#1SIYINQABA AfCFTA CLCCEED ECA Eswatini National AfCFTA Forum 3 November 2022 | Mountain View, Mbabane | Eswatini#2Presentation Menu Rationale & Setting Macroeconomic Overview Emerging Issues Global Level Regional Level Country Level The Unexplored Potential - The Case for Eswatini Exploring Niches for exporting from Eswatini Cross-Cutting Issues Way Forward#3From Eswatini to the World Black Kambe ENHOER FALAPOR Black Mass Stack Mamba CONE CRE AGE & SONG Estarti Kitchen Est Kitchen ange&Grape efruit Est Orange, Mandade te fakudzestudios.com/pieces-of-time/ 7 "TRANSCENDENCE R65,000.00 Mbongeni Fakudze 23 'THE SUM OF EVERYTHING" R325,000.00 19 TURBULENCE" R65,800.00 Read more Show Details Add to cart Show Details Add to cart Show Details#42 July 2018 Eswatini one of the first countries to ratify the AfCFTA agreement. The Agreement includes the Protocol on Trade in Goods, the Protocol on Trade in Services and the Protocol on Rules and Procedures on the Settlement of Disputes. Rationale & Setting How do we move from commitment to implementation. The AfCFTA National Implementation Strategies are aimed at supporting countries with a view to maximize the benefits of the Agreement while minimizing potential induced adverse effects.#5Today's forum is part of a wide stakeholder consultative process to get inputs from key stakeholders. Rationale & Setting Strategy must be alive and respond to the opportunities, challenges and constraints that exist relating to Eswatini export potential and capabilities. Ultimately private sector is the user and beneficiary of such instruments that have major potential to transform the national economy. Your active participation, contribution and ideas would go a long way in creating a practical, action-oriented strategy for the country.#6Objectives of AfCFTA Implementati on Strategies Identify where comparative advantages, lie for each country for diversification. Identify priority value chains to be Maximize trade developed in order potential in the context of the AFCFTA Agreement. to support economic diversification. Eswatini's national strategy should facilitate the identification of key value addition and trade opportunities and constraints, measures and capacities required for the country to take full advantage of national, regional and global markets within the context of AfCFTA.#7Bilateral Meetings Private sector, Government,, academia, think-tanks, civil society (youth groups, women) & development partners. To uncover key areas deserving deeper analysis and provide consultants an opportunity to collect a wide range of documents, data and other resources for consideration and review. Roundtable discussions Stakeholder engagements National AfCFTA Forum Validation Workshop#8میرا Macroeconomic Review#9Context: Macroeconomic framework, production & trade Macroeconomic • Eswatini is one of the world's most trade- dependent economies, with South Africa being main trading partner. . • Member of SACU, SADC, COMESA, AfCFTA, SACU-MERCOSOUR, SACU+M - UK EPA, SADC - UK EPA. • Common Monetary Area provides a nominal anchor for monetary policy, and Eswatini's inflation generally mirrors that in South Africa. Current debt to GDP ratio at 43% on average compared to the region's average at 60% of GDP#10ESWATINI ECONOMIC SNAPSHOT Slow Economic Growth Limitations of growth model based on government consumption. Economic crisis worsened by Covid- 19 and unrest. 1.7% Average real GDP growth between 2014-19, compared to 2.6 percent for Sub Saharan Africa (SSA) in the same period High Youth Unemployment & Informality Private sector not creating enough jobs to reduce unemployment and skills mismatch. 