Attachment_6_Trade_Hub_Annual_Report_FY_2014.pdf

Southern Africa Trade Hub FY 2014 Annual Report 1

SOUTHERN AFRICA

TRADE HUB

ANNUAL REPORT FOR THE PERIOD

OCTOBER 2013 - SEPTEMBER 2014

23 October, 2014

This publication is prepared for USAID by AECOM International Development to report on the work and milestones of the USAID Southern Africa Trade Hub under Contract No. 674-C-00-10-00075-00.

Southern Africa Trade Hub FY 2014 Annual Report i

SOUTHERN AFRICA

TRADE HUB

ANNUAL REPORT FOR THE PERIOD

OCTOBER 2013 - SEPTEMBER 2014

FY 2014

Contract No. 674-C-00-10-00075-00

Submitted to:

USAID South Africa

Prepared by:

AECOM International Development

DISCLAIMER:

The authors’ views expressed in this document do not necessarily reflect the views of the United States

Agency for International Development or the United States Government.

Cover photo: Women Cleaning Soy Beans During Trade Hub-led Training, Nampula Province, Mozambique.

Southern Africa Trade Hub FY 2014 Annual Report ii

TABLE OF CONTENTS

ACRONYMS .....................................................................................................................................................III

I. INTRODUCTION AND OVERVIEW

II. HIGHLIGHTS & RESULTS

TRADE FACILITATION

AGRICULTURAL VALUE CHAINS

TEXTILES AND APPAREL

CLEAN ENERGY

ENABLING ENVIRONMENT

III. ISSUES, CHALLENGES AND LESSONS

IV. ORGANIZATION AND STAFFING

V. FINANCIAL REPORT

VI. ANNEXES

Southern Africa Trade Hub FY 2014 Annual Report iii

ACRONYMS

AAFA American Apparel and Footwear Association

ACE (Malawi) Agricultural Commodity Exchange

ACTIF African Cotton & Textile Industries Federation

AGOA African Growth and Opportunity Act

ANSI American National Standards Institute

ATI African Trade Insurance

AVC Agricultural Value Chains

AW ASYCUDA World

B2B Business-to-Business

BITC Botswana Investment and Trade Centre

BOCCIM Botswana Confederation of Commerce, Industry and Manpower

BURS Botswana Unified Revenue Service

CASS Central African Seed Services

CBM Coordinated Border Management

CE Clean Energy

CFA Clearing and Forwarding Agents

COP Chief of Party

CPI Investment Promotion Institute

CTICC Cape Town International Convention Centre

DIA Department of Industrial Affairs

DOE Department of Energy (Swaziland)

DSQA Lesotho Department of Standards and Quality Assurance

DTI Department of Trade and Industry (South Africa)

DTIS Diagnostic Trade Integration Study

ECOWAS Economic Community of West African States

EE Enabling Environment

EIF Economic Integrated Framework

ERB Energy Regulation Board

ETG Energy Thematic Group

FtF Feed the Future

FY Fiscal Year

GAZEDA Special Economic Zones Authority

GCNet Ghana Community Network

GGDA Gauteng Growth and Development Agency

ICP International Cooperating Partners

ICT Information and Communications Technology

IDC Industrial Development Corporation

IPA Trade and Investment Promotion Agency

IPEX Export Promotion Institute

IPP Independent Power Producers

JBC Joint Border Committee

Southern Africa Trade Hub FY 2014 Annual Report iv

LTE Leaders in Trade Exhibitions

LNDC Lesotho National Development Corporation

MBS Malawi Bureau of Standards

MCCI Malawi Chamber of Commerce and Industry

MCNet Mozambique Community Network

MIT Ministry of Industry and Trade

MMEWD Ministry of Mines, Energy and Water Development (Zambia)

MOF Ministry of Finance

MRA Malawi Revenue Authority

MREs Monitoring Reporting and Evaluating Systems

MSME Medium Small and Micro Enterprises

MT Metric Tons

MTI Ministry of Trade and Industry

NCE Namibia Customs and Excise

NEP National Enquiry Point

NIST National Institute of Standards and Technology (US)

NSW National Single Window

PMU Project Management Unit

PPP Public-Private Partnership

PS Permanent Secretary

PTF Partnership for Trade Facilitation

RE Renewable Energy

REA Rural Electrification Authority

REFIT Renewable Energy Feed-in Tariffs

RERA Regional Electricity Regulators Association of Southern Africa

SACAU Southern African Confederation of Agricultural Unions

SACU Southern African Customs Union

SADC Southern African Development Community

SADCSTAN SADC Cooperation in Standardization

SAGL Southern African Grain Laboratory

SANSOR South African National Seed Organization

SAPP South African Power Pool

SERA Swaziland Energy Regulatory Authority

SESA Sustainable Energy Services for Africa

SI Statutory Instrument

SIPA Swaziland Investment Promotion Authority

SME Small and Medium Enterprise

SPG Strategic Partnership Grant

SPS Sanitary and Phytosanitary

STDF Standards and Trade Development Facility (WTO)

TBT Technical Barriers to Trade

TIDCA Trade, Investment and Cooperation Agreement

TF Trade Facilitation

TTF Taiwanese Textiles Federation

Southern Africa Trade Hub FY 2014 Annual Report v

UNCTAD United Nations Conference on Trade and Development

USAID United States Agency for International Development

USG United States Government

USITC US International Trade Commission

USTR United States Trade Representative

WAPP West African Power Pool

WCO World Customs Organization

WRS Warehouse Receipt System

WTO World Trade Organization

ZABS Zambia Bureau of Standards

ZRA Zambia Revenue Authority

Southern Africa Trade Hub FY 2014 Annual Report 1

I. INTRODUCTION AND

OVERVIEW

The key objective of the USAID-funded Southern Africa Trade Hub (Trade Hub) project is to increase international competitiveness, intra-regional trade and food security in Southern Africa.

