introduction to african regional economic communities by crane insights - 2017

Crane INSIGHTS Video Workshop Slides- Africa‘s Regional Economic Communities -

© Crane Consulting House Ltd, 2017

Who is this workshop for?

© Crane Consulting House Ltd.

If you are:

1. Very uncertain on whether or not your investment in Africa is secure2. Not sure where the profits really can be obtained despite a country’s good growth

prospects3. Feeling very frustrated at how slow things are moving for your business in Africa4. Getting confused by the cultural practices across Africa

What Job Roles will Benefit?


If you work as:

1. A CEO or Senior BD Executive of a High Tech Equipment Manufacturer looking to see which markets hold the best prospects to buy your equipment

2. A Senior Strategic Director/Manager for your company and would like to help your company plan for Africa better

3. A Sales Director searching for the best potential partners and distributors and very keen to know which markets to focus on and which ones not to

4. An Investor looking for opportunities in Africa and you would like to anticipate future high growth opportunities

5. A CEO or Senior BD Executive of a FMCG company looking to see which markets would be best served by your company’s products

6. An SME owner or CEO with a tight budget but with a desire to sell great products in Africa and don’t know which country to begin with

7. An aspiring CEO or Executive with a desire to improve your skills and knowledge so that you can rise up the ranks faster and provide great value to your company

The Paradox of Africa and Importance of a Structured Approach to Africa Market Entry


With 54 very different countries, Africa presents an interesting paradox:

Some countries are too big for some companies……yet can be seen as too small for other companies in the same industry

One country looks promising……Yet another may actually be better

Africa as a whole is growing……But neighbouring countries could be moving in different directions

One country compared to others looks to be growing rapidly in one year……The next year it is moving in the opposite direction


“From a geographic standpoint it’s hard to plot a 50-country strategy, so we think about East Africa and what an alliance of five countries can mean. The same applies to South Africa with its tariff-free satellites of Swaziland, Lesotho, Botswana and Namibia market expanders. The Nigerian hub offers similar economic comforts…We think about maybe four big geographic clusters…”

-Jeffrey Immelt, CEO, General Electric

Example


Understanding Africa from this regional perspective will simply save companies time and money while at the same time will help you in reducing the risk of launching in the wrong place or at the wrong time.

From a practical standpoint, as a company executive, understanding Africa through its regions would help you decide between 1 of the following market entry strategies we recommend:1. You can select to start within 1 specific region as the point/centre of focus2. Or you can select 1 or more countries from one region as a starting point. 3. Or choose 1 or more countries in several regional blocks as the entry point

Benefits to Your Business

Africa’s Regional Blocks: The African Union

African Union Overview


HistoryFounded: May 25 1963 in Addis Ababa, Ethiopia (headquarters) as Organization of African Unity (OAU) by the 32 African states.

21 members joined later reaching 52 by the time of the AU’s creation in 2002.

Created with the aim of enhancing African integration.

The vision for the Union was to build on the OAU’s work by establishing a body that could accelerate the process of integration in Africa, support the empowerment of African states in the global economy and address the multifaceted social, economic and political problems facing the continent.

South Sudan joined in 2011 on attaining independence – total of 53 countries

Morocco – left the AU's predecessor, the Organisation of African Unity (OAU) in 1984, for political reasons but in 2016 reapplied to join. It may be readmitted in January 2017 during the Annual Heads of State and Government meeting in Addis Ababa.

African Union Priorities: Agenda 2063


Agenda 2063It is a strategic framework for the socio-economic transformation of the continent over the next 50 years. Its builds on, and seeks to accelerate the implementation of past and existing continental initiatives for growth and sustainable development.

Within Agenda 2063, there are 7 Aspirations:

1. A prosperous Africa based on inclusive growth and sustainable development 2. An integrated continent, politically united based on the ideals of Pan Africanism and the vision of Africa’s Renaissance 3. An Africa of good governance, democracy, respect for human rights, justice and the rule of law 4. A peaceful and secure Africa 5. An Africa with a strong cultural identity, common heritage, values and ethics 6. An Africa, whose development is people-driven, relying on the potential of African people, especially its women and youth, and caring for children 7. Africa as a strong, united, resilient and influential global player and partner

African Union: Burkina Faso Case Study


The 2014 Popular Uprising-28th October 2014 a popular uprising due to President Blaise Compaore (27 yrs) constitutional amendment ahead of 2015 presidential election-30th October government dissolved and president flees to Cote De Ivoire. -31st October Head of presidential guard declares himself president due to a power vacuum

The AU/ECOWAS Intervention-3rd November 2014 AU resolves that ECOWAS to take lead in resolving matters. 3 African Heads of State arrive in Burkina Faso and a transitional government is formed within a day with the aim of arranging an election in late 2015.

