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FREIGHT & TRADING WEEKLY

For import / export decision-makers FRIDAY 20 January 2017 NO. 2230

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The South African National Roads Agency Limited (Sanral) will soon announce details of a KwaZulu-Natal project that will re-route the N3 national road through the De Beer’s Pass – located between Ladysmith and Harrismith – to shorten the distance between Durban and Johannesburg.

That’s according to Skhumbuzo Macozoma, the road agency’s new CEO, who took office in December. He also said that the existing Gauteng Freeway Improvement Project (GFIP) – which currently covers about 200km – would be

expanded to cover more than 400 kilometres.

He noted that Sanral would be focusing on “winning back the support and trust of the South African public” and would look at alternative funding methods for the “expensive upgrades”.

The Organisation Undoing Tax Abuse (Outa) welcomed Macozoma’s statement that Sanral would be “looking to achieve a balanced funding portfolio with fuel tax-based revenue as well as toll income”, according to the organisation’s transport portfolio director, Ben Theron.

Sanral CEO hints at expansion plans

Sanral CEO, Skhumbuzo Macozoma.Photo credit: Outa.

Alan Peat

The high cost of over-border road freight transport is throttling two-way trade in southern Africa, according to the United Nations University (UNU), a postgraduate teaching organisation involved in collaborative research and education.

And this lack of cost-competitive, two-way movement of goods is in itself a major contributor to the overall cost factor. Empty return hauls impose costs on SA exporters as the full cost of the return trip must be allocated to the outbound leg. This is a good example of the benefits of fostering trade as a two-way street.

A working paper for UNU by Thando Vilakazi and Anthea Paelo, titled ‘Understanding intra-regional transport towards the integration of markets: Competition in road transportation between

Malawi, Mozambique, SA, Zambia, and Zimbabwe’, pointed out that, with these high cross-border freight prices in southern Africa, deep-water imports were in some cases cheaper than regionally produced goods.

Because of high transport costs, the researchers point out that it costs less overall to import animal feed and refined sugar from South America than to source both products from Zambia, even though Zambia enjoys a cost advantage in the production of both products.

With animal feed costs at around US$400/tonne in 2015 and transport from Zambia to Gauteng at above US$100/t, the researchers asserted that transport costs effectively broke the regional value chain and favoured deep-water trade. “A competitive benchmark for this route would be about US$40/t,” they said.

And Vilakazi and Paelo

added that reducing transport costs by half would improve the cost competitiveness of regional producers by more than 10%, allowing them to more effectively compete with deep-water suppliers who supplied more than US$200 million worth of animal feed.

“High transport costs are detrimental to regional value chains and encourage deep-water imports,” the research brief said, adding that “transport infrastructure is critical to the efficiency of trade in goods and services”. And, with most goods in the sub-Saharan region transported by road, “understanding the efficiencies, cost- and price-drivers, investments and market dynamics along road networks is therefore important”.

The paper added that prices for overland cross-border freight in southern Africa remained higher than

Extortionate transport costs continue to throttle regional trade

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WCO Classification OpinionsThe World Customs Organisation (WCO) on 10 January released the classification decisions taken at the 58th session of its Harmonised System Committee (HSC) meeting held from 28 September to 07 October 2016.The release includes 14 new classification opinions; 10 sets of amendments to the HS explanatory notes; as well as 27 classification rulings. These relate, among other things, to seeds of fruits of the genus capsicum for sowing; a ready-to-eat stew preparation containing dark chocolate and cocoa; chewable cough and throat tablets; sugar-coated milk chocolate sweets put up for retail sale with sweets dispensers; ceramic ink; a “hall element device”; tube bundle containers consisting of a number of cylinders (four or six) used for the transportation of compressed natural gas; a

two-wheeled transportation device (also known as “hoverboard”); f loating structures; products presented for use in the field of trauma surgery for setting fractures; and a virtual reality set for a video game console.Should you be interested in receiving copies of (i) Classification rulings; (ii) Amendments to the compendium of classification opinions; and amendments to the explanatory notes, simply send us an email with “WCO Classification Opinions” in subject line.

