REGIONAL

INTEGRATION AND

ECONOMIC

DEVELOPMENT IN

AFRICA

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Abstract: Africa has witnessed a period of sustained and impressive economic growth in the past

decade. Yet optimism for the continent’s development coexists with concerns that this surge of

growth is less a reflection of structural improvements to the African economic framework, than it

is a byproduct of increased demand for the continent’s primary commodities; the latter being the

less sustainable path to development. Amidst these fears, it remains evident that Africa’s growth

can be consolidated and potentially transformed into sustainable development for her nations

through the promotion of deeper economic integration between African economies, and as such

African Regional Economic Communities have pursued this agenda. The general approach of

these Regional Economic Communities towards economic integration is one that focuses largely

on trade liberalization, at the expense of needed attention to behind the border issues, such as

supply constraints and the inadequate productive capacities of domestic African economies.

This paper examines this approach towards economic integration, the bottle-necks and obstacles

that characterize it, and the potential for new and better-informed efforts at regional integration

to reap the benefits of a significantly improved economic and political climate abroad the

continent in recent years.

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TABLE OF CONTENTS

1. Introduction…………………………………………………………………………… 4

2. The fragile nature of Africa’s economic boom………………………………………. 6

3. Regional integration as a means to sustain and consolidate Africa’s economic

growth………………………………………………………………………………… 8

4. The African approach to regional integration……………………………………… 16

5. Current trends..…………………..…………………………………………………… 19

6. Obstacles to trade liberalization……………………………………………………… 21

7. Conclusion: Regional integration and multilateral trade liberization; finding the

balance ………………………………………………………………………………… 23

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1. INTRODUCTION

It has long been established that regional integration fuels growth and socioeconomic

development for the states that engage in this practice. Regional integration schemes, which are

generally of an economic and/or political nature, entail practices that typically promote the

liberalization of trade, and the creation of a larger regional market, both of which facilitate a

more efficient allocation of resources between consumers and producers in the regional

economy, and create market opportunities for economies of scale. In addition, regional

integration initiatives offer opportunities for countries to tackle shared problems such as security

and environmental issues, which lie beyond the capacity of each individual country so

concerned, to singly address.

With the goal of sustainable economic development in mind, and in recognition of the

potential inherent in deeper economic integration to encourage this development, multiple

Regional Economic Communities, comprising neighboring African states, have emerged, as

endorsed by the 1980 Lagos Plan of Action for the Development of Africa and the 1991 Abuja

Treaty. Eight of these communities are currently recognized by the African Union. These are

CEN-SAD: Community of Sahel-Saharan States

COMESA: Common Market for Eastern and Southern Africa

EAC: East African Community

ECCAS: Economic Community of Central African States

ECOWAS: Economic Community of West African States

IGAD: Inter-Governmental Authority on Development

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SADC: Southern Africa Development Community

UMA: Arab Maghreb Union

These bodies, while strengthening economic integration between their member states, are

envisaged as the building blocks of an even greater integration project, the creation of an African

Economic Union, by 2028.

This commitment to economic integration among African policy makers is especially

valuable in light of the current details of Africa’s socioeconomic narrative. Africa’s growth in

recent years has outpaced those of most other regions around the globe, with six of the ten

currently fastest growing economies coming from the continent, and an average Gross Domestic

Product growth rate for all the economies within the continent at well beyond four percent

between 2000 and 2008 (Mc. Kinsey, 2010). Initiatives that foster greater economic integration

between the nations in the continent demonstrate the capacity to sustain these positive

developments across the African economic geography.

However more sinister factors necessitate a greater commitment towards regional

integration on the continent. Although Africa’s economic surge is representative of certain

improvements to the general socioeconomic conditions on the continent such as political stability

and greater commitment to democracy among her governments, experts maintain that this

growth is a mere reflection of favorable demand for Africa’s primary exports among foreign

interests. In addition, Africa’s economies are largely undiversified, depending mostly on the

export of one or two key primary commodities for economic growth. Judging by the volatility of

these commodity prices in the past, it is clear that growth and development cannot be sustained

through primary exports alone, and failure to acknowledge this may result in a relapse for

5

African economies. As a means to tackle this issue, appropriately implemented integration

initiatives demonstrate the capacity to diversify African exports and production, as well as to

increase the manufacturing capacity of African economies. Yet, besides the fact that they have a

history of failing to achieve their targets, African REC’s have largely adopted an approach to

integration that fails to look beyond tariff and non-tariff barriers to trade, at the expense of

attention towards behind-the-border concerns which must be considered and addressed if there is

to be deeper and more beneficial economic integration on the continent.

