With the rapid broadening of Africa’s partnerships, regional integration has become crucial. To make the most of the competition amongst partners and acquire a critical mass for negotiations, African governments must co-ordinate policies more effectively and share some of their sovereignty at supra-national level. Existing initiatives under the African Union, including the African Peer-Review Mechanism (APRM) and the New Partnerships for Africa’s Development (NEPAD), need to be reinforced and carried out.

Regional integration needs a new impetus. Africa has a clear agenda for economic integration which dates back to the 1960s (Grant et al., forthcoming). However, even though a timetable was set out, progress has been slow and deadlines have not been met. Regional economic communities continue to face the challenges of political instability, poor economic diversification, multiple and overlapping memberships, insufficient financial resources, and poor implementation of commonly agreed protocols and decisions, among others (see Chapter 3).

Traditional partners can support regional economic integration, through their own stated objectives to assist Africa’s economic development and the provision of funding, for example to regional groups. Under its African Growth and Opportunities Act (AGOA) the United States put in place regional trade competitiveness hubs to help African sub-regions to take advantage of market access preferences granted under the act. The European Union is negotiating Economic Partnership Agreements with sub-regional groups and is a major provider of development assistance at regional level, with the specific objective of strengthening regional integration.

Emerging partners give help to the financing and building of transport infrastructure, thus helping tackle one major hurdle to regional integration. But more broadly, while the African agenda for regional economic integration has received explicit support from emerging partners, to date most of the engagement has been on a bilateral level (Box 6.10). 

Box 6.10. China, India, Brazil and Africa’s regional integration agenda

  • The Forum for Co-operation between Africa and China (FOCAC), which set out China’s Africa Policy in 2006 and remains the main framework for the relationship, includes a reference to the African Union and regional groups but is not specific on China’s support to these institutions. Some support has been provided for African-led peace and security initiatives, such as the Intergovernmental Authority on Development (IGAD) and the NEPAD. China has offered support for some African Union activities, and recently officials have shown a growing inclination to engage with Africa at a more multilateral level and support regional integration. Yet, China’s engagement remains predominantly bilateral, with a strong focus on infrastructure development. 
  • At the India-Africa Summit in April 2008, the Delhi Declaration made it clear that India is seeking to strengthen its partnership with the AU and regional groups. It is not yet clear how this will manifest itself as to date Indian co-operation has largely come in the form of technical training and private sector investment. 
  • When in office Brazil’s President Luiz Inacio Lula da Silva was one of the most vocal supporters of Africa’s advancement on the international stage, undertaking numerous visits to the continent with private sector representatives. Brazil has however been pursuing co operation largely through bilateral relations. In July 2010, however, ECOWAS and Brazil held a special Summit of Heads of State in Sal (Cape Verde).

Beyond their stated intentions, there are concerns that the new and old economic players and their African counterparts are harming regional integration by striking bilateral trade deals. Asche (forthcoming) argues that this applies to relations with all three major powers: the European Union, United States and China. Bilateral arrangements for investment topics may be fine as long as investment policies are not harmonised in African groups and investment promotion agencies pursue national interests. In trade, however, as African regional groups strive to become customs unions with common external tariffs, agreements on the African side should be concluded regionally rather than bilaterally. Yet, this did not apply to the EU-South Africa Trade, Development and Co-operation Agreement (TDCA), for instance. Trade negotiations over the past decade between the EU and other sub-Saharan countries were meant to have been conducted with regional groups to foster integration, but have become dominated by bilateral negotiations. Africa’s regional economic communities are made up of two types of countries. Those classified as Least Developed Countries need not sign proposed arrangements with the EU to continue benefiting from European trade preferences. Those classified as Middle Income Countries stand to lose in EU trade from not signing an economic partnership agreement and becoming subject to appreciable tariffs again, like Cameroon, Côte d’Ivoire or Ghana. In the absence of consensus between least developed and middle income countries on the regional groups, the middle income nations decided to sign individually, in violation of regional treaties, or in small subgroups such as Botswana and others in southern Africa. The EC agreed to separate negotiations with single countries when “complex dynamics in the group” hamper regional agreements, although only on a provisional basis (European Commission, 2010).30