Tyre Environmental Levy On 13 January notification was received of the proposed draft amendments to the rules to the Customs and Excise Act, 1964 for the environmental levy on tyres, on which comment is due by 15 January. This is the first notification that I can recall, but am happy to be

corrected if I’m wrong.

SADC EPA & MercosurComment on the South African Revenue Service (Sars) release of 05 December 2016, of the draft amendment of rules to the Act, 1964 of Sections 13, 46A and 49 in respect of the Southern African Development Community (SADC) Economic Partnership Agreement (EPA); the Preferential Trade Agreement (PTA) between the Common Market of the South (Mercusor) and the Southern African Customs Union (Sacu); and Form DA185.4A2 – “Registration Client Type 4A2 – Exporter (Local or Foreign)”, is due by 20 January.

Protection of Investment ActThe trade and industry minister has invited interested parties to comment on the draft regulations on mediation

rules in terms of the Protection of Investment Act, 2015 by no later than 29 January.

TFA – 4 to goOn 09 January Saint Vincent & the Grenadines became the 106th World Trade Organisation (WTO) member to ratify the Trade Facilitation Agreement (TFA). Only four more ratifications for the TFA are required for it to enter into force.

106th Kyoto Convention Accession The WCO has announced that Benin on 06 January acceded to the Revised Kyoto Convention (RKC), thereby becoming its 106th contracting party.

These statements have been edited because of space constraints. For the full versions go to ftwonline.co.za. Note: This is a non-comprehensive statement of the law. No liability can be accepted for errors and omissions.

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The International Chamber of Commerce (ICC) has hit out at the SA government for resisting signing the Trade Facilitation Agreement (TFA) – a deal designed to offer financial and technical support in streamlining cross-border movement of trade.

This confirms a statement from an FTW source in last week’s article about the TFA which also pointed out the government’s recalcitrance.

Pat Corbin, ICC director, told FTW: “Regrettably, SA will not be eligible to attend this month’s International Forum for National Trade Facilitation Committees meeting in Geneva.”

This, he added, focused on Africa – the main target and beneficiary of the agreement, particularly due to its distance from major world markets and its “frustrating deficiencies”.

The reason for the ICC’s dissatisfaction, according to Corbin, is because “despite

representation at the highest level, we have not yet found a way to engage with government to form a joint committee.

“Our customs authority and

the department of trade & industry advised that they did not feel obligated, in terms of the wording of the agreement, to participate in such a committee.”

With only four signatures required to achieve the two-

thirds majority of WTO members, the agreement is expected to come into play shortly.

But despite the TFA’s specific focus on Africa, 40 of the present 59 outstanding members of the WTO are from the continent, including SA.

They, suggested Corbin, would have to be “dragged screaming” into the agreement, a deal that the rest of the world has warmly

welcomed for the benefits it offers – especially

significant cost- and time-savings in the movement of trade goods.

ICC slams SA’s resistance to trade agreement

The agreement is expected to come into play shortly.– Pat Corbin“

Congestion on roads and the inherent fuel efficiency and lower emissions of rail are contributing to growth in the use of rail for logistics.

A market study released by research company Technavio predicts that the global rail logistics market will experience a compound annual growth rate (CAGR) of nearly 4% to 2021. “Intermodal freight transportation is forecast to be the segment that will show the highest growth rate, with a CAGR of almost 5% through the forecast period.

“This growth will be driven by the cost-efficient solutions to transport complex commodities provided by the intermodals. The intermodal segment accounted for a majority 41.72% of the global market,” says Sharan Raj, one of the lead analysts at Technavio for logistics research.

The study covers most regions, with the exception of sub-Saharan Africa.– Ed Richardson

Global rail logistics set for growth


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The Maersk Group is set to become an integrated carrier, combining its liner, terminal and forwarding units into a maritime equivalent of the likes of FedEx and UPS.

This closer cooperation between Maersk Line, APM Terminals and Damco was a headline of the group’s pre-Christmas address from CEO, Søren Skou.

He also pointed out in an earlier statement in September that the Transport & Logistics Division would operate on an on-line basis.

