Sat, Aug 12, 2006 - Page 9 News List

Can regional integration really save Africa?

By Gabriel Nahimana

During the last quarter-century, global economic growth has soared, but Africa continued to lose ground. Indeed, the continent's share of world exports fell from 4.6 percent in 1980 to 1.8 percent in 2000, and its share of world imports declined from 3.6 percent to 1.6 percent over the same period.

Africa's share of global flows of foreign direct investment (FDI) also fell, from 1.8 percent in 1986-1990 to 0.8 percent in 1999-2000. Can regional economic groupings, such as the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC), help increase trade and bolster growth?

Overall trade flows in southern Africa fell from US$131.1 billion in 2002 to US$112.3 billion in 2003, with South Africa -- one of only three countries in the region that recorded current-account surpluses -- accounting for 65 percent of the total. Whereas South Africa's foreign trade almost doubled between 1994 and 2002, exports from, say, Malawi to Tanzania or from Mozambique to Zambia remained negligible, despite their geographic proximity.

The low level of intraregional trade, despite the SADC and COMESA, reflects several factors, including a range of non-tariff barriers -- mainly communications and transport problems, customs procedures and charges, and a lack of market information. Moreover, in the past, southern African countries put their faith in protectionism and import substitution policies. Relying on "infant economy" arguments, major exports were restricted and legal obstacles were erected against foreign participation in the development of natural resources, as well as financial and other services, further impeding regional integration.

Nowadays southern African countries are committed to reinforcing their regional integration through economic harmonization. A regional plan approved in August 2003 in Dar-es-Salaam, Tanzania's capital, by the SADC focuses on promoting trade, economic liberalization and development as a means of facilitating the establishment of an SADC common market. This requires completing the formation of a free-trade area, with 85 percent of SADC trade to be liberalized in 2008, and 100 percent in 2012.

A common market -- including harmonized policies for free movement of factors of production -- will enhance competitiveness, industrial development and productivity. However, protocols and political treaties are not sufficient to boost integration. The major barrier is the region's great diversity in economic and institutional development. The SADC's regional plan establishes a timeframe for policy implementation over the next 15 years that takes these constraints into account, focusing on macroeconomic policies, debt problems and establishing a stable and secure investment climate.

Macroeconomic policy harmonization is needed to ensure that changes in one SADC member country do not adversely affect economic activity elsewhere. The new initiative calls for all member states to harmonize their economic, fiscal and monetary policies completely, beginning with currency convertibility and followed by exchange-rate unification and, finally, a common currency.

Several currencies have attained some measure of regional convertibility, which should encourage monetary harmonization and promote intraregional trade, as countries' trade flows shift from partners that require payment in foreign currency.

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