African trade deal could lift millions out of poverty

Mine workers wearing face masks looks on at the end of their shift, amid a nationwide coronavirus disease (COVID-19) lockdown, at a mine of Sibanye-Stillwater company in Carletonville, South Africa. (Reuters)
Short Url
Updated 28 July 2020

African trade deal could lift millions out of poverty

  • Once in force, the AfCFTA will bring together 1.3 billion people across 55 countries with combined GDP of $3.4 trillion

JOHANNESBURG: A pandemic-delayed African free trade deal, if fully implemented, could boost incomes across the continent, pull millions out of poverty and cushion against the negative fallout from COVID-19, the World Bank wrote in a report on Monday.

The African Continental Free Trade Area (AfCFTA) was due to come into force on July 1, but that proved unworkable after the virus forced widespread border closures and halted talks between governments over the removal of tariffs.

It may now begin operating from the start of 2021.

The pandemic is expected to cost Africa up to $79 billion in lost economic output this year alone with the additional risk of millions of job losses.

“In this context, a successful implementation of AfCFTA would be crucial,” the report said. “(It) is a major opportunity for Africa, but implementation will be a significant challenge. Lowering tariffs is only the first step.”

Once in force, the AfCFTA will bring together 1.3 billion people across 55 countries with combined GDP of $3.4 trillion.

World Bank researchers estimated the trade deal would lift 30 million Africans out of extreme poverty and 68 million from moderate poverty by 2035.

Full implementation could increase real income in Africa by 7 percent, or nearly $450 billion, mainly by reducing the cost of trade through the elimination of tariffs and red tape.

Ivory Coast and Zimbabwe — countries with the highest costs of trade — could see income gains of 14 percent.

The volume of total exports would increase by almost 29 percent, according to the World Bank, with exports between African nations rising 81 percent. 

Exports to non-African countries would increase 19 percent.

“The report estimates that compared with a business-as-usual scenario, implementing AfCFTA would lead to an almost 10 percent increase in wages, with larger gains for unskilled workers and women,” the report said.

Japan’s NTT to spend $38 billion to buy out, take DoCoMo private

Updated 43 min 37 sec ago

Japan’s NTT to spend $38 billion to buy out, take DoCoMo private

  • Move is intended to enhance the competitiveness of the NTT group as it consolidates its services

MITO, Japan: Japanese telecoms giant Nippon Telegraph & Telephone, or NTT, announced Tuesday it will spend $38 billion to buy out and take private its mobile unit NTT DoCoMo in one of the largest ever deals of its kind.
NTT and NTT DoCoMo executives released details of the plan Tuesday.
The move is intended to enhance the competitiveness of the NTT group as it consolidates its services, said NTT’s CEO Jun Sawada.
“We want to be a game changer,” Sawada said.
He said that between Sept. 30-Nov. 16 the company would buy DoCoMo’s shares at a price of $34.46. DoCoMo’s shares were last trading at $28.39. NTT held about 66 percent of DoCoMo’s shares as of March 31.
The acquisition will be financed by bridge loans, not a share offering, the company said.
The restructuring dovetails with newly installed Prime Minister Yoshihide Suga’s push for lower telecoms rates and more consumer and business-friendly services. It is expected to enable DoCoMo to offer cheaper rates in competition with rivals such as SoftBank and KDDI.
Suga has made expanding digital services a main part of his policy agenda and has called for reforms of the industry’s complex pricing policies and relatively inflexible contract arrangements. Pressures to improve such services have intensified with the push for remote work during the coronavirus pandemic.
NTT’s shares fell 2.7 percent ahead of the announcement, which was made after markets closed. DoCoMo’s shares were suspended from trading. Share prices for other NTT subsidiaries surged ahead of the announcement.
NTT DoCoMo is Japan’s largest mobile carrier, with more than 70 million subscribers. It was founded in 1992. According to its website, it holds a 44.2 percent market share compared with the 32 percent share held by KDDI’s au brand. SoftBank is third ranked, with a nearly 24 percent share.
Although DoCoMo is the market leader, its profits have been eroding, a factor that helped drive the decision to consolidate.
Sawada said there was no direct link between the buyout and cutting mobile subscription prices.
“However, by doing this, DoCoMo will get stronger. That’s why we are doing this. As the result of this, we could build a stable foundation which apparently could give us power to decrease the price,” he said.
The NTT buy out is the biggest ever in Japan and one of the largest worldwide. The biggest so far was the $48 billion acquisition of Dallas, Texas-based energy utility TXU Corp., now known as Energy Future Holdings, by Kohlberg Kravis Roberts, the Texas Pacific Group and Goldman Sachs Capital Partners in 2007.
A trend toward such deals appears to be gathering pace, as Japanese companies sitting on big cash piles adjust their business strategies in a time of growing uncertainty.
NTT traces its roots to 1869, the early days of the telegraph in Japan. Founded in 1952 as the government phone utility, it was privatized in 1987. The company has expanded its network services as its fixed line business has been largely supplanted by mobile phones, at least for individual users.
Japan’s mobile phone rates are on average about half the costs charged in the US and much lower than in Canada and South Korea, according to a study by telecoms services research firm
At about $3.90 for 1 gigabyte (1G) of mobile data, however, costs in Japan are far higher than in many European and Asian countries, such as China, where 1G cost 61 cents and India, where the cost was only 9 cents.