The group, said Skou, would be “investing massively” in the digital and technology side of the business.

“We intend to lead the industry when it comes to digitising container shipping,” he added. “Everyone has a website but the reality is that the industry is quite analogue in the way it transacts business. We get 55% of all bookings through

maerskline.com and generate more than US$10 billion in revenue, and we see the opportunity to sell different services in the future.”

Such an concept in

the maritime industry immediately prompted FTW to raise a number of queries to Maersk Line in SA, with a primary one of these being whether this one-stop-shop concept would become available in SA.

We also questioned

whether the group would develop a landside collection/delivery system like the integrated air carriers; in which ports/countries were all three of the liner, terminal, and forwarding units present; in ports/countries where all three were not available how these missing functions would be supplied; and when the ‘single umbrella division’ was due to start operating, and whether it would effectively replace the currently autonomous management of the three separate business units.

But Matt Conroy, SA trade and marketing manager at Maersk Line in Cape Town, told us that it was still too early to answer such specific questions.

“It’s still very much a

vision of the company in the future,” he told FTW, “with our CEO, in his pre-Christmas preview, talking about an ‘integrated transport and logistics company’ as the way forward. The meat can only be added to this conceptual

bone later.”However,

he was able to tell us that it was most definitely going to be a truly global platform.

And, where the company

was short of a specific business unit/

function it could substitute a partnership basis and “operate with the service providers it already deals with”. Or, conversely, the Maersk Group could develop its own operation.

“Extensive research has obviously been conducted,” Conroy added, “but the detailed results will only be available over time.”

Maersk spells out ‘integrated carrier’ ambitions

We intend to lead the industry when it comes to digitising container shipping.– Søren Skou

“

Kenya and Denmark have signed a five-year agreement that will see Danish shipping company Det Forenede Dampskibs-Selskab (DFDS) training Kenyan maritime cadets for the next five years.

“This agreement will enable Kenya marine engineering and nautical science cadets to acquire seagoing service of 12 months which is a mandatory requirement towards attainment of professional qualifications in the maritime industry – either as marine engineering officers or navigating officers,” Nancy Karigithu, the Kenyan permanent secretary for maritime and shipping affairs, said in a statement.

While Kenya has five institutions offering marine engineering and nautical science courses, the graduates are reported to be finding it challenging to secure the required shipboard training.

According to Karigithu the sea-going training will help revive the Kenyan shipping industry, which has been stagnating.– Ed Richardson

Denmark to train Kenyan cadets


When it comes to trade finance and technology there is no bigger buzzword at present than the blockchain – and while not yet in use in Africa, interest is growing fast.

According to Steve Chemaly, a director at Norton Rose Fulbright Africa, a blockchain is a distributed ledger that records and verifies transactions. Everyone on the blockchain has an identical copy of the ledger but no one can edit it. It provides collective, unfalsifiable evidence and verification of the transactions recorded in the ledger.

“The implications for electronic trade finance platforms are significant,” he told FTW. “For example an electronic trading platform designed to process accounts receivable (invoice finance or factoring), and letter of credit transactions could use blockchain to substitute paper documents with a digital alternative or any form of a

single distributed and shared ledger. This will process transactions faster and more reliably. The distributed ledger provides single, immutable records of a trade, capable of verification by all parties involved in the transaction. It prevents the fraud that can

occur where a seller submits the same accounts receivable invoices for financing.”

With blockchain banks can easily create new marks for themselves in trade finance

by providing digitised letters of credit or trade finance instruments for the movement of both digital and physical goods.

Barclays and the Israeli start up Wave have been the first organisations to execute a global trade and finance transaction using blockchain technology, but the trend is fast gaining ground and others have followed in quick succession, all proclaiming blockchain transactional success.

But where does this leave the conventional letter of credit – which has been around for more than a century – as a payment instrument?

“The innovation that has begun and will continue is that it will be digitised and loaded onto the electronic trade platforms together with the invoices, bills of lading and other trade documents, which will result in a better instrument,” said Chemaly. “This will significantly reduce the cost of a trade transaction by avoiding the costs arising from handling the vast paper trail required to facilitate its supply chain. The blockchain technology, which uses a distributed ledger, enables all parties to the transaction to view the relevant title, shipping and other trade documents. The documents can be accessed and uploaded from any device, including mobile ones.”