58.1% Youth unemployment in Eswatini Declining Investment Low private Year Inflows, US $ % of GDP investment 2020 $0.04B 1.11% and FDI, 2019 $0.13B 2.87% and 2018 $0.03B 0.67% weakened 2017 $-0.06B -1.31% exports 2016 $0.03B 0.70% Vulnerabilities to External Shocks I ■ Recurrent I droughts are a I threat to key ¡ export sectors and I are likely to I worsen with rising | I temperatures 7% Cost to government expenditure as a result of 2015/16 drought as a share of GDP#11Overall Real GDP Growth (%) Estimates (2017 - 2020) & Forecasts (2021-2024) 2.6 2.4 2.0 5.9 Forecast Period 3.7 2.6 2.4 -1.9 2017 2018 2019 2020 2021 2022f 2023f 2024f Source: NDP, 2023/24 - 2027/28#12Heavy Reliance on SACU: Fiscal Revenues (% GDP) Total Revenue & Grants Domestic taxes 2017/18 2018/19 2019/20 2020/21 Estimates as of March 2022 actual actual actual actual 2021/22 out turn 28.20 25.10 27.50 28.80 25.30 14.40 14.50 15.40 15.10 15.60 2.30 2.30 2.60 2.20 2.60 5.10 5.20 5.40 5.40 5.20 4.20 4.60 4.50 4.90 4.90 0.70 0.80 0.70 0.90 0.70 CIT PIT VAT Other income tax Excise Fuel levy 1.70 1.90 1.90 1.80 1.80 Other (sum of all the other small 1.00 0.50 1.30 0.60 0.50 lines) Grants 0.90 0.70 0.80 0.40 0.20 Taxes on International Trade and transactions SACU Source: MoF MTFF March 2022 12.00 9.30 9.70 12.60 8.90 • Eswatini engaging on AfCFTA under SACU. Major focus on SACU revenue protection. • How substantial is SACU Offer? • Can Eswatini/SACU afford to offer more? • What are the cost implications?#13Trade in Services Ms. Khangezile Dlamini#14O animi www ammm#15National African Continental Free Trade Area (AfCFTA) Forum for the Kingdom of Eswatini THEME: Development of Eswatini Implementation Strategy for AfCFTA Stakeholder consultation and Media engagement 3rd-4th November, 2022 Mountain View-Mbabane#16Presentation outline •Brief and anticipated outcome . Rationale and setting •The economy of Eswatini • Emerging issues: Global, Regional and Country level • Unexplored potential • Cross cutting issues •Way Forward#17Brief and anticipated outcomes Collect relevant national data on the service sectors Assess the capacity and competitiveness of the services sector in Eswatini and its connectedness with other regional and international service providers • Identify specific regulatory barriers to trade in the twelve priority services sectors OUTCOMES Anticipated outcomes National AStrategy on trade in goods and services National implementation plan#18Rationale and setting Rationale for the exercise: ❖Promote (starting at national) the harmonization of appropriate policies, strategies & measures for the agreement to be fully implemented *In order to derive utmost potential and capacities of Swati service suppliers, there is need to have a structured approach. ❖To ensure implementation and enforcement ❖ It is believed that the protocol isvery much in sync with national policy objectives, other noble goals and aspirations like poverty reduction, job creation etc. So why not harness this opportunity?#19• Setting In my view, this excercise could not have come at a better time, the environment we are in right now needs 'all hands on the deck' in the context of:- Worsening fiscal deficit, which stood at 8.6 of GDP in 2020 from 5.3% in 2019 Gross public debt (including domestic arreas) rose to nearly 48% of GDP from 38% in 2019 Inflation increased from 2.6% in 2019 to 4% in 2020 ⚫ On the banking sector none performing loans increased. • So clearly this backdrop is begging for urgent action.#20Emerging issues: Globally, regionally & nationally ● • • Globally: At a global level, The COVID-19 pandemic resulted in unprecedented pressures on supply chains. Logistic disruptions and rising energy prices have further contributed to supply shortages and spiralling shipping costs. • Policy factors are showing that in recent months, significant tensions have emerged in global trade, encompassing several major economies. The resultant atmosphere of uncertainty could cause multi-national enterprises to cancel or delay investment decisions until the trade and investment climate is more stable. (It is estimated that services are the largest recipients of international investment flows, accounting for just over half of global outflows in 1999, Services comprised about one fifth of worldwide trade in balance of payments terms)#21• Emerging issues: Globally, regionally & nationally Trade in services has now expanded both in breadth-to encompass more professions and industries—and in