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Measures to lift 100 million Africans out of poverty by 2035 on track

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The African Continental Free Trade Area is the world’s largest free trade area. And the largest trade organization since the establishment of the World Trade Organization.

Bringing together 54 countries of the African Union and eight regional economic communities. To create a single market. It has a population of about 1.3 billion people and a combined GDP of about $3.4 trillion.

In addition to being a free trade area, the AfCFTA is a flagship project of the African Union. (AU) Agenda 2063, Africa’s long-term development strategy for transforming the continent into a global powerhouse of the future.

Kigali, Rwanda

The agreement establishing the AfCFTA was signed in Kigali, Rwanda, on March 21, 2018 by 44 AU member states. Ten more countries have since signed the pact.

The AfCFTA Agreement entered into force on May 30, 2019, 30 days after the deposit of the 22nd instrument of ratification. As specified in its Article 23. Trading under the AfCFTA started on January 1, 2021.

The AfCFTA market comes with many opportunities, some of which are highlight in this article.

Limitless choice

Consumers will have limitless choice of quality products at an affordable price. This is due to the fact that AfCFTA aims at eliminating import duties.

On products that are produced within Africa and thus satisfy the rules of origin. It also defines standards that shall apply to those products in order to ensure quality.

The size of the market will attract both African and foreign investors. The AfCFTA’s legal framework provides for a protocol. That will set rules and regulations for investment facilitation and investor protection.

Industrialization

The trade area will spur industrialization through development of regional and continental value chains.

The AfCFTA rules of origin provide for criteria that have to be fulfilled by a product in order to enjoy duty-free, quota-free preference in the market.

These include products that are wholly obtained in that state party and products that have undergone substantial transformation in that country.

Africa’s GDP

The World Bank estimates that the AfCFTA could boost Africa’s GDP by 7 percent – almost $450 billion – by 2035.

In part by reducing import tariffs, but more importantly by eliminating non-tariff barriers (NTBs).

It should also deliver notable benefits in how income is distributed. Potentially lifting some 30 million people out of extreme poverty and 68 million out of moderate poverty.

Salary gaps

The AfCFTA will bridge salary gaps between men and women. The World Bank study revealed that African women will greatly benefit. As they constitute the majority of those engaged in intra-African trade.

A growing manufacturing sector would provide new job opportunities, especially for women. The report estimates that compared with a business-as-usual scenario.

Implementing the agreement would lead to an almost 10 per cent increase in wages, with larger gains for unskilled workers and women.

Labor intensive industries

Wages would grow slightly faster for women than for men as output expands in key traditionally female labour–intensive industries.

According to World Bank estimates, by 2035, wages for women would increase by 10.5 per cent with respect to the baseline, compared with 9.9 per cent for men.

A large proportion of small-scale operators at border crossings tend to be female. Women assume a variety of roles in small-scale trade as border traders, transporters, processors, or vendors.

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Impediments to trade

Often, they face more severe impediments to trade than their male colleagues in the form of higher trade costs and more pervasive corruption.

More limited access to price and market information, and more frequent harassment and abuse.

Elimination of NTBs is critical to boosting intra-Africa trade and achieving the objectives of the AfCFTA.

Trading across borders

It will reduce the costs of trading across borders and ease the cross-border movement of goods.

The bulk of the AfCFTA benefits will be realised if state parties efficiently manage and eliminate NTBs.

Annex 5 of the Protocol on Trade in Goods establishes a reporting, monitoring, and elimination mechanism.

Specific trade obstacle

Where traders can file a complaint on a specific trade obstacle they have encountered during the process of moving goods and services across borders. The mechanism is available online at www.tradebarriers.africa

To achieve the aspiration of AfCFTA and ensure that gains in economic growth are inclusive – of women, youth, and SMEs – and ultimately sustainable.

Real action is needed on the ground. The private sector, composed of traders, investors, and producers, is the engine of economic growth and main driver of job creation.

Private sector

In recognition of the central role of the private sector to deliver on the promises of the AfCFTA, an inclusive private sector strategy has been developed.

To identify the main barriers to trade and production in four initial priority value chains – agro-processing, automotive, pharmaceuticals, and transport and logistics.

These value chains were prioritized based on the relatively high level of import substitution today – an indicator of existing demand in local markets.

Existing exports

And some level of existing exports – an indicator of the ability to produce these goods locally. Sectors identified for future waves include horticulture, textiles, financial services, telecommunications, and IT.

The AfCFTA can provide a significant opportunity for women, giving them a head start towards increasing their economic empowerment.

African leaders have signalled their willingness to create an enabling environment for women to fully exploit the trade opportunities offered by the AfCFTA.

Heads of state and government

The Assembly of the Heads of State and Government of the African Union thus committed “to broaden inclusiveness in the operation of the AfCFTA.