The Trade Hub is supported by USAID under Contract No. 674-C-00-10-00075-00, awarded to AECOM

International Development with a period of performance from 2010 until 2015. The initiatives of the United

States Government that provide context and support for the Trade Hub’s activities are:

African Competiveness and Trade Expansion (ACTE);

Feed the Future (FtF);

Clean Energy (CE);

Partnership for Trade Facilitation (PTF).

In line with these initiatives and the technical direction in Contract Modification No. 8, Section C: Scope of

Work of November 20, 2012, the Trade Hub provides needs-driven assistance to the Southern African

Development Community (SADC), the Southern African Customs Union (SACU), governments and private sector organizations in eight countries.

With an office in Gaborone, Botswana, an office opening next quarter in Centurion (Pretoria), South Africa and embedded advisors in Malawi and Namibia, the Trade Hub works primarily in Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland and Zambia. Starting in FY2013, and in line with

Modification No. 8 of the project contract, the Trade Hub reduced its technical assistance delivery from 13 to five indicative result areas, which are described below:

IR1.1: Trade Facilitation aims to improve efficiency in trade administration covering import, export and transit goods procedures and transparency of border administration by promoting and facilitating the adoption of simplified trade processes and modern tools.

IR1.2: Agricultural Value Chains focuses on improving storage and structured trade; standards and quality;

investment and adoption of modern technologies; and strengthening regional organizations to enhance production and availability of tradable maize, groundnuts and soy to enhance food security.

IR1.3: Textiles and Apparel focuses on business linkages between regional and international buyers and

African-based garment and textiles manufacturers; and providing technical and advisory support to Botswana and Mozambique to position themselves as attractive and viable investment locations.

IR1.4: Clean Energy works in collaboration with the Regional Electricity Regulators Association of

Southern Africa (RERA) and country energy regulatory bodies to build capacity to develop and implement policies, regulations and feed-in tariffs that will enable and attract new investments in clean energy generation.

IR1.5: Enabling Environment supports measures that improve the business climate, environmental compliance and gender integration as enablers of competitiveness and sustainability.

The Work Plan for FY 2014 continued the technical assistance for initiatives and activities started in FY

2013, in line with funding obligated through Modifications 12 and 13.

Southern Africa Trade Hub FY 2014 Annual Report 2

II. HIGHLIGHTS & RESULTS

Southern Africa Trade Hub FY 2014 Annual Report 3

Trade Facilitation

Southern Africa Trade Hub FY 2014 Annual Report 4

TRADE FACILITATION

During the year, the Trade Facilitation team held extensive consultations with the Malawian and Namibian governments to agree on a road map, action plans, resources and organizational decisions and structures needed to start implementation of the NSW.

The Trade Facilitation (TF) team continued research this year to better understand the factors and drivers that enable trade across borders, and is ensuring that the modernization tools the Trade Hub is promoting and facilitating, address the following elements:

Efficiency of customs administration;

Efficiency of import-export procedures;

Transparency of border administration;

Availability and use of ICT;

Improved regulatory environment.

NATIONAL SINGLE WINDOW

The Trade Hub set the goal of facilitating the adoption of a National Single Window (NSW) as a trade modernization program in Malawi and Namibia. A number of milestones were set to measure and track progress towards the key results.

MALAWI NSW

The Trade Hub reached agreement with the Ministry of Industry and Trade (MIT) to embed a technical advisor, Stuart Millen, in the Malawi Revenue Authority (MRA), as the lead agency for NSW. The

Malawian Government issued a work permit for the advisor and visas for his family and the MRA has provided office accommodation. Technical assistance terms of reference and a work plan have been negotiated, and the advisor will work closely with the MRA to establish a multi-ministry project management unit (PMU) and help the Steering and Technical Committees become functional. Initial efforts will focus on developing and implementing a communications strategy and consultation plan to engage the private sector and other government agencies. The first phase of the NSW program will concentrate on customs reform and modernization to create a customs single window environment. Mr. Millen mobilized to

Blantyre in September 2014. Since his arrival, the NSW Advisor has been actively coordinating beneficiary officials from the MRA and the MIT in support of the Trade Hub’s communication advisor to schedule public awareness events planned for November 2014.

In September, Trade Hub hired a short term NSW communications advisor to design and develop a

Communications Strategy and Plan that will support Malawi’s public awareness campaign for the NSW during the “Induction Phase.” Key stakeholders in the public and private sector in both Lilongwe and

Blantyre were engaged and consulted on their needs and expectations in moving forward with a NSW. The draft communications strategy and plan has been completed and is currently under Trade Hub review prior to distribution to the Malawian government.

Southern Africa Trade Hub FY 2014 Annual Report 5

NAMIBIA NSW

The Trade Hub team and the Namibian government agreed to terms of reference and a work plan and the advisor and his family received a work permit and visas. The advisor relocated to Windhoek in August 2014.

The advisor will work with Namibian Customs and Excise (NCE) and the National Single Window PMU in

Ministry of Trade and Industry on the National Single Window and the Namibia Trade Information Portal.

In August, Trade Hub hired a short term NSW Communications advisor to design and develop a communications strategy and plan that will support Namibia’s public awareness campaign for the NSW during the “Induction Phase.” Key stakeholders in the public and private sector in Windhoek and Walvis Bay were engaged and consulted on their needs and expectations moving forward with a NSW. The draft communications strategy and plan has been completed and is currently under Trade Hub review prior to distribution to the Namibian government.

