Sunday, March 7, 2021

Regional integration vital for African economic growth

As a landlocked country, Botswana’s “economic potential is intrinsically linked to the conditions prevailing in neighbouring countries.”

Most obviously, it is “dependent on coastal neighbours for access to the sea and it “cannot integrate in sub-regional markets” unless its neighbours “desire this and implement policies aimed toward this.”

That is the message that an African Development Bank researcher, Kennedy Mbekeani, has for Botswana and other African countries. The solution he recommends is that these countries should integrate economically in order to deal with their adverse economic circumstances. On average it costs US$1,961 to export a container in sub-Saharan Africa, $890 in East Asia and $1,228 in Latin America and the Caribbean. The cost to import is even higher. The cost of trading across borders in sub-Saharan Africa is the highest in the world. The cost of infrastructure services in Africa, among the highest in the world, comes from fragmentary national boundaries preventing achievement of scale economies.

Mbekeani says that while African countries have been making effort to integrate the continent, intra-African trade performance has been lagging and at only 11.7 percent of total trade, it is the lowest degree of market integration of any major region. On the other hand, Europe had the highest degree of market integration in 2009 when using intra-regional trade share as a measure of regional integration. It was followed by Asia and North America. Africa had the lowest degree of market integration among its regions with only 11.7 percent of its trade destined within the continent. Although there has been an increase in the share of intra-Africa trade over the last decade, more than 88 per cent of the continent’s exports still end up outside of Africa.

“Regional integration can help to achieve economies of scale and build the supply capacity and competitiveness of Africa through targeted regional infrastructure to fill vital missing links, inter connect the continent and undertake reforms to facilitate cross-border trade, investments, financial flows and migration. Greater integration will have many benefits, including enhancing food security by facilitating greater intra-African trade in food products, and supporting the development of international production chains and greater value addition in Africa,” Mbekeani writes in a research paper “Understanding the Barriers to Regional Trade Integration in Africa.”
All told, Africa has eight regional economic communities (RECs) which cover all major sub-regions:

the Arab Maghreb Union (AMU), Communaut├® Economique des Etats de l’Afrique Centrale (CEEAC), Communaut├® Economique et Mon├®taire de l’Afrique Centrale (CEMAC), Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), Economic Community of West African States (ECOWAS), Southern Africa Customs Union (SACU), Southern African Development Community (SADC) and the Union Economique et Mon├®taire Ouest-Africaine (UEMOA). The estimated value of intra-REC exports as well as the share of intra-REC trade is very low. In 2009, the RECs with the highest share of intra-REC trade were the EAC (23 per cent), UEMOA (14.5 per cent) and SADC (12.2 per cent). The RECS with the lowest share of intra-REC trade were CEEAC (0.3 per cent) and CEMAC (0.5 per cent). In absolute terms, trade among the SADC countries was the largest reaching $16 billion in 2009.

To a certain extent, the failure by African economies to integrate is also a result of external influence. Mbekeani says that differences in market access treatment affect incentives for regional integration and may negatively affect investments by firms in regional supply chains, cross-border investment and outsourcing. The example he gives is of least-developed countries benefitting from the European Union’s Everything But Arms duty-free, quota free access initiative, while other African countries do not.

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