This paper contends that in the interest of sustainable development for African nations,

regional integration policies will have to address concerns beyond trade liberalization at the

borders, and take into account the behind-the-border concerns such as the domestic production

capacities, and the market environment of African economies.

2. THE FRAGILE NATURE OF AFRICA’S ECONOMIC BOOM

Africa’s recent economic progress has been rather impressive. The Gross Domestic

Product growth rate averaged over the entire region is expected to hover around five percent1 for

the next few years (African Economic Outlook, 2013) with certain countries like Ethiopia and

Rwanda in the Sub-Saharan region in particular achieving figures as high as 8% (World Bank,

2013).2 More significantly, this growth has resulted in poverty eradication, with the poverty rate

in Africa falling from 56.5% percent to 48.5% between 1990 and 2010 (World Bank, 2013).3

While this recent economic surge, all the more astounding in light of the global economic

slowdown, may be attributable in part to structural improvements to Africa’s socioeconomic and

1

2

3

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political framework, it is also heavily dependent on the price of commodities and primary

exports, which have soared in recent years, propped up by demand from a growing middle class

in emerging economies like China and India.

Indeed, while Africa’s manufacturing capacity has remained stagnated over the past four

decades, and the percentage of manufactured goods as a share of total exports has reduced

(World Bank, 2013), primary exports, and fuels in particular have largely made up the bulk of

African exports. New discoveries of petroleum in Ghana, Ethiopia, and Uganda, among other

countries suggest that this trend may continue if not well addressed. Most African countries,

besides having primary commodities as their predominant exports, also demonstrate the tendency

to depend greatly on the production and export of only one or two key commodities in particular.

Petroleum as a share of Nigeria’s total exports, for instance, stood at about 97% between 1980

and 2010 (UNECA, 2013).4 In addition, Africa’s pronounced infrastructural deficit and lack of

an enabling environment to encourage entrepreneurship and businesses, largely constrains even

greater prospects for development and economic growth on the continent.

Africa’s growth cannot be termed sustainable if it continues to derive mostly from the

prices for its primary exports, which have proven to be rather volatile in the past. The slump of

these prices in the 1980’s significantly contributed to Africa’s economic stagnation at about that

same period, which has now come to be termed as Africa’s lost decade. The commodity prices

that so favor African exports, have faced downward pressures in recent times (Chatterjee, Aroop,

2013)5, indicating that if African governments are to bring about sustainable economic

development, they will need to refocus their growth and developmental policies on initiatives

that promote economic diversification and industrialization. This is not to suggest that African 4

5

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economies are to completely desert the production of primary exports, in which they do possess a

comparative advantage; after all, they have made significant contributions to African growth of

recent, and they possess the potential to continue to do so in the coming years. But, in the interest

of sustaining these recent positive trends, African governments should not completely hinge the

growth and development of their economies on these commodities.

3. REGIONAL INTEGRATION AS A MEANS TO SUSTAIN AND CONSOLIDATE

AFRICA’S ECONOMIC GROWTH

Numerous understandings and perceptions of regional integration exist. According to

Hans Van Ginkel, regional integration refers to the process by which states within a particular

region increase their level of interaction with regards to economic, security, political, as well as

cultural and social issues (Van Ginkel, H., Van Langenhove L., 2003) 6 Philip de Lombaerde and

Luk Van Lagenhove posit that regional integration is the worldwide phenomenon of territorial

systems that increase their level of interaction between their components and create new forms of

organization, co-existing with traditional state-led organizations at the national level (De

Lombaerde, Phillip and Van Langenhove L., 2007).7 Luk Van Lagenhove also contends that

regional integration initiatives fulfill the following eight functions8;

• The strengthening of trade integration in the region

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• The creation of an appropriate enabling environment for private sector

development

• The development of infrastructure programmes in support of economic growth

and regional integration

• The development of strong public sector institutions and good governance;

• The reduction of social exclusion and the development of an inclusive civil

society

• Contribution to peace and security in the region

• The building of environment programmes at the regional level

• The strengthening of the region’s interaction with other regions of the world

These definitions acknowledge that regional integration must entail some form of cooperation

between multiple states, in recognition of the benefits that this cooperation can provide for the

parties involved. The scope of this cooperation is not necessarily limited, but is enhanced by the

instances of convergences between the interests and goals of the parties involved, and these

interests and goals may derive from sociocultural, political, and/or economic factors.