CUSTOMS CONNECTIVITY PILOT PROJECT (CCPP)

Even though the Customs Connectivity Pilot Project reached an advanced stage in early 2013, it could not be completed as originally envisaged and planned. Without the missing elements of the Source Code, the vendor was not able complete the project. The vendor informed Trade Hub in late April 2014 that it was withdrawing from the project and was not willing to negotiate a modified contract to complete the work. The vendor’s technical lead for the project has also left and is no longer available to do the work. More than three years after the inception of the project, technological changes have also overtaken the original plan. For example, Namibia is implementing ASYCUDA World (AW), while Botswana remains on ASYCUDA++ requiring two solutions to connect the two systems. As a result, Trade Hub was forced to terminate the

Connectivity Project in early May 2014.

In 2013, realizing that the Source Code may not be provided by the United Nations Conference on Trade and

Development (UNCTAD), Trade Hub developed a Plan B that would enable the completion of the pilot by introducing an extra step for downloading the information from the Cloud and uploading it into

ASYCUDA++. It was decided to not follow this route for the following reasons:

Considerable time and cost (up to a year and at great expense) with no guarantee of success or utility.

Any new service provider would have to backtrack and assess how much work remained to be completed, which would require substantial investment in an experimental program;

Plan B is not a technically robust approach, requiring end-user intervention to import data into

ASYCUDA++, and would become redundant soon as most customs administrations plan to migrate to

AW shortly;

It remained a major risk to press forward with the CCPP without finding a way to work closely with

UNCTAD, which supplies AW to most customs administrations in the region (Botswana, Lesotho, Malawi, Namibia, Zambia, and Zimbabwe are all either already using, or in the process of migrating to

AW);

It was not clear if and how the Trade Hub would be able to roll out the connectivity solution to other countries in the region, without the cooperation of both UNCTAD and the South African Revenue

Service (SARS), bearing in mind that most of the countries conduct trade with and through South Africa.

Customs Connectivity remains a critical tool in Trade Facilitation and the knowledge and experience gained over the last three years will be useful in the development of future connectivity systems. In particular, the choice of a cloud-computing platform has clear advantages over point-to-point systems such as RADDEx V1 and previous UNCTAD endeavors. The hub and spoke architecture of the cloud-based solution offers

Southern Africa Trade Hub FY 2014 Annual Report 6 flexibility and ease of expansion: a customs administration needs only maintain a single link to the Cloud to automatically exchange data with any other connected administration, while point-to-point architecture requires that administrations maintain a link for each administration involved in data exchange. In addition, the Cloud platform transfers the burden of data security and costly hardware maintenance and expansion to the Cloud service provider, reducing the resource demands on the administration.

CUSTOMS MODERNIZATION

BOTSWANA

The Trade Hub obtained USAID approval to proceed with a customs modernization program with the

Botswana Unified Revenue Service (BURS) that will lay the groundwork for implementing a NSW. The

Trade Hub embedded a customs modernization advisor with BURS in September 2014. The Botswanan

Parliament passed the Electronic Communications and Transactions Bill and the Privacy and Data Protection

Bill in May 2014 and submitted both to the President of Botswana for signature. These two statutes will provide the legislative authority for Botswana to move forward on their NSW vision. The Trade Hub and

USAID have planned technical assistance for FY 2015, to lay the ground for further productive engagement going forward.

In September, the Trade Hub mobilized a legal review advisor to work with BURS to facilitate drafting of a new Customs Act for Botswana. The advisor has been actively making desk work preparations and will commence legislative working group meetings.

NAMIBIA TRADE INFORMATION PORTAL

Work on the Namibia Trade Information Portal is well underway. During Quarter 4, the Trade Hub supported Namibia Customs and Excise (NCE) to garner greater support from other government agencies to provide necessary documentation for the Trade Repository. The primary trade content catalogue is now almost complete, providing a detailed description of all the trade documentation and information to be collated for uploading to the Trade Information Portal.

In June 2014, following five months of design and specification development with the Trade Hub, NCE approved the technical specifications for the Trade Information Portal. Technical development of the Portal will now proceed and is expected to be completed by the end of 2014.

In July 2014, iWits started development of the Namibia Trade Portal website with funding from the Trade

Hub. Development is incremental, with a new part of the website delivered every 2-3 weeks for testing; this helps minimize the resources required for testing and provides NCE with a hands on demonstration of development progress.

In August, the Trade Hub engaged 3CE Technologies to provide a Harmonized System (HS) classification tool and customs duty calculator components to be integrated with the website. Also in August, the Trade

Hub engaged the NCE Classification and Valuation department to assist in classifying the trade documentation gathered from numerous ministries during Q2 & Q3 2014.

In September 2014 the TF team delivered an interim demonstration to the Customs Commissioner and senior managers, which was very well received. Development is on target for completion in December 2014 and the

Commissioner has indicated February 2015 for the official launch, to allow sufficient time for testing and preparation of content.

Southern Africa Trade Hub FY 2014 Annual Report 7

SADC COMPRENHENSIVE TRADE FACILITATION PROGRAM

In July 2014, USAID requested that the Trade Hub engage SADC to develop a Comprehensive Trade

Facilitation Program (CTFP) and provide technical assistance. The Trade Hub met with SADC to finalize the

SOW for the CTFP and recruited consultants to perform the work by the beginning of 2015.

SADC’s interest is to have a practical program that it can use in working with its members to coordinate their needs and mobilize technical assistance. As such, the SOWs will be modified to focus the CTFP on helping members meet their obligations under the Agreement on Trade Facilitation (TFA) and the Revised Kyoto

Protocol. The CTFP focuses on:

Analyzing and collating member country needs and priorities;

Identifying areas of technical assistance need;

Identifying areas of financial assistance need;

Identifying appropriate sources of technical assistance and finance;

Laying out feasible approaches for SADC to facilitate and coordinate assistance to members;

Monitoring and evaluating the progress of SADC members with the implementation of the reform efforts.

