|The Courier N° 134 - July - Aug 1992 - Dossier A fresh look at Africa? - Country Reports Grenada- Seychelles (EC Courier, 1992, 104 p.)|
|Dossier: A fresh look at Africa?|
It is now widely recognised that regional cooperation and integration will have a crucial role to play in efforts to improve the economic outlook in Africa. At the Africa Conference held in Maastricht in July 1990, the EC Commission offered to coordinate reflection on an action programme to promote regional cooperation and integration in sub-Saharan Africa.
Regional integration and cooperation are broad subjects, with many ramifications. In recent years considerable work has been done at various levels. Following the signature of the Treaty establishing the Pan-African Economic Community in June 1991, the UN Economic Commission for Africa, the Organisation of African Unity, the African Development Bank and the UN Development Programme have all been preparing the ground for its implementation. In 1990, the World Bank initiated a broad exchange of views on regional cooperation and integration while UNCTAD has also devoted more attention to the subject. In the franc zone countries, detailed work is in progress with a view to reinforcing economic integration, while in Southern and Eastern Africa new possibilities of cooperation with post-apartheid South Africa are being explored. It is noteworthy that the Canadian International Development Agency has recently prepared a policy statement in which regional integration is made the 'lens' through which Canada views its programming. Recent workshops in Florence and Abidjan have also been devoted to the issue.
It is not by chance that the EC Commission offered to play a coordinating role in this area. The European Community has always attached considerable importance to support for the regional efforts of developing countries. In the case of sub-Saharan Africa, this is reflected in the Lomé Conventions, which have, for more than 15 years, given special emphasis and significant allocations of resources to regional cooperation.
In the following series of articles, prepared by officials of the Development Directorate-General of the EC Commission, the issues of regional cooperation and integration are considered in greater detail. The main article summarises the progress made towards implementing the Africa Conference recommendations and looks at the principal questions which need to be tackled. It draws heavily on the background material of the Florence and Abidjan workshops. In three further texts, we look at specific elements which are significant to a successful regional strategy- non-governmental or private sector involvement, monetary cooperation, and improving trade. Finally, we provide an overview of existing regional organisations operating in sub-Saharan Africa.
The African experience: what went wrong
Ever since the independence era, African countries and leaders have attached great importance to regional cooperation and integration. This led to the creation of numerous regional organisations and bodies. Several have a broad mandate focusing on trade and economic cooperation while others have a narrower remit dealing with a specific sector or theme. Despite some successes, the many regional bodies have made little real progress. Before an action programme to revitalise integration in sub-Saharan Africa can be conceived and launched, it is important to know why past efforts have not produced the desired result. On such a complex subject, one should not expect to identify a single explanation or cause. Several factors are at work and their interrelations are not fully understood. However, there is broad agreement that the following are some of the main factors:
- economic and trade policies have, by and large, been inward-looking; there has been limited political commitment towards implementation of economic policies that help to expand intra-regional trade;
- while there has been some progress on the reduction of tariffs within regional groupings in sub-Saharan Africa, the situation regarding non-tariff barriers, which place a heavy burden on traders, has not changed much;
- weak monetary management (with the exception of the franc zone countries) and inadequate banking systems, as well as overvalued exchange rates impose constraints and risks on payments;
- integration has been dominated by governments and government-based institutions; the private sector has not been involved (although private sector elements have engaged in de facto integration, outside official channels);
- governments have not shown enough political commitment with respect to the implementation of measures agreed upon;
- the colonial heritage in terms of infrastructure and industry location has not been conducive to intra-regional trade;
- physical conditions (distance etc.) and the weakness of trade support services place a heavy burden on intra-regional trade;
- the organisations set up to foster integration in sub-Saharan Africa are very weak in human and financial resources and there has been a lack of clarity in their mandate; they have had limited capacity to design and implement regional policies; in addition disputes between organisations as regards their perceived competence have gradually increased, further undermining their effectiveness.
In recent years a global consensus has emerged on the idea that despite all the difficulties encountered, regional cooperation and integration are essential for Africa. In a world with an increasing tendency towards trading blocs and with the declining importance of primary commodities in international trade, the continent has no alternative but to persevere in its long-standing ambition for closer cooperation and integration.