Regional Integration Agreements vary by virtue of the extent to which they propose to

actually integrate the national economies of the member states involved. Generally there are five

sequential arrangements of regional integration, each building on those that precede it, in

accordance with their level of depth:

Preferential Trade Area: Such an arrangement encourages intra-regional trade by partially, but

not entirely, eliminating tariffs and/or quotas on goods traded between the countries in the

stipulated region, as compared to the tariffs or quotas imposed on third party goods.

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Free Trade Area: In a free trade area, trade liberalization is facilitated by the complete

eradication of tariffs and import quotas between the countries within the delineated region. In

this arrangement, the governments of the member states are not denied the opportunity to

determine their individual trade policies with economies that are external to the free trade area.

However, the creation of a free trade area typically requires, on the part of each member state,

the establishment of Rules of Origin, a set of legal requirements based on which imported goods

can be classified as either goods produced within and/or by states in the region, or goods

produced by states external to that region.

Customs Union: In addition to the complete eradication of tariff barriers to trade as provided for

in a free trade area, a Customs Union ensures that the countries within the region maintain a

Common External Tariff on goods from countries that are external to this region. Thus,

governments so involved must cede some measure of sovereignty, particularly in the

determination of their trade policies with those interests external to the customs union.

Common Market: Common markets involve a greater measure of integration, by facilitating, in

addition to the liberalization of trade, the free mobility of the factors of production within the

region. This ensures efficiency in the allocation of market resources within the region, which

bodes well for greater welfare within the regional economy. This mode of integration as a result

of its depth, and the greater degree of mutual interdependence between the economies of the

states involved, necessitates a significant harmonization of fiscal and/or monetary policies, in

recognition of the consequences that the policy decisions of one government may duly have on

another’s economy. Supposing for instance, that a government lowers its income tax rates as

compared to those of the other states, it will witness an influx of labor, an important factor of

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production, from the countries in the common market, quite obviously to the disfavor of the

latter states.

Economic Union: Where the common market necessitates a broad convergence of fiscal and

monetary policies,9 the economic union enforces that these policies are more or less uniform.

The economic union is the deepest form of economic integration,10and in addition to other

attempts at harmonization such as the creation of a single central bank within the region, it may

involve the adoption of a common currency for those states that are members of the union.

Political Union: A political union centralizes political authority in a single governmental

framework for the entire region, and provides shared legislative, political, and constitutional

structures for the member states within the union. This comes at the expense of autonomy for

these states, since they hand over their sovereignty to the centralized institution. However it

provides a greater capacity to streamline and render uniform, the economic policies of the

member states involved, thus reducing the probability of conflict based on diverging interests,

between the member states within the union.

Table 1: Features of Integration

Type of

Arrangement

Free trade

among

members

Common

commercial

policy

Free factor

mobility

Common

Monetary

and fiscal

One

government

9 10

11

policy

Preferential

Trade Area

No No No No No

Free Trade

Area

Yes No No No No

Customs

Union

Yes Yes No No No

Common

Market

Yes Yes Yes No No

Economic

Union

Yes Yes Yes Yes No

Political

Union

Yes Yes Yes Yes Yes

Source: Assessing Regional Integration in Africa V, UNECA 2012

The demonstrated interest by African governments in regional integration, as evidenced

in their membership of at least one of the Regional Economic Communities, is in full recognition

of the developmental benefits that regional integration provides for their national economies.

Effective regional integration benefits national economies, for instance, in the sense that it

enables the countries so involved to develop and benefit from shared infrastructure, which

otherwise would be beyond the scope or financial capacities of a single country to create. In

addition, trade liberalization policies, which largely accompany economic integration, create the

opportunity for the diffusion of business ideas and technological spillovers abroad the regional

market, which bodes well for economic growth and development in the long run. Strictly from a

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firm’s perspective, encouraging trade liberalization also increases the scope for the adoption of

economies of scale, which, juxtaposed with competition brought about by the entry of more

firms into the market, engenders greater cost-efficiency (both time and monetary), and

qualitative improvements to the goods and services provided by the firms for the consumers.