According to Chemaly, questions of how this will actually work in the context of an import/export transaction have recently been addressed by HSBC and Bank of America Merrill Lynch in the application of

their recently launched proof of concept project.

“The importer will input the information that it would like to see the exporter provide, and the exporter and/or its bank will upload such information. This information can be tracked and viewed by all parties to the transaction. The exporter can upload images of the trade documents for storing on the distributed ledger. Once the images are loaded, the data is embedded and cannot be altered. Applying this proof of concept, each of the parties involved in the letter of credit transaction (the exporter, importer and both of the

banks) can view images and data in real time (even using their mobile devices) to see what the next actions to be taken are. Confidential data would be encrypted,” he explained.

According to Chemaly, this technology is expected to be used in Africa within the next five to eight years.

“Strate, which is the Johannesburg Stock Exchange clearing system, in consultation with the four major South African Banks, are already testing this proof of concept for purposes of settlement of trades on the Johannesburg Stock Exchange,” he said. – Liesl Venter

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Gaining access to trade finance through the normal banking environments remains one of industry’s biggest stumbling blocks.

According to Charl du Toit, managing director of Ziegler South Africa, which incorporates InHouse Ziegler, the informal trade finance lending market offered by some clearing and forwarding agents has played a significant role in addressing this challenge as it allows shippers to access trade

finance on a more efficient and less onerous basis – thereby relieving the pressure of pledging tangible security which is usually required by the banks in addition to various other strenuous requirements.

“Traditionally, trade finance product offerings were the domain of larger banking institutions,” he said.

But this has changed significantly due to the challenges many shippers face in accessing the finance – particularly on account of the increased focus on risk

following the global economic meltdown several years ago.

“Even in the informal lending environment, hedging your risk is critical,” said Du Toit. “Even though our lending criteria are much lower than those of the commercial banks, we still conduct thorough credit and risk assessments on our borrowers.”

Political and economic uncertainty severely affected shippers and the companies and consumers to which they supplied their products, explained Du Toit.

“Therefore, the end user’s inability to consume affects the borrower’s ability to service their debt. But we have also seen many shippers finding innovative ways to re-engineer their business models and still remain very profitable.

“All they need is the money to help them make it a reality and at Ziegler we are always looking to assist shippers who require our much-needed support to grow their businesses.”

Du Toit told FTW he was extremely positive about the coming year.

“Our economy was under tremendous pressure last year due to various elements and external factors. The IMF forecasting is still relatively low; however we are predicting positive growth in 2017 compared to 2016,” he said. “Cash-strapped shippers who are looking to capitalise on this growth will be happy to know that trade finance is going to greatly assist them in turning prospective clients into actual sales.”

Informal lending market relieves the pressure for shippers

Providing financial support for global trade is fast becoming the norm in a world of continued economic uncertainty.

According to some estimates, up to 90% of world trade nowadays relies on one or more trade finance tool.

“The world economic outlook remains bleak and cash is king. Even large international companies are opting to use trade finance,” Clifford Blackburn, CEO of TSI Central Station, told FTW.

In his view, a variety of reasons exist for this, including the need to know what the cost per item is.

“There is also a bigger need to pay in local currency,” he explained. “There is a lot to be said about predictive logistics,

mostly taking the volatility out of the supply chain – and trade finance certainly does this.”

He said predictions were that big bankers would be trying harder to capture this market in 2017.

“They do, however, have a certain disadvantage by only being financiers, unlike other solutions available to industry such as Bluestrata which is now Investec Import Solutions (IIS).”

According to Blackburn the big challenge is making a

wise decision as to which trade finance provider to use.

“ISS has introduced some real innovation to the market

place combining trade finance with total logistics. From an African logistics viewpoint innovation is hugely important – as is understanding the type of funding.”

For Blackburn the future lies in total innovative intelligent predictive logistics.