On paper, the Chinese attitude is more friendly to regional integration, but in substance it operates in the same way as the bilateral treaties require tariff concessions. Despite the ambitious aspirations of the East African Community (EAC), which declared a common market on 1 July 2010, and a proposed huge free-trade area comprising the EAC, the Common Market for Eastern and Southern Africa (COMESA) and Southern African Development Community (SADC), African regional economic communities will weaken unless African leaders come up with tough backing to put them at the frontline of key trade talks, including with China.

Ultimately, the impact of emerging partners on Africa’s regional integration is for African countries to manage and take advantage of international development co‑operation, FDI and other development finance on offer. At the end of the day, emerging economic powers cannot map out regional integration for Africa. Their interest is not based on developing country solidarity and Africa’s economic health, but on their own economic and political needs (Kimenyi and Lewis, 2011). As le Pere and Sheldon (2007) point out, there are prospects for economic growth from engagement with the emerging powers but the key also lies in the ability of African countries to articulate pro-growth policies; democratisation and inclusive systems of government; improved political and corporate governance; conflict resolution and more competitive labour practices.

At the sub-regional level, governments should consult each other on national and regional priorities, shun “incentives wars” where countries try to outbid each other for investment and aid. Better co-ordination will ensure African countries have more bargaining power (UN-OSAA, 2010). In the same vein, the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action should be put into effect for Africa’s regional programmes. As no one country can negotiate with the emerging powers on regional integration, countries need to come together and define a clear and common strategy for engaging with emerging partners. They must identify regional priorities for donor funding and investment. From a financing perspective, many projects in Africa are too small for emerging powers to consider. Only larger regional projects will be attractive for these partners (Box 6.11).

Box 6.11. Sovereign wealth funds: an untapped source for Africa?

Sovereign wealth funds from the new economic powers are increasingly interested in the developing world, and are recycling surpluses towards developing countries.

This represents a major opportunity, as these investments have long-term and stable perspectives, the type of funding needed in developing countries. However, Turkisch (forthcoming) studies historical databases on the funds’ transactions and shows that Africa remains underinvested by the operators, despite the major opportunities. African infrastructure investment foreseen by the UN’s Millennium Development Goals (MDGs) are only half-funded and Africa will therefore remain highly dependent on external funding. Just 1% of the assets of sovereign wealth funds could fill the gap. The funds have been diversifying beyond natural resources and are particularly noticeable in northern and southern Africa where telecoms and media are popular. Outside of these regions, land has been bought.

However, despite the high returns there are specific barriers to sovereign wealth funds in Africa, which have to be addressed. Some are structural and require long-term policy responses, such as the lack of key technologies. Further, weak sovereign ratings and weak regulatory framework contribute to perceptions of volatility in the returns. Other barriers to investment in Africa are short term. There should be more deliberate and co-ordinated policies to attract and cooperate with sovereign wealth funds. The international community and major financial institutions could also help push the funds toward Africa by creating more vehicles to attract investment and reduce uncertainty through the collection and sharing of relevant information. In particular, the lack of large and liquid investment targets seems to hold back significant investment from the sovereign wealth funds. There is therefore a need for regional co-ordination to offer cross-country infrastructure investment opportunities of scale with the right benefits linked to access to multiple markets.

Source: Turkisch (forthcoming).

Theme 2011

Experts from different fields analyse what measures should African governments take in order to engage effectively with emerging economic partners in Africa, such as China, India, Brasil or Turkey.

 

Tax expenditure surveys


Jean-Philippe Stijns, co-author of the "Public Resource Mobilisation" study, highlights Morocco's practices while observing their taxation policies.