The Constitutive Act of the African Union, adopted on 11 July 2000, includes provisions for economic and monetary union, and specifies that the Union shall have the African Central Bank, the African Monetary Fund and the African Investment Bank (Art. 19). However the specific protocols relating to these have not been drawn up. In the light of the modest progress made in implementing the Lagos Plan of Action and the Abuja Treaty, it is important to analyse carefully the factors in favour of economic integration and opposing it.
4.1 Factors in Favour of Economic Integration
There is an Africa-wide consensus that regionalization is desirable. Africans are drawn together and instinctively distrust the boundaries that separate them. Continental institutions such as the OAU, ECA and ADB have a strong legitimacy.
There is universal recognition of the prospective benefits of regional economic integration. These include lowering transaction costs to business, lowering risks to investment, expanding markets, enabling pooling of regional resources in research and development, better utilization of natural resources, utilization of economies of scale in production, more efficient allocation of resources, etc.
Africa has functioning subregional organisations of various kinds. There is an incrementalism already at work. These organisations and associations range from the East African Cooperation to various riverine associations to deal with shared natural resources. These are specific responses to specific situations, and as such are well adapted and are likely to survive and grow. However, there is as yet no forum in which Africa’s subregional organisations can come together, to meet themselves and with the regional organisations. Filling this gap is an important challenge.
Many African countries share similar institutional and legal histories. They tend to use the same languages. The qualifications awarded by their educational systems are broadly compatible. There are relatively few social and cultural barriers to migration, intermarriage and socialization. Africans enjoy the same music. There is a real cultural unity, together with a genuine appreciation of the cultural diversity of the continent.
There is a real economic integration going on at an informal level. It has been recognized for many years that many countries’ ‘real’ economies have been mostly informal, and much larger, more dynamic and more regionally integrated than their official economies.
The challenge of responding to common problems, including marginalization in the processes of the WTO and the pandemic of HIV/AIDS, also bring African countries closer together. Pooling of capacities and developing common approaches increases the influence of Africa in international fora and its likelihood of making substantial gains. The joint African-led NEPAD initiative is a fine example in this respect.
The political process of creating the African Union therefore represents a high-level reflection of a much deeper social, economic and cultural unification across Africa. The real processes of integration may be invisible to political scientists and diplomats, but they should not be underestimated.
4.2 Problems with Economic Integration
However a number of powerful factors militate against effective economic integration. The most significant of these is the lack of a dominant political-economic power on the continent that can form the core of a regionalization process. Most African countries are exporters of raw materials, especially agricultural and mineral products, and compete with one another for markets. Industrial production is concentrated in a relatively small number of countries, and is not significant on a global scale.
Throughout Africa, there is fear of the development of hegemonic subregional states. Whenever one of the continent’s more powerful countries (South Africa, Nigeria, Egypt) appears to be taking an active interest in subregional affairs, many of its smaller neighbours will try to combine to counterbalance what they see as its excessive power. In contrast to the U.S. or Japan, these larger states are not so economically powerful that their neighbours want to bandwagon with them. The question of whether or not to embrace and support the leading role of the largest regional economy should be seriously discussed.
Integration between neighbouring African states is usually the integration of unequal partners, and the benefits of the arrangement are often polarized towards one partner. For example South Africa is the major beneficiary of the Southern Africa Customs Union, and has therefore allowed compensatory mechanisms to be built in that benefit the other smaller members. Similarly, the disproportionate benefits accruing to Kenya in the EAC created antagonism in Uganda and Tanzania. Although integration is (overall) a sum-sum exercise, the disproportionate allocation of benefits may create friction between countries.
Currently, there are substantial benefits that accrue to certain influential groups because of the existence of borders, and the maintenance of states with sovereign status. The rents that can be extracted from artificially-imposed borders may be declining, but they have not disappeared.
The securitization of many states makes governments suspicious of any measures that involve lessening control. While states are fearful of external or internal subversion, they are likely to try to retain as much power as possible in the hands of their security apparatuses. Allowing free movement would be resisted by governments that are fearful of the infiltration of religious or political extremists.