Views differ as to what form this regionalism should take. It is generally admitted that a number of conditions necessary for market integration to yield significant benefits are simply not fulfilled in present-day sub-Saharan Africa. Thus it is often pointed out that the total market size of the area in question is only equivalent to that of Mexico or Belgium, that the region's trade is North/South oriented, that there is a lack of complementarity in production structures or that the initial income levels are too low.
If market integration is considered solely in these terms, the case for supporting regional economic integration may appear weak. But it is clearly inappropriate to judge the utility of cooperation and integration on so narrow a basis. In social, political and, indeed, economic terms, the effects of cooperation and integration extend far beyond static trade gains. Using a more dynamic analysis, one could highlight gains in productivity resulting from increased competition, improved flows of information and therefore of technological know-how, and savings on transaction costs.
Moreover, recent studies undertaken by the International Trade Centre on subregional trade promotion in Africa indicate that the potential for intra-African trade expansion is much larger than it appears at first sight. It is estimated that $4-5 billion worth of sub-Saharan African imports from other regions could be obtained from other countries in the subcontinent which export similar products.
The political arguments are well known: regional bargaining power is stronger than national bargaining power in international negotiations; regional cooperation can help build confidence among neighbouring countries and prevent the development of animosities. There is little doubt that political stability is one of the most important factors for foreign private investors wishing to invest in sub-Saharan Africa. It has also been said that regional integration, if its benefits are clearly perceived by the populations, can be helpful in allowing the introduction of necessary, but unpopular, policy reforms.
The integration of Europe, which began in the decade after the Second World War, was motivated by both economic and political considerations. On a political level, solidarity was needed to avoid the threat of new conflicts, by incorporating West Germany into a stable framework. On the economic side, Europe had to be reconstructed after the devastation of the war. Today, the European experience is widely referred to as one of the few examples of successful and sustained integration. Even though conditions in Africa do not compare with those which preceded the move towards integration in Europe, the latter's experience illustrates a number of principles which are relevant for any process leading to closer collaboration and interaction among countries.
Peace, stability and growth: Experience has shown that political stability and regional security contribute substantially to the success of economic integration. Likewise, growth and sound national policies are prerequisites for a successful integration process.
Outward-orientation: Regional cooperation and integration should be seen as a step forward towards more production and trade rather than as a defensive mechanism. Experience has shown that outward-orientation of regional groupings towards third parties fosters competition within the grouping and exposes it as a whole to foreign competition. Past initiatives on integration among developing countries have often emphasised high regional protective barriers in order to promote industrial development. It is now recognised that a more open approach, with only selective protection, is much more promising.
Coordination of macro-economic policies: Special attention needs to be paid to the regional dimension of adjustment and to monetary policy. In coordinating policies, it should be recognised that integration has many facets. An important consideration in this regard is the complementarily between trade promotion and production. Trade promotion alone cannot guarantee sustained expansion of trade over a long period and it should be accompanied by sustained measures to improve productivity and production.
Broad participation: Integration can only be successful if it is based on broad support within the private sector and more generally within society.
Regional policies to ensure equitable distribution of benefits. The benefits of integration or other policy measures are not automatically shared equally among all the partners involved. Typically, partners with more flexibility or immediate potential obtain a larger share of the benefits, at least in the short term. Progress towards integration therefore depends on setting up realistic compensation mechanisms.
Strong and independent institutions: Integration and cooperation policies need to be promoted by an institutional system that can take initiatives with regard to the specific tasks that are allocated to them. This implies security as to resources as well as appropriate mechanisms to ensure accountability, monitoring and transparency.
The principle of subsidiarily: Successful integration and cooperation require a definition of the responsibilities of the different bodies involved. It must be clear what needs to be done at the level of the countries and at the regional level. The principle means that a matter is referred to a higher level only when it can be handled more effectively there. An example of this might be cross-border environmental issues. Conversely, the actual implementation of regional common policies may be better handled at local or country level.
Variable geometry: All reforms do not interest participating states to the same extent. It is therefore unrealistic to expect them to move at the same pace. Economic integration should proceed on the basis of progressive steps with self-selection allowing progress among those which have the potential to move more rapidly towards integration. Other members can then join the core group when they are ready. Such 'variable geometry' also helps to avoid a situation where the pace of integration is determined by the slowest member.