geographical reach, made possible through business process outsourcing and offshoring practices. The United Nations Conference on Trade and Development (UNCTAD) (2018) suggests that the world is at the dawn of a fourth industrial revolution, propelled by frontier technologies and robotization advances that make production better, cheaper and faster than ever before. Services industries are experiencing a radical transformation alongside technological improvements, information technology services in particular-even emerging areas such as environmental consulting and engineering services-are increasingly contributing to developing countries' export diversification and economic development strategies.#22• ● Emerging isssues regionally The private sector is the cornerstone of most economies on the continent. SMEs in particular have an increasing potential in facilitating trade in services and hence, the development of value chains in Africa. They represent about 90 per cent of enterprises in the region and employ about 60 per cent of the workforce (International Trade Centre, 2018). Emerging areas such as environmental consulting (with climate and environmental issues) and engineering services-are increasingly contributing to developing countries' export diversification and economic development strategies.#23• ● Emerging isssues regionally The Covid-19 pandemic has exposed the continent to the fundamental deficiencies in African economies regarding infrastructural services be addressed in order to greatly enhance connectivity and develop businesses on digital networks further, the crisis is gave rise to greater attention on online supply in sectors such as retail, health, education, telecommunications and audio-visual services; and there can be opportunities for African service suppliers in these areas. Increasing labour mobility (Mode 4) • New sunrise services activities in developing countries such as creative industries (music, dance, online entertainment, film, virtual internships) are on the rise. • These activities are particularly attractive to youths and can add value to the tourism product in all African#24• . Emerging issues-Country level The widening gap between the wealthy and the poor and its persistence over the years, deepening economic and social challenges, including youth unemployment. Governance and political uncertainty to some level, as it relates to power relationships, power concentration, power imbalances and conflicts of interest within and between families, communities and the wider Eswatini. Digitization of trade is fast gaining momentum, as a consequence of the pandemic. It is fast paced bringing along challenges as well as opportunities. Increased focus on value chains approach • Knowledge economy ambitions, increasing focus on IP Rights & Protection.#25A E F F A C F F A 渠 87 Unexplored potential 19#26Country A Mode 1: Cross-Border Modes of supply Country B Service Provision Consumption Provider The service crosses borders Mode 2: Consumption Abroad Service Provision Consumption Consumers reside abroad Consumer Provider Mode 3: Commerciale Presence Established a commercial presence Consumer Country A Mode 4: Presence of natural persons Service Provision Consumer Country B An independent arrives from A Temporary Stay! Natural Person An employee is sent from employer in B Service Provision Service Provision S S SS S Consumer Intra-corporate transferee Commercial Presence Juridical Commercial Presence Juridical Person Person#27Cross cutting issues - Gender, youth, PWD and other groups – equal participation and inclusion continue to be elusive. • Environmental sustainability, climate change and the Green economy •Human rights and equal access to productive resources • Information, technology, innovation. • Data and or statistics • Regulatory framework#28Workplan - Way Forward NO ACTIVITY RESPONSIBLE ENTITY 1 September 22 2 3 5 LO 2. 1. Launch of Research process Submission of Inception Report 3. Review and finalisation of the Inception Report 4. National Stakeholders Consultations 5. Submission of Preliminary findings 6. National AfCFTA Consultative Forum 7. Further National Stakeholders Consultations 8. 