Rwanda: Making African Regional Integration Mean Business

Greg Mills And Michael Spicer
Kigali

African farmers face numerous challenges.

Over the past three decades there has been much talk about regional integration in Africa as a means to reduce onerous trade costs and spark growth and development. The reality, however, has lagged some way behind the rhetoric.

There have been innumerable studies and many international conferences on the subject of regional integration. Few - if any - have delivered concrete results, aside at least from happy consultants and pampered policy-makers and wonks.

There are two different views on the purpose and method of integration. There are those - let's describe them as the 'tradies' - who prefer to see the process being expedited through trade agreements and tariff-reduction initiatives such as the Southern African Development Community's free trade protocol or through the Common Market on Eastern and Southern Africa.

Inter-continentally it is to be facilitated, in terms of this perspective, for example through the European Union's regional economic community agreements.

But little apparent benefit has been realised through the focus on trade. Today, African countries exchange on average just 10 percent of their goods with each other.

This is partly because African products lack complementarity - things to sell to each other that they do not make. What's more, over 98 percent of the world economy lies outside the continent.

It is therefore almost inevitable that African producers should first aim to get a slice of the external market. Another reason is because of the high costs of doing business in Africa.

Indeed, greater competitiveness is crucial to lessening the costs to African producers and improving their returns. What is apparently ignored by the 'tradies' is that the big gains come not in the first instance from removal of discriminatory tariff barriers, but removal of barriers to internal as well as foreign trade and investment.

Bilateral and regional trade agreements can often make things worse with all their discriminatory provisions, for example such as that on rules of origin. These can raise compliance costs, especially for small and medium business, and present one more obstacle to them getting a foothold on the trade ladder.

This highlights the importance not of trade agreements in being the principal drivers of regional integration, but instead of emphasising the reduction of the costs of trade and other impediments to doing business.

This is the second view of integration promoted by those who see it as key to reducing the costs of doing business and improving African competitiveness - let's call them the 'functionalists'.

Here, in turn, are three areas of focus: The first of these is the need to promote trade and transport flows not principally through tariff structures (though those do have their place), but through trade facilitation.

Trade costs form a high percentage of the costs of African exports and imports. The high cost of transport in Africa - which is some 30 to 40 percent above that in other developing regions - undermines African growth prospects.

For almost half of 48 sub-Saharan countries, transport payments absorb over 20 percent of foreign earnings from exports. For some landlocked nations, these costs absorb over 50 percent.

Particularly significant is the negative impact of poor transport infrastructure on rural development, making it difficult for example for African farmers to specialize in high value crops for export.

These are not only transportation charges due to poor infrastructure, but trade costs caused by inefficient customs and clearance procedures, themselves the product of a closed mindset and an uncompetitive policy environment.

Both of these categories of cost are compounded by often pervasive corruption which imposes significant additional costs.

There is much that can be done in the short-term to improve this situation in Africa. And this does not have to involve big-ticket 'hard' infrastructure projects.

Indeed, quick gains need to be centred on the things that are within the power of Africans to most easily change: policies and procedures - reducing delays, opening customs procedures 24 hours and standardising procedures, and by adopting a zero-tolerance policy and practice towards corruption.

A second area is to develop regional strategies to address looming shortages in two key areas of day-to-day living and business: power and water.

By 2025, it is expected that Malawi and South Africa will face absolute water scarcity; Lesotho, Mauritius, Tanzania and Zimbabwe will be water stressed; and Angola, Botswana, DRC, Mozambique, Swaziland and Zambia are likely to experience water quality and availability problems in the dry season.

Source: http://allafrica.com

<back