A very low level of international trade is conducted between African countries. In the Southern Africa subregion (excepting South Africa), for example, no more than 5% of international trade is between member states, and most of this is accounted for by Zimbabwe. This level did not change despite the efforts of SADCC in the 1980s. Moreover, few developing countries have experienced rapid economic growth on the basis of intra-regional trade, as opposed to exporting to world markets.
Most trade between neighbouring states is informal or illegal. Lowering tariff barriers does not address the constraints on this trade. It also does not address the main transaction costs of formal trade, which consist of informal duties and tolls exacted by underpaid officials and soldiers.
Integration faces severe external constraints. African economic union is a case of ‘South-South’ integration. In history there have been few successful cases of economic cooperation between countries that are poor and economically dependent. African countries suffer from the blights of poverty and dependence in excess: absolute levels of poverty are growing, countries are reliant on exporting primary commodities and labour, levels of domestic and inward investment are low, and recent world trade agreements are not bringing any appreciable benefits to the continent. Until African economies are able to achieve respectable rates of growth and poverty reduction, the prospects for integration will remain dim.
The governance constraints on successful integration are considerable. Increasingly, the governance requirements for economic growth are demanding attention from policymakers and planners. Good governance aims at the creation of a capable and effective state, that is, a state in which the public service, the legislature, the judiciary and statutory bodies are empowered to provide an enabling environment for the private sector and civil society to play their respective roles in a mutually reinforcing manner. For such an enabling environment for investment by the private sector, both national and international, to exist, it is essential to have good legislation, the rule of law, effective regulatory institutions, sound fiscal management and a range of other governance tasks.
Economic integration is a demanding task. The current poor levels of implementation of treaty obligations in Africa are a reflection of the lack of institutional capacity for taking on the onerous tasks of drafting the required legislation and rules necessary for turning commitments into realities. The governance requirements for integration, at both national and regional level, will be considerably more substantial than existing capacities. Currently, Africa displays a low level of implementation of treaty obligations. This is due to (a) unwillingness to sacrifice sovereignty, leading to (b) unwillingness to incorporate international treaties into domestic law and give powers to supranational bodies and (c) a low level of institutional development, so that the hard bureaucratic work of implementing obligations is rarely actually carried out. This problem is not unique to economic integration treaties: African governments often sign up to regional and international commitments without first scrutinizing in detail the requirements of fulfilling their obligations. Problems of weak institutional capacity are exacerbated by brain drain, prevailing under-resourcing of educational institutions, and the HIV/AIDS pandemic.
Some of the requirements of preferential trade areas are contradicted by the demands of structural adjustment programmes required by donors and creditors, whose priorities are more usually to promote competitive exports to the global market.
As a result of the above, the outcomes of attempts at creating common markets and developing subregional economic integration have been disappointing. More modest functional cooperation on specific projects and in particular sectors has had a better record. Infrastructural projects (building or rehabilitating road and rail links, power grids) have often been more successful. These have often been donor-funded. These are a necessary foundation for regional economic integration, but should not be taken to represent economic integration itself.
4.3 Economic Integration and Regional Peace and Security
The peace and stability function of economic integration is important for various reasons. First, it provides an important political impulse towards economic integration. Second, economic integration will be successful if it generates economic growth, and that in turn is facilitated by peace and security.
Economic integration should help limit inter-state conflict, because there are strong countervailing interests against a break in relations between economically-integrated neighbours. Similarly it should militate against internal conflict, as there are economic interests vested in maintaining a well-functioning internal market. Most of the time regional integration does function in this manner. It creates commonalities of interest among different groups including governments across the region. It raises the costs of violent conflict. It helps to create ‘security communities’ in which the resolution of disputes by resort to conflict is literally unthinkable.
However, economic integration is a process that involves friction and there are losers as well as winners. Successful integration requires strong institutional mechanisms for containing friction and resolving disputes. In addition, some business interests can profit from conflict.
There are arguments for single regional organizations dealing with both economic issues and peace and security. There are also arguments for separating these functions. A detailed discussion of this question and related issues would require extensive discussion of how regional and subregional organizations can facilitate peace and security, which is beyond the scope of this paper.
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