Lessons for Businesses Investing in Africa•As African economies and countries are integrating, prolonged civil strife is becoming a thing of the past. This therefore in turn secures your investment in particular countries in Africa as the regional body or bodies will always intervene to restore normalcy.

Other cases of interventions by regional communities that have reduced the period and impact of conflict include: Mali coup, Nigeria (Boko Haram), Kenya (2007 disputed election), Madagascar coup intervention etc•A key point to remember: Regional Economic Communities are increasingly a major insurer against risk in Africa for global companies

Africa’s 8 Regional Economic Communities

Africa’s Regional Economic Communities (RECs)


•Every One of Africa’s countries belongs to 1 or more regional economic communities. A regional economic community is a grouping of several countries aimed at achieving common goals in trade and political stability.

•RECs are important because they play a major role in affecting individual country future policies as well as help in minimizing risks regarding political and economic stability.

•Of the 8 regional communities, we as Crane, focus on the 7 which are influential in their members affairs. AMU, EAC, COMESA, ECCAS, ECOWAS, SADC and IGAD.

Arab Maghreb Union (AMU)


5 countries•Algeria•Libya•Mauritania•Morocco•Tunisia

Arab Maghreb Union (AMU)


HistoryFounded-17 February 1989, when Constitutive Treaty of the Arab Maghreb Union signed by the Five Heads of State in Marrakesh, Morocco. Key development – 2015 establishment of the Maghreb Bank for Investment and Foreign Trade -initial capital of $150 million.Challenge: The least integrated economic region worldwide, due to regional politics. The bulk of trade conducted in the Maghreb is between the individual economies and external markets, particularly the EU. Population - 94 million; combined GDP - nearly $430 billion.

HighlightsBiggest in GDP - AlgeriaSmallest in GDP – MauritaniaKey industries in the region – Oil, gas, phosphates, manufacturing, automotive The main issues affecting the block – 1) rise of ISIS and global terrorism esp. Libya, and 2) regional non-violent political disputes particularly between Algeria and Morocco.

East African Community (EAC)


6 countries•Burundi •Kenya•Rwanda•South Sudan (August 2016) •Uganda•United Republic of Tanzania

East African Community (EAC)


HistorySince the 1920s, Kenya, Tanzania and Uganda have enjoyed a long history of co-operation under successive regional integration arrangements. The Treaty signed in Arusha, Tanzania on 30 November 1999 and came into force on 7 July 2000.Progress: Customs Union - January 2005; Common Market – 2010; Monetary Union by 2021.Population - 150 Million people; GDP of $146 billion

Key HighlightsBiggest in GDP – Kenya Smallest in GDP - BurundiHighest GDP growth – Tanzania and KenyaKey industries in the region – Agriculture (coffee, tea), oil and gas upcoming, Main issues affecting the block – 1) South Sudan and Burundi political Crisis; 2) Transnational infrastructure projects; 3) Monetary and Political federation progress

Southern African Development Community (SADC)


15 countries•Angola•Botswana•Democratic Republic of the Congo•Lesotho•Madagascar•Malawi•Mauritius•Mozambique•Namibia•Seychelles•South Africa•Swaziland•United Republic of Tanzania•Zambia•Zimbabwe

Southern African Development Community (SADC)


HistoryFirst established as a development coordinating conference (SADCC) in 1980. Formed to advance the cause of national political liberation in Southern Africa, and to reduce dependence particularly on the then apartheid era South Africa. Became SADC in 1992 - to promote sustainable and equitable economic growth and socio-economic development through efficient productive systems, deeper co-operation and integration, good governance and durable peace and security among fifteen Southern African Member States.Population - 280 million people; GDP - over $600 billion. Within SADC is the Southern African Customs Union which comprises of 5 countries.

Key HighlightsBiggest in GDP – South AfricaSmallest in GDP - SeychellesHighest GDP growth – Tanzania and DR CongoKey industries in the region – minerals (gold, precious stones, copper), tourism, oil and gasA main issue affecting the block is the Labour troubles in South Africa that affect citizens from member states who travel to South Africa for work.

Common Market for Eastern and Southern Africa (COMESA)


19 countries•Burundi•Comoros•Democratic Republic of the Congo•Djibouti•Egypt•Eritrea•Ethiopia•Kenya•Libya•Madagascar

•Malawi•Mauritius•Rwanda•Seychelles•Sudan•Swaziland•Uganda•Zambia•Zimbabwe

Common Market for Eastern and Southern Africa (COMESA)


HistoryFormed-December 1994; replaced former Preferential Trade Area (PTA) which existed since the early 1980s. Created to be States that have agreed to cooperate in developing their natural and human resources for the good of all their people. Main focus - formation of a large economic and trading unit to overcome trade barriers faced by individual States.Since October 2000, COMESA has operated a free trade area (FTA) with 16 of its member States being a part of the FTA. Aims to be customs union by 2018.Population - over 500 million people; GDP - over $650 billion.