These potential benefits are especially valuable in light of Africa’s specific economic

condition. Africa’s national economies are generally characterized by small market sizes, with

eleven countries in the continent harboring populations below three million,11 and fourteen with a

GDP of less than $ 5 billion according to data from the World Bank, which greatly limits the

scope for the adoption of economies of scale by firms within the countries. This is also

somewhat challenging for African governments in that it complicates attempts to create public

infrastructure, which would enhance economic development. In some cases the small sizes of the

domestic markets are incapable of supporting the provision of the necessary infrastructure.

According to United Nations Economic Commission for Africa for instance, most African

economies are incapable of supporting a viable steel project, one of the demands of any

meaningful effort towards industrialization, individually12. Electricity shortage in Uganda is

similarly attributable to constraints imposed by the size of the domestic economy, denying the

country substantial annual economic growth (UK Department For International Development,

2011)13. However, a comprehensive approach to these issues, entailing their solution on a

regional level, through the creation of shared regional electricity grids in Uganda’s case, for

example, will facilitate the expansion of the domestic markets beyond their borders, encouraging

economies of scale, and provide scope for cooperation between national governments in tackling

Africa’s significant infrastructure deficiencies.11

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The current imbalance in the commodity structure of Africa’s exports in favor of primary

commodities, and fuels in particular can also be addressed and rectified through effective

regional economic integration. It is recognized that regional integration is not an end in itself, but

an important path that paves the way towards globalization and effective and welfare-procuring

integration between economies across various regions around the world. However, despite the

significant potential benefits that it may yield in terms of increased trade for the global economy,

the trend towards globalization does encourage individual economies to specialize in the

production of goods and services in which they possess a comparative advantage. These are

primary commodities in the case of most African economies. If African governments were to

embrace multilateral trade liberalization, thus advancing globalization, without adequately

pursuing regional integration, African economies may well remain undiversified and incapable

of achieving more sustainable economic development.

But, with deeper economic integration, and enhanced trade between the countries on the

continent, African economies will witness value addition in their manufacturing sectors, as

against specialization in raw unprocessed primary products (Mathilde Douillet and Karl Pauw,

2012).14 This in itself is not a prerequisite for economic growth, but at the very least, it will

encourage economic diversification, and ensure greater competitiveness of African goods in the

global market, thus preventing the scenario where African governments continuously hinge their

growth and economic development on capricious commodity prices.

In addition to all these, cohesive integration in the face of the challenge of global

warming and climate change can ensure that African nations develop in a manner that does not

jeopardize the safety of the environment, and implicitly the development of future generations of

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Africans. Indeed, global warming is a trend that is obviously detrimental to the development of

the global economy in the long run, and it is recognized that sustainable economic development

must take into account its general impact on the environment in this respect. Most domestic

African developmental agendas focus on industrialization, a process which has largely proved

destructive to the global environment in the past when its benefits have not been appropriately

weighed against its cost to the environment. With particular reference to Africa, although land on

the continent is not especially more fertile than those in other regions, Africa remains the

continent with the greatest expanse of arable land,15 and the nations on the continent demonstrate

a comparative advantage in the production of agricultural goods (which are primary

commodities)16. Although a focus on industrialization can and should be rationalized in terms of

its potential to diversify the African economies, this approach should not come at the expense of

the destruction of Africa’s arable land, a scenario which, if not preemptively checked, will

become increasingly more likely judging by the signs of climate change on the continent. The

Sahara desert for instance continues to encroach into countries like Nigeria, Niger, Cameroon,

and Chad in West Africa and has significantly contributed to shrinking Lake Chad from 25,000

square kilometers to 1,500 square kilometers between 1963 and 2001 (UN, 2012)17. To say that

this poses a threat to the livelihoods of those agriculturists and fisher-men that live within the

region, and the national economies as a whole, is an understatement.

However, regional cooperation will enable African nations to address these issues

collectively. The Lake Chad Basin Commission (LCBC), consisting of those countries that are

nearest to Lake Chad, which jointly cooperate to effectively preserve and manage the use of this

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valuable resource, gives evidence to this18. The project is not undertaken by a single nation,

seeing as it is beyond the scope of a single nation to do so. Fully acknowledging that the benefits

of this project were applicable to all, it involved the cooperation of the respective governments of

Chad, Cameroon, Niger, Nigeria, and the Central African Republic. Even more notable is the

potential for regional integration to effectively decelerate the onslaught of climate change,

through the effective harmonization of economic policies within that region that take into full

recognition their effects on the environment. In addition to the fact that shared energy

infrastructure across a region will induce economies of scale, lowering the costs of these projects

and ensuring more efficient allocation of energy resources by reducing the likelihood of waste,

African Regional Economic Communities, if vested with the needed authority, can dictate

policies that ensure greater use of sustainable energy resources among their member states.

