The results are incontrovertible: Africa scores low on regional integration. This means that more can be done, and better.
The first line of attack should be the sluggish production that is holding regional integration back across the continent. Improving regional networks of production and trade by enhancing countries’ productive, distributive, and marketing capacities in a strategic manner – that is, so that countries’ capacities complement each other – would pay off well. Better cross-border cooperation among public and private stakeholders are the best chance of success. Some countries still need to win their place in regional commodity and value chains, while others need to establish firm ground so as to maintain their position. Win-win solutions can be found.
What is the way forward? In practical terms, a lot more needs to be done to investigate opportunities to build innovative, regional value-chain frameworks in different sectors. Furthermore, using better technology, higher-quality inputs, and updated marketing techniques would remove a number of bottlenecks. With the African Continental Free Trade Area (AfCFTA) agreement now in its operational phase, production and exports are likely to increase. But for growth to be more than ephemeral, production-related decisions must be made on sound bases and with a long-term perspective; they must embed state-of-the-art techniques and technologies and be forward-looking.
Not to be overlooked, non-tariff barriers constitute a major challenge to fully implementing regional trade agreements and the AfCFTA. They must be addressed. In addition, national planners need to encourage and emphasise continuous investment in research and development.
Having said this, global value chains do not function without people. The continent should dig into its labour goldmine by identifying skills gaps and developing cross-border skills enhancement programs. In simple terms, the extent to which countries and regions will benefit from regional and global value chains depends on the skills of their populations: more precisely, on how well workers’ competencies match the technology and production capacities of today and tomorrow.
Recent studies indicate that for any industry to succeed in the global economy, cognitive skills such as literacy, numeracy, and problem-solving are of absolute importance. Transferable skills such as these shield a population from the negative social impacts sometimes occasioned by the introduction of global value chains.
Global production is expected to become more and more fragmented and sophisticated. This makes it all the more crucial that policymakers continue to develop skills that can adapt to the requirements of a changing labour market.
After policymakers address obstacles to the productive dimension of regional integration, their second line of attack should be the continent’s infrastructure deficit.
A failure to tackle Africa’s infrastructure needs would prove disastrous to regional economic and social integration. Without adequate infrastructure, raw materials do not get to factories, production does not take place, goods do not reach consumers, and trade and financial activities do not flourish, either within borders or across them. Unbundling production from national boundaries depends on functioning logistics and operational transport infrastructure. Foreign direct investment flows to locations with cost advantages; poor infrastructure is a major deterrent.
In addition, the functioning of modern society depends on the smooth supply of a vast range of infrastructure-dependent services that improve the quality of life. These services are the foundation for social well-being, acceptable health and safety standards, and a decent environment.
In short, poor infrastructure equates to a bleak future, both economically and socially.
One of the keys to sustained economic and social development, is long-term, coordinated planning to develop and maintain basic regional infrastructure and logistics. But developing and maintaining infrastructure is costly: growing demands for infrastructure puts government’s budgets under great pressure. In many developing countries, public finances are overwhelmed by demographic upsurges such as urbanisation, growing populations, and migration. The costs of providing peace and security also constrain budgets.
To cope, policymakers should look to innovative approaches to financing infrastructure. While some countries are already adept at involving the private sector, innovative variants of public-private partnerships could attract additional private capital and expertise. Among other avenues, pension funds and insurance markets are promising sources of finance for low-risk projects.
But improving access to finance does not solve the problem of poorly integrated infrastructure. Often, the stumbling block lies in inefficient or poor construction. Rigorous competition should be introduced in procurement processes and in construction, and greater transparency should be established at all stages of a project. Legal and regulatory frameworks should be reviewed and more efficient infrastructure demand management systems should be set up to smooth the supply of services and products, to better mitigate wear and tear, and to cater to unforeseen events, such as natural or man-made disasters. Naturally, actors should also invest in new technology and adopt innovative management strategies.
The productive and infrastructure dimensions of regional integration are intricately linked. Improving one improves the other. Corrective measures to tackle these two dimensions would be a massive boon for the trade dimension of regional integration.
But it would be a mistake to rely on production and infrastructure alone as a means of improving trade. This is why the 2019 ARII’s third recommendation is to move decisively to implement the AfCFTA while mitigating harmful side-effects, such as lower tariff revenues, that sometimes accompany free trade agreements.
Once operational, the AfCFTA will be the largest trading block in the world. It has untapped potential to develop the continent and lift millions out of poverty if mitigation measures are in place.
Our final recommendations address the free movement of people and macroeconomic integration. While ARII 2019 shows better results for these dimensions than for the three dimensions just discussed, performance is far from uniform. For instance, the Arab-Maghreb Union (AMU) has yet to explore the potential of freer movement of people. As for macroeconomic integration, the Economic Community of Central African States (ECCAS) and the East African Community (EAC) operate no bilateral investment treaties at all. Yet the importance of a mobile workforce and foreign investment are well documented: the former accelerates innovation and reduces costs, while the latter is a sine qua non for increasing production and developing the infrastructure within a region, thus paving the way for greater prosperity.
Insofar as human mobility is concerned, therefore, we recommend greater visa openness with the goal of a visa-free regime for all African citizens and use of the African passport as provided for in the African Union’s Free Movement of Persons Protocol (Kigali). The 2019 edition of the Africa Visa Openness Index calculates a record 87% of African countries either improving or maintaining their index score from 2018, with much of the improvement coming from the adoption of e-visas and visas upon arrival for Africans. But Africa’s regional economic communities can do more: from issuing multi-year visas after assessing an applicant, all the way to creating visa-free regional blocs. More regional cooperation on the freedom of movement among regional economic communities will go far to integrate the continent.
Finally, policymakers should move to make substantial investments a reality in the regions and the continent. They should harmonise plans of action to safeguard the macroeconomic stability of their region and they should take disciplinary action where necessary. Exogenous shocks like natural disasters and capital outflows should be better managed to reduce economic instability.
About the Index
If prosperity, social cohesion, and human development are the destination,
then regional integration is the path.