SADC endorsed the idea of a workshop to present the CTFP to its members and donors.

TRADE HUB VISIT TO WCO IN BRUSSELS TO ATTEND THE TFA WORKING GROUP

On September 28th, the Director of the Trade Hub’s TF team accompanied four representatives of the customs administrations of Malawi, Botswana, Namibia and SADC to Brussels, Belgium to attend the

Second WTO Trade Facilitation Agreement (TFA) Working Group meeting.

The meeting was held to update World

Customs Organization (WCO) members on the status of TFA negotiations, to discuss the

WCO Mercator Program for TFA technical assistance and to plot future steps for WCO members moving forward with the modernization programs required to comply with the TFA. In addition, Trade Hub made plans for the delegation to meet with various divisions of the WCO to allow for briefings and presentations on the design and development of WCO programs and services for its members.

These briefings focused primarily on risk management strategy, the WCO Cargo

Targeting System, WCO Capacity Building for

Customs and WCO Publications. Botswana, Malawi and Namibia are all WCO members.

Mr. Brian Glancy (Trade Hub), Mr. Philiso Valashia

(Commissioner BURS), Mr. Bevan Simataa (Commissioner

Namibia Customs and Excise), Mr. Shadric Namalomba

(Commissioner Malawi Revenue Authority) and Mr. Willie Shumba (SADC) meet with Mr. Kunio Mikuriya (third from left), the Secretary General of the WCO.

Southern Africa Trade Hub FY 2014 Annual Report 8

ISSUES, CHALLENGES AND LESSONS

CUSTOMS CONNECTIVITY PILOT PROJECT

A key lesson learned from this activity is the importance of early engagement with technical partners and major stakeholders. In hindsight, a deficiency in the technical approach was not finding a way to work hand in hand with the source code owner. The assumption by the vendor that it could reverse engineer ASYCUDA++ turned out to be wrong. Securing the involvement of UNCTAD as a technical partner at the outset would have reduced the level of effort required by the software vendor to reverse engineer the ASYCUDA++ system, reducing project complexity and accelerating the development process. Another lesson learned was the importance of managing stakeholder expectations of pilot programs such as this, as pilot projects are by definition experimental and not designed to generate significant results.

NATIONAL SINGLE WINDOW

While the reasons were different in each country, Trade Hub faced challenges in quickly embedding advisors in Malawi and Namibia. National elections delayed the process in Malawi, while in Namibia there were delays coordinating the arrangements between the Ministry of Finance and the Ministry of Trade and

Industry. As a result of the delays, there has been less progress towards developing a NSW “champion” to spearhead inter-agency cooperation, in both Namibia and Malawi, than the team had thought possible following the issuance of cabinet-level memoranda. Additionally, the delays in embedding advisors and developing ministry “champions” resulted in less progress than expected in developing a National Steering

Committee, PMU and Technical Committee in both Namibia and Malawi.

With its current strategy and approach, which includes the following elements, the Trade Hub is well-positioned to make more progress:

Aligning technical assistance with the government’s operational environment and processes;

Facilitating meaningful dialogue and consultation between the government and private sector, and promoting participation by traders in reform processes;

Providing technical assistance to improve agency management skills and capacity in project management, change management and human resources management.

The Trade Hub’s objective is to create a NSW environment that enhances private sector acceptance and support, allowing the NSW to develop with confidence it will succeed. As in other countries, the Trade Hub has determined that the best approach is to encourage and support customs modernization and the creation of a customs clearance single window as “phase one” of establishing a NSW. Customs organizations generally have greater autonomy, resources and advanced systems to make decisions and investments and to lead the way towards a national single window. This approach needs ongoing support and technical direction, and for that reason the Trade Hub will embed a staff member in each country full time for the duration of the project.

Establishing a NSW is a complex and lengthy process and costly automation project. Working with other donors and SADC to support the Trade Hub’s mandate goes a long way to ensuring success.

MILESTONES AND RESULTS PLANNED

NATIONAL SINGLE WINDOW

• Trade Hub STTA advisors deliver Project Management and Change Management training;

• Communications strategies and plans implemented for Namibia and Malawi;

• NSW Champion, Steering and Technical Committees and PMU established in Malawi and Namibia;

• Stakeholder consultation/public awareness launch events underway in Malawi and Namibia;

• Readiness Assessments underway in Malawi and Namibia.

Southern Africa Trade Hub FY 2014 Annual Report 9

CUSTOMS MODERNIZATION FOR BOTSWANA

• Botswana border crossings visits and process analysis underway;

• Customs Modernization work plan interventions agreed and scheduled;

• BURS Training organization/capacity assessed and recommendations issued;

• Customs Law text and amendments first reading completed.

SADC COMPREHENSIVE TRADE FACILITATION PROGRAMME (CTFP)

• CTFP development consultancy underway;

• SADC/USAID/WTO Trade Facilitation Conference organized.

TRADE REPOSITORY

• Trade information and documentation received from all stakeholder Other Government Agencies;

• Development and testing underway.

Southern Africa Trade Hub FY 2014 Annual Report 10

Agricultural Value Chains

Southern Africa Trade Hub FY 2014 Annual Report 11

AGRICULTURAL VALUE CHAINS

In FY14, the Agricultural Value Chains component focused on the following four primary result areas across the targeted value chains of maize, groundnuts and soybeans:

Improved storage and structured trade;

Improved standards and quality;

Increased investment and technology transfer;

Strengthened regional organizations.