In essence, regional economic integration is without a doubt, beneficial to African nations

in light of the challenges and constraints that their often small market sizes, and largely

undiversified economies impose on any prospects for a sustained improvement to socioeconomic

conditions on the continent, such as has characterized Africa’s foray into the new millennium.

4. THE AFRICAN APPROACH TO REGIONAL INTEGRATION

The Abuja Treaty signed by African Heads of States in 1991, and rendered operational in

1994, paved the way for a concerted collective effort towards regional integration by African

governments, through the endorsement and appropriation of a six-phase time-plan with the end

goal as the creation of a continent-wide African Economic Union (with harmonized fiscal and

monetary policies for all fifty-four of its member states) and a starting point as the consolidation

of the existing Regional Economic Communities by their member states. For each of the eight

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Regional Economic Communities, recognized by the African Union, the approach to economic

integration between their respective member states is that of linear market integration

(Hartzenberg, Trudi 2011)19. In essence, the member states of the Regional Economic

Communities are expected to gradually integrate and liberalize trade in goods and services as in

the establishment of a Free Trade Area and Customs Union, facilitate labor mobility within the

region as in a Common Market, and then integrate capital markets with the establishment of an

Economic union. These efforts will also occur at an inter-regional level, as specified by the six-

phase plan of the Abuja Treaty, over the course of thirty four years, culminating in the creation

of the African Economic Union in 2028.

Figure 1)

Linear Market Integration: The integration trajectory of Africa’s REC

Table 2: Africa's Integration Process

INTEGRATION STAGES IN THE ABUJA

TREATY

COMPLETION DATE IN THE ABUJA

TREATY

First stage (5 Years) Strengthen REC’s 1999

Second Stage (8 Years) Coordinate and

harmonize activities and progressively

2007

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Free Trade Area

Customs Union

Common Market

Economic Union

eliminate tariff and non-tariff barriers

Third Stage (10 Years) Free Trade Area and

Customs Union in each REC

2017

Fourth Stage (2 Years) Continental Customs

Union

2019

Fifth Stage (4 Years) Continental Common

Market

2023

Sixth Stage (5 Years) Continental Economic

and Monetary Union

2038

Sources: Adapted from “Assessing Regional Integration in Africa V”, UNECA 2012

Justification for this approach lies in the understanding that economic integration must be

achieved first at a regional level, before the more ambitious goal of continent-wide economic

integration in the interest of socio-economic development, is achieved.

5. CURRENT TRENDS

The vision of the 1991 Abuja Treaty demonstrates the recognition of the role of regional

integration in fostering economic development on the part of African policy makers. The

measures employed and/or stipulated in these policies generally focus on the eradication of tariff

and non-tariff barriers to trade between the neighboring African member states. Such an

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approach is indeed highly beneficial to the prospects of intraregional trade in recognition of the

obstacles that conditions at the borders of African countries pose to mutually beneficial trade.

Non-tariff barriers, for instance, such as tedious customs procedures at African borders, and the

proliferation of check points at these borders, particularly in West Africa, significantly obstruct

mutually beneficial trade between African states. Eradicating such barriers, in addition to those

of tariffs and import quotas would indeed promote trade.

However African Regional Economic Communities have repeatedly demonstrated an

inability to meet their targets. With regards to the complete eradication of non-tariff barriers to

trade at African borders, especially those in West Africa, the borders continue to remain

notorious for their numerous check-points. As regards tariffs, in spite of the ambitious targets set

by their respective Regional Economic Communities, African countries continue to maintain

high tariffs on products from neighboring states. A combination of these and other factors have

rendered the process of conducting cross-border trade in most African countries rather difficult.

