Cautious optimism for regional integration in sub-Saharan Africa

This article is a revised version of a summary chapter in the World Bank report: Political economy of regional integration in sub-Saharan Africa. The report finds that regional integration in this area is more successful than one would expect given the difficult setting in which it takes place.

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Pathways to integration

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Regional integration in sub-Saharan Africa (SSA) is crucial for increasing trade within Africa, building more competitive African economies, and creating larger markets for goods and services produced in the region. Yet there are many paths towards greater integration, some of which are easier than others. In addition, integration need not follow a linear path or occur mainly through formal inter-governmental economic coordination. In order to gain insights into how regional integration is occurring in SSA, determine impediments to it, and develop recommendations for how the World Bank and other development agencies can help further facilitate it, the World Bank commissioned a set of political economy of regional integration studies covering sector analyses of agriculture, financial services, professional services, trade facilitation, and transport. In a comparative context, the findings of the studies suggest cautious optimism for regional integration efforts in sub-Saharan Africa. They also question perceptions that regional integration in SSA is doomed to be less successful than in other parts of the world. Economic integration is typically difficult, especially among less developed economies. In addition, failed integration attempts and slow implementation of integration policies is a global pattern, not only an African one. As in other parts of the world, we find that efforts at integration are more likely to succeed when they have strong internal support among the governments and/or private sectors of the member states as well as take a pragmatic and flexible path to integration rather than a rigid and all-encompassing one. There is no question that it is these factors that are behind recent progress in regional integration in SSA. Similarly, economic integration is more likely to succeed when it occurs alongside regional attempts at improving political stability and/or developing joint infrastructure. We see evidence of this in sub-Saharan Africa as well. For these reasons, arguably, regional integration in sub-Saharan Africa is perhaps somewhat more successful than one would predict given the challenging environment in which it is occurring. The studies also show that sector- and issue-specific characteristics strongly influence the pace and complexity of integration efforts. Most prominently, some areas require far more government action than others. For example, efforts to improve regional transport infrastructure and regional trade facilitation require policy coordination among a large number of government agencies. By contrast, consumer-facing sectors, such as finance, do not need such harmonisation to operate regionally. Rather, they can adapt to the host-country regulations. For these reasons, it is not surprising that integration is happening much faster in consumer retail than in other sectors or policy areas. The studies suggest the World Bank and other international development organisations could engage in useful efforts to facilitate greater integration efforts. A few recommendations are listed below.

1. Prioritise flexibility over rigidity

It is tempting to want to work through existing regional economic communities (REC), such as COMESA, ECA, and SADC, to pursue integration efforts. However, the member states of Africa’s RECs often have highly divergent integration priorities. Working through them therefore can often be more of an impediment to integration than a benefit. Instead, in many instances, it makes sense to allow a subset of countries to move forward in one area and use these gains to work on a broader set of issues and/or countries. That regional economic communities can be an impediment to integration may seem paradoxical. However, these RECs only have power that governments delegate to them. As a result their influence tends to reflect the level of integration rather than advance it. Rather, it is highly unusual for these communities to pressure national governments at the early stages of integration. In addition, because RECs tend to operate by consensus, working through them to advance integration can allow the most reluctant member states to exercise the greatest amount of leverage. Not permitting integration outside a formal Regional Economic Community as a result can slow the pace of integration.

2. Encourage simplicity over complexity

Many integration efforts stall because they pursue complex negotiations across a range of government agencies. This approach gives groups opposed to integration leverage to block progress towards it. In addition, it also strains the capacity of many governments. One way to minimise these impediments to integration in some areas is to encourage mutual recognition of standards rather than policy harmonisation. Within a REC, for example, countries could choose to recognise the standards of the most stringent member state in the particular sector. One potential objection to advocating for simplicity is that efficiency could come at the cost of lack of inclusion among stakeholders in the integration process. A government agency, for example, that has concerns over integration policies could deliberately obstruct implementation of them due to lack of consultation during the policy design stages. Yet policymakers need to balance this risk against the one created by giving any plausible stakeholder a potential veto. In addition, Presidents and Legislatures ultimately determine the pace and scope of the integration process. Heads of government ministries and agencies are accountable to them, not an independent source of government authority.

3. Reach out to the private sector

Governments are unlikely to impose losses on certain groups without pressure to do so from another set of domestic actors. In addition, World Bank projects often focus most of their attention on working with governments. Reaching out to private sector actors that have an interest in integration can help shift momentum towards this outcome. In addition, firms already operating regionally may have innovative insights that might prove useful for World Bank staff working on integration projects.

4. Focus on joint infrastructure

Africa’s infrastructure deficit is large and the costs of developing it are daunting. In many instances, it is sensible to consider infrastructure development from a regional point of view rather than a national one. Not only can this help leverage economies of scale in financing infrastructure development, it can also help create the foundations for greater integration efforts by reducing costs of trade. The returns to these investments are enhanced when they are accompanied by policy reforms that remove barriers to the movement of goods, investment, services and people. For example, investments in connective transport infrastructure need to be accompanied by measures that lead to faster border procedures, the removal of roadblocks, fewer weighbridges and greater competition among transport providers.

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Untapped opportunities

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The pessimistic view that regional integration can only play a limited role in Africa because of relatively small size and similarity of endowments between countries is still common. Our studies challenge this conventional wisdom. It is becoming increasingly apparent that there is enormous scope for increased cross-border trade and investment in Africa. Moreover, with rising incomes in Africa there are growing opportunities for cross-border trade in basic manufactures, such as metal and plastic products, and processed food that are costly to import from outside the region. The potential for regional production chains has yet to be exploited and cross-border trade in services offers similarly untapped opportunities. The full study is available at http://ecdpm.org/wp-content/uploads/Political-Economy-Regional-Integration-SSA-World-Bank.pdf About the authors Paul Brenton is Lead Economist, Trade and Competitiveness Global Practice, at the World Bank, and Barak D. Hoffman is Public Sector Specialist, Governance Global Practice, at the World Bank.

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This article was published in GREAT Insights Volume 5, Issue 4  (July/August 2016).