Key HighlightsBiggest in GDP - EgyptSmallest in GDP - SeychellesHighest GDP growth – Tanzania, Kenya, EthiopiaKey industries in the region – Agriculture, manufacturing, oilThe 2 main issues affecting the block include: 1) the development of the customs and monetary unions; 2) harmonization of tariffs for goods traded by member states with each other.

Economic Community of Central African States (ECCAS)


11 countries•Angola•Burundi•Cameroon•Central African Republic•Chad•Congo•Democratic Republic of the Congo•Equatorial Guinea•Gabon•Rwanda•São Tomé and Principe

Economic Community of Central African States (ECCAS)


HistoryEstablished in October 1983 by members states of several regional blocks within Central Africa. Aims at promoting and strengthening a harmonious cooperation in order to realize a balanced and self-sustained economic development.Population - over 160 million people; GDP - over $260 billion.Within ECCAS exists the 6 member Central African Economic and Monetary Community established in 1994 as a successor to a previous organization.

Key HighlightsBiggest in GDP - AngolaSmallest in GDP – Sao Tome and PrincipeHighest GDP growth – Rwanda, DR CongoKey industries in the region – Oil, minerals, agricultureThe main issues affecting the block include 1) the stability of DR Congo particularly in its East as well as civil conflict in the Central African Republic and, 2) volatility of oil and commodity prices affecting the incomes of member states that heavily rely on income from exports of this commodities.

Economic Community of West African States (ECOWAS)


15 countries•Benin•Burkina Faso•Cabo Verde•Côte d’Ivoire•Gambia•Ghana•Guinea•Guinea-Bissau•Liberia•Mali•Niger•Nigeria•Senegal•Sierra Leone•Togo

Economic Community of West African States (ECOWAS)


HistoryEstablished by the Treaty of Lagos between 15 West African Heads of State and Government in May 1975. The treaty of Lagos revised in 1993 and scope of cooperation expanded. Vision - to promote cooperation and integration, leading to the establishment of an Economic Union in West Africa in order to raise the living standards of its peoples, to maintain and enhance economic stability, foster relations among member States as well as to contribute to the progress and development of the African Continent.Population - 340 million; GDP - over $735 billion.

Key HighlightsBiggest in GDP - NigeriaSmallest in GDP – The GambiaHighest GDP growth – Cote d’IvoireKey industries in the region – Oil and gas, agriculture, cocoaThe main issues affecting the block include 1) setting up a customs and monetary union in the next 5 years, 2) rise of terrorism in the region and piracy at sea, 3) slump in commodity prices affecting member states that export those goods.

Intergovernmental Authority on Development (IGAD)


8 countries•Djibouti•Eritrea•Ethiopia•Kenya•Somalia•South Sudan•Sudan•Uganda

Intergovernmental Authority on Development (IGAD)


HistoryCreated in 1996 to succeed the Intergovernmental Authority on Drought and Development that was founded in 1986 to deal with issues related to drought and desertification in the Horn Africa. Mission - to assist and complement the efforts of the member States to achieve, through increased cooperation: food security and environmental protection, peace and security, and economic cooperation and integration in the region.Trade and market integration in IGAD has lagged behind primarily caused by poor incentives for member States with overlapping memberships to other regional economic communities (COMESA and EAC), that are further along on their market integration course.

Key HighlightsModerate Success in leading and influencing peace initiatives among its member states. This includes facilitating the peace processes between Sudan and South Sudan, Ethiopia and Eritrea and within Somalia. Currently the main issues the region is dealing with are combating terrorism in Somalia and developing peace in South Sudan.It has major effects on economies of South Sudan and Somalia.

Essential Elements of Africa Market Intelligence

Crane’s Key Elements of Africa Market Intelligence


• Current and Future Economic growth prospects• Major Upcoming Events• Political Cycle• FDI in resource driven sectors• FDI in consumer driven sectors• History of Civil Strife• Regional Policies of the main blocks• Standing of the country in their REC• Level of integration of the REC• Business Reforms as a block and as a country• Government Reforms• Country rivalries within block

What’s Next?


Please feel free to get in touch with us directly. We are looking forward to support you growing your business in Africa


David Karanja

[email protected]

www.craneconsultinghouse.com

introduction to african regional economic communities by crane insights - 2017

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