Highlights from FY2014 include:

960 farmers received soy extension training as well as 75 metric tons of certified soy seed and 75 metric tons of fertilizer from a local commercial company as part of a contract growing agreement;

Farmers received 15.8 metric tons of certified groundnut seed and training on groundnut inputs and planting by a local commercial company as part of a contract growing agreement;

416 farmers received improved seed for groundnuts under the Jungle Beat/SAGM Strategic

Partnership Grant, while nine Peacock Enterprises staff and contract farmers received training for the maintenance of seed quality and prolonged seed shelf life;

115 people representing 49 organizations responsible for 85,000 tons of privately owned storage capacity received training in grain grading and storage management;

123 participants representing 47 groundnut processors and local organizations received training on scalable (commercial/household) aflatoxin mitigation technology;

The Trade Hub conducted a review of aflatoxin mitigation training in Chipata, Zambia involving 36 participants from 12 partner organizations to assess the knowledge and skills that participants acquired and how they have applied what they learned.

o Participants learned how to produce crops with low or no levels of aflatoxin and;

o COMACO was the major processor company that participated in the training. The company has managed to reduce aflatoxin levels in the peanut butter they produce from 16 ppb to 6 ppb, below the official minimum acceptable aflatoxin level for Zambia of 10 ppb (South

Africa has the same standard).

The Trade Hub brought five new FY2014 Strategic Partnership Grants to approval status in Quarter

4 and developed seven additional SPGs for FY2015 (all planned to reach implementation status by

November 2014);

60 participants attended the Agricultural Storage Investment Fund Conference to raise awareness and determine the working operations of the fund, which is designed to increase rural agricultural storage in Malawi and Zambia;

33 seed industry representatives from small, medium and large seed companies were trained in the use of the newly established South African National Seed Organization (SANSOR) Seed Market

Intelligence Platform.

Aflatoxin Training, Maputo, Mozambique.

Southern Africa Trade Hub FY 2014 Annual Report 12

IMPROVED STORAGE AND STRUCTURED TRADE

Key activities undertaken and results achieved by the Trade Hub in improved storage and structured trade in

FY 2014 include the following:

WAREHOUSE RECEIPT SYSTEM (WRS) MOZAMBIQUE UNDER DEVELOPMENT

A WRS Mozambique study/risk assessment commenced, and preliminary results are providing valuable information to ETG Mozambique and other stakeholders with regards to WRS development;

ETG Mozambique has confirmed its interest in operating a WRS in Mozambique (a first in the country), and the agriculture team with ETG developed and secured USAID approval for a full SPG proposal. Grant implementation will commence in FY 2015, and ETG will operate WRS in four locations in the country, two rural locations and two at border posts.

In support of its activities, a Warehouse Bond Insurance Assessment for Malawi and Zambia was commissioned as one of the key conditions for increased financing of WRS by banks. In addition, the Trade

Hub engaged a consult to conduct a study reviewing interest for warehouse storage requirements in Malawi to promite private sector investment in grain and oil-seed storage. The study showed strong interest

(demonstrated by submission of EOIs) from investors (development banks, financing companies, etc.) to invest in such a fund amounting to over USD 35 million in potential funding. The study indicated that the demand for such finance from major storage operators amounts to approximately USD 40 million. The study also reviewed interest for warehouse/storage requirements in Zambia and revealed a preliminary appetite from storage operators amounting to USD 70 million.

AGRICULTURAL STORAGE INVESTMENT FUND (ASIF)

Based on the Warehouse Bond Insurance

Assessment cited above, the Trade Hub helped organize an Agricultural Storage

Investment Fund (ASIF) conference in

Johannesburg on September 4, 2014. The conference was extremely well attended by storage operators, investors, service providers and development organizations from Zambia, Malawi, Tanzania and South

Africa. The one-day investor conference enabled financiers and users of the storage fund to provide valuable information on how an ASIF can be established and

ASIF Conference, Johannesburg, South Africa.

Students receiving Grain Management Training in soy grading techniques in Zambia, March 2014.

Southern Africa Trade Hub FY 2014 Annual Report 13 managed. Based on the outcome of the ASIF conference, the Trade Hub will focus on “taking ASIF to market.”

GRAIN STORAGE MANAGEMENT IMPROVED

The Trade Hub organized grain management training courses and engaged consultants to deliver trainings in

Zambia and Malawi (two courses). Grain storage owners, feed millers, grain traders and farmer association representatives received certificates in grain management/grain grading/handling & storage management at the conclusion of the training.

The Trade Hub also awarded a SPG grant to Ybema Grain Services this year to provide sustainable commercial grain management training services within the FtF focus countries.

IMPROVED STANDARDS AND QUALITY

AFLATOXIN REMOVAL IN GROUNDNUTS TRAINING

The Trade Hub conducted three training workshops in FY 2014, two in Mozambique in partnership with

USAID/Mozambique’s Agrifuturo project and one in Malawi. The training assisted the groundnut industry to comply with the standard limit of 4 ppb for aflatoxin in groundnuts for export and food processing. 85 nutritionists, processors and farmer leaders completed the training. The trainings included specific gender mainstreaming aspects and highlighted gender constraints in the groundnuts value chain and demonstrated how gender inequalities are contributing to high aflatoxin levels in groundnuts sold to processors.

The Trade Hub plans to promote in-shell groundnut trading in FY 2015 through trainings. The team also awarded a SPG to Deltamune-Vetlab Zambia, which will enable Vetlab Zambia to provide accredited lab services, making it the first lab in SADC outside South Africa to include accredited aflatoxin services.

Southern Africa Trade Hub FY 2014 Annual Report 14

INCREASED INVESTMENT AND TECHNOLOGY TRANSFER

The Trade Hub focused on increased investments and technology transfers through the development of the

SPG program.

IMPLEMENTATION OF SPGS AWARDED DURING 2013

CASS/Jungle Beat Zambia: grant completed and closed;

Capstone/Peacock Malawi: seed trials in Mozambique rescheduled;

SAGM/Jungle Beat Zambia: final milestone achieved and grant close out process commenced;

NWK/NWK Zambia: final milestone achieved and grant close out process commenced;

AFGRI/AFGRI Zambia: grant completed and closed;

Spintelligent/ZNFU Zambia: grant completed and closed.

