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New trade group may unify Africa

Jul 02 2010 08:20

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Johannesburg - If it works, the East African common market launched on Thursday may be the catalyst to unify the continent's patchwork of small, piecemeal economies into a mid-century regional giant of 2 billion people.

Although pan-Africanism has been a rallying cry since the continent, starting with Ghana 50 years ago, began to throw off its colonial shackles, political and commercial unity has proved elusive.

Roads and railways built by Europeans to carry Africa's timber and minerals link individual states to the sea, rather than each other, and the polarising politics of the Cold War caused conflict, division and mistrust that linger to this day.

Slowly, however, Africa is coming together.

From the 1960s to 1990, exports from sub-Saharan countries to each other accounted for 5% or less of their total outbound trade, according to United Nations trade body UNCTAD.

By 2006, that proportion had risen to 11%, a woeful performance compared with 46% for emerging Asia and 71% for developed Europe, but undeniably a step in the right direction.

The theory goes that freer and greater trade between African states will stimulate local economic growth and create jobs by attracting more domestic and foreign investment, and by cutting reliance on expensive external imports.

The common market of the East African Community (EAC), comprising Kenya, Uganda, Tanzania, Rwanda and Burundi, may turn out to be the proof needed to make regional integration a reality rather than a political pipedream.

"Intra-African trade is increasingly at the forefront of the economic reform agenda on Africa, and EAC is a really important test bed for how well African countries can actually integrate their markets," said Tom Cargill, an Africa researcher at London's Chatham House think-tank.

"So far there's been a lot of talk about this but not a lot of action on the ground."

Building blocs

Part of Africa's problem is not so much its lack of regional trading zones as the presence of too many overlapping and conflicting agreements that create an institutional dog's dinner to the detriment of real liberalisation.

It is home to 14 major economic blocs, more than any other part of the globe, and of its 53 countries, 27 are members of two, 18 belong to three and Swaziland has signed up to four.

Most of them amount to little more than an acronym, but by taking its five-year-old customs union to the next level and, at least in theory, removing internal barriers to the movement of labour and capital, the EAC has created a single trading entity of 126 million people and an annual output of $75bn.

That is a more attractive prospect for a domestic or foreign firm than five poor countries with populations that will never provide any economy of scale on their own.

"For a big multinational, a market like Rwanda, however efficient it may be, is too small," said Cargill. "They're hoping regional integration in Africa can work to provide them with the advantages of scale to be able to invest meaningfully."

If the EAC's experience produces the fruits of overcoming mutual mistrust and short-term self-interest, it should stimulate real integration in a continent that will be home to 2 billion people by 2050, more than both China and India.

"When there is success in a specific region, it can show people that it is actually important that people integrate, that countries integrate, and that they will derive economic and financial benefit," said Janvier Nkurunziza, an Africa trade specialist at UNCTAD in Geneva.

Ancillary benefits

Suspicion of liberalisation, particularly in socialist Tanzania, is likely to make it a long, hard road, and the EAC's goals of monetary union by 2012 and political federation by 2015 are ambitious, to put it mildly.

As in Europe, selling integration to voters facing more competition for jobs will also be difficult.

"Even before the common market was introduced, we have seen a mass influx of Kenyans in hotels, banking and insurance companies in Tanzania," said Cathy Charles, a university student in Dar es Salaam. "Now the floodgates will be opened."

If it works, there will ancillary benefits for both Africa and the rest of the world.

Closer commercial links are likely to lead to narrower diplomatic and political ties, making it easier for Africa to present a united front to the rich and emerging countries clamouring for its energy and minerals.

Reducing reliance on exports to developed markets, whose short- and medium-term prospects are modest at best, will also put African economies on a more stable footing.

The creation of a consumer market in Africa, already home to 1 billion people, has the potential to stimulate growth in other, more developed corners of the globe - a view espoused most recently by French President Nicolas Sarkozy.

"Africa is our future, and will be a principle reservoir for world economic growth in the decades to come," he told a France-Africa summit in May.

- Reuters 

 
 
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