protectionism in the region, which is unsurprising given the Members states have not made any serious investments on regional value chains. The question therefore remains, if the regions have not done it can it be done at the continental level? It is doubtful.
Lessons for Kenya and the Rest of Africa
Even before the Covid -19 pandemic, it would appear that there were firms that could manufacture some of the PPEs. It is little wonder that within short time we are seeing companies indication they have capacity to manufacture these products. The question that begs is what has Kenya been waiting for? And have the relevant governments been deploying the need incentives to these firms?
There is chance for African countries to come up with trade policies that can encourage local manufacturers to engage in the making of products that are currently being imported including PPEs. This can be achieved by tax incentives , zero rating the importation of the components needed, lowering energy costs and encouraging innovation hubs. Regionally there is an opportunity for Kenya to be pioneer and leader in the Regional Value Chains.
As an illustration, Kenya’s National Industrialization policy in its preamble talks of “recognizing the importance of promoting resource based industries, and in particular, labour intensive, export-oriented industries for increased productivity and growth in all the industrial sub-sectors, bearing in mind the impact of forward and backward linkages in the economy”.
This is an ambitious policy which is yet to be implemented by the Kenyan government. It is noteworthy one of the strategies the Government intends to employ is to “Facilitate the creation of a business-friendly environment for private sector-led industrialization”. Is the environment friendly? I don’t think so otherwise these products that the country direly needs now would be available in plenty. The policy formulators need to move into the implementation stage.
It is hoped that the Covid-19 pandemic will be a wake-up call for Africa. And Africa needs to minimize reliance on Aid as this experience clearly shows that donors will only donate if they are not in the same situation as the recipient.
Patrick's Trade Digest 