Private Sector Participation in AID for TRADE Presented by: S.V.Divvaakar, Director Ace Global Ventures Mauritius Pretoria, August, 2006 Towards an Effective Aid for Trade Package For Southern & Eastern Africa

Private sector in trade: enterprise profile SMEs are very small, vulnerable entities Implications: Home market: SMEs are vulnerable to import competition from large international players Exports: High degree of intermediation and vulnerability to trade developments

Challenges in exports Expanding business: Supply side constraints: –Resources for Upscaling/ expansion –Institutional finance –Business acquisition costs Market linkages Cross border investments Retaining business: Trade Information Import Compliance: –Adjustment costs –Detentions/ rejections –Automation and IT Commercial risks: –Credit sales –Intermediary costs Trade measures –Antidumping duties

Key Challenges faced at home Increasing competition from imports, following trade liberalisation Limited capacity/ access to professional skills and financial resources : –shortage of working capital –marketing problems –power shortage –Inadequate equipment –Non-availability of raw material –labour and management problems

Aid For Trade Map

Export Constraints to be addressed Sector Competitiveness enhancement –Value chain analysis –Intervention focus Enterprise Capacity development –Export-related knowledge –Business, Financial and Commercial Skills Common pool actions: –Trade-related infrastructure, including trade facilitation –Compliance measures to meet import market rules, regulations and standards

Perceptions: Trade Development Programmes Many programmes at the higher-end: policy analysis, export strategy, trade negotiation support End products are high-level directives, not adequately followed by budgetary/aid support to key sectors Mismatches in sequencing of needs and available offers

Expectations from Aid for Trade Private sector focus means an enterprise/ sector-oriented approach –‘De-mystification’ of trade jargon; customisation of content to ‘real targets’- specific products and markets –Wholesome package: trade information, enterprise training, market linkages, and investments for trade conformance (quality standards and others) –Intervention should be sustained, not sporadic –Beneficiaries should have more influence and ownership in selection, delivery and evaluation

Effective delivery of Aid for Trade DONORS BENEFICIARIES Sector Apex Bodies (Local technical absorption, and outreach) SPECIALISED AGENCIES (Linkages to international best practices, technical know-how) (Flexible, multi sector medium term funding)

Involving Private Sector as Partners in Aid for Trade Triangular production networks Improving Aid Effectiveness Global Sourcing Programmes Pure-play technical assistance

Partnering with Private Sector in Aid for Trade- Case I Global Sourcing Programmes Example: Developing African Supply chains for AGOA Trade facilities Cost sharing Training, Sampling WALMART, SHOPRITE

Partnering with Private Sector in Aid for Trade- Case II Triangular production networks Pre investment support Production facilities supply side inte rv entions Example: Relocation Investments in yarn/fabric segments for AGOA origin cumulation Chinese, Indian, Sri Lankan manufacturer exporters

Partnering with Private Sector in Aid for Trade- Case III Indian cashew nut processors (partners) Beneficiary enterprises Donors Example: Development of semi-automatic cashew processing activities in Tanzania, Benin Investment support Production facilities supply side inte rv entions Pure-play technical assistance

The South-South Dimension India,China and South Africa: new BRICS of the Global Economy Afro Asian Trade patterns: Trade and Investment Components –Trade Preferences –Trade Credits –Development Cooperation –Technical Assistance –Strategic Physical Resources Energy security Minerals and metals –Treaty Seeking Investments India Africa Credit Lines: –NEPAD: 200 Mn (80mn approved already) –EXIM Lines: $ 500 Mn –Pan African Network (telecom and IT) 53 countries –Capacity Development: ITEC and ABCF (1000 officials)