“I know that is a mouthful but if you take it apart then

innovative as trade finance ties into your logistics supply chain, managing the when how and what. Intelligent is never over-ordering or under-ordering, never over-spending on your stock (this is where companies can get into financial problems, too much stock on the floor) or running out of stock,” he explained. “We refer to the trade financers as bean counters; they are effectively banks and ensure that the right people are paid at the right time. Predictive is the operative word; you need to have

someone that looks after you from cradle to grave or at least looks after the various service

providers – and this is the game changer.”– Liesl Venter

Tying trade finance into the logistics supply chain

The future lies in total innovative intelligent predictive logistics.– Clifford Blackburn

“

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‘Know the export destination, and know your debtor’. That’s the single golden rule for exporters, particularly when trading into Africa.

“Africa is a good export market,” says national sales manager, business finance at Sasfin Bank, Arno van Niekerk. “But some African countries are short of hard currency – US dollars – in the wake of lower commodity prices. Therefore, there are currency liquidity risks when dealing with some of these countries.”

Exporters therefore need to differentiate between a commercial risk where the buyer fails to pay and economic risk where the forex to make payments is simply not available, he cautions. “The companies that exporters deal with may be financially stable and able to meet their payment obligations. However the global economic challenges faced by different countries have led to shortages of forex. Governments are prioritising their forex expenditure and therefore forex used to settle debts may not always be available,” he adds.

Knowing your debtor is therefore not enough. The company may be well known with established offices and a good payment record, but this could all be trumped by a shortage of forex, which is an economic risk over which the exporter has no control.

According to Van Niekerk, Sasfin Bank is involved in export finance for a number of clients exporting into Europe, the US, UK and some select African countries.

Sasfin recently sold 70% of Sasfin Premier Logistics to Imperial Group to form Imperial Sasfin Logistics

(ISL). “As a consequence of the move we are now able to assist clients in both imports and exports. We are able to assist with the full logistical process, providing a single entry point for clients from a freight, logistics and

finance perspective,” he says.Van Niekerk believes this

is particularly relevant as

South African companies increasingly combine imports and exports within their business models. “For example, an increasing number of South African companies are importing goods from around the world – finished goods, components and raw materials. In some cases they assemble or manufacture goods for export.

“The export markets are usually into Africa and this means that clients have to make sure that the f low of funds is secure,” Van Niekerk adds.

Currency liquidity risks play key role in Africa trade

Governments are prioritising their forex expenditure and therefore forex used to settle debts may not always be available.– Arno van Niekerk

“


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The high cost of logistics and labour has been named as the major obstacle to South Africa’s gross domestic product (GDP) growth.

“We need growth of a minimum of 5% to grow jobs and prevent the projected 27% unemployment rate for next year,” said Nedbank economist, Busisiwe Radebe.

She pointed out that structural reform – something for which the global credit ratings agencies were calling – was the only way for the country to avoid a potential downgrade to junk status and to grow the economy.

“We have the plan – the nine-point National Development Plan – which provides a sound, sustainable way towards that structural reform. The problem is, we’re not implementing it,” said Radebe.

“We all know we need to bake a bigger pie but we are sick of hearing about

that. We need action now. We need to know how and when.”

She believes structural reform is urgently needed in two areas – education and labour. “If we have the knowledge resources and the proper skills force, we could build a strong economy,” said Radebe.

“It's time we took a hard look at education – starting from primary to secondary education. It's clear that standards are not maintained throughout South africa's schools."

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South Africa may succeed in improving its 2016 economic performance to avoid a recession but the country remains at risk.

According to Steven Gamble, a director at Norton Rose Fulbright Africa, global uncertainty will also continue to have a direct negative effect on South Africa in the coming months.

“This is due to the extent of South Africa’s integration into global financial markets. Despite both the rand and the JSE having recovered strongly over the past few months, South Africa’s current account deficit leaves it vulnerable to short-term capital outflows amid changes in investors’ risk perceptions and appetite,” he told FTW.

He said it was expected that the country would avoid a recession in 2017 but that the speed of any likely economic recovery and medium-term growth, already constrained by structural impediments, could be adversely affected if international uncertainty were to lead to increased risk aversion and reduced investor appetite towards emerging markets.