The non-governmental force-the motor of integration
A striking feature of regional integration and cooperation initiatives in sub-Saharan Africa is the almost total lack of formal involvement of both foreign and local private social and economic operators. Yet one of the most frequently cited advantages of regional integration is that by widening the market available to producers, it allows them to achieve economies of scale and increase their productivity. This neglect of the role of private initiatives in regional activities is all the more surprising given the importance attached to the issue of stimulating private capital flows to Africa in development circles. In spite of numerous efforts, private investment flows to Africa have all but dried up. Many private investors have pulled out and those that have remained have been highly reluctant to increase their exposure in the region. Although it is recognised that many other matters have to be addressed before this situation can be rectified, regional integration could very well contribute to re-establishing the confidence of offshore investors.
In order to establish more clearly the correlation between regional integration and foreign private investment, an interesting survey was carried out earlier this year. The questionnaire was sent to a cross-section of private-sector companies across Europe with interests in the region and 225 companies responded.
The initial analysis of the data provided by the survey leads to a number of interesting conclusions. Firstly, as might be expected, the subject of regional integration and cooperation in sub-Saharan Africa is of great interest to the private sector, particularly larger companies and those in France, Portugal and the United Kingdom. It seems that those companies with strong historical trading links with SSA attach more importance to regional cooperation and integration than those from countries with fewer links. It is noteworthy that the average company in the sample is already operating in no fewer than 10 countries of sub-Saharan Africa.
The results of the survey show that the private sector considers that it would benefit from improved regional cooperation and integration since this would, among other things, lead to freer movement of labour, closer monetary cooperation/improved currency convertibility and greater regional stability. A large majority of companies stated that a stable, convertible currency would benefit their companies. Good governance and political stability were seen as crucial elements in the decision to invest; over half of the respondents rated political instability as the greatest single disincentive to investment out of ten possible disincentives. Although 65% of the companies considered that the lowering of tariff barriers would only slightly affect their business, or not at all, non-tariff barriers (administrative procedures including import licensing procedures, quantitative restrictions, etc.) raised considerably more concern and appear to be a source of great frustration. The survey confirmed market expansion as a key expected advantage of regionalisation.
In considering the role of non-governmental forces in regional cooperation and integration, it is important to note the dual nature of the private sector in Africa. In parallel with disinvestment in the formal private sector, there has been a noticeable expansion in informal-sector activities, which often transcend boundaries-so much so that the issue of whether, and how, to integrate informal activities into the mainstream regularly features in discussions on regional cooperation and integration.
For some, informal trade is not welfare-enhancing, but a symptom of market distortions which is bound to disappear as the individual countries achieve the objectives of the structural adjustment programmes that they are undergoing. For others, the informal sector is based on the traditional division of labour and specialisation and constitutes a training ground for future formal entrepreneurs which should be actively supported. The true situation lies somewhere in between, and involves trading activities which are the continuation of traditional trading patterns that have existed for centuries. The difficulty is distinguishing between the 'good' informal-sector activities and the 'bad' ones, in order to ensure that dynamic elements of the sector can contribute to collective welfare.
Cooperation between the Chambers of Commerce operating in the different countries of a region could be an effective way of increasing the involvement of the private business community in cross-border activities. The involvement of nongovernmental forces should not stop there. Trade unions, farmers' organisations, research institutes, NGOs, consumers' and employers' groups. all these will have a crucial role to play in ensuring that the integration process gathers momentum on a practical level.
Why should the 'new' regionalism succeed?
Once it is admitted that closer regional cooperation is a condition for the development of sub-Saharan Africa in the 1990s, a question which arises is why new regional initiatives should be any more successful than previous ones. To answer this, one should be aware of the fact that the new regionalism has several advantages which previous attempts did not enjoy.
There is now a more supportive international environment for regional endeavours. The first wave basically went against the prevailing mood and was generally considered to be inimical to the GATT philosophy. Today, even the United States, which is a major advocate of non-discrimination and multilateral liberalisation, is making moves towards regionalism. In addition, the general level of protection in the world economy is considerably lower than in the 1960s and 1970s. Most regional groupings have moved from being defensive and inward looking to a more outward-looking approach. This reinforces the argument that regionalism can be a complement to, or even a catalyst for, multilateral liberalisation.
