Africa’s Quest for Deeper IntegrationBy Joe Atta-Mensah // Friday, November 8, 2013
Since the inception of the Organization of Africa Unity, now the African Union, African leaders have focused on the promotion of regional cooperation and integration in Africa. The leadership of the continent strongly believes that through the strategies, policies, programmes and activities of regional integration, the fifty-four fragmented economies on the continent could be integrated into one strong, robust, diversified and resilient economy, supported by a first-class trans-boundary infrastructure; a highly educated, flexible and mobile workforce; financial capital that is highly mobile; sound health facilities; and peace and security. The leadership of Africa continues to stress that the spirit of ownership and self-belief of national development policies, which gives sufficient policy space to member States to design strategies that address their specific needs with a view of ending aid dependency over time, must underpin the process of achieving these lofty goals.
The need for the integration of the continent is stronger than ever if African countries are to overcome the constraints of marginalization in the global marketplace. With the exception of a few countries, most African countries are small in size and structure and their economies are poorly developed. Moreover, most of African’s economies are agrarian and less diversified, and the level of trade between African countries is alarmingly low. That is why the African Union believes that the imperative for the integration of the markets in Africa is very urgent so that its member States can overcome the constraints arising from their small domestic markets and reap the benefits of more competitive economies which are conducive to increased domestic and foreign investment.
The need for deeper integration of the continent is also very strong because many African countries face numerous common challenges that must be tackled by collective efforts. These problems include the marginalization of the region in the international trade, weak infrastructure, subpar performance in macroeconomic policies, and the misuse of regional commons, such as the environment and natural resources. In addition, many African countries are among the lowest income countries in the world. The Nile, the Great Lakes and Lake Victoria (among others) serve as major water sources to many countries and therefore must be managed in a collective and concerted manner to assure their sustainability. Additionally, sixteen countries are landlocked and therefore face high transport costs and unique difficulties, which can be resolved through improved regional cooperation.
Intra-African trade will not improve with the current standard of infrastructure in Africa. Africa needs safe, reliable, efficient, affordable and sustainable infrastructure systems to support economic activities and to provide basic social services, especially for the poor. That is why the UN Economic Commission, in collaboration with the African Union Commission, the African Development Bank, and the regional economic communities (RECs), continues to engage in programmes and activities that seek to promote transport infrastructure and services. These institutions continue to advocate for the maintenance and rehabilitation of existing roads, expansion of the road network to isolated areas, improving railways network, replacing obsolete and inappropriate equipment at ports, developing more dry ports to serve both landlocked countries and interior areas of coastal countries, and increasing air transport connectivity on the continent.
The sustainable management of Africa’s vast natural resources is also a major concern. The management of the resources requires regional cooperation and integration among countries and therefore requires the pan-African institutions, the RECs and inter-governmental organizations to work closely in designing policies and programmes in the area of resource management. River Basin organizations and regional power pools are being used to manage shared water resources and energy, respectively.
Scientific evidence clearly shows that because of greenhouse emissions, the global climate is changing. Poor developing countries, including those in Africa, are at the most risk because they are more dependent upon agriculture, more vulnerable to coastal and water resource changes, and have less financial, technical and institutional capacity for adaptation. Furthermore, some African countries are in the Sahel Zone which is threatened by desertification and continues to gain ground in the southern direction. In response to the threats, member States of the African Union are designing a comprehensive Action Plan on how to mitigate and adapt to climate change on the continent.
Shifting the trade paradigm within the continent
Despite the challenges since the formation of the OAU and its subsequent transformation, there is no doubt that Africa is making considerable progress in its efforts to integrate. Efforts are being made to harmonize policies while improvements have been made in the areas of trade, macroeconomic policies, infrastructure, and ICTs. The decision by Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and Southern African Development Community (SADC) to establish a single free trade zone for the 26 member countries goes a long way to deepen the continental integration agenda of the continent. In addition, several African regional economic communities (RECs) have also taken steps to accelerate the process of sub-regional integration by transforming themselves into free trade areas, customs unions, common markets, or monetary unions. Some of the RECs have also created financial structures to support the regional integration process. Progress is also being made with regard to the development of policies to manage common water resources and to develop regional infrastructure such as roads, telecommunications links and power pools.