“The threat of a downgrade and the current political

uncertainty (including elevated unemployment and concerns regarding succession) will continue to contribute negatively to the speed of any likely economic recovery and medium-term growth in South Africa,” said Gamble. “However, we must assume that most informed international investors will already have taken into account the possible impact of a downgrade, and may already have made their investment decisions. Therefore, it is likely that the threat of the downgrade is already taken into account, to some extent, in the present market levels.”

He said it was important, however, to take into account that Moody’s had recently stated that political instability was now South Africa’s primary credit risk, and as a consequence placed five state-

owned enterprises on review for a downgrade over concerns around their ability to raise funding.

“Fluctuations in currency remain another key factor in South Africa. The rand has regained much of its strength from a year ago, making South African commodities considerably more expensive than has been the case over the last 12 months,” he said. “The strengthening of the rand and lack of stability in the nation’s currency is a critical risk in terms of the ability of South Africa to export goods and commodities on a more consistent and sustainable basis. It is difficult to see how

the government of South Africa will address this currency risk in the near

future.”– Liesl Venter

SA likely to dodge a recession – but risk remains high

Structural reform the only solution


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12h45 – 13h30 NETWORKING LUNCH

PANEL 3 THE USER PERSPECTIVE ON REGIONAL INTEGRATION ON THE MAPUTO CORRIDOR

13h30 – 14h20What does it mean for operators when Regional Integration works? What works on the Maputo Corridor? What is the impact on your operations when Regional Integration doesn’t work? What are the most important things that need fixing? How can we fix these things?

PANEL 4 INTEGRATING RAIL SERVICES ON THE MAPUTO CORRIDOR

14h20 – 15h30

What role has rail infrastructure and rail transport played in integrating the region? The benefits of rail on the Maputo Corridor for hinterland cargo. The prospects for increasing bi-directional cargo flow on rail - A look into the planning and future demand, capacity and infrastructure development

Date: Thursday 2 February 2017 Time: 08h00-15h30Venue: Emnotweni Casino – The Arena, NelspruitCost: Attendance is for free, but booking is essential Visit www.transportsig.com to make your bookingTheme: Is regional Integration really working? A look at the Maputo Corridor.

In collaboration with the Maputo Corridor Logistics Initiative

Alan Peat

It sounds like science fiction, but the concept of a global f lying warehouse may not be beyond the realms of possibility.

The global on-line retail titan, Amazon, is the sole patent-holder for the concept of a massive flying warehouse, with stock replenished by a series of shuttles (smaller airships) and with fleets of drones to deliver goods to key locations.

The company’s drone delivery ambitions have been highly publicised since 2013. But this patent filing from Amazon is about how the e-commerce giant could make drone deliveries work through “airborne fulfilment centres (AFCs)”.

These are basically high-tech, state-of-the-art Zeppelins – without the highly combustible gas, hydrogen, as their support medium.

The AFCs would be stocked with a certain amount of inventory and positioned near a location

where Amazon predicted there would be a booming demand for certain items.

In its patent filing, Amazon suggested for example that this could be a major sporting event where its AFCs could float above the stadium carrying snacks and souvenirs – items that sports fans buy in plenty.

At the same time, these AFCs could also deliver audio or display advertising near the event.

The patent reflects a complex network of systems to enable delivery by air, allowing the drones, including temperature-controlled models for food delivery, to be stocked at the

AFCs and sent down to make a precise, safe, scheduled or on-demand delivery.

To service the AFCs, Amazon envisioned the shuttles carrying people, supplies and drones to the AFCs or back to the ground. It also pointed out that this use of shuttles to return drones to the AFC would

allow it to reserve the drones’ power for making deliveries only.

The company also envisaged this warehouse system having full cyber-support, with all its elements being connected to inventory management systems and other software and remote computing resources, managed by people in the air or on the ground.

The patent also detailed its various vehicles ‘talking’ to each other as they flew deliveries around. Basically, the whole kit and caboodle functioning as a mesh network, relaying data to each other about weather, wind speed and routing, for example, or beaming e-book content down to readers on the ground.

