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Regional Economic Communities in Africa

Written by: African Development Bank

Article Overview: Regional economic integration has a long history in Africa. The South African Customs Union (SACU) was established in 1910 while the East African Community (EAC) was set up in 1919. The East African Community collapsed in 1987 but is now being actively revived. Currently there are 14 regional economic communities in Africa.

Regional Economic Communities in Africa

Regional economic integration has a long history in Africa. The South African Customs
Union (SACU) was established in 1910 while the East African Community (EAC) was
set up in 1919. The East African Community collapsed in 1987 but is now being actively
revived. Currently there are 14 regional economic communities in Africa. They are:
· the Arab Maghreb Union (AMU) established in 1989;
· the West African Economic Community (CEAO) formed in 1972;
· the Economic Community of the Great Lakes Countries (CEPGL) established in
1976;
· the East African Community (EAC) formed in 1919;
· the Common Monetary Area (CMA);
· the Economic Community of Central African States (ECCAS);
· the Common Market for Eastern and Southern Africa (COMESA);
· the Economic Community of West African States (ECOWAS) established in 1975;
· the Mano River Union (MRU) formed in 1973;
· the Central African Customs and Economic Union (UDEAC) established in 1964;
· the Eastern and Southern African Preferential Trade Area (PTA) formed in 1981;
· the Southern African Development Community (SADC) formed in 1992 and formerly
called SADCC, which was established in 1980;
· the South African Customs Union (SACU) formed in 1910; and
· the Indian Ocean Commission (IOC).
In addition, there is the proposed continent-wide African Economic Community, whose
treaty was signed in 1991 (the Abuja Treaty) and which is expected to be in place by
2025. Even a cursory analysis shows that Africa has a multiplicity of RECs, characterized
by overlapping memberships. Indeed, it is common to find a country belonging to 2 or
more RECs. A case in point is Southern Africa where Lesotho and Swaziland are
members of SACU, CMA, SADC, and COMESA. Also, Mauritius belongs to IOC,
COMESA and SADC. Mauritania is a member of both ECOWAS and AMU. Many
analysts believe that overlapping memberships in RECs could cause complications and
inconsistencies due to the conflicting obligations and divided loyalty. In fact, the lack of
progress or success with African integration schemes has been attributed in part to
conflicting interests brought about by overlapping memberships in several RECs.
Osagie (1992) strongly decries this prevalence of overlapping memberships as it tends to
encourage lack of commitment to any of the organizations. According to him, “The
phenomenon of multiplicity of regional groupings within the same economic space is
peculiar to Africa. It is probably only in Africa that one country belongs to 2 or 3
communities, to which it exhibits little or no political commitment”, Osagie (1992, p. 20).
A possible explanation for the eagerness of countries to join integration schemes could be
the political motivation or inspiration of regional integration arrangement in Africa.
According to McCarthy (1999, p. 17) “the [African] experience has been that regional
integration is driven by pan-Africanist ideology of continental unity and a desire to
escape the constraints posed by the smallness of economies.”

Unfortunately, in spite of the proliferation of integration arrangements, there has been
little or no success in regional integration in Africa, judging by the impact of RECs on
intra-African trade. Intra-African trade as a share of total foreign trade has remained low.
According to the Economic Report on Africa 2003 by the Economic Commission for
Africa (2003, p. 38):
Trade among Sub-Saharan African countries (Africa-to-Africa trade) accounts for only
12% of Sub-Saharan exports, up from 8% in 1989. The eight major established regional
arrangements did not contribute to the increase; their shares of Africa-to-Africa trade
were either stagnant or declining between 1989 and 1993.
A recent study of COMESA by Geda and Kibret (2002, p. 8) supports this finding as
they find that “regional integration arrangements failed to positively affect intra-regional
trade. In fact, intra-COMESA trade is not significantly different from its trade with nonmember
countries. This is the case whether imports or exports are used to measure
bilateral trade.” The low share of intra-regional trade in total foreign trade probably
reflects the high proportion of Africa’s trade with the European Union (EU) and the
United States (U.S.) and the so-called “hub-and-spoke” pattern of trade. Baldwin (1997).
Also contributing to this low share are structural factors like the competitive nature of
primary-producing, small, low-income economies with little or no manufacturing
capacity, and the existence of weak financial sectors and poor intra-state and inter-state
transport and communications infrastructure in African countries. McCarthy (1999).
However, what is rather disturbing is that Africa’s regional arrangements have the lowest
levels of recorded intra-regional trade of all such integration schemes in the world.
Indeed, it has been found that shares of intra-regional exports are typically below 5% in
African RECs; see Fouratan and Pritchett (1993). The two exceptions to this
phenomenon of low intra-regional trade are CEAO and SACU, which both have shares
of intra-regional trade in excess of 10% of total trade. In 1990, CEAO’s intra-regional
trade amounted to 11.3% of total exports while in 1994, SACU’s intra-regional exports
was an impressive 20.3% of total exports; see McCarthy (1999, p. 22). Also, several
countries depend critically on trade taxes as a source of government revenue. They have
therefore been reluctant to eliminate trade taxes without an assured compensatory source
of revenue. In addition to the limited trade potential and the constraining structural
features of the typical African country already alluded to, the low share of intra-regional
trade in total trade of African RECs is attributable to many factors including:
· failure to implement reduction in trade barriers;
· inability to devise equitable arrangements for sharing the gains from integration;
· ineffectiveness of common external tariff due to requests for exemptions;
· failure to discontinue existing economic ties with non-members;
· wide differences in the degree of dependence on trade taxes as sources of revenue;
· lack of sustained political commitment;
· macroeconomic instability; and
· political instability and poor governance; see Lyakurwa et al. (1997) and Geda and
Kibret (2002).

The barriers to intra-African trade are largely policy induced. Overcoming the barriers
will necessitate changes in trade and commercial policy. Most importantly, tariff and
non-tariff barriers to trade need to be dismantled. Also important will be improvements
in macroeconomic policy management including the elimination of over-valued
exchange rates. Within the regional economic communities, there is need for policy
coordination especially in the areas of industrial production, and transport and
communications infrastructure. In the long run, intra-African trade will no doubt expand
with increased industrialization and rising income per capita in member countries of the
RECs.

African Development Bank
Economic Research Working Paper Series
Enhancing Africa’s Trade: From Marginalization
to an Export-Led Approach to Development
Milton A. Iyoha
Professor, Department of Economics & Statistics
University of Benin, Nigeria
Economic Research Working Paper
No 77 (August 2005)

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Article Tags: abuja treaty, african customs, african economic community, arab maghreb union, case in point, central african states, common market, customs union, eac, economic communities, economic union, indian ocean commission, ioc, mano river, monetary area, preferential trade area, regional economic integration, sacu, sadcc, southern africa



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