SPGS AWARDED IN FY 2014

PMD Packaging/Valid Nutrition Malawi

(VNM) grant awarded. VNM is now developing a new product, RUCF (Ready to

Use Complementary Food), which targets children under five and pregnant women.

The grant will also enable Malawian farmers to supply/market aflatoxin-compliant groundnuts, which are a major ingredient in

RUCF. PMD packaging is currently producing the specialized packaging line for commissioning in the first quarter of FY

2015.

Ybema Grain Services grant awarded. The grant will enable the company to provide sustainable/commercial grain management training services within the FtF focus countries, leading to improved grain storage and reduced post-harvest losses. This provides a sustainable way for the Trade Hub to phase out its direct support of grain storage management training.

CASS/Agseed SPG grant is at the awarding stage. The CASS/Agseed SPG focuses on groundnut and soya bean certified seed development within Mozambique. This will address one of the major impediments for development of these FtF target crops in Mozambique.

Deltamune/Vetlab grant awarded. This SPG will provide accredited grain and oil seed laboratory services (including aflatoxin testing) in Zambia, the first in SADC outside South Africa.

ETG Mozambique grant is will be submitted to USAID for approval in early FY 2015. The SPG will enable ETG to establish WRS (including third party storage) in four locations within

Mozambique. This will be the first WRS development in the country.

SPG IN PIPELINE FOR FY 2015

25 concept notes (CNs) were received by the closing date of July 17, 2014. The CNs were evaluated by the

Trade Hub Grants Evaluation Committee (GEC). 11 CNs were selected for presentation/review by USAID’s

The Trade Hub sponsored technical workshops that offered case studies, business tips and best practices for soil quality, mechanization, increased yields and sustainability.

Southern Africa Trade Hub FY 2014 Annual Report 15 agricultural technical staff. During a joint assessment exercise, eight CNs were selected for full proposal development. Full proposals will be submitted for USAID approval during early October 2014 (Q1 FY

2015). Following withdrawal by one of the applicants, the Trade Hub is finalizing grant proposals for the following seven SPGs:

Ammtech/COMACO; Groundnut processing development in Zambia;

Zhauns/Lumuno Organic Farms; Vegetable processing/outgrower development in Zambia;

Boerdery/NASFAM; Groundnut Value Chain development in Malawi;

Vermeulen Aandele Trust; Soya product upgrading & marketing development in Malawi;

Solidaridad; Maize and groundnut value chain development (including outgrower linkages) within Mozambique;

Cargill; Maize and soya marketing development in Mozambique;

Intertek; Laboratory development in Mozambique.

TABLE 3: Strategic Partnership Grants Pipeline

Grantee Committed Country Amount Description

Obligated

CASS 12/1/2012 Zambia 100,000 Provision of groundnut sorting / grading equipment / export

CAPSTONE 9/27/2012 Malawi 100,000 Introduction of new hybrid maize variety to Malawi

AFGRI 12/7/2012 Zambia 100,000 Installation and operation of 15,000 MT of grain storage

SAGM 12/1/2012 Zambia 100,000 Groundnut seed provision and outgrowing / export

NWK 5/22/2013 Zambia 100,000 Soy seed provision and outgrowing

SPINTELLIGENT 11/21/2013 Zambia 100,000 Agritech Expo

PMG 06/01/2014 Malawi 100,000 Production of Ready to Use Complimentary Food (RUCF)

Ybema 08/01/2014 Regional 100,000 Regional Mobile Grain Training Service

Cass/AG Seeds 10/01/2014 Mozambique 100,000 Agro-seed multiplication and Processing in Mozambique

Deltamune

Zambia 90, 000 Establishment of ISO 17025 Accredited laboratory Services in Zambia

ETG Mozambique 100,000 Trade, Storage and Processing of Agricultural Commodities in Mozambique

SPG Pipeline Development Concepts Approved Implementation FY2015

Cargill Concept Approved

Mozambique 100,000 Agriculture Commodities Trading and Storage

H A Amman T/A Ammtech

Concept Approved

Zambia 60,000 Manufacture of Food Processing and Packing Machinery

Zhauns Business

Opportuity

Concept

Approved Zambia 100,00

Processing of Hot Chili Sauce through Outgrower Scheme of Chili, Garlic and Onion

Intertek Testing

Services

Concept

Approved Mozambique 100,000 Agriculture Laboratory Services

MH Boerdery

Konsultante

Concept

Approved Malawi 100,000

Improvement of Small Holder Groundnut Marketability through Multiple Value Chains Intervention

Solidaridad Concept Approved

Mozambique 100,000 Improvement of soil fertility and production yield for small holder farmers in Mozambique

Vermeulen Aandele Concept Malawi 100,000 Import and Export of Staple Commodities from and within

Southern Africa Trade Hub FY 2014 Annual Report 16

Grantee Committed Country Amount Description

Trust Approved Southern Africa

STRENGTHENED REGIONAL ORGANIZATIONS

SOUTH AFRICA NATIONAL SEED ORGANIZATION (SANSOR)

A total of 33 seed industry representatives from small, medium and large seed companies were trained in the use of the newly established SANSOR Seed Market Intelligence Platform.

The regional (Malawi, Mozambique and Zambia) roll-out of the SANSOR market intelligence platform has now been planned (based on an intensive consultation process, including access to a demo website) for Q1

FY 2015.

SOUTHERN AFRICA CONFEDERATION OF AGRICULTURAL UNIONS (SACAU)

The Trade Hub presented a draft report for a regional agricultural market and market intelligence plan to

SACAU. The SACAU market system will focus on regional market information related to the most important commodities and thematic topics of interest to the agricultural sector.

