Context
Africa’s economy is making progress; growth rates continue to top 5% in spite of the global economic and financial crisis, inflation is down to single figures and foreign direct investment is on the increase. Yet Africa is still a long way from realising its true potential. It accounts for a mere 1.6%1
1The Africa Competitiveness Report 2011, World Economic Forum,
the World Bank and the African Development Bank, p. 4
of world trade and the growth rates of regional trade are still too low. The private sector is often small, and not competitive, and productivity remains low.
If African entrepreneurs are asked why productivity is so low, they list many factors. These almost always include inadequate access to (micro) credit, poor infra- structure and uncertain environments.
The lack of regional and international competitiveness is also partly the result of the limited size of their own markets. Landlocked states have to contend with high additional transport costs for their imports and exports on account of their distance from seaports. National borders make the exchange of goods and services more difficult and more costly through the imposition of duties and other trade barriers.
Processes promoting regional economic integration are a good springboard for overcoming these obstacles, establishing links with the global market and attracting investors. They pave the way for the identification and development of regional competitive advantages to boost economic growth, employment and incomes, and thereby reduce poverty.
Africa has recognised these challenges and aims to tackle them with the help of regional economic com-
munities (RECs), some of which were founded shortly after independence. The African Union aims to create common markets in the RECs in North, East, Southern, West and Central Africa and thus gradually move towards a continent-wide economic community by 2028. Integration generally proceeds very slowly in Africa as it does elsewhere. It involves many negotiations because it is associated with the loss of sovereign rights and government revenues (customs duties and other levies on foreign trade). African states have come under considerable pressure to push ahead quickly with regional economic integration. This is not least a result of the introduction of Economic Partnership Agreements (EPAs) by the EU with its African, Caribbean and Pacific (ACP) partner states at regional level, which are intended to replace the unilateral preferential agreements as they come to an end. For these reasons Germany attaches great importance to development cooperation with Africa on regional economic integration as laid out in the Africa Strategy of the German Government. Approach
The partners of German development cooperation on regional economic integration are the RECs in East Africa (East Africa Community – EAC), Southern Africa (Southern African Development Community – SADC), West Africa (Economic Community of West African States – ECOWAS) and Central Africa (Communauté Économique et Monétaire de l’Afrique Centrale – CEMAC). In addition, as an important shareholder, Germany plays a part in shaping the policies of the World Bank and the African Development Bank (AfDB) relating to regional infrastructure projects.
| A new high voltage line between Zambia and Namibia allows Namibia to import electric power from countries with a huge hydropower potential such as Zambia, the Democratic Republic of the Congo and Mozambique.
| Infrastructure and highway con - struction. Labourers work on a new road in Mozambique in October 2007. Photos: Nampower | KfW, photothek.net | KfW
T O P I C S H E E T : R E G I O N A L E C O N O M I C I N T E G R A T I O N Photo: GIZ
The measures help enable capable and efficient regional and national institutions (in particular the RECs) to jointly develop and implement the regional economic integration agenda. The primary focus is placed on strengthening regional organisations in terms of both their expertise in economic policy and their ability to take action by developing institutional and individual capacities (organisational development, consultancy and training) in the following respects:
• general economic policy issues (for example
monetary policy, competition policy and investment promotion);
• coordination and facilitation of complex processes surrounding the establishment of a common market, i.e. free trade in goods, free trade in services, free movement of capital and freedom of movement and establishment for labour;
• improvement of the quality infrastructure (QI) in order to promote intraregional and international trade.
This support for regional economic integration is rounded off by regional economic development measures that are not linked to the RECs. The activities are geared to overcoming specific development constraints in several African states simultaneously. This approach is taken when it can be expected to generate tangible efficiency gains, e.g. when improving the environment for private-sector initiatives and investment, promoting dialogue between the private sector and the state, establishing a sustainable microfinance system and preparing regional infra- structure projects and programmes.
Results
Regional economic integration processes are complex and long-term. German development cooperation has contributed to the elimination of administrative bottlenecks in the partner organisations and to the improvement of the RECs’ ability to coordinate, facilitate and monitor regional economic integration processes. The introduction of new management instruments and the reform of internal organisational structures
and communications have increased transparency in the RECs and have deepened the understanding of roles and key functions, thus increasing the effectiveness and efficiency of the institutions.
The expertise of managers and professionals in the RECs and their member states are enhanced with a view to preparing and advancing negotiations on agreements for the liberalisation of trade in goods and services (in the SADC), free movement of capital and freedom of movement and establishment for labour (in the EAC). The German advisory services also contribute to the successful implementation of agree- ments that have already been signed on the creation of sub-regional free trade.
The common market in the EAC commenced on 1 July 2010. One of the ways in which German development cooperation is contributing to its success is by providing advice on the dismantling of non-tariff trade barriers, which would be a considerable impediment to intraregional trade.
Beyond direct support to RECs, transnational develop- ment measures active in different African countries in the field of sustainable economic development help, for instance, to give hundreds of thousands of businesses, small farmers and households access to financial services (saving, microcredits, microinsurance schemes), thus allowing them to realise their potential. They are also helping accelerate customs clearance at borders in individual regions.
| Trucks bring goods to be exported to a container port in Southern Africa.