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A visa-free Africa still faces hurdles

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Despite fears of increase in crimes, some countries are liberalizing visas to attract investors
Would an Africa in which Africans require no visas to travel boost prospects for intracontinental trade?
The African Union (AU) and many of the continent’s economic organisations think so and want it to be a reality by 2020. It is not an entirely original concept (the European Union already has a visa-free policy for its citizens), and many experts laud the AU’s position, at least in principle.
The idea of an African passport dates back a quarter of a century but has failed to catch on with countries that fear an increase in smuggling, illegal immigration, terrorism, and the spread of disease as well as a negative impact on local job markets. With migration, legal and illegal, blamed for recent outbreaks of xenophobia in South Africa, some of these fears seem credible.
Visa-free travel for Africans in Africa could be a logistical nightmare given that some citizens do not have travel documents and others lead nomadic lives. Individual countries may need to enact legislation to adopt the African passport. Few African nations use the biometric data that an African passport requires.
Last year the AU launched an African passport, a signature project of former chairperson Nkosazana Dlamini-Zuma. However, the passport is currently available only to senior diplomats and top officials of AU’s 55 member states.
Of those member states, only Seychelles offers visa-free access to all African countries. “The large and fast-growing economies aren’t following suit because the visa regime itself has created a bureaucratic habit,” notes Daniel Silke, director of the South Africa–based Political Futures Consultancy.
“Old habits are hard to break, although there is justification for hesitation in terms of the legitimate layer of security that visas provide.”
Mr. Silke adds that growing and large economies worry about the impact that increased population movements might have on labour markets and cities. Some of Africa’s fast-growing economies are Côte d’Ivoire, Ethiopia, Guinea, Senegal and Tanzania. Out of desperation, thousands of immigrants travel to South Africa, the continent’s largest economy, to find work.
“With urban cities expanding rapidly across Africa, government institutions are strained, and cities that offer opportunities for trade, health care, a booming labour market, infrastructure, among others, will be under increased pressure,” notes Mr. Silke.
He suggests a focus on efficient and affordable visa procurement processes, advising regional communities to enact and implement policies that make it easier for their citizens to move from one member state to another.
In November 2017, after 15 years of negotiations, the Central African Economic and Monetary Community (CEMAC), comprising of Cameroon, Central African Republic, Chad, Equatorial Guinea, Gabon and the Republic of Congo, ratified the visa-free movement of its citizens.
Under the policy, member states will adopt biometric technology, ensure police and security services’ coordination, and respect for different labour regulations.
The next best thing to a visa-free system is visa on arrival, which may include authorization to stay for up to 90 days. Rwanda adopted this protocol in 2013 and has witnessed an increase in African visitors and investors, noted Mr. Anaclet Kalibata, the country’s director general of immigration and emigration.
Mr. Kalibata told Africa Renewal that between 2013 and 2016, the number of Africans receiving visas on arrival at Rwandan entry points increased by more than 100%. “We have also hosted many more conferences as a result of the removal of travel restrictions,” he said.
He maintained that crime rates in the country did not increase because of visa on arrival, contrary to fears initially expressed by skeptics.
“Most of the people entering our country do so for good reasons,” said Mr. Kalibata. He pointed out that Rwanda has “laws governing criminality associated with the movement of people. We also believe in competitiveness in terms of skills.… So, opening our borders has attracted new talent and investment.”
Like Rwanda, Ghana now offers visa-free access to a third of AU member states and visas on arrival to the other two-thirds. In so doing, the country has made the most progress of all African states toward a visa-free Africa for Africans, according to the Africa Visa Openness Report 2017 by the African Development Bank (AfDB).
Senegal is offering visa-free access to 42 African countries in a bid to reenergize its tourism sector.
At his swearing in as Kenya’s president last November, Uhuru Kenyatta announced that all Africans will henceforth receive visa on arrival.
An alternative to adopting visa-free access or visas on arrival is for countries to enter into reciprocal arrangements with other nations. Namibian authorities are making efforts to finalise such arrangements, meaning that citizens of countries allowing Namibians visas on arrival will receive reciprocal service at Namibian ports of entry.
Although Rwanda already offers Africans visa on arrival, it is also receptive to reciprocal arrangements with other countries, explained Mr. Kalibata. “We’ve proven just how effective unrestricted regional travel can be through the issue of a unified national identity card and border pass for citizens of Uganda, Kenya and Rwanda.
“Another border pass agreement between Rwanda, the DRC, Burundi, Tanzania and Uganda has fostered regional social cohesion, and we’ve seen cross-border trade in our countries now contributing 42% to GDP, which is very significant,” he added.
Rwanda’s experience, however, is not enough to change the perception of the negative impacts of liberalizing entry visas. Jean-Guy Afrika, AfDB’s principal policy expert and a contributor to the Africa Visa Openness Report 2017, notes, “The 2016 analysis of Africa’s visa policy regimes demonstrated that on average Africans needed visas at departure to travel to 54% of other African countries (from 55% in 2015); could get visas on arrival in only 24% (from 25% in 2015); and do not need visas to travel to just 22% (from 20% in 2015).”
The reasons African countries remain closed to each other, says Mr. Afrika, vary significantly. “The key reasons advanced by policy makers generally relate to fears of job losses and security concerns. But there could also be issues of culture and trust. The answer probably lies somewhere in the nexus between politics, culture, history and economics.”
Mr. Afrika confirms that at the regional level, East and West Africa lead in visa openness. “In the 2017 rankings of the Africa Visa Openness Index, 75% of countries in the top 20 are in these two regions. Only one is in the North and none in Central Africa.”
The AfDB, the AU and the World Economic Forum Global Agenda Council on Africa collaborated on the Africa Visa Openness Report 2017, the second of its kind. Researchers gathered data from the International Air Transport Association and from responses to questionnaires administered to national focal points.
“Overall the trend is positive, given that just four years ago only five countries offered liberal, arrival or no visa, access to citizens of all African countries. Today that number stands at 14, but we want that number to keep moving up,” Mr. Afrika says.
Visa liberalization is not a magic bullet, he cautions, even if it can foster Africa’s integration. He recommends other reforms and massive investments in connectivity to complement visa liberalization, citing Rwanda as an example of a country benefiting from coordinated investments and policy reforms, including in business and air transport infrastructure.
“Visa openness may only be one piece of the interconnected African states puzzle, but it is nonetheless a very important one,” concludes Mr. Afrika.

