Regional Integration in Africa

There is growing robust evidence that Africa should first deepen its own regional integration before being in better position to open up with the rest of the world. Even more urgent with the Covid-19 pandemic. Regional integration is a development priority for Africa. All Africans, not just policy makers and decision makers, have a role to play in making integration a reality for the continent. Integration matters in Africa. It affects what people can buy; the variety of what is on offer at the local market; how easily citizens move between countries; where individuals travel for leisure or for work; how cost effective it is to keep in touch; where people choose to study or look for a job; how to transfer money to family or get start up capital for a business.

Regional integration is about getting things moving freely across the whole of Africa. This means getting goods to move more easily across borders; transport, energy and telecommunications to connect more people across more boundaries; people to move more freely across frontiers, and capital and production to move and grow beyond national limits. Africa’s integration journey towards a more connected, competitive and business friendly continent is underway and its road map is, in some areas, under construction.

“The Vision of the African Union is to become an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena.” African Union Agenda 2063

“Africans must seek growth that is primarily anchored on their priorities and that is capable of delivering structural transformation. Regional integration is a key strategy for development.” This was the statement echoed by the Economic Commission for Africa, during the 2016 Africa Regional Integration Index report.

Measuring where Africa stands on regional integration gives an assessment of what is happening across the continent and is an important way of highlighting where the gaps are. It is a dynamic, evolving way to track integration by giving everyone access to verified, quality information to start a dialogue and take forward the next steps to integrate Africa. Thus, regional integration may be motivated by economic, political and other strategic factors, and these may change as integration advances. For example, it is well known that regional integration in Africa was initially driven by political rhetoric around pan-Africanism; however, economic considerations now seem to have taken over. Regionalism is not a new phenomenon. Its origins have been traced back to 19th century Europe, but a significant milestone was reached more than a century later when the Treaty of Rome establishing the European Community was signed in 1957. The Southern African Customs Union set up in 1910, is the first attempt at regional integration on the continent, and among the oldest in the world.

What is remarkable about regionalism in the modern era is its exponential rise, especially since the 1990s. Currently 302 regional trade agreements (RTAs) are in force, the majority of them involving goods only. Various theories have been put forward to explain this “new regionalism” Baldwin (1995) suggests a ‘domino theory’ of regionalism whereby the signing of the North American Free Trade Agreement (NAFTA) by the United States signalled a paradigm shift, which unleashed ‘pressures for inclusion’ across countries around the world that felt left out of such a promising arrangement. These pressures were exacerbated by the impasse in WTO negotiations and by the feeling that it was easier to negotiate among smaller groups of like minded countries outside of the WTO than in the green rooms of the trade body. Pressures for inclusion have also led some countries to join multiple RTAs resulting in ‘spaghetti bowl’ regionalism.

Why Regional Integration is important to Africa’s development agenda

Regional integration can promote economic growth and sustainable development in various ways: by supporting trade liberalisation; by helping build cross-border and regional infrastructure; by tackling conflict and fostering peace and security; and by enhancing cooperation in several other areas, for example, freer flows of investment and of people across borders, among others. Of these channels, the trade growth nexus has received a great deal of attention in research perhaps because this relationship is more easily quantified. Regional integration has become both more important and more urgent as a means to build back better. In particular, the pandemic has highlighted the need to build self sufficiency at national and regional levels to reduce dependence on extra African imports of food and essential products. The availability of these goods became erratic and shortages arose as global supply chains were disrupted by the pandemic. Regional trade can be an engine of growth in the recovery process and more generally, regional integration can spur the development of regional value chains, contributing to the structural transformation of Africa and strengthening the continent’s resilience to external shocks, such as COVID-19 pandemic.

Despite a massive increase in Africa’s total merchandise exports during the past half century, reaching nearly half a trillion US dollars in 2018, the continent’s share of world exports is still relatively low. This share stood at 2.5% in 2018, lower than Africa’s share of global GDP (3%), and well below the continent’s share of world population (17%). Moreover, Africa’ exports remain concentrated in a few unprocessed primary commodities. Regional trade offers an easier route to boosting Africa’s trade than external trade, which is subject to greater competitive pressures and more pervasive non-tariff barriers. Even here, the room for improvement is substantial, intra-Africa trade is the lowest of all major regions, at approximately 15%, compared to 54% in the North American Free Trade Area, 70% within the European Union and 60% in Asia. Moreover, intra-Africa trade features a larger share of manufactures than Africa’s exports to the rest of the world, which are concentrated in low value added mineral products (IMF, 2019). For example, during 2000-2017, manufactured goods represented 36% of intra-Africa exports, compared to 24% of African exports to the rest of the world.

