Regional integration (part 2) – Ubuntu in a cui bono world?

The recent University of Cape Town Building Bridges workshop on regional integration raised the importance of taking a political economy approach to understanding progress and the reforms required to further promote regionalisation.

The challenge then is how to design policies that take these political economy insights into account, something ECDPM is now working on in our PERIA project (the Political Economy of Regional Integration in Africa) looking at five RECs (Regional Economic Communities) and the African Union.    

As was raised in the Cape Town discussions, among other things, the current regional integration agenda is a descendant of post-independence idealism about pan-Africanism. The suggestion was made that this kind of idealism, and the group of continental visionaries like Nkrumah and Nyerere that espoused it, no longer exists – “we’re not living in an Ubuntu world anymore” said one participant, referring to the philosophy of mutual dependence or "A person is a person through other people". Indeed, a major theme of the workshop was a focus on the following key question: cui bono  - to whose benefit?

Identifying winners and losers – and their power to influence

Like any policy reform, regional integration creates winners and losers, and its implementation or not depends on their power to influence reform individually or through coalitions. Prospective losers can block or undermine reforms as much as potential winners might promote the agenda.

The example was given of road transporters holding up plans to promote rail transport from Malawi to the Mozambican coast. Furthermore, where informal rules and practices are often drivers in decision making processes, the ability of pressure groups to undermine reform coalitions may be higher due to the opaque process/lack of transparency.

In discussing the private sector and regional integration, it therefore seemed useful to examine which actors might have influence using a taxonomy from Pritchett, discussed here before. This categorises firms according to whether they operate in the domestic or export market, and if the sector is characterised by competition or rents.

Firms operating in a domestic competitive sector are ‘workhorses’. These are the small-scale manufacturers or even informal agricultural producers and sellers who face the greatest challenges of doing business and are also likely to lose from cheaper regional imports. They are also likely to have little political influence to alter the agenda.

Firms selling into competitive export markets, like the horticultural exports that are emerging in a number of African countries, are labeled “magicians” for their ability to be competitive despite the challenges. They might benefit from regional integration in terms of easier access to inputs and markets. But unless they are very large scale in a small economy, they are unlikely to have political suasion.

The “power-brokers” are those firms operating in rent-creating sectors, like utilities companies in the domestic market, or mining companies in the export markets. Indeed, transporters such as those mentioned above are often a protected, rent-creating sector with considerable political power and influence on policy implementation – in regional integration and in other areas.

While different private sector actors will have different levels of influence on policy within countries, power relations between countries also clearly matter. The recently postponed launch of the Tripartite Free Trade Agreement (TFTA), originally due this month, reportedly hang on how the South African government can balance the TFTA ambitions with domestic concerns about subjecting the private sector to regional competition by adopting more flexible rules of origin.

What shall we do? A proposal for 3 A’s

Trade theory makes the assumption that the losers from economic integration can not only be identified but also compensated. In some cases this may be feasible and necessary to promote the regional integration agenda, but in a world of imperfect institutions where identification and compensation isn't feasible or in a leaders’ interest (not just in Africa), policy reforms may need to build these political economy concerns into their design. This could take three forms:

Alter

One way is to try and Alter the incentive structure in place so that, through a different distribution of the costs and benefits, or a better accountability mechanisms for example, the incentives to implement the regional agenda are stronger and the consequences of non-implementation stronger. RECs such as COMESA are now introducing a monitoring mechanism, while UNECA is also launching a regional integration index that may play this role. Such mechanisms – usually in combination with other forms of collective action – may alter the incentives through transparency and accountability pressures.

Adapt

Another is to Adapt to the existing incentive structure. Rather than abandoning a "rules-based system", this would imply creating rules (e.g. for a revived SADC tribunal) that are adapted to reality to allow it to continue to function even if rulings are viewed unfavourably by member states – failure to do this was its downfall in its previous form.

Avoid

Finally, policy makers can Avoid existing interest groups by short-circuiting existing blockages. If at present there is little political appetite for implementing regional protocols, regional integration and cooperation can nonetheless be taken forward on narrower areas where interests align, both within and between countries. Some of the narrower cross-border projects along corridors in Southern and Eastern Africa, are doing just this.

And leveraging the private sector for regional integration?

Leveraging the private sector for regional integration by the public sector is a policy challenge - it assumes benevolent policymakers. Where this channel is not open, it may fall on firms, individuals and CSOs to push the regional agenda, within and outside formal institutions. But even here it can happen - East African professional services integration offer an example of companies pushing for mutual recognition, somewhat independently of formal institutional processes of integration.

While a political economy approach highlights the (selfish) interests and motivations of individuals among other aspects, this is not to say that ideals are irrelevant, or that Ubuntu is dead - but long-term Ubuntu may depend on a better understanding of short-term Cui Bono.

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This blog is view of the authors and not necessarily that of ECDPM