BY KERRY DIMMER

Africa Renewal

IMF Managing Director welcomes devaluation, voices concern on debt burden for Ethiopia

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Managing Director of the International Monitory Fund (IMF) Christine Lagarde visited Addis Ababa and held discussions with Ethiopia’s Prime Minister and President. During the discussions with media on Friday, December 15, 2017, Lagarde stated that the IMF welcomed the 15 percent devaluation on the Birr but also called for a more flexible monitory policy.
“We welcome the devaluation that took place by 15 percent and I also indicated to the authorities that we would believe in order to support an export driven policy which is currently advocated by the authorities, a more flexible monitory policy would probably be more appropriate, and that is what we are recommending,” she stated.imf
She further underlined that to address imbalance that is currently seen in trade and boost more export is within reach if the right measures are taken, including in terms of monitory policy.
“I think we are a short while away from shifting to more export, less import, the terms of competitiveness are improving and this is certainly something that we support,” she stated. Mentioning concerns, Lagarde mentioned that there are issues with debt burden and debt service.
“There are areas clearly in terms of debt burden and debt service where we are concerned and where we hope that the situation can improve. But it is predominantly a message of expectations and support that we want to deliver,” she said. She further stated that she was extremely satisfied with the dialogue she has had with Ethiopian officials and is convinced that the second phase of development that is being advocated in the country will actually deliver good results.
In her meeting with Economic Commission for Africa’s Executive Secretary Vera Songwe, Lagarde stated that the demographic phenomenon on the continent needs to be monitored and dealt with.
“High single digit growth rate which are short of delivering on per capita basis, given the demographic phenomenon, are observed in some countries. Regrettably there are quite a few countries on the African continent that are not growing at those rates, there are 17 of them actually which are in per capita basis, are seeing income go down and not go up.”
“So while we are saying the sun is shining on the global economy, there are too many countries that are left behind on per capita basis. We clearly have to address their particular concerns and their particular fundamentals to see how we can all help. Move them to a better, more sustainable more inclusive growth going forward,” Lagarde said.
On her part Vera Songwe also underlined the need to focus more on demographics on the continent. “I think when a big institution like ours meet, it is important that we look at what are the innovative solutions that we can bring to the continent. The question of demographics has been a big one; it continues to be a big one.”
“For a long time we have talked about the demographic dividend, now we are asking ourselves do we have a dividend or are we going into a demographic trap which basically means we look at GDP per capita, look at issues of inequality and so on. But even though countries grow at 7 to 8 percent which we celebrated for the last two decades, with the rate of population growth, we probably need to be doing 15 percent to be able to see substantial increases in GDP per capita,” Songwe said.
She also underlined that to achieve the above, one of the innovative things that can be done is to bring institutions such as the ECA and IMF together to work on new models of growth for the continent.