If this plan were to see the light of day, Amazon would likely need regulatory approval from aviation authorities which could be complex. But, while the US firm files and is awarded many patents, it does not necessarily mean the ideas will become reality.

Droning on about flying warehouses


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Although US president-elect Donald Trump hasn’t said much about Africa in his foreign policy speeches, commentators are convinced that his trade policy pronouncements so far are likely to affect SA-US trade relations.

It is pointed out that the largest economy in the world is one of SA’s biggest trade partners, and US political decisions therefore often have repercussions in this country and the rest of the world to one extent or another.

It's clear that Trump is opposed to free trade, and if this is translated into government policy, it is likely to have an enormous impact on the current global trend towards liberalisation of trade.

It is indeed almost inevitable that it would lead to growing protectionism in international trade – with all sorts of new pressures for the global economy.

And, while previous US regimes – particularly that of Obama – have entrenched good trade relations with Africa, including SA, through trade agreements like the African Growth and Opportunity Act (Agoa), this Africa-friendly stance could be in some

doubt when driven by the Trumpmobile.

Trump’s self-assertive international trade declarations up to now have focused mainly on China and Mexico. But, while he has not aimed any of his barbed comments at Africa, we can assume that the right-wing stance of the administration under Trump is more than likely to see some changes. Whether detrimental or not is still

unknown, but a harder Republican stance is almost certain.

Trump has made it clear that he is not in favour of trade deals, especially those that he sees do

not favour the US. And that stick can be waved at Agoa, which gives a pretty extensive range of African export products duty- and quota-free access to the US market. And, with dry goods from Agoa-approved African countries now totalling the equivalent of about R55.5 billion, it definitely feeds lifeblood into the continent.

And SA export producers, apart from chicken farmers, have been among the major beneficiaries of the Agoa trade deal. But with Trump’s anti-free-trade pronouncements, Agoa’s

tax-free access to the US is obviously hanging in the balance.

Added to that is the African offshoot of the most-favoured nation (MFN) tariff into the US. According to the World Trade Organisation (WTO) website, based on 2014 data, the US has an average applied tariff of 3.51% for all products being imported from other WTO members.

Averaged across all industries, this is the maximum tariff that the US promises to impose on imports from other WTO members.

However, Trump, as part of his stated protectionist plans for American workers, has already proposed the imposition of a 35% tariff on imports from any firm, American or not, based outside of the US.

Basically advocating for a tenfold increase in the average import tariffs that are already in place, this would take America’s tariff levels way above those of even the most protectionist states – Pakistan (24.38%), India (21.7%), and Thailand (20.68%), according to the WTO.

Possibly the only thing that is likely to put the kibosh on his plans to massively increase import tariffs to other WTO members, is that the US would become more prone to retaliation by its trade partners.– Alan Peat

In what direction will the ‘Trumpmobile’ drive Africa trade?

LAST WEEK’S TOP STORIES ON

US-AfricaTrade

With Trump’s anti-free-trade pronouncements, Agoa’s tax-free access to the US is obviously hanging in the balance.“

Zuma promises ‘radical transformation’President Jacob Zuma used his swansong “January 8 statement” as leader of the ruling ANC to promise radical economic transformation that will affect all sectors of the economy, from exports to mining, education to land redistribution.

Logistics major enters commuter bus sectorImperial Logistics has acquired a majority stake in Interstate Bus Lines, the largest commuter bus operation in the Free State.

Trump shadow over growth prospectsProspects of a moderate acceleration of global economic growth to 2.7% in

2017 after a post-crisis low in 2016 are overshadowed by the Trump presidency, according to the World Bank’s January 2017 Global Economic Prospects report.

Agriculture could unlock Africa’s export potentialAfrican agriculture holds the key to unlocking real export opportunities for the continent.

Maersk boxship runs aground in ItalyThe 366-metre-long, 9 038-TEU capacity Maersk Line containership, the MV Gustav Maersk, ran aground early on Tuesday (Jan 10) while transiting the Strait of Messina in southern Italy on her voyage from Rijeka, Croatia to Gioia Tauro, Italy, according to a statement.