9. Submission of Draft National Strategy for Review 10. Review of the Draft National Strategy 11. Revision of the Draft National Strategy to address comments from the Review 12. Circulation of Draft National Strategy and Drafting of National Strategy and Implementation Plan SRO/ATPC Consultants Consultants/Ministry/ECA Consultants supported by Ministry/ECA Ministry/ECA/Consultants Consultants supported by Ministry/ECA Consultants Consultants/ Technical Team/ National Reference Group National Reference Group / Ministry/ECA/Other Stakeholders Consultants/Ministry/ECA Ministry/ECA/Consultants Implementation Plan to Stakeholders for Comments 13. Validation Workshop for the National AfCFTA Strategy 14. Finalization of the National AfCFTA Strategy and Implementation Plan 15. Submission of Finalized National AfCFTA Strategy and Ministry/National Reference Group/ECA Consultants with support from Ministry & ECA Consultants Implementation Plan to Ministry 16. Launch of the National AfCFTA Strategy and Implementation Plan 17 Priority action plans Ministry/ Government Ministry / National Reference Group October 22 November 22 6 7 8 9 10 11 12#29Thank you for listening! -#30停機 Emerging Issues#31D Global Perspective • High levels of state support and protection remain in key sectors • Fair international competition is hindered by continuing high barriers and state support Agro-food products overall face higher trade barriers than industrial goods. • Rising government support across a range of industrial sectors OECD#32D Global Perspective • Rapid internationalisation of state- owned enterprises (SOEs). • Digitisation of Trade and e-commerce (policy options & frameworks). • Fragmentation of global value chains (GVCs). • Climate change. OECD#33Regional Perspective Russia - Ukraine war, high fuel prices resulting in high transport costs. Increasing number of global suppliers shifting from GVCs to RVCs. Inadequate infrastructure, transport and logistics. Evaluate and Re-Engineer Trade with Traditional Partners (US and EU). African exports of goods and services have been growing in past decade, but volumes remain low at just 3% of global trade.#34Diversity of AfCFTA Member States • Need for consideration of different . economic realities and degrees of economic development; Consideration of cultural & social dynamics; Different resource endowments and • Different levels of institutional capacity & development present in Member States Regional Perspective#35Regional Perspective - AfCFTA Guided Initiative Africa imported about 85% of its food (2016-2018) from outside the continent, amounting to $35bn and is expected to reach $110bn by 2025. (UNCTAD) Vehicles. Computers and IT products. Pharmaceuticals. Food. Electronics. Automobile Spare Parts Clothing And Fashion Accessories Stationery (Dubai?) Machinery & Engineering Products Chemicals#36Regional Value Chains UNDP Futures Report Report developed with AU and AfCFTA and identifies key value chains for Africa's revolution based on country offers and tariff structures • Value Chains identified include Automotives; Leather and Leather Products, Cocoa; Soya; Textiles and Apparel; Pharmaceuticals; Vaccine Manufacturing; Lithium-Ion Batteries; Mobile Financial Services; and Cultural and Creative Industries.#37AfCFTA Committee on Trade in Goods Trade Facilitation, Customs Cooperation and Transit Sub- Committee Committee on Trade in Goods Non-Tariff Barriers Sub-Committee Trade Remedies Sub- Committee Sanitary and Phytosanitary Sub- Committee Technical Barriers to Trade Sub-Committee Rules of Origin Sub- Committee Non-Tariff Barriers Coordinating Unit#38II Country Perspective#39Benefits of AfCFTA to Eswatini • Firstly, domestic supply constraints are the primary factor inhibiting the accelerated growth of Eswatini's exports. Secondly, Eswatini has become tied to the economic structure and performance of SACU (i.e. South Africa). • Thirdly, the bulk of exports outside of SACU are closely tied to preferences, exposing the Eswatini economy to the dangers of preference erosion and the removal of preferential access. • Fourthly, creating economies of scale for small, landlocked economies. like Eswatini. • Lastly, AfCFTA will help resolve overlapping memberships and create certainty around Eswatini's preferences.