REGIONALISM IN AFRICA :
par Margaret LEE
AAPS
INTRODUCTION
Regionalism, as defined in this paper, encompasses efforts by a group of nations to
enhance their economic, political, social, or cultural interaction. Such efforts can take
on different forms, including regional cooperation, market integration, development
integration, and regional integration. African leaders have long envisaged regionalism as
a viable strategy to pursue with a view to uniting the continent both politically and
economically. While regionalism in Africa has taken on different forms to accommodate the
changing national, regional, and international environment, all organizations that aim to
integrate regional economies in Africa have adopted market integration as a component of
their strategy, with a view to increasing intra-regional trade. Market integration is the
linear progression of degrees of integration beginning with a free trade area (or in some
cases a preferential trade area) and ending with total economic integration. The model for
such integration is the European Union (EU).
Notwithstanding the fact that market integration has failed miserably on the continent, it
continues to be highly regarded by most African leaders as a solution to Africas
growing marginalization within the world economy. The creation of NAFTA (North American
Free Trade Agreement) and the movement toward EU monetary integration, only served to
reinforce the commitment African leaders have toward market integration. In response to
these events, the member states of the Organization of African Unity (OAU) in 1991 signed
the Abuja Treaty creating the African Economic Community (AEC), which calls for the total
integration of African economies by 2025. The creation of the AEC falls on the heels of
the failure of the OAU to meet the objectives of the 1980 Lagos Plan of Action, which had
called for the creation of an economic community in Africa by 2000.
While African countries continue to be actively involved in pursuing market integration,
some critics argue that instead of attempting to enhance intra-regional trade, African
countries should be involved in attempting to integration their economies into the world
economy. It is the latter process, they argue, that will facilitate the type of growth and
development that is crucial to prevent Africa from being further marginalized within the
world economy. For such critics, market integration is part of the problem, not part of
the solution. They argue for, example that: (1) regionalism will not shield Africa from
the global economy and that Africa will only begin to grow again if it opens itself
to the financial and trade flows from the world economy; (2) instead of attempting
to integrate their economies at the regional level, Clearly it will be best for
sub-Saharan Africa to integrate with the EC and reap all the possible benefits,
since,
the temptation to use regionalism as a vehicle for import-substituting
industrialization will only divert attention from efforts to integrate SubSaharan Africa
with the world economy; (DE MELO and PANAGRIYA) and (3) There are other areas,
including Africa, where there are proposals, but where the political and social conditions
seem no easier to meet than those for global integration. In these, it is difficult to see
any argument (except perhaps that of limited bargaining ability) for regions as an
alternative or supplement to global integration.(PAGE, 2000: 5)
No matter how committed African leaders may be to a regional integration agenda, such
criticism cannot be ignored. This is especially the case since globalization is having a
significant impact on Africa. In fact, the impact is so potentially devastating that
seemingly there exists a race to the bottom,(MAZUR, 2000: 88-91) in which
Africa is being further underdeveloped by multinational corporations who work closely with
corrupt African leaders to continue to extract Africas wealth from its soil, leaving
poverty and destitution in its wake.
In light of the above, the question must be raised as to whether African countries should
pursue strategies designed to unify economies at the regional level in anticipation of
protecting them against the onslaught of the world economy? Or alternatively, given the
rapid speed in which world economies are integrating, should they abandon such efforts and
pursue strategies that by-pass the region and focus on integrating their economies into
the world economy? With respect to the first question, many argue that integration at the
regional level must be outward-looking and only be pursued if the ultimate objective is
integration at the worldwide level.
The subtitle of this paper, Part of the Solution or Part of the Problem? is
taken from a study by Colin McCarthy entitled, Regional Integration: Part of the
Solution or Part of the Problem? In the study McCarthy argues, that the
acceptance of over-ambitious integration schemes in Africa has not been good policy,
and Africa needs rapid economic growth and development.(Mc CARTHY, 1996: 230).
Instead of pursuing market integration, regional economic organizations in Africa should
focus on regional cooperation, with market integration as a future goal. McCarthy further
notes that
even if regional integration could in the end succeed as a formal
exercise, sustainable growth will require competitiveness in world markets.(Mc
CARTHY, 1996: 230).
The real challenge before African leaders in the new millennium is to develop a strategy
that enhances the political, economic, social, and cultural integration of the continent,
while simultaneously ensuring that it is not further marginalized within the world
economy. In essence, this means determining how regionalism and globalization can coexist
and be conduits for, rather than hindrances to, growth and development in Africa. This
paper seeks to explore the prospects for this coexistence. It will be argued that
regionalism, as currently practiced in Africa, is part of the problem and not part of the
solution. It is anticipated that more questions will be raised about regionalism in Africa
than answers provide, since the phenomenon examined is very complex and one that some have
termed the weave-world of regionalisation and globalisation. (BOAS, 1999:
1061)
In order to explore the weave-world of regionalisation and globalisation, the
paper will first review theories of regionalism. This will be followed by a section that
places regionalism in the new millennium within the context of neo-liberalism,
globalization, and political instability in Africa. The practice of regionalism in Africa
will be discussed next, which will be followed by an assessment of the weave-world of
regionalism and globalization in Africa.
