The European Business Council for Africa

Globally, the coronavirus pandemic (COVID-19) is killing thousands of people daily and has resulted in production and supply chain disruptions, termed as ‘supply-demand shocks’. The pandemic has caused ripple effects across all economic sectors including those linked to natural resources, manufacturing, services and entertainment. The impacts of the pandemic are being felt in Africa particularly because most national economies are commodity-dependent, and demand for commodities has generally declined over the first quarter of 2020 and may continue to decline if the future remains uncertain.

Sustainable economic development based on the oceans and meeting the aspirations of individual countries, the African Union, economic actors and the African public has many different labels. The choice of either of the terms ‘blue’ or ‘ocean’ linked to ‘economy’ are used in different contexts, but the key attributes desired include minimizing damage to the environment and natural assets, generating benefits and opportunities equitably for people, and promoting resilience to climate change. This report uses the terms ‘blue economy’ and ‘ocean economy’ synonymously – as the business, local and national economies, citizens, beneficiaries and potential victims are the same.

This paper surveys the literature on sovereign debt from the perspective of understanding how sovereign debt differs from privately issue debt, and why sovereign debt is deemed safe in some countries but risky in others.

The answers relate to the unique power of the sovereign. One the one hand, a sovereign has the power to tax, making debt relatively safe; on the other, it also has control over its territory and most of its assets, making debt enforcement difficult.

The paper discusses debt contracts and the sovereign debt market, sovereign debt restructurings, and the empirical and theoretical literatures on the costs and causes of defaults. It describes the adverse impact of sovereign default risk on the issuing countries and what explains this impact. The survey concludes with a discussion of policy options to reduce sovereign risk, including fiscal frameworks that act as commitment devices, state-contingent debt, and independent and credible monetary policy.

Rethinking the Foundations of Export Diversification in Africa

Soaring food and energy prices are hitting African countries especially hard as they struggle with the impact of the COVID-19 pandemic, climate change and the war in Ukraine.

To cope with current crises and insulate itself against future shocks, Africa must diversify its economies. The continent of 1.4 billion people is among the least diversified regions in the world with regard to exports.

Commodities account for more than 60% of total merchandise exports in 45 of the 54 countries in Africa, leaving them highly vulnerable to global commodity price shocks and undermining the continent’s inclusive growth and development prospects.

This briefing paper summarises a study by CUTS International Geneva on “The Nationally Determined Contributions in the Lead-Up to COP26 and Beyond: Stakes for Least Developed Countries”. The study explored the centrality of NDCs and their review cycle in the functioning of the Paris Climate Agreement, the challenges they may pose and the opportunities they may provide for LDCs, and the COP26 priorities for the LDC group.

Climate change is one of the most important issues facing the international community that is using the momentum provided by the Covid-19 pandemic recovery to multilaterally address the impacts of changes in climate, especially on countries more affected by rising temperatures and with limited resources.

This note provides a historical review of past work undertaken at the WTO on trade and environment issues, and highlights latest development under three trade and environment initiatives: Trade and Environmental Sustainability Structured Discussions (TESSD); Informal Dialogue on Plastics Pollution and Sustainable Plastics Trade (IDP); and Fossil Fuel Subsidy Reform (FFSR).

The WTO contributes to environmental conservation and preservation through its mandate of ensuring sustainable development and avoiding protectionism, through work in various WTO bodies, as well as through its rules and enforcement mechanisms. However, given there is no 'special agreement' on the environment, under WTO rules, members can adopt trade-related measures to safeguard the environment provided the conditions to avoid misuse of such measures for protectionist purposes are met.

The livelihoods of rural communities depend primarily on the availability of and access to renewable resources, including water, land and living resources. These resources are components of ecosystems with complex and dynamic relationships. Holling (1973) and Gunderson (2000) have shown that these ecosystems have their own capacity or resilience to adapt to external pressures induced by humans and large-scale environmental changes. This capacity is found in other complex systems, notably in what Ostrom (2009) has called the ‘social-ecological system’, a concept which integrates resources, their uses and the governance frameworks established by their users.

This study on the investment climate in Benin is a continuation of the one on the business environment carried out in 2019 by the African Development Bank.

Investment is an important driver of economic growth with important implications for debt sustainability. Investment efficiency gaps adversely impact debt sustainability in Africa. The current heightened fiscal vulnerabilities can be attributed to external factors including volatile commodity prices particularly for commodity-exporting countries and health challenges like COVID-19 pandemic that weakened fiscal revenues and growth. In addition are domestic factors such as elevated government spending on the back of big-push investment expenditures to close infrastructure gap, increased security expenditures in response to conflict and social unrest in some countries. Using a dynamic stochastic general equilibrium (DSGE) framework, we estimate the role of debt in the provision of productive investments, driving economic growth and subsequent debt sustainability.

This paper investigates the determinants of venture capital investments across 25 African countries over the period 2014-2019. In particular, it considers the significance of innovation and digitalization in Africa’s venture capital activity. The results show that digital infrastructure, high-technology exports, internet coverage, market size, minority investor protection, and government effectiveness are the main drivers of venture capital deals in Africa over the period examined. More generally, these findings highlight that digital infrastructure and connectivity, innovation and institutional frameworks all play an important role in shaping a favorable environment to attract venture capital funding.