In spite of the progress made, there are a number of challenges, which include the low level of intra-African trade, poverty, monetary integration and the movement of people. Intra-regional trade in represents on average around 10 percent of total exports. There are many factors assigned for the low intra-African trade, including the economic structure of the member States which constrains the supply of diversified products, poor institutional policies, weak infrastructure, weak financial and capital markets and failure to implement trade protocols.
Furthermore, Africa’s trade performance compared to other regions of the world is also very low. For example, trade within the Association of South East Asian Nations (ASEAN) accounts for about 60 percent of their total exports. The same is true for the countries of the Latin American Free Trade Association (LAFTA) area, whose intra-regional trade accounted for 56 percent of total exports. It is no wonder that the economies of ASEAN and LAFTA are doing remarkably well.
Recommendations for Increased Integration of African Economies
In order to promote and address the challenges impeding the flow of goods and services within Africa, we need to make appropriate policy prescriptions. Member States would have to commit to the effective structural diversification of production and exports. The production of non-traditional export commodities with comparative advantage on regional and global markets must be encouraged. Government might consider shifting their industrial development policies and strategies towards diversified production lines, which are driven by approaches based on the processing of local raw material and on local innovation.
Transport infrastructure and services should be improved through maintaining and rehabilitating existing roads, expanding the road network to isolated areas, improving railways network, replacing obsolete and inappropriate equipment at ports, developing more dry ports to serve both landlocked countries and interior areas of coastal countries, and increasing air transport connectivity in the sub-region.
To increase the free movement of the citizenry, the African Union should introduce a common passport so that Africans may move across borders freely throughout the continent. In addition, Africans should be given the right of residency for any African country they so desire. This would help promote trade and investment within the continent.
As each African country may choose to implement independent policies, the imperative for a continental approach to addressing challenges is now stronger than ever. Hence, African leaders and institutions should continue their efforts to deepen the integration of the continent. Some of the continental policies needed to address the challenges of the financial crisis may include:
- Acceleration of the African common market. Such a measure will increase internal trade within the continent which in turn will spur economic growth and poverty alleviation. To achieve a common market, African countries should remove all forms of physical and non-physical trade barriers. There is also the need to scale up infrastructure development, harmonize trade laws, and abolish visas for Africans to travel within the continent.
- The pursuit of financial and monetary integration by African countries should be maintained. However, for monetary integration to be successful, African countries should adopt coherent and convergent macroeconomic policies. Countries must agree on a continental set of convergent criteria for macroeconomic variables and indicators.
- In order to overcome the challenges of fragmented markets, African financial markets need to be fully integrated. The merging of national stock exchanges into an African Stock Exchange would be a powerful source and driver of capital flows to Africa. A single stock market would contribute to the mobilization of the financial resources needed to finance the continent’s integration agenda including infrastructure projects. A prerequisite for a successful integration of the markets is that trading laws, accounting standards, legislations, rules, listings, trading days, settlement, and reporting standards would all have to be harmonized. Furthermore, participating countries should ensure currency convertibility, because an integrated exchange with a multiplicity of inconvertible currencies only compounds the administrative costs which integration itself seeks to remove.
In conclusion, each and every African should understand that “hand outs,” glorified as aid or grants, will not single-handedly change the lives of the many poor citizens of the continent. Ultimately, Africans are totally responsible for the development of the continent and therefore should shoulder the burden of financing its development, no matter how long it takes and how painful it may be. That is why Africa must fully embrace regional integration as a strategy for its development. Africa must unite.
Joseph Atta-Mensah is the Senior Policy Adviser of the Capacity Development Division of the United Nations Economic Commission for Africa (UNECA).
Photo courtesy of Albany Associates via Flickr Commons.