New rule to discard postdated cheque system

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The Council of Minsters is going to forward a new regulation to parliament which allows a payee (person to whom money is paid or is to be paid) to withdraw cheque money from banks without waiting the time set by the person who wrote the cheque. Usually people will write a postdated cheque if they do not have the proper amount of money in their bank balance.
In the current working system the payee withdraws money from the banks starting from the day written on the cheque by the person who wrote it. However, the new rule which is drafted by the National Bank of Ethiopia and requires an endorsement from the parliament allow the person cashing the cheque to get the money from the bank immediately.
The new rule is expected to be operational before the end of this fiscal year.
Sources who are close to the issue told Capital that the new rule will minimize the power of informal money lenders that many people across the country use.
“As a country that requires modern banking system informal money lending is not what we need. The new system will diminish trust between borrowers and informal lenders. Because if the borrower knows that the lender can get money from the bank after the cheque is written they will be afraid of making a deal with informal lenders which ultimately will cause them to go to banks to follow the legal procedure.’’
The source added that the new rule also will discard the use of cheques as guarantee of loans.
“Some people use cheques as a guarantee of getting a loan to borrow money. For example if one thinks that they will get one million birr in the next three months they will write a cheque of 1.5 million birr for the lender that will be withdrawn after six months and then they will return the money to the lender before the effective day of the cheque. By these method cheque is not used as a means of transaction but if we discard timeline of cheque people may not use it as guarantee because the lender get their money out of the bank on the day they issued the cheque.’’
Bank professionals said that Ethiopian Revenue and Custom Authority (ERCA) which uses a bank statement for tax calculations is the other factor causing business people to use cheques as means of guaranteeing they will get their loans repaid.
Abey Zewde who is an economist told Capital “if somebody lends some money from someone and the money goes through the bank ERCA assumes that the money coming from a means of transaction which allows people to pay taxes on what they don’t sell. So to escape these kind of things they borrow money from people by writing a cheque and they pay it to the lenders before they withdraw the cheque money from the bank.’’
Last year the National Bank of Ethiopia (NBE) and the Ethiopian Bankers Association (EBA) introduced a system that would control fake cheques and provide a homogeneous bank cheque payment service.

EEP, Corbetti Geothermal ink first power purchase agreement

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The Ethiopian Electric Power (EEP) is going to sign its first ever power purchase agreement with Corbetti Geothermal after a long delay on two separate power feeders. The agreement is expected to be sealed off next week.
The company had previously agreed with the then Ethiopian Electric Power Corporation in 2013. They were in the process of producing a total of 1,000MW power at the location called Corbetti and the surrounding area, Shalla Woreda, East Arsi Zone of Oromia, 270km southeast of Addis Ababa.
Mekuria Lemma, Strategy and Investment Director with the EEP, told Capital that the two bodies agreed on a feed in tariff in the beginning. He said that EEP has agreed to pay USD 0.075 cents per kwh for the Corbetti project. The Tulu Moye and Abaya projects which will be developed in the second phase will contribute to Corbetti Geothermal to gain USD 0.069 cents per kwh, according to Mekuria.
“They have a scale advantage on the Tulu Moye and Abaya projects so the price has also been reduced compared with Corbetti,” he added.
If the project becomes effective it would be the first large scale private power project for the country that will be connected with the national greed on the power purchase agreement basis.
Mekuria said that the first phase of the project that will take place at Corbetti will take 7.9 years and enable to generate 500 MW project.
“A Geothermal energy project by its nature is not expected to be fully operational in a few years,” EEP officials said. He said that because of this the power production will reach 500MW in the long run.
“We will receive the first 20MW within two years and it will continue on its growth step by step,” he added
Corgetti Geothermal was initially formed by Ethiopian affiliated company called Rift Valley Geothermal and its Icelandic partner Reykjavik Geothermal. Currently Berkley Energy and Iceland Drilling have joined the company. Berkley is the major shareholder with over 53 percent share.
The two sides that finalized the negotiation in the beginning of the Ethiopian New Year are expected to seal their agreement on Tuesday December 19 at the Sheraton Addis.
The country’s energy development is mainly dominated by hydro power, while wind has become the other alternative. Even though the country has a capacity to produce 10,000mw from geothermal the current production is not higher than 50mw.
On its own project EEP has also planned to generate about 75mw of energy from geothermal at Aluto Langanoo, which is closer to the project of Corbetti Geothermal. But the Aluto project is not going as planned.