Through interventions that support young Africans, women, and small and medium enterprises.

As well as integrating informal cross-border traders into the formal economy by implementing the simplified trade regime”.

Women and youth

In line with the directives of African leaders, a protocol on women and youth in trade is being developed.

It is expected to address the specific constraints and barriers women face when trading on the continent.

The protocol will enable AfCFTA state parties to effectively address the constraints women in trade face and create an environment that allows women. To utilize the agreement by accessing wider markets, improving their competitiveness. And participating in regional value chains.

General objectives

Article 3(g) of the AfCFTA provides that one of the general objectives is to “promote industrial development through diversification.

And regional value chain development, agricultural development and food security”. The agricultural sector is a key feature of African economies.

It contributes more than 60 per cent of employment for the population and more than a third of total GDP.

Traditional agricultural products

In addition, Africa mainly exports traditional agricultural products such as cocoa, coffee, cotton, tea, and spices outside the continent; and imports food products like cereals, vegetable oils, dairy, fish, and meat products in order to meet food security requirements.

That said, boosting intra-Africa agricultural trade (and agro-processing development) is critical to achieving the aspirations of Agenda 2063.

And the AfCFTA to create jobs, promote inclusive development, alleviate poverty, and secure food for Africans.

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Three Global Firms Signed By Nairobi Financial Hub On Its Launch

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Three companies were signed by Nairobi’s international financial centre on the day of its launch. The three include Prudential plc, ARC Ride Kenya and AirCarbon Exchange (ACX).

The Nairobi International Financial Centre (NIFC) is a special economic zone for financial firms.

Prudential, one of the world’s biggest insurers and asset managers, became the first firm to formally join the NIFC.

Singapore-based global carbon exchange ACX came along with Prudential. It seeks to set up a carbon exchange in Kenya.

Check out: Why Buyers Are Now Running Away From Popular Used Toyota Cars

NIFC has also admitted ARC Ride Kenya. It is a new start-up that is going to establish an electric vehicle assembly plant in Nairobi. The plant will produce two and three-wheeled electric bikes and scooters.

Also, the Financial Centre is determined to bolster the manufacturing sector in the country. It has signed an MoU with the Kenya Association of Manufacturers (KAM), to help increase financing and investment in the sector.

NIFC authority has hinted at being in discussion with other participants seeking to join it and will give official news soon.

“Last year Prudential Plc, one of the world’s biggest insurers and asset managers, made a commitment to relocating their Africa headquarters from London to Nairobi and join the Centre. Today we are proud to announce that Prudential becomes the first firm to formally join the Nairobi International Financial Centre,” Vincent Rague, Chairman NIFC Authority.

After many years of waiting, the hub will eye large foreign firms, boosting capital flows to Kenya and the region.

The authority has singled-out four sectors that it will prioritise for growth: financial technology, green finance, investment funds, and becoming a hub for regional multinationals.

The NIFC general regulations have been enacted, as the initial set of tax incentive proposals have been passed.

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Certification from the NIFC Authority must be applied by Firms considering conducting business through the NIFC.

A 15% corporate tax will benefit firms operating a carbon market exchange or emission trading system under the NIFC. The 15% advantage will happen for the first 10 years of operation.

Companies certified by the NIFC Authority and have invested a minimum of Sh5 billion will benefit from the certainty that, the Capital Gains Tax applicable at the time they make their investments will remain unchanged during the lifetime of the investments.

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Hackers Make Tactical Change, Now Targeting Small Businesses

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Traditionally, cybercriminals have been targeting big companies with aim of demanding ransoms running into millions. Nonetheless, the trend no longer holds, as new studies have shown the shift in hackers’ interest from big companies to small and medium ones.

Studies have shown that hackers are shifting their focus to small online businesses which they believe are more vulnerable.

Experts have warned that these SMEs and payment portals, especially those relying on mobile payment solutions, are now facing high risks of cyber attacks coordinated by these hackers.

Speaking during the inaugural Africa Cybersecurity Congress held in Nairobi, Hadi Maeleb, Agora Group co-founder and CEO said the threats to online businesses were growing at a high rate.

Further, he stated that more than 90% of business owners are unaware that their enterprises are at risk, despite the high growth rate of the attacks.

“Cybercriminals are now targeting small businesses more as they have realized that these enterprises do believe they would be exposed due to their comparatively low turnovers until they lose their data and payments are compromised,” said Mr Maeleb.

With the adoption of e-commerce platforms, State agencies, financial institutions, healthcare, energy and utilities have persistently faced cyber-attacks in the recent past.

According to CAK- Communications Authority of Kenya’s first-quarter data (between January to March 2022), a total of 79.2 million cyber-attacks were reported. This has prompted the government to issue 28,848 advisories in an attempt to fight the rising attacks.