Thus, regional integration can play a vital role both in increasing Africa’s global trade and in enabling diversification away from dependence on commodity exports and excessive reliance of imports of food and other basic goods from outside of Africa. It can also help in building regional economic infrastructure; in fostering food and energy security; in generating jobs for the increasing number of young people; and in alleviating poverty and delivering shared prosperity. These are also some of the ways in which regional integration in Africa can advance the continent’s development, especially at a time when the pandemic has wreaked havoc to economies across the continent, making it even more urgent to recover and rebuild. Regional integration has become a necessary condition for Africa to optimize its growth potential and to be able to compete and play a leading role in the global marketplace. Individually, most of the countries are simply too small. The Abuja Treaty, adopted by the African Union in 1991 and in effect since May 1994, set out a road map for achieving an economic and monetary union in Africa through a gradual process of coordination, harmonisation and progressive integration of regional economic communities (RECs) over six stages spanning 34 years. While the Treaty has been criticized for its ambitious targets, it is reassuring to note that significant progress has been achieved to date: the process has been delayed, but not derailed despite the COVID-19 pandemic.

Key milestones in African Integration

The first stage has now been completed, with eight RECs officially recognized by the African Union. The second stage has not been fully completed because progress by the RECs and by members within the RECs has been uneven (AU, ECA and AfDB, 2017). The third stage, which envisaged the full establishment of FTAs and CUs at the REC level by 2017 is still work-in-progress in some RECs. Currently, the integration process is somewhere between stages 3 and 4. While a continental free trade area (CFTA) did not feature explicitly in the Abuja Treaty, it was deemed a logical step along the way to a continental Customs Union and negotiations on it started in June 2015. So far, due to varying levels of ambition and implementation, all the eight AU recognized RECs have registered delays in reaching key milestones. However, four of the RECs EAC, ECOWAS, COMESA and SADC have made important progress at regional integration, while the remaining four are struggling with the very first step in the process. Even among the more successful initiatives, progress has been slow and erratic. For example, after the launch of the SADC- FTA in August 2008, several milestones have been missed, including SADC’s vision to establish a customs union by 2010, a common market by 2015, a monetary union by 2016 and single currency by 2018.

The EAC, on the other hand, has made significant strides in a relatively short period. It launched its customs union in January 2005, within just five years of coming into operation in July 2000. Its Common Market Protocol entered into force in July 2010, and the protocol for the establishment of a monetary union was signed in November 2013. With an intra-regional trade share of about 19 percent in 2017, the EAC is clearly the best performer among Africa’s economic blocs.

Challenges to Integration at the level of RECs

The main factors affecting progress in deepening integration in Africa have been amply documented. The genesis of regional integration in Africa can be traced to the continent’s colonial legacy: a continent left fragmented, with geographically scattered, small populations and long distances between capitals, compounded by land lockedness and inadequate infrastructure. This gave rise to a political rhetoric about rebuilding Africa, consolidating unity, achieving self-reliance and ensuring peace and security. Where the economic imperative was emphasized, it was through an endogenous development strategy calling for industrialisation based on import substitution, which effectively closed off national borders. In this context, regional initiatives were motivated more by political cooperation than by economic interest, let alone sustainable development concerns. Even though trade eventually found its way into regional treaties, member states remained nationalist and often reluctant to cede sovereignty to a supra-national authority. This perspective explains why trade liberalisation commitments have not been followed through, or have been implemented partially and erratically.

Evidence from other regions that have successfully achieved a high degree of trade integration suggests that economic cooperation and trade were at the top of their integration agenda, and that commitments were enforced through self-discipline and sanctions. In Africa, because solidarity prevailed over economic interest, non-compliance went largely unpunished. Moreover, most countries have been concerned about the adverse impacts of tariff cuts on government revenue and local industries. This has added to their reluctance to implement liberalisation commitments. In some cases, countries have raised tariffs in violation of their agreement, under pressure from imports. In others, resistance to rapid trade liberalisation is reflected in the long list of exceptions and sensitive products factored into the agreements. The pandemic has not helped either. An increase in protectionism has been noted in some countries, fueled by nationalism and the need to build self sufficiency, especially food security.

A constant challenge to integration is the lack of coordination at various levels of the integration machinery between RECs, between RECs and national governments, between different government departments, and between the government and the private sector. This challenge is exacerbated by implementation costs, institutional weaknesses and overlapping memberships. Whereas trade agreements are signed between governments, it is the private sector that carries out trade and so is affected by the treaties. Principles of inclusiveness dictate that the government consults the private sector in preparing its negotiating position. Unfortunately, in most African countries, there is little consultation with the private sector, which results in the business community viewing trade agreements with suspicion or lobbying for certain commitments to be reversed because they are deemed to be against their interest.