On average, the number of days involved in importing and exporting goods on the continent

stand at approximately thirty seven and thirty two respectively, compared to eleven for both

procedures in OECD High Income countries (UNECA, 2012).20

In addition, most Regional Economic Communities have failed to meet the deadlines

determined by the Abuja Treaty in 1991, for deeper economic integration, by virtue of the

progression from FTA’s to Cusoms Unions. (example)

Table 3: Checkpoints on Selected African Highways

Highways Distance, Km Number of Checkpoints

20

19

Checkpoints per 100 Km

Tema-

Ouagadougou

962 25 2.6

Ouagadougou-

Bamako

910 19 2.09

Lome-

Ouagadougou

1036 23 2.22

Cotonou-

Niamey

1036 34 3.28

Abidjan-

Ouagadougou

1122 37 3.3

Niamey-

Ouagadougou

529 20 3.78

Sources: Regional Integration and trade in Sub-Saharan Africa, UK Department for

International Development, 2011

6. OBSTACLES AND PROBLEMS BESETTING TRADE LIBERALIZATION AND

INTEGRATION IN AFRICA

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Although Africa’s Regional Economic Communities recognize the importance of

regional integration, and have been set up for the very purpose of enhancing it, they have

performed dismally in promoting trade liberalization and implicitly integration, among their

member states, and with other regional economic communities on the continent. Intra-African

trade remains the lowest in comparison to other regions in the continent at 11 percent (UNECA,

2012) This is attributable to certain obstacles, some of which include;

A lack of commitment on the part of African governments: Certain African governments

have yet to comply with the policies of their respective Regional Economic

Communities as regards the eradication of tariffs. In addition, the Regional Economic

Communities do not seem appropriately endowed with the necessary authority to enforce

their policies among their member states. A case in point is that of Zimbabwe and the

SADC Tribunal at the August 2010 SADC Summit (Hartzenberg, Trudi, 2011).21 The

reason for this may be that the trade liberalization policies are not necessarily aligned

with the goals and interests of their member states.

Macroeconomic Divergence: For more stable African economies like that of South

Africa, tariffs may be economic tools to encourage the growth of their domestic

industries, while to some others which are less stable, they may be important sources of

revenue22. Admittedly, although trade liberalization does procure welfare benefits to the

economies involved, eradicating tariffs would procure varying degrees of losses to each

of the economies, since African governments in particular attach different levels of

significance to their tariff policies.

21

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Overlapping REC memberships: Although eight Regional Economic Communities are

recognized by the African Union, there are as many as fourteen regional economic

groupings on the continent, often with overlapping memberships: only ten African

countries have not committed to more than one Regional Economic Community. Since

the policies of these Regional Economic Communities are yet to be harmonized, this

imposes conflicting demands on those African governments that belong to multiple

Regional Economic Communities.

Lack of infrastructure: African governments remain plagued with a lack of appropriate

infrastructure to translate the trade liberalization policies into increased and gainful trade

between themselves and their neighboring states.

Security Concerns: Those regions in Africa plagued by civil unrest, especially UMA and

ECCAS, and CEN-SAD, have largely failed to achieve their goals for economic

integration.23

Financial difficulties: Beyond the financial demands that implicitly accompany the

consolidation of an REC, UNECA has identified that at a continental level, the creation

of a Free Trade Area within Africa will necessitate some form of financial responsibility

on the part of each African government, in order to redistribute the gains, and costs, that

economic integration provides much more equitably between the African economies.

In recognition of these difficulties, the African Union Commission has collaborated with the

Regional Economic Communities in establishing a Minimum Integration Program (MIP), an

initiative that seeks to converge the activities of the REC’s, and to address certain areas of

regional and continental concern as regards the goal of deepening intraregional and continental

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integration, and to surmount those previously highlighted obstacles, as well as others, that hinder

effective economic integration. In addition to these goals, the MIP’s will incorporate attainable

objectives from the African Union’s Strategic Plan (2009-2012).

The MIP has also been created with the intention to identify successful integration

practices within certain REC’s, and to have these replicated in other REC’s. One of the practices

that demonstrates a great potential for success, and one to which the MIP accordingly hopes to

replicate, is the Tripartite-Free Trade Area initiative. The tripartite FTA is to comprise the

member states of the COMESA, the EAC, and the SADC REC’s, a total of twenty-six African

countries, with a combined GDP of about $530 billion, which represents more than half of

Africa’s economic output. Establishing a Free Trade Area over this entire region, beyond

boosting interregional cooperation among the REC’s involved, will undoubtedly spell impressive

economic benefits for the region, and accelerate the current general pace towards the

achievement of continental integration.

7. LOOKING BEYOND TRADE: THE UNDERLYING ISSUE

Admittedly, Africa’s dismal performance at promoting greater economic integration is

attributable in part to the tariff and non-tariff barriers, as well as other related factors, which

inhibit mutually beneficial trade. Accordingly, the African Union Commission and the Regional

Economic Communities have identified these factors, and through such initiatives as the

Minimum Integration Program, seek to have them addressed.