Furthermore, most African economies are themselves undergoing an unprecedented transformation, with populations increasingly taking their destiny into their own hands. Another decisive element stems from the intensification of regional links in other parts of the world. This has reinforced the conviction of African leaders that they must unite in order to enable the continent to participate more fully in the new international order.
Above all, this second wave has the advantage of being able to draw lessons from the past, in Africa and elsewhere. Identification of past difficulties is a step towards avoiding them in the future.
Monetary cooperation in Africa
Monetary institutions play a vital role in regional trade and investment. Nonconvertible and often overvalued currencies put a heavy burden on commercial transactions between African countries. In some cases, transactions can take place using parallel exchange rates, but there are always additional risks and complications. Use of the official exchange rate often results in delays and involves costly administrative procedures linked to exchange controls. Weak monetary management (with the exception of the franc zone) and inadequate banking systems contribute to maintaining North/South rather than stimulating South/South trade.
Regional payments arrangements and clearing facilities in Africa were intended essentially to circumvent the problems of currency nonconvertibility and foreign exchange shortages. The basic idea of a clearing facility is that, for a group of countries, bilateral transactions should not all be immediately carried out in foreign exchange, but should instead be accumulated over a period. Balances are then worked out and cleared, with only the net amounts being settled in foreign exchange.
The European Payments Union, created in 1950, is considered to have facilitated a quick restoration of convertibility of the European currencies. Although it was wound up in 1959, the Union had lasting effects in the form of continuing close collaboration among central banks. In the ECOWAS region, the West African Clearing House has been operational since 1976. For Eastern and Southern Africa and the Indian Ocean, the Preferential Trade Area Clearing House was established in 1984. Experience so far with these arrangements has been mixed. In West Africa, the volume of transactions has gone down. At the same time, there has been an increase in delayed payments. Conversely, the PTA Clearing House has functioned well and transactions have increased substantially. But both arrangements face a number of problems such as.
- the small size of intra-regional trade as against total trade;
- the unbalanced nature of intra-regional trade (ie some countries export consistently more within the region than others), which limits the foreign exchange saving;
- the complexity of the procedures, which results in long delays and discourages private-sector operators from using the facilities.
A regional payments arrangement is a step in the direction of monetary harmonisation and, eventually, in the direction of monetary union. There are presently 14 African countries that belong to the French franc zone and a few others that are part of the Rand zone in Southern Africa. Cooperation between countries belonging to a monetary zone with advanced payments arrangements and countries with weak and unstable currencies poses some specific problems. However' both those countries which belong to such a zone and others could benefit from a strengthening of banking and financial institutions.
Bridging the gap between words and deeds
It has been noted that there is a wide gap between the theory and the practice of regionalism. Since integration is multifaceted, it needs to be approached from a wide variety of angles. The ideas set out below identify three different 'actors', upon whom the success of regional initiatives will depend. Regional cooperation and integration must, of necessity, be the coordinated effort of African governments, African regional institutions and the international donor community. Together, they must create the enabling environment required for the private sector and civil society to participate effectively.
African Governments. The most crucial factor in regional integration and cooperation is a strong and sustained political commitment in keeping to the agreed regional agenda. This makes African political leaders key figures in cooperation and integration. It is their decisions which will determine the role of regional organisations and institutions, as well as that of the private sector. Likewise, it is their decisions and commitment to succeed which will determine the response of the international community.
Many decisions which could have spurred on the cooperation and integration movement have been taken in the past, but have not been implemented. At the present juncture, when there is intensified interest in promoting regional cooperation and integration, it would be useful to take stock of these decisions and to seek to implement, in order of priority, those measures which could advance the integration process.
Political commitment to cooperation and integration also means taking the necessary steps to establish means for implementing regional policies. Such operational focal points for regional matters could also be charged with ensuring consistency and mutual reinforcement between national development plans and regional objectives. States should also provide viable regional institutions with the necessary resources and autonomy to undertake the functions assigned to them.