SADC SPS REGIONAL STRATEGY DEVELOPMENT

Based on a request from the SADC Secretariat, Trade Hub is providing technical assistance for the development of a Regional Sanitary and Phytosanitary strategy. The SPS strategy is planned to be validated in Q1 2015 in the SADC meeting in Durban.

SADC SEED CENTRE

The Trade Hub has provided technical assistance to support the development of the SADC Seed Centre Web-based seed catalogue. The new website and Seed Centre database have now been designed. The launch of the

SADC seed catalogue is planned for late 2014.

MILESTONES AND RESULTS PLANNED

IMPROVED STORAGE AND STRUCTURED TRADE

SPG for Ybema Grain Services training within FtF countries launched;

ASIF Malawi (and Zambia) storage investment fund “taken to market”;

Warehouse bond insurance assessment for Malawi and Zambia undertaken, Mozambique assessed for ATI membership;

WRS risk assessment for Mozambique completed;

ETG Mozambique SPG implementation leading to WRS and third party storage in four locations in

Mozambique launched.

IMPROVED STANDARDS AND QUALITY

Deltamune/Vetlab SPG implemented, leading to accredited lab services in Zambia;

Malawi groundnut in-shell marketing study implemented, training program developed and implemented;

Assessment of the impact of aflatoxin mitigation trainings undertaken in FtF countries;

Intertek SPG implementation commenced, leading to laboratory services development in

Mozambique;

SAGL laboratory training program for FtF countries developed.

INCREASED INVESTMENT AND TECHNOLOGY TRANSFER

Close out Capstone/Peacock Malawi; SAGM/Jungle Beat Zambia; NWK/NWK Zambia;

Southern Africa Trade Hub FY 2014 Annual Report 17

Implementation of SPGs developed/approved during FY 2014:

o PMD/VNM Malawi;

o Ybema Grain Services;

o Deltamune/Vetlab;

o CASS/Agseed;

o ETG Mozambique.

Grant approval and commencement of implementation of seven pipeline SPGs:

o Ammtech/COMACO, Zambia;

o Zhauns/Lumuno Organic Farms, Zambia;

o Boedery/NASFAM, Malawi;

o Vermeulen Aandele, Malawi;

o Solidaridad, Mozambique;

o Cargill, Mozambique;

o Intertek, Mozambique.

STRENGTHENED REGIONAL ORGANIZATIONS

Support for SADC SPS regional strategy development provided;

Regional market information system organized through SACAU;

Support to SADC Seed Centre Web-based seed catalogue development training and launch completed;

Training for seed trade market intelligence platform through SANSOR;

Regional roll out of seed trade information portal through SANSOR.

Southern Africa Trade Hub FY 2014 Annual Report 18

Textiles & Apparel

Southern Africa Trade Hub FY 2014 Annual Report 19

TEXTILES AND APPAREL

The Trade Hub’s activities and interventions in the textiles and apparel sector contributed to the project’s overarching objective of increasing international competitiveness and intra-regional trade in Southern Africa.

Specific goals for work in the sector included:

To increase the amount of regional and international trade in textiles and apparel products;

To expand the level of awareness among buyers and investors of underutilized capacity at regional factories;

To increase awareness of policy, regulatory, infrastructural and business climate improvements that will enable growth in textiles and apparel (and other types of light manufacturing) in the region.

SOURCE AFRICA 2014

Source Africa 2014 (www.sourceafrica.co.za) took place June 18-20, 2014 at the Cape Town International

Convention Center, Cape Town, South Africa.

The Trade Hub supported Leaders in Trade Exhibitions (LTE), a South African event management company specializing in textiles and apparel shows, to manage the event in collaboration with the American Apparel and Footwear Association (AAFA) and the African Cotton & Textiles Industries Federation (ACTIF). Key apparel companies present included Li Fung, Vanity Fair, PVH, Trimark Sportswear Group and Ash City. At the show, the dates for Source Africa 2015 were officially announced as June 3-5, 2015. The exhibition dates have since been rescheduled to June 10-11, 2015.

Source Africa's four business seminars focused on sourcing requirements for the U.S. market, navigating policies for African trade and intra-African trade, the African Growth and Opportunity Act (AGOA) and other free market policies and agreements affecting African trade and the challenges that African countries are addressing in order to attract foreign direct investment.

The final Source Africa seminar involved a discussion of a study commissioned by the East Africa Trade

Hub of the development of the cotton textile value chain. Other Source Africa 2014 seminars included a number of high caliber speakers in the industry from Africa and the U.S. The keynote speaker for the plenary session was U.S. Trade Representative for Textiles & Apparel, Ms. Gail Strickler. The plenary session also received contributions from the Chief Director for Textiles, Clothing & Footwear, Abisha Tembo.

http://www.sourceafrica.co.za/

Southern Africa Trade Hub FY 2014 Annual Report 20

Erica Barks-Ruggles, the U.S. Consul General in Cape

Town, opened the plenary and introduced Ms.

Strickler, whose keynote address emphasized the tariff savings a U.S. importer can realize by sourcing from

Africa. Mr. Tembo discussed the South African government's industrial policy action plan for regional development and innovative ways to increase the region's share of the textiles and apparel market.

Speakers conducted radio interviews with SABC and other outlets after the session.

Country pavilions at Source Africa 2014 from the region included Botswana, Lesotho, South Africa, Swaziland and Zimbabwe. South Africa’s pavilions included representation from Trade and Investment KwaZulu-Natal, the Gauteng Growth and Development

Agency, and the South African Footwear and Leather Export Council. Other countries with pavilions included Cote d’Ivoire, Egypt, Ethiopia, Kenya, Madagascar, Mauritius, Nigeria and Tanzania. Egypt and

Swaziland participated at Source Africa for the first time.