THEORIES OF REGIONALISM
As previously noted, theories of regionalism can be divided into regional cooperation,
market integration, development integration, and regional integration. This section will
provide a brief overview of the main tenets of the theories.
Regional Cooperation
Regional cooperation is a collaborative venture between two or more partners, with
common interests in a given issue.(BOURENANE, 1997: 50-51) Such ventures can
include, for example
Execution of joint projects, technical sector cooperation, common
running of services and policy harmonization;
Joint development of common natural resources;
Join stand towards the rest of the world;
Joint promotion of production. (HAARLOW, 1997: 16)
Market Integration
Market integration consists of the linear progression of degrees of
integration. They include a: free trade area where tariffs are removed among member
states, but each country retains its own tariffs against non-members; customs union where
the free trade area remains in place and member states impose a common external tariff
(CET) against non-member states; common market where the customs union remains in place
along with the free flow of the factors of production (capital and labor); economic union
which consists of a common market along with the harmonization of monetary and fiscal
policies; and total economic integration which consists of a common market along with the
unification of monetary and fiscal policies.(BALASSA, 1961: 1)
The welfare gains from integration are based on the notion of trade
creation and trade diversion. The former takes place when there is a shift from a
high-cost, less efficient regional producer to a low-cost, more efficient regional
producer. Trade diversion, on the other hand, consists of a shift from a low-cost, more
efficient non-member producer to a high-cost, less efficient regional producer.
The potential gains from market integration include:
Increased production arising from specialisation according to
comparative advantage;
Increased output arising from the better exploitation of scale
economies;
Improvements in the terms of trade of the group with the rest of
the world;
Forced changes in efficiency arising from increased competition
within the group;
Integration-induced changes affecting the quantity or quality of
factor inputs, such as increased capital inflows and changes in the rate of technological
advance. (ROBSON, 1980: 3)
For these gains to be realized, the theory assumes that there exists:
Perfect competition in transport markets;
Free flow of labour and capital inside but not between countries;
No transport cost;
Tariffs as the only trade restrictions and balanced trade between
countries;
Prices reflecting the opportunity costs of production;
Resources, e.g. labour, fully employed.(HAARLOV, 1997: 26)
While some benefits of market integration are static since they are realized during the
early period of integration, others are dynamic and are therefore only realized over time.
Market integration has failed miserable on the continent largely
because the above-mentioned conditions do not exist for its successful implementation.
Development Integration
Development integration theory was developed in response to problems
created by market integration. According to the theory, the objective of integration
becomes economic and social development, and it is therefore linked with development
theories. Development integration requires more state intervention than market
integration. States must first and foremost make a political commitment to integration,
since such commitment is seen as laying the foundation for cooperation. It is anticipated
that this will help member states work toward implementing policies that will help with
problems created as a result of the unequal distribution of benefits, one of the major
causes of the failure of market integration.
With the view to providing a remedy for the unequal distribution of
benefits, policies that are of a compensatory and corrective nature are to be implemented.
Although designed to correct the problems of market integration, development integration
has proven more difficult to implement than market integration.
Regional Integration
Regional integration is defined as a process by which a group of nation states
voluntarily and in various degrees have access to each others markets
and establish mechanisms and techniques that minimize conflicts and maximize internal and
external economic, political, social and cultural benefits of their
interaction(HAARLOV, 1997: 15). Both the formal and informal market is taken into
consideration. Regional integration differs from market integration in that, while
formal institutions are necessary to oversee the linear progression of the various phases
of integration, regional integration does not necessarily require formal institutional
structures, nor is there necessarily a linear progression of integration. In the case of
the latter, integration is assessed by the amount of economic, political, social and
cultural interaction that transpires between member states. It does not require all member
states to share these activities simultaneously.
Given the failure to date of market integration on the continent,
regional integration, coupled with regional cooperation, is perhaps a more viable strategy
for Africans to pursue.
THE CONTEXT OF REGIONALISM IN THE NEW MILLENNIUM
In order to access regionalism in Africa, such efforts must be placed within the context
of neo-liberalism, globalization, and political instability in Africa.
Neoliberalism
Neo-liberalism, the orthodoxy that calls for limited governmental
intervention in the economy, privatization, the demise of the welfare state, and monetary
and fiscal discipline (the so-called Washington Consensus), has been at the forefront of
economic policies in Africa in the guise of IMF/World Bank Structural Adjustment Programs
(SAPs). After two decades of SAPs, there is a growing consensus that they have failed,
leaving most African countries further marginalized within the world economy. While the
demand for an outward-looking trade policy, namely the removal of barriers to trade, has
done more to open the economies of Africa than has any regional economic organization been
able to do, such liberalization has not resulted in increased intra-regional trade among
African countries, but instead with the core states within the capitalist world economy.