However, the issues that hinder deeper economic integration within the continent are not

completely exclusive to border conditions. Although efforts at trade liberalization will

accordingly mitigate the obstacles posed by tariff and non-tariff barriers towards integration, this

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alone is not the most effective means to facilitate enhanced trade between African states. Efforts

to combat the behind-the-border issues, such as the fact that most African countries remain short

of the productive capacity in terms of commodity export structure, to meet the requirements of

the consumers on the continent, must concurrently be made alongside efforts to liberalize trade.

African commodity exports remain predominantly primary commodities, and the

economies of most African countries are undiversified as well as lacking the manufacturing

capacity to process their raw materials, and export them as finished products. Nigeria, for

instance remains unable to refine its petroleum before exportation, eventually importing the

refined product, and other goods which are produced with the initial raw material, from foreign

governments and firms, and at higher costs.

Table 4: Commodity Structure of African Exports (percent)

Commodity Classes Sub-Saharan Africa North Africa

Food, Live animals,

beverages, and tobacco

11.0 4.8

Crude Materials, oils and fats

(Fuels excluded)

9.7 2.5

Mineral fuels, lubricants, and

related material

51.2 68.6

Chemicals 2.8 5.4

Machinery and transport

equipment

6.1 5.6

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Other manufactured goods 15.1 12.2

Sources: Assessing Regional Integration in Africa V, UNECA 2012

Given this situation, it is evident that African production is currently incapable of meeting the

demands of African consumption, specifically as regards processed and manufactured goods.

Increasing market access for African firms, without concurrently improving the production and

manufacturing sectors in individual African economies, will not sufficiently improve the

unimpressive pattern of intra-African trade (Reddy, 2010)24.

This impediment to cohesive integration is largely as a result of the nature of the market

environment in African countries. Despite improvements over the past few years, it remains

comparatively difficult to start and run businesses in most countries on the continent. This is due

to, among other factors, a lack of the infrastructure, such as energy, ICT, and transport facilities

which are important for the successful management of these businesses. In addition, small and

medium sized enterprises in particular, which are more or less entrepreneurship-oriented, find it

difficult to procure financial assistance, which is highly valuable in the early stages of their

development. Well managed businesses possess the potential to spur technological innovation,

enhance the manufacturing capacity, and diversify national economies. It is therefore no surprise,

that given the current conditions as regards Africa’s business environment, Africa’s

manufactures as a share of total exports from the continent, have depreciated over time

(UNECA, 2012). Inasmuch as the reduction or complete eradication of tariff barriers may

actually spur regional production to meet the demands of the consumers within the specified

region, the manufactured goods so produced, given Africa’s current manufacturing capacity, will

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remain unlikely to pose significant competition to imports from foreign countries who

demonstrate a comparative advantage in the production of this particular range of goods.

In addition, the markets for certain products within African countries, not least

manufactured goods, are often dominated by monopolies (UNECA, 2012), some of which are

government backed, and largely incompetent, as a result of the lack of market competition that

their specific hierarchy within the market structure implies. The presence of such firms in

Africa’s domestic markets stifles the emergence of potentially well-managed firms within those

markets, which besides spurring innovation and their accruing technological spillovers, would

engender greater competitiveness within African economies, and effectively consolidate Africa’s

manufacturing capacity well enough to potentially meet the demands of African consumers.

Therefore, in addition to employing measures that liberalize trade among African states,

African REC’s must broaden the scope of their operations to accommodate for policies that

promote domestic production and increased manufacturing capacity within African states. Such

policies would of course revolve around the installation of the necessary infrastructure

(particularly energy, transport and ICT services), the provision of financial assistance to SME’s

through lowered interest rates on loans and tax holidays for example, and the encouragement of

greater market competitiveness through the discouragement of monopolies, in order to foster the

growth of businesses on the continent.

Education can also prove a useful tool in this respect. It is well recognized that

supranational institutions which determine whole or part of the educational policies within a

region could foster greater factor mobility through streamlining the educational requirements of

their individual member states, and thus enabling for instance, a lawyer who earns his degree in

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one country within the region, to easily respond to demand for the services of those of his

profession in a different state within the region. This to an extent, is within the capacity of the

West African Examination Council, a body which promotes education and issues Ordinary Level

Examination Certificates to students in five West African States; Nigeria, Sierra Leone, Liberia,

Gambia, and Ghana. Yet even beyond this, such institutions could encourage increased

engagement in entrepreneurship, and substantially enhance the market performance of firms

within the region, by endowing the students with the skills required to run businesses effectively

through entrepreneurship education.