Participant reviews of the venue and the organization ranged from good to excellent, and participants commented in surveys that the venue was both appropriate and accessible with room for improvement as the continues to grow. Exhibitors felt that the exhibition could have attracted more fabric suppliers, footwear suppliers and dye-houses.

REGIONAL PROMOTION FOR SOURCE AFRICA 2014

Source Africa 2014 was the culmination of considerable fieldwork by the Textiles and Apparel team, including the following:

LESOTHO VISIT

The Trade Hub visited Lesotho to profile textile and garment manufacturers, in collaboration with the

Lesotho National Development Corporation (LNDC). The majority of business in Lesotho is handled by agents based in Durban who provide sourcing and financing services to the industry.

BOTSWANA FACTORY VISITS

The Trade Hub visited knit factories (Daye Wan, Everybody Knitting, and Fascinating Botswana) and Cut, Make and Trim factories (Marine Garments and Western Apparel) to conduct the industry survey. The factories are ready to compete in the South African market. Fascinating Botswana is in the process of setting up a new plant in Bulawayo, Zimbabwe as part of their expansion. This is reflective of a change in sourcing strategy for South African retailers; they are returning to the region with orders and are open to partnerships.

CANADIAN IMPORTER VISITS BOTSWANA AND LESOTHO GARMENT FACTORIES

The Trade Hub arranged a visit by the Canadian Trimark Sportswear Group to Carapparel, a Botswana garment exporter. Trimark Sportswear, a $1 billion revenue group, has a $200 million apparel division and is currently sourcing from China, Cambodia, and Bangladesh as well as from one factory in Lesotho. However, Trimark is currently looking to capitalize on opportunities created by AGOA by expanding its sourcing from

Africa for products to be sold in the U.S. market. The company is interested in locating information on regional factories through a portal similar to Tradegood and ImportGenius and working with regional agents

USTR Gail Strickler at Source Africa 2014 Opening

Plenary/Policy Session.

Southern Africa Trade Hub FY 2014 Annual Report 21 familiar with the industry. Trimark also visited the Lesotho factories of New-Wide and Sun Textiles prior to

Source Africa 2014, and they visited the Hippo Knitting factory after the event.

SOUTH AFRICA VISIT – KWA-ZULU NATAL AND GAUTENG

The Trade Hub, accompanied by the Lesotho National Development Corporation (LNDC), visited the South

African provinces of Kwa-Zulu Natal and Gauteng to profile companies participating in Source Africa and to meet apparel agents and design houses. These apparel agents work as intermediaries between South African retailers and garment manufacturers in the region by developing the product with buyers, sourcing the materials, providing technical specifications and financing work in process for garment manufacturers.

Agents have changed their sourcing strategy from China to a focus on South Africa and the region by opening their own facilities and sourcing locally. In three years' time, they expect to source 80% of their business locally due to the South African Rand exchange rate and South African retailers' demand to source locally and regionally. Agents are willing to partner with local investors to expand sewing operations and create jobs for African communities. Challenges for some factories include textile availability, access to finance, and access to markets and labor.

MOZAMBIQUE VISIT

The Trade Hub presented at the Mozambique Cotton & Textile Investment Conference in Maputo in May

2014, which was organized by the Mozambique Cotton Institute and the National Directorate of Industry under their respective ministries. Investors in attendance included Marubeni Corporation (Japan), which is considering setting up a textile mill in Mozambique; DN Associate Lda (India), which is involved in industrial park development in Nacala; and Nova Texmoque (METL- Tanzania), which is already running a dyeing and printing facility in Nampula City and is looking to establish a completely integrated operation, from ginning to spinning and weaving. The Mozambican government has identified a number of projects in medical cotton pads, artisanal textiles and textile parks in the Nacala and Beira Corridors covering the entire value chain.

SOURCE AFRICA PROMOTED IN ASIA

The Trade Hub made presentations in Hong Kong and Taiwan in February 2014, collaborating with the

American Chamber of Commerce in Hong Kong and the Taiwanese Textiles Federation (TTF) in Taiwan, to promote Source Africa. Much of sub-Saharan Africa's apparel export production is managed through Asian holding companies, agents and merchandising operations. The Hong Kong symposium on Source Africa was attended by 38 participants, including sourcing agents from Avery Dennison Hong Kong B V; James Mintz

Group, Inc; KGS Sourcing Limited; Kiabi International Supply Services Ltd; Li & Fung Group; Ralph

Lauren Asia Pacific Limited; Target Sourcing Services Hong Kong Ltd; the Gymboree Corporation; and VF

Asia Ltd. Topics of discussion included the Third Country Fabric provision, factory compliance, the availability of training institutions and development of port facilities. As a result of the symposium, Kiabi

International Supply Services Ltd, Core Solutions, Li & Fung, KGS Sourcing, and Plus Glenn Hershey committed to attending the June Source Africa event in Capetown. In Taiwan, the Trade Hub met with and presented to sourcing agents at a workshop organized by TTF.

REGIONAL VISIT BY INTERNATIONAL TEXTILE/APPAREL BUYERS

Select international buyers who attended Source Africa 2014 capitalized on their presence in the region to visit suppliers in Lesotho to obtain firsthand, on-the-ground understanding of factory capabilities, production and quality procedures. The buyers, who represent fast-growing companies specializing in denim and knits, visited Lesotho factories in coordination with the LNDC. American company JusfFab visited five Lesotho factories immediately after the show, while Trimark, a Canadian firm with growing U.S. market share, visited two factories. The buyers toured the facilities and discussed potential business for the U.S. market.

Southern Africa Trade Hub FY 2014 Annual Report 22

BOTSWANA TEXTILE AND…