Policy-making at regional level is nearly always a matter of compromising between the perceived needs of different countries. Implementation of policies which are for the good of the whole may involve short-term costs for individual member states. Governments should focus on long-term benefits and objectives and be ready to bear some short-term discomfort. The importance of a workable and realistic mechanism to redistribute the benefits of integration cannot be overemphasised-especially in the case of Africa, which has wide disparities in per capita incomes, levels of industrialisation and physical/geographical situations (eg landlocked or island states).
Integration and cooperation should not remain an official affair. The aim should be to improve the standard of living of the largest possible section of the population. Measures taken in this area will inevitably affect the people of Africa, whether or not they are involved in the debate and today, the wind of democratic change which is blowing through the continent is placing production increasingly in the hands of those same people. It should be borne in mind that the reactions of ordinary people to particular measures can be a barometer of their effects, and can therefore have an effect on the level of political commitment.
African leaders are convinced of the crucial role that cooperation and integration will have to play in overcoming development obstacles in the coming years. Are the people, who are the main actors in economic development, convinced ? It is surely essential to inform the public regularly on the progress made as well as on major developments concerning regional cooperation and integration.
In order to extend regionalism beyond official circles and to move into a more operational phase, it is also essential to improve the climate for private-sector cross-border activities. Recent studies have shown that non-tariff barriers place constraints on the movement of goods, capital and labour which are far from negligible. Governments must formulate and implement action programmes to dismantle non-tariff barriers whose existence can only be detrimental to regional cooperation and integration efforts.
A particularly severe constraint is the prevailing monetary and financial situation. Although in some areas of Africa, fairly advanced forms of monetary cooperation are already in existence (the franc and rend zones), much remains to be done to improve monetary coordination and ensure efficient ways of settling regional transactions, through the strengthening of the role of commercial banks and clearing mechanisms.
Regional organisations and institutions: There can be no doubt that strong, autonomous institutions play a crucial role in regional cooperation and integration. It is the capacity of such bodies to perceive the interests of the whole, rather than simply those of individual member states which has helped Europe find consensus on some of the most thorny issues. The first step in strengthening regional institutions and organisations appears to lie in the genuine rationalisation of the present institutional framework with a view to harmonising the activities of the different sub-regional groups.
The 200 regional bodies and entities in sub-Saharan Africa could surely benefit from streamlining in order to ensure that the mandate of each is clear and does not overlap with those of others. Where mandates are similar, all efforts should be made to ensure value-added through coordination, cooperation and/or merging, rather than rivalry and competition for scarce resources.
In clarifying the mandates of the institutions and organisations two aspects should be given particular attention. One is the division of labour between different institutions, the other is ensuring that the institutions have the necessary executive powers. A principle which could help in the division of labour is that of 'subsidiarily', which was referred to previously.
A second crucial step is to ensure that the institutions have enough autonomy and own resources to undertake the tasks assigned to them. Independence implies reduced politicisation in staff recruitment. This will also enhance the credibility of the institutions as arbiters of the 'regional good'. In addition, attention should be given to ensuring the accountability of the institutions.
Regular exchanges of staff and information between the regional and national levels should be encouraged and formalised with a view to making the best | possible use of existing expertise on I various subjects.
The emphasis placed on strong autonomous institutions should not, however, obscure the fact that institutions and treaties are only means to an end. In the final analysis, cooperation and integration are about practical projects and programmes.
Regional organisations should also look into ways and means of enhancing the political will for regional cooperation and integration. Factors affecting this include the perceived capacity of the regional effort to cater for individual interests, the associated costs, the efficiency of compensation mechanisms, pre-existing relations between participating countries and previous successes (or failures). The institutions can influence several of these factors and in particular the perception by the states of the advantages of integration and of policies to reduce its costs.
Finally, the success of a particular scheme is a function of its ambitions. This basic fact points to a need to formulate realistic, flexible and pragmatic objectives.
The International Community. Even though the success of regional initiatives ultimately hinges on the will of sub-Saharan Africa itself, external support is bound to play an important role. Consistent with the recognition of the power of regionalism as a tool for the subcontinent's economic development, more and more donors are adapting their aid mechanisms to cater for this re-emerging priority. Some are actively exploring new possibilities for supporting regional activities (eg the World Bank and the ADB). Others already have firmly established procedures (eg the UNDP with its multicountry programmes, the EC through the Lomé Conventions, France, Canada and the Scandinavian countries) and the IMF has acknowledged that there may be room for regionalism. But much more still needs to be done. Most donors are still far better equipped for cooperation with individual states than with groups of countries.