#40What are some of the constraints? • Some constraints sector specific, and require an understanding of the unique challenges that confront producers, investors and exporters in key industries. • But most of the constraints to competitiveness cut across all sectors and will require an economy-wide response and bold institutional, regulatory and policy reforms. • Country has put in place policies, regulations and structures in support of trade facilitation measures, but a lot need review and update. International Best Practice & Regional Harmonisation.#41National Trade Facilitation Institutional Arrangement -#42Eswatini National Trade Facilitation || Committee (NTFC) . Established in 2013 & reconfigured in 2018, approved by Cabinet & gazetted in 2019 • To support national implementation efforts relating to WTO Agreement on Trade Facilitation (TFA) • Secretariat hosted by the Ministry of Commerce, Industry and Trade together with the Eswatini Revenue Authority ● NTFC is co-chaired by the Principal Secretary of the Ministry of Commerce, Industry and Trade (MCIT), the Commissioner General of the Eswatini Revenue Authority (SRA) and the Chief Executive Officer of Business Eswatini • Gender: Percentage of female in the committee: Currently 5 of 26 members are women 19%).#43Improving Trade Facilitation • VAT Refunds vs Duty Free entry of raw materials - review VAT refund processes and consider status for firms exporting outside SACU. • Upgrade legal & institutional framework on competition to strengthen capacity to enforce anticompetitive behavior. • Bureaucratic and outdated processes: Fast-track eGovernment initiatives to implement single window to automate procedures for trade licenses, permits, certificates, etc.#44S 個 Trade Structure#45- Merchandise Exports – Main Export Products A Scented Mixtures 1 Sawn Wood 4 Alcohol > 80% ABV HS4 ID 3302 Exports Value $530M Percentage 27.4% Raw Sugar HS4 ID 1701 Exports Value $397M Percentage 20.5% A Industrial Fatty Acids, Oils and Alcohols HS4 ID 3823 Exports Value $206M Percentage 10.7% Source: OEC 2 3 HS4 ID Exports Value Percentage 4407 $60.4M 3.12% Non-Knit Men's Suits HS4 ID 6203 Exports Value $53M Percentage 2.74% Non-Knit Women's Suits HS4 ID 6204 Exports Value $47.4M Percentage 2.45% 5 6 HS4 ID 2207 Exports Value Percentage $32.3M 1.67% HS4 ID Cars Exports Value Percentage Other Sugars 8703 $26.1M 1.35% 7 HS4 ID 1702 Exports Value $24M Percentage 1.24% 80 9#46Merchandise Exports - Main Export Markets South Africa 1 Mozambique 4 Exports Value Percentage $1.13B Exports Value 58.4% Percentage Nigeria 2 Uganda 7 $70.2M 3.63% Exports Value Percentage $29.4M 1.52% United Kingdom 5 Exports Value $143M Exports Value Percentage 7.42% Percentage Kenya Exports Value Percentage Source: OEC 3 ☑ Israel $130M 6.7% Tanzania 80 $55.6M 2.87% Exports Value Percentage $28M 1.45% 6 United States 1.84% Exports Value Percentage Exports Value $35.5M Percentage 9 $25.9M 1.34%#47Merchandise Imports – Main Import Products Oil & Mineral Fuels 1 - Elec. Machinery 4 Cereals HS 2 ID 27 Import Value 297,589,307 ----- HS 2 ID Cars 87 Import Value 128,502,397 Elec. Machinery HS 2 ID 84 Import Value 119,561,608 Source: UNCTADSTAT 2 HS 2 ID Import Value HS 2 ID Plastics Import Value 3 HS 2 ID 85 89,663,644 5 HS 2 ID Import Value 10 89,663,644 Д Cosmetics 33 Import Value 89,663,644 39 69,889,788 HS 2 ID Cotton 6 Import Value 7 80 Cosmetics 9 39 69,499,635 HS 2 ID Import Value 33 89,663,644#48Merchandise Imports - Source Countries 1 4 South Africa Import Value United States $1.14B Import Value $32.2M 2 5 United Arab Emirates 16,726.81 China Import Value Japan Mozambique 16,162.95 Import Value $24M $121M Other Asia, nes 15,352.74 Percentage 3.63% Germany 12,763.25 Malaysia 