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in other regions. This “even though many of the input costs of road transportation – vehicles, fuel and drivers’ wages – are lower than in Europe and North America. Benchmarking exercises indicate that transport costs from, for example, Zambia to the province of Gauteng are around twice what they should be”.

Not that the researchers are laying the blame on road transporters charging high prices to push up their profits. “Improving border efficiency plays an integral part in achieving cost reductions,” they said. “Border delays add around US$20/t to delay costs per day for a bulk load and have a larger impact on sensitive goods such as perishable foods. Such costs, both in monetary terms and time, reduce the scope of mutually beneficial regional trade flows.”

And the transporters, who work on profit margins often

well below 5% – and even, in some cases, actually below cost – agreed. They have many times complained to FTW that border-post inefficiencies in Africa cost them days in delays, and “delays are money”. The truckers are also beset by inherent corruption at the borders, with drivers often allocated slush funds of anything up to US$1000

to bribe their way through border posts. Either that, or they sit for days while customs officials shuffle their documents, until often a transport company

member brings the cash to buy them out of trouble. Police roadblocks on the road networks also require bribes to negotiate.

Added to that is the sheer inadequacy of the continent’s infrastructure. The title of ‘main highways’ often refers to roads full of dangerously deep potholes, and many surfaces that have so broken up that they are now little more than dirt roads.

Adele Mackenzie

Power parastatal Eskom may face legal action following its suspension of power to several rural non-paying municipalities this week – with more to come next week – which agricultural producers say will be a “catastrophe” to their operations.

Agricultural lobby group AfriForum lost its urgent court interdict last week to prevent the suspension and over 22 district municipalities have either already been suspended, or face suspension over the next week.

AfriForum’s legal representative, Willie Spies, told FTW that the lobby group was in the process of finalising a more comprehensive court application that it planned to present in March. He believes there are other ways for Eskom to recover the money from defaulters. “This practice of punishing everyone as a result of some defaulters will be tested in our courts,” he said.

Astral Foods CEO Chris Schutte said in a statement last week: “To date, Astral is a fully paid-up client with the municipality and legal action against the parties responsible for placing Astral in this calamitous position will be taken.”

The scheduled disconnection times for the Lekwa (Standerton)

municipality in Mpumalanga – set for January 23 – will interrupt Astral’s feed and poultry operations.

“We regard disconnection of electricity supply to Astral’s largest feed milling and poultry processing operations as a catastrophe,” said Schutte.

“The implications of the ongoing power cuts cannot be mitigated and will directly lead to bird welfare issues, business interruption costs and the loss of finished product in the cold chain. The magnitude of this decision has far-reaching impacts on the community, livestock and food security at a national level.”

He noted that over 11 million birds could be affected and would need to be culled.

Astral is the largest client of the Lekwa local municipality and, given the size of Astral’s Goldi processing plant and the Meadow Feeds mill in the town (the largest feed mill on the continent), is also the largest employer in Standerton. Over 4 000 people are employed by the company

Schutte said Astral was currently interacting with various parties to discuss the far-reaching implications of the planned power disconnection, and the potential economic, social and animal welfare consequences.

“The interruption of supply as a result of non-payment remains an agonising decision for Eskom, but we take solace in the fact that we

spared no effort to collect outstanding debts amicably,” an Eskom spokesperson told FTW.

He pointed out that the power parastatal had, amongst others, embarked on an extended Promotion of Administrative

Justice Act 3 of 2000 (PAJA) process, engaged all relevant and affected stakeholders – including the Department of Cooperative Governance and Traditional Affairs (Cogta) and National Treasury – entered into multiple payment plans, and offered the suppression of future interest, as an incentive.

Five municipalities paid their arrears over the weekend and were spared from power cuts on Monday.

Agri-producers not chicken to take legal action over power cuts

The implications of the on-going power cuts cannot be mitigated and will directly lead to bird welfare issues.– Chris Schutte

“Transport costs from Zambia to Gauteng are around twice what they should be.“

Extortionate costsFrom page 1

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