For those donors who have not yet established clearcut procedures it is now imperative to take account of the priority given by Africa itself to regional integration and cooperation in order to ensure effectiveness of the resources deployed. Others need to simplify access to regional resources and examine the consistency of their action at national and regional level.
Action by development partners can help significantly to reduce constraints caused by policy divergence, given their role in determining policy decisions. The interrelationship between regional cooperation and other development policies-especially structural adjustment measures-should be used to ensure that positive measures reinforce, rather than contradict, each other. Current efforts to devise and implement regional adjustment in sub-Saharan Africa should be continued and extended.
Serious consideration should also be given to the budgetary implications of regional integration and cooperation measures. Revenue and expenditure effects should be assessed in order to draw up an implementable strategy.
Donors should, as a matter of principle, avoid supporting projects at national level which hinder the achievement of the objectives of regional projects and programmes. Where efficent producers exist in the region, donors should promote untied aid (eg balance of payments support) and thus avoid diverting demand from the region.
Another important issue which needs more attention is the matter of the high number of regional bodies on the African continent. The survival of a number of regional institutions and organisations is a result of the willingness of donors to finance them. Few of them are self sustaining. This implies that the rationalisation of the institutional framework is as much a donor coordination problem as it is a problem of internal coordination on an African level. The donor community should, therefore, seek a coordinated response to Africa's own efforts to rationalise the system.
Other ways of helping the process include the following:
- development and maintenance of regional transport and communications networks;
- enhancing manpower resources through the transfer of know-how (exchange programmes between institutions) and research networking;
- supporting programmes which improve public awareness of regional integration and cooperation (publicity campaigns, information on the benefits of regionalism, compensatory policies to be implemented, etc.);
- removal of barriers to trade;
- support for measures to increase cooperation in monetary and financial services.
The international community should also work towards ensuring that the international trading environment is conducive to the integration and cooperation efforts of African countries. Donors and donor agencies could show their commitment by practicing self denial in requesting or imposing trade regimes which they do not or will not implement in their own countries or regions. In this respect, keeping the requirements of regional cooperation or integration high on the international agenda of trade and financial institutions, in line with the objectives of the Global Coalition for Africa, will be a sine qua non of success.
The observations and recommendations outlined above could be expanded and developed in order to move towards a more operational programme of action for the promotion of integration and cooperation, to be placed on the agenda of African and international community leaders, within the framework of the Global Coalition for Africa. In-depth research is already being undertaken on some of the proposals.
Integration is not a panacea. It must be complemented by other elements such as effective human resource development strategies, sound national development policies and more emphasis on international environmental issues and good governance.
Improving trade between African States
Trade plays a central role in the more advanced stages of economic integration. Many of the regional integration groupings created in Africa in the last 30 years aimed ultimately at creating a free trade area if not a common market. However, development of intra-regional trade flows has been rather disappointing. Intra-African trade as a share of total African trade declined from an average of about 6% in the 1970s to about 4.5 % in the 1980s. Intra-regional trade in most of the regional groupings tended not to perform any better, with perhaps the exception of ECOWAS, which displayed more stable internal trade development. The internal trade of the largest regional grouping, the PTA, diminished from 5.6% at the beginning of the 1980s to 4.6% at the end of the decade.
What is the explanation for this disappointing development? The following are among the principal obstacles to intra-regional trade:
- adequate infrastructure is lacking. Transport and communication facilities are often oriented towards trade with the former colonial centres. One of the consequences of this is that information on supplying neighbouring country markets is insufficient and the cost of information and transactioas is commensurately high;
- many African countries are exporters of primary commodities and are thus in competition with each other on the world market;
- as a result of these first two points, the most important markets for African products are not to be found in- the region. An intra-trade creating effect similar to that experienced in Europe could not, therefore, be expected;
- the national interests of the different members of regional groupings tend to diverge to a considerable extent. This frequently results in long and complicated negotiations on the lowering of trade barriers;
- African leaders have often given priority to national rather than regional interests. This is partly due to the severe internal economic and political problems which these countries have had to address in recent times. This problem can only partly be overcome by political will, but to a large extent, national economic development and wealth are preconditions for successful regional integration;
- in many African countries, government revenue consists mainly of tariff receipts, as these are the income source which it is easiest to collect. Thus, in order to compensate for state revenues which would be reduced by liberalisation measures, a restructuring of the tax system becomes necessary. This, of course, complicates the liberalisation process and makes governments reluctant to agree;
- the tying of aid, both project and adjustment support, to supplies from donor countries/regions also tends to reduce possibilities for intra-regional trade.