Assessing Regional Integration in Africa

Even with the official launch of the AfCFTA in July 2019, and the start of trading under the Agreement as from 1st January 2021, progress on economic integration at the REC level continues to be closely monitored. At some point, the REC FTAs will be subsumed by the AfCFTA as the latter reaches 100% liberalization. Eventually also, the expectation is that the REC level customs unions will be subsumed with the advent of the African continental customs union. Until that happens, however, regional integration at the level of the RECs will continue to serve as a barameter of continental integration.

Regional integration is not just about trade and the movement of persons. It also encompasses integration in the areas of infrastructure, governance, peace and security, among others. Moreover, with the rise of services trade, it is useful to consider trade integration in terms of both goods and services. Since an African monetary union with a single currency, is envisaged by the Abuja Treaty on the way to the African Economic Community, it is critical to ensure that a threshold level of macroeconomic convergence is achieved within and across RECs. It has proved difficult to measure the degree of overall integration achieved by an RTA or by individual members within it. This is largely because there is no consensus on what ‘overall integration’ should measure and, in any case, data remains a constraint for some regions or countries. However, a recent initiative has seen the publication of the AFRICA Regional Integration Index a composite index based on five dimensions of economic integration: trade integration, regional infrastructure, productive integration, free movement of people, and financial and macroeconomic integration.

The road to the AfCFTA

The African Continental Free Area (AfCFTA) was officially launched at the 12th Extraordinary Summit of the African Union in Niamey, Niger on 7th July 2019. Adding to the significance of the event was the signing of the Agreement by Nigeria, Africa’s largest economy. Nigeria was a notable absentee when 44 of the 55 AU member states signed the Agreement at the Extraordinary Summit on the AfCFTA in Kigali in March 2018. Thirty member states also signed the Protocol on Free Movement of Persons at the Summit. To date, 54 African states have signed the AfCFTA Agreement, which entered into force on 29th April 2019 when the threshold of 22 countries ratifying the Agreement was reached. Since then, 15 more countries have ratified the Agreement. Remarkably, ratifications continued while the entire continent was battling the pandemic, and despite the havoc it caused, the trade protocol of the Agreement officially came into effect on 1st January 2021, six months behind schedule, which is no trivial feat under the present circumstances.

The AfCFTA marks an important milestone in Africa’s long and rather strenuous history of regional integration, going at least as far back as the Abuja Treaty of 1991. In 2012, the African Union adopted the Action Plan on Boosting Intra-African Trade (BIAT). The Plan identified seven action clusters, among which trade policy an area where Africa continued to face a number of challenges, including the absence of a continental framework for facilitating intra-regional trade, high tariffs between AU Member States, overlapping membership in RECs, and lack of diversity in its exports base. Partly as a response to these challenges, at their 24th Ordinary Assembly held in January 2015, AU Heads of State and Government adopted Agenda 2063: The Africa We Want as a shared framework for inclusive growth and sustainable development for Africa to be realized over the next fifty years. Agenda 2063 underscored the AfCFTA as one of the flagship projects “to significantly accelerate growth of Intra-Africa trade and use trade more effectively as an engine of growth and sustainable development”. Specifically, its goal is to double intra-Africa trade by 2022 by addressing persistent challenges comprehensively and resolutely.

The Abuja Treaty assumed that RECs would all pursue economic integration efforts to become to customs unions by 2017. This did not quite happen. The AfCFTA was therefore (originally) conceived to address this shortcoming by consolidating pre-existing FTAs into a single pan African FTA. To this end also, the Tripartite Free Trade Area (TFTA) which brings together COMESA, EAC and SADC, was launched in June 2015. Progress on the TFTA continues alongside the AfCFTA, as demonstrated by the ratification of the TFTA Agreement by Rwanda in July 2019 the fifth country to do so.

The AfCFTA, however, is not the end of the road; it marks the beginning of a journey. So far, only negotiations on trade in goods and services, and on the settlement of dispute, have been concluded even if some finishing touches are needed in some areas, in particular on the trade protocols, where several member countries are yet to submit their schedules of tariff liberalization and commitments in service sectors, and finalize rules of origin. The second phase of the negotiations will focus on investment, competition policy, intellectual property rights, and e-commerce. The broad scope of the AfCFTA negotiations, stretching far beyond conventional WTO issues, suggests that the AfCFTA is more than a trade agreement. It is rooted in the idea of development regionalism, and promises to deliver wider benefits.

Finally it’s estimated that the Regional integration in Africa is low as compared to what it could potentially be this is keeping in mind with the remarkable differences across countries. Suggesting that there is room for increased integration on the continent and tap into the benefits. AfCFTA can play a critical role to create conducive environment (also in assisting with COVID-19 recovery), as expected to help boosting intra-African trade and developing much needed RVCs.