Deeper Regional Integration an opportunity for Africa

This low level of integration is not only limited to the movement of people but is also reflected in trading patterns. In comparison to Europe, North America and South East Asia, Africa has the lowest level of intra-trade. In short, we hardly trade with our neighbours even when it makes economic sense to do so.

A clear example of how Africa’s low level of integration hampers economic growth can be found in air travel, where, with 12% of the global population, the continent accounts for less than 1% of the global air service market. A key reason for this is that Africa has not consolidated its air market. Consider this: In 2013, Africa’s air transport had grown at a rate of 6.6% over the last decade to become the fastest growing region globally. With potential growth forecasted at 5.7% annually, over and above the global average of 4.9%, Africa’s share of the global air services market can be significantly enhanced with improved intra-Africa flights.

Photo: Pan African Airlines

However, many African countries restrict their air services markets to protect the share held by local airlines, specifically state-owned air carriers. The Yamoussoukro Decision signed off by 44 African Nations, which became binding in 2002, after being endorsed by OAU heads of state and government in 2000, was meant to address this. It commits its signatories to put in place policies to deregulate air services and promote liberalized intra-Africa airspace; a regional air market open to transnational competition. While 10 countries have not signed on or completed proper ratification of this decision, the many who are signatories have not implemented it.

Benefits of integration

By enhancing integration on all fronts – both movement of people and trade – Africa could potentially add US$ 20 billion annually in agricultural trade. In airline travel, an open skies model between just 12 African countries could catalyze creation of more than 150,000 jobs and add up to US$ 1.3 billion to Africa’s GDP. 100% open skies across the continent could double or triple those figures.

East African Airlines Boeing 737-200 Menten. Photo: Wikimedia Commons

On the labor markets front, integrating Africa’s work-force could potentially reduce the emigration of talent out of Africa. The continent is reported to have lost about a third of its human capital and continues to lose its skilled personnel at an increasing rate. The brain drain many African countries experience could become rather the transfer of talents across borders. An unemployed nurse from Ghana could earn a decent living in Liberia while contributing to better health services in the host country. A young graduate from Tunisia’s technical schools could find a decent job in the plumbing industry in South Africa and so on. The free movement of labor will also create opportunities for Africa’s youth by encouraging trade, new business and job creation.

How can Africa integrate?

Policy reform and policy implementation is central to regional integration in Africa. It is worth noting that in Africa, mostly it is not the absence of good policies but rather a lack of adequate implementation frameworks that hamstrings development. As demonstrated earlier, the Yamoussoukro Decision, for instance, as promising as it is, is yet to be implemented over 10 years after it was ratified by 44 of the 54 countries on the continent.

That said, the following policy recommendations are offered as suggestion on how we can enhance regional integration.

Photo: Africa 21

Revamp transport infrastructure by focusing on rural roads where up to 70% of the population and food producers reside, yet less than 30% have access to roads. Channeling investment in rural roads will have a higher benefit-cost ratio to ensure regional integration in agro-markets results in unlocking of the US$ 20 billion annual potential in agriculture trade.

Reform trade and production policies. Africa produces what it doesn’t consume and consumes what it doesn’t produce. Such policies should be reformed. Africa should also prioritize policies strengthening regional trading blocs such as ECOWAS in West Africa, SADC in Southern Africa and COMESA in East and Central Africa, rather than the current investment and focus on improving access to developed country markets at the expense of consolidating the regional market.

World commodities Map-Africa. Photo: CIA Factbook, Simran Khosla/ Global Post

Reduce the non-tariff barriers that contribute to making Africa a region with the longest import/export wait times in the world – 38 days for importation and 32 days for exporting goods.

Reduce the cost of cross border trade by improving transport infrastructure and embracing ICT technology to reduce clearance times. Currently, transport costs account for 30 – 50% of total export value in Africa and are 63% higher than other regions. This stifles the competitiveness of intra-Africa trade.

Dar es Salaam port, the current largest port in Tanzania. Photo: Gulfconstructiononline

Implement in full the Yamoussoukro Decision. Costs to revamp Africa’s infrastructure are astronomical. However, the cost to revamp the air infrastructure are relatively lower. While urban roads require US$ 20 billion and railways US$ 10 billion, airports are at US$ 8 billion. This, in addition to implementing the Yamoussoukro Decision, means Africa can leverage on the airline market to enhance connectivity, spurring integration and economic growth. Currently, airlines account for less than 1% of regional connectivity and movement of people and freight, and this low base is an opportunity for market expansion.

Photo: World Bank

Regional integration is an imperative whose time has come and should be urgently embraced by every citizen of Africa. By taking the concept of sovereignty so seriously, African countries have missed out on the numerous opportunities that come with the mutually beneficial welfare improvements if deeper integration is fostered. After all, shared wealth and opportunities for jobs amongst African countries is surely better than poverty in sovereignty.

The views expressed here are those of the authors and do not necessarily represent those of the institution with which they are affiliated