This long list of obstacles should not lead to the conclusion that regional trade integration is a hopeless undertaking. However, strategies and expectations need to be adapted better to existing realities.
Preferential trade areas or free trade areas can be a useful first step to introducing stronger competition between regional firms before liberalising on an international basis. The additional harmonisation of external tariffs, however, should only be considered with care. Diverging national interests in negotiations on harmonisation may lead to complications and slow down the whole liberalisation process. In cases where the bulk of external trade is taking place with third countries rather than within the region, the creation of a customs union may lead to welfare losses because the trade diversion effects exceed the trade creation effects of the union.
The dismantling of tariff and non-tariff barriers to regional trade and factor movements should cover as many goods and services as possible so as to spread the potential gains among the countries concerned and thus reduce the need for compensation. Looking at services in particular, it should be noted that these do not have an important role in existing regional groupings. In the past, this was also true of the European Community. The rapid increase in the 'traceability' of services seems, in fact, to be a recent phenomenon, facilitated by technological developments and greater mobility of both consumers and producers.
The international discussion on the liberalisation of trade in services, which is taking place in the GATT Uruguay Round, is, in a certain sense, forcing governments to devote some attention to this issue, having hitherto shown little interest in it. African countries cannot afford to be left behind in an era of increasing international cooperation and competition in this sector. Regional integration could, as in the case of goods, represent an intermediate step in facilitating the opening of the sector to international competition.
Integration through liberalisation can best be achieved in the framework of a generally coherent internal economic policy. As has been mentioned above, tax reform might be necessary to establish the precondition for liberalisation. Attention should also be paid to measures to improve trade support services (export credit, the banking system in general, insurance etc.).
Recent approaches designed to relaunch initiatives on regional integration seek to take account of most of the issues mentioned above. An important additional consideration is that conditions in the ACP are different and much more difficult than in Europe. It would therefore be a mistake to try to draw a direct comparison between progress in sub-Saharan Africa and the European Community's own integration process.
Overview of organisations for promoting cooperation and integration in sub-Saharan Africa
The Charter of the Organisation of African Unity (OAU) of 1963 was, as the name implies, designed to promote African unity. In 1980, the Lagos Plan of Action was approved, with a view to forming a Pan African customs union by 1990. The plan was based on ideas developed under the aegis of the United Nations Economic Commission for Africa (ECA), which has been one of the most prominent advocates of integration in Africa. More recently, in June 1991, the OAU Heads of State signed a treaty in Abuja (Nigeria) which provides for the creation of a Pan-African Economic Community over the next three decades. These initiatives demonstrate, to a certain extent, the recognition by African States that regional integration is an important instrument of development strategy.
Recently, the African Development Bank (ADB), which plays an important role in financing and mobilising resources for development in sub-Saharan Africa, has also emerged as a key player in the promotion of regional cooperation and integration.
The largest regional grouping in sub-Saharan Africa is the Economic Community of West African States (ECOWAS). This has 16 members. a total population of 179 million and a GDP of $78 billion ( 1988). It has a very diverse membership ranging from Nigeria, which accounts for 55% of the population and 60% of GDP, to some of the smallest African countries and economies. In terms of production, some states (notably Côte d'Ivoire), are highly industrialised while others are overwhelmingly dependent on agriculture for their income.
ECOWAS has achieved very modest results despite the fact that this group of countries had one of the best growth performances of all regional groupings before the creation of the union. In fact, ECOWAS was virtually the only grouping for which market size was sufficient for the exploitation of economies of scale and yet, since 1980, GDP has declined considerably. One of the major problems for regional trade has been the interaction between the members of the CFA franc zone and the states which have nonconvertible currencies.