Indeed African Regional Economic Communities are not completely blind to these

realities, and a few have begun taking measures to address the supply-side constraints as well as

other behind-the-border barriers to mutually beneficial trade, economic integration, and

economic development within Africa. The T-FTA initiative in particular highlights, as one of its

three key pillars, industrialization (Hartzenberg, Trudi, 2011), a factor which has previously gone

ignored in Regional Integration Agreements on the continent in the past years, and one which

directly engages the malaise of economic non-diversification among African states. However

more Regional Economic Communities must emulate such initiatives and effectively enforce

them among their member states in order to ensure that Africa’s recent burst of growth is

successfully transformed into sustainable and poverty-eradicating socioeconomic development

for the masses on the continent.

7. CONCLUSION: REGIONAL INTEGRATION AND MULTILATERAL TRADE

LIBERIZATION; FINDING THE BALANCE

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Africa’s share of world trade currently stands at 3.2 percent (UNECA, 2012), having dropped

more or less consistently, from levels of about five percent in 1960. This indicates that, besides

having not achieved the goals of deeper economic integration between themselves, African

economies have yet to be comprehensively integrated with the rest of the global economy.

UNECA attributes this to high import tariffs imposed on commodities from foreign states by

African governments, starkly contrasting the market access offered to African economies by the

rest of the world, and the European Union, Africa’s biggest trading partner, in particular. African

governments may rationalize this behavior as one in the interest of the protection of its domestic

industries, which cannot survive stifling competition from foreign firms. However, if African

markets fail to keep pace with the business ideas and technological innovations that characterize

greater interaction and competition within the global market, these trade policies may prove to be

counter-intuitive, creating a wedge between the conditions of those economies that are in a

position to reap the developmental benefits of activity in the global market, on one hand and

African economies on the other. Quite like regional integration policies, multilateral trade

liberalization initiatives that embed Africa more greatly within the global economy can procure

welfare and boost economic growth and development in the long run for the continent.

However, the trade-related aspects of regional integration, which admittedly dominate

African regional integration agreements, seemingly increase the degree and frequency of

economic interaction and trade between the member states in each regional economic community

at the expense of trade with the rest of the global economy. It is obvious that, through completely

eliminating tariffs on goods imported from each other while imposing a common external tariff

on goods produced in third party countries, as in the case of a customs union, these member

states create a bias towards goods that are produced within the region. This could lead to trade

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diversion, a static effect of economic integration, by which a country which does not possess a

comparative advantage in the production of a certain good, is afforded an advantage nonetheless,

albeit an artificial one resulting from the regional trade agreements. The case can be made that,

solely from this perspective, Africa’s attempts at regional economic integration will hinder its

domestic economies from greater integration with the global economy.

Yet, to limit the scope for the analysis of regional integration to its potentially negative,

static impact on the prospects of free and efficient trade would be to ignore its significant

dynamic contributions to the economic development of a nation. Regional integration stimulates

investment, greater market competitiveness, and provides opportunities for economies of scale,

all especially pertinent to Africa’s goals for socioeconomic development. Indeed, regional

integration schemes can combat the negatives that derive from multilateral trade liberalization.

While multilateral trade liberalization schemes may promote economic growth and

development in some respects, they also encourage specialization among countries in the

production of those commodities at which they demonstrate a comparative advantage. This is not

at all beneficial to Africa’s undiversified economies as regards their goals for a more sustainable

approach to economic development, as against over-dependency on capricious demand for

primary commodities. Regional integration can potentially combat this issue in that it will

provide a somewhat protected, and yet competitive market environment for Africa’s

manufacturing capacity to grow, and then to compete effectively within the global economy. In

fact, the economic development that will result from such measures will significantly contribute

to Africa’s increased capacity to trade, and thus to be integrated into the global economy.

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However, the threats that Africa’s high import tariffs pose to its economic development

in the long run as well as the prospects for its integration into the global economy are indeed

real. In addition to strengthening regional economic ties, African economies will have to embark

on multilateral trade liberalization, albeit judiciously in recognition of its potential to render

Africa’s goals for economic diversification unachievable.

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