10,722.27 3 India ☑ Ireland 6 Bahrain 10,068.21 Import Value Source: OEC $56.4M Import Value $17.8M#49Trade Summary Related Last Previous Unit Reference Balance of Trade -362.30 1179.00 SZL Million Mar 2022 Current Account -754.00 1533.00 SZL Million Mar 2022 Current Account to GDP 7.40 7.00 percent of GDP Dec 2021 Imports 7854.20 7702.90 SZL Million Mar 2022 Exports 7491.90 8882.30 SZL Million Mar 2022 Source: World Bank, WITS#50Trade Structure: Rise in Regional Exports Source Markets 2010 Source Markets 2021 Eswatini Exports Eswatini Exports Market Partner share (%) Market Partner share (%) South Africa 57.25 South Africa 66.59 US 8.40 Kenya 6.32 UK 3.9 Nigeria 4.98 Mozambique 3.84 Mozambique 3.54 Australia 2.74 Tanzania 1.88 Decreasing intensity of trade between Africa and its historical partners reflects the acceleration of globalization and new trade corridors in the developing South-South cooperation.#51Trade Structure - Imports Source Markets 2010 Destination Markets 2021 Eswatini Imports Eswatini Imports Importer Partner share (%) Importer Partner share (%) South Africa 89.04 South Africa 72.97 China 2.24 Kenya 6.32 India 1.68 Nigeria 4.98 Other Asia 1.36 Mozambique 3.54 UK 0.62 Tanzania 1.88 Decreasing intensity of trade between Africa and its historical partners reflects the acceleration of globalization and new trade corridors in the developing South-South cooperation.#52The Eswatini Textile Story- Lessons for AfCFTA#53What can we learn from Eswatini's Textile Sector? • Initially attracted by improved market access to the US; • Extension of 3rd country fabric provisions under AGOA spurred exports. • Increasing pressure for Eswatini to improve on governance issues. • Loses AGOA Status and some firms leave Eswatini. • Most due to Diplomatic relations between Eswatini & Taiwan stayed. • Increased emphasis on regional (SA) buyers and exports to SA. ● ● Slowly at first and by 2017 bulk of Textile exports to SA. • Expansion into regional markets is possible.#54Eswatini 2010 2014 2018 Madagascar 2010 2014 Textile Exports - Changing Markets 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Exports to SSA and the North by top SSA exporting countries (share). Source UN-COMTRADE. SSA North 2018 Lesotho 2010 2014 2018#55250,000 200,000 150,000 100,000 50,000 Regional Textile & Clothing Exports O O O 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 о Exports to SSA by top SSA exporting countries - South Eswatini Africa is omitted Lesotho since 96.4% of its Mauritius Madagascar -0-Kenya exports is constituted by re- exports Ethiopia Source UN-COMTRADE.#56Value Chain work in Eswatini In supporting the country various studies focusing on value chain development have been undertaken in Eswatini covering various key value chains. • SADC • COMESA • World Bank, CPSD Economic Recovery Strategy & Action Plan NPD 2023/24 - 2027/28#57Facts . Eswatini has a small domestic market and Eswatini producers are failing to meet demand even on basic commodities. The target cannot be the small domestic market that we are currently failing to serve. • As a small, land-locked country, the economic and export success of Eswatini will depend on its ability to raise production and move exports and imports in and of the country as smoothly as possible.#58Cross-Cutting Issues Gender Mainstreaming Inclusion of Youth Climate Change issues Digital Transformation Intellectual Property Competition Policy Human Rights Urbanisation vs Rural Development#59END#60Increasing production capacity of MSME's . · ● . Improving access to finance. - supply chain financing - FINTECH - Promote guarantee schemes - Dedicated development finance Development of export readiness programme for MSME's - Training on exports, export requirements - Standards, labelling & packaging - International Marketing and Trade Shows Encourage increased value addition and export of value-added products Diversify export basket to expand export base and improve resilience Improve access to land for productive purposes, e.g., agriculture. • Market Linkages, especially within AfCFTA