The Preferential Trade Area (PTA) for Eastern and Southern African States was established in 1981 and now comprises 16 countries with a total population of 146 million and a GDP of $33 billion. The PTA includes four of the five most industrialised sub-Saharan African economies, but has a market size which is insufficient for exploitation of economies of scale. Although it is too early to pass a clear judgement on its achievements, there are promising signs in the area of trade liberalisation and facilitation as well as trade financing.
The Economic Community of Central African States (ECCAS) comprises ten members and has only existed since 1983. It includes countries which are also members of UDEAC (Union Douanière et Economique de l'Afrique Centrale) and CEPGL (Communaute Economique des Pays des Grands Lacs). Like ECOWAS and PTA, ECCAS has members with widely divergent situations ranging from relatively rich oil-producing countries to least developed ones. The future of ECCAS depends on its capacity to implement compensation mechanisms and on its ability to integrate Zaire into a system which is basically 'French'.
The convertibility of the CFA franc seems to have contributed significantly to regional efforts in the Communauté Economique de l'Afrique de l'Ouest (CEAO) which was created in 1974 as a reaction to the difficulties surrounding the negotiations for the creation of ECOWAS. The CEAO also has certain other advantages over the other unions which include:
- the lone tradition of regional cooperation among its members;
- significant labour and capital mobility;
- a fairly effective compensation mechanism (Fonds de Solidarite).
The economies of scale argument would not be justified for the CEAO, but it does have considerable scope for economic specialisation. In any event, the CEAO has achieved a relatively high degree of integration and is considered to be the most successful grouping in sub-Saharan Africa.
Although the Union Douaniere et Economique de l'Afrique Centrale (UDEAC) enjoys the same currency convertibility as CEAO, it has had one of the worst performances in terms of intra-regional trade. This is probably due to limited mobility of labour and capital in the area. In addition, UDEAC appears to have an acute problem with sharing out the costs and benefits of integration.
The Southern African Development Coordination Conference (SADCC) was set up in 1980 to facilitate coordination of measures that would help the member countries to reduce their dependence on South Africa. Economic cooperation was thus a continuation of successful political cooperation in foreign policy. This may explain the remarkable progress made by SADCC in regional transport and communications. Joint food security efforts have also yielded significant results.
The Southern Africa Customs Union (SACU), set-up in 1910, created a free trade area between South Africa, Botswana, Lesotho and Swaziland. The agreement gives South Africa the responsibility for managing tariff receipts. The system is a source of conflict because, although it reduces the administrative burden on the other three countries, it confers powers on Pretoria to redistribute the receipts. In addition, while South African products freely enter the markets of Botswana, Lesotho and Swaziland, access in the other direction is more limited. SACU is, nevertheless, one of the more operational customs unions in sub-Saharan Africa.
The Indian Ocean Commission (IOC) comprises five Member States, including France (Reunion) and was founded in 1982. The membership of an industrialised country affects the scope and objectives of the organisation, but it is too early yet to assess its performance as a body for facilitating regional exchange.
The Communauté Economique des Pays des Grands Lacs (CEPGL) comprises Zaire, Rwanda and Burundi. It was founded in 1976 but has had limited results in stimulating intra-union activities.
Sectoral or thematic groupings
The sectoral or thematic approach to regional cooperation has had some success and it is one which is increasingly favoured in sub-Saharan Africa.
The Comité Permanent Infer-Efats de Lutte contre la Sécheresse dans le Sahel (CILSS), which is seeking to tackle the problems of drought/desertification in the Sahel, has made remarkable progress in the exchange of information and in collaborating in certain other areas. The concrete and realistic nature of its mandate facilitates its functioning and its capacity to achieve objectives.
The Inrergovernmental Authoriry on Drought and Development (IGADD), which was created in 1985, is also receiving increasing recognition due to its capacity to address directly an issue which is of: real concern to its members. Its activities are, however, severely constrained owing to war and civil strife in a number of the member countries.
As pointed out earlier, regional cooperation can also be undertaken within groupings which have no permanent institutional form. A case in point is the extension of transport corridors in Eastern Africa. Other examples include cooperation in the area of fisheries, locust control and the control of livestock diseases.