Invest in Cybersecurity

Mr Maeleb noted that business owners should invest in cybersecurity tools as there is no magical solution to cybercrime.

“This ‘democratization’ of cyberattacks is expected to push losses due to business interruption, financial theft, personal data breaches and even ransom payments over the Sh4 trillion mark by end of 2022,” he said.

At the peak of the pandemic, several states adopted tough lockdown measures such as social distancing, working from home, and online learning.

Also read: Why Buyers Are Now Running Away From Popular Used Toyota Cars

Hackers shifting focus to small businesses.

This adoption of digital solutions such as e-commerce, remote working and banking went up as Kenyans turned to online platforms to curb the spread of the coronavirus.

“Unfortunately for them, the business of cybercrime has evolved to a point where attacks like ransomware are now sold as a service,” he added.

Even though these measures triggered the adoption of digital platforms, they also increased vulnerability such as ransom, data breaches, harassment, cyberbullying, and data breaches.

Kenya’s ICT Policy which came into effect in 2006, is credited for creating an enabling environment for the growth and usage of technology.

Kenya’s ICT Policy which came into effect in 2006, is credited for creating an enabling environment for the growth and usage of technology.

To achieve Kenya’s Vision 2030 goal of a regional ICT hub, the tech sector was expected to contribute directly and indirectly to an additional 1.5% of Kenya’s GDP by 2017/2018.

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Why Buyers Are Now Running Away From Popular Used Toyota Cars

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As it has been noted that Kenyans are now running away from the popular used Toyota car models, contrary to what has been a tradition in the country. The rise in their costs has seen even dealers cut down on imports of these vehicles due to decreased demand.

Traditionally, popular models such as Toyota Premio and RAV4 have been synonymous with middle-income earners over the years. However, this is no longer the trend.

Car dealers say more Kenyans are now going for vehicles such as Nissan Sylphy and Mazda, which cost less compared with popular Toyota models.

Toyota Vs Nisaan and Mazda models

According to Charles Munyori, the secretary-general of Kenya Auto Bazaar Association, Nissan Sylphy and Mazda’s CX5 and Axela, are quickly gaining popularity among Kenyans.

Mr Munyori said the price of a Toyota RAV4 has short up to Sh3 million currently from Sh2.8 million in February while a Premio is going for Sh2.2 million from Sh2 million four months ago.

On the contrary, Mazda Axela is now selling for Sh1.6 million with Nissan Sylphy (Blue Bird) going for at least Sh1.5 million.

Currently, consumers find these brands to be the best alternatives to their preferred models, as they are relatively cheaper and good.

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With the rising household costs, these car prices are making them affordable to most Kenyans as they struggle to balance the high cost of living.

“We are seeing a shift where Kenyans are now moving from the popular brands such as Toyota Premio and RAV4 to other models. This shift has been occasioned by the high cost that these cars are now fetching at the market,” said Mr Munyori.

“In fact, most of the car dealers are hardly bringing in Premio and RAV4 models because they are not moving and they will tie up money that they would need for importation of more vehicles,” he said.

Ex-Japanese vehicles

Ex-Japan vehicles dominate the Kenyan second-hand sector with a more than 80% market share.

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The buyers in the sector prefer these cars as their spare parts are easier to obtain locally compared to other brands. Additionally, buyers believe that the resale value of Toyota vehicles are higher than that of other brands like mazda or Nissan.

Reasons for risisng vehicle cost

The rising cost of vehicles in the country has been linked to the unavailability of dollars locally, a shortage of electronic chips in Japan, and a weakening shilling against the dollar.

The country is currently experiencing extreme dollar shortage, that one has to wait for at least three days to get $20,000 or $25,000 from the banks.

“We have to wait for like nine days in order to accumulate $80,000, and this has seen car dealers delay in making their orders. We are really feeling the impact of the dollar shortage in the market,” Mr Munyori said.

banks have imposed regulations on dollar purchase. This has forced traders to face difficulty in meeting their obligations.

Industrialists are forced to start seeking dollars in advance. The shortage puts a strain on supplier relations and the ability to negotiate favourable prices in gap markets.

On the other hand, Semiconductors are used in making electronic devices. Their shortage has forced the vehicle manufacturers to scale down the production. The quantity and quality cannot be maintained with decrease in one of the crucial raw material.

Finally, the shilling has persistently remained weak against the dollar. this has made it costly for importers shipping in goods.

The shilling has hit a record low trading at of Sh 117.06 against the dollar. This predicts a continued rise in imported goods, and signifies a further dollar shortage crisis.

The continuous depreciation in shilling stability is attributed to increased demand for dollars from importers. This highly arises on importaion of crude oil and merchandised goods.

It should be noted that most external debt is repaid in the dollar. Therefore, a weakened shilling increases prices of imported goods, and puts pressure on the country’s debt repayment.

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