This increased trade, however, has for the most part been one-way, with the core countries
having flooded the African periphery with more efficiently produced and/or cheaper
products that have caused massive industry closings or de-industrialization.
Globalization
Globalism, according to Robert Keohane and Joseph Nye, is a state
of the world involving networks of interdependence at multicontinental distances. The
linkages occur through flows and influences of capital and goods, information and ideas,
and people and forces, as well as environmentally and biologically relevant substances
(such as acid rain or pathogens). Globalization and deglobalization refer to the increase
or decline of globalism. (KEOHANE and NYE, 2000: 105)
The implications of globalization for Africa in general, and for
regionalism in Africa in particular, have been significant. The benefits of globalization
have been unevenly distributed throughout the world, resulting in many least developing
countries, including most in Africa, being further marginalized within the world economy.
Sub-Saharan Africa countries remain constrained by weak supply and demand
capabilities, while lacking institutional capacity. They are, therefore, also less able
than other countries to reap potential trade/investment/technological transformation
benefits from globalisation, whereas for other communities it has contributed to increased
improverishment, inequalities, work insecurity, weakening of institutions and social
support systems, and erosion of established identities and values. Thus, for a
considerable amount of people, this leads to less human security, more vulnerability and
increased social conflict.(BOAS et al, 1999: 1065)
Sub-Saharan Africas further marginalization is ironic in that
many of these countries are highly integrated into the world economy, with exports
consisting of an estimated 30% of GDP. The problem, of course, is that the majority of
these exports consists of primary products and thus are subject to price fluctuations on
the global market. The prices for may of these commodities are at their lowest in a
century and a half, and African countries have not increased their export levels, nor have
they been successful in securing significant foreign investment.(UNDP, 1999: 2, 31)
With respect to regionalism in Africa, globalization has resulted in
some countries feeling that integration at the regional level is secondary to integration
at the global level. While clearly for political reasons this is not publicly articulated,
it can, however, be seen in practice. As one critic recently noted: African
governments are now being told, and they appear convinced, that globalization offers new
higher economic opportunities for which Africa must, in the words of IMF deputy managing
director, sharply accelerate reforms to fully integrate itself into the world
economy and take full advantage of the opportunities of globalization. Thus, the
attitude in most African governments now appears to be that of complacency and
resignation. They now appear to believe that the ascribed opportunities of globalization
are so great that they are worth the enormous social, economic, and political costs
associated with adjustment.
In practice this means that semi-peripheries, such as South Africa, seize upon
opportunities to further integrate their economies into the world economy, both at the
expense of their own workers and industries and its regional integration partners. The
recent EU/SA FTA reflects this phenomenon. South Africa signed the agreement knowing that
it would have a devastating impact on both the members of the Southern African Customs
Union (SACU) and the Southern African Development Community (SADC). With respect to SACU,
the agreement was reached without the consultation of the BLNS countries (Botswana,
Lesotho, Namibia, and Swaziland), although the SACU treaty stipulates that such agreements
must be approved by all SACU members. With respect to SADC, in addition to the fear that
EU goods, expected to be more efficient and cheaper, will penetrate the markets of the
SADC countries, undermining agriculture and industrial sectors, some SADC members states
complained that South Africa only became serious about completing the negotiations for a
SADC FTA when it had completed negotiations with the EU. Some South African trade
officials feel that the EU/SA FTA agreement will allow them to become more integrated into
the world economy, notwithstanding the fact that the consequences could also be quite
severe for South Africas own economy. This, however, is a chance they feel they must
take.
In the meantime, the US, threatened by the EUs prospective penetration of the South
African market, has initiated discussions with South Africa about the prospects of a US/SA
FTA. These ongoing overtures by the capitalist core toward South Africa feed into the
notion of South African exceptionalism. This had resulted in a further divide
between South Africa and its SADC partners, with many having nostalgia about the good old
days when South Africa was not a member of SADC. In feeling that they are an exception to
the rest of Africa, South Africa attempts to wield its economic power when
negotiating with its partners in both SACU and SADC. South Africa is therefore viewed as
an unfair and arrogant trading partner. This arrogance plays itself out in how some South
African government officials view their regional partners. For example, in response to
questions about the consequences of the negative impact that an EU/SA FTA would have on
its SACU members, Willem Bosman, Director of Regional Economic Organizations within the
South African Ministry of Foreign Affairs noted that:
But I do feel there is perhaps
a shock treatment that is necessary to tell them, now you are on your own, South Africa
cannot any longer provide for you 50% of your budget
Now you have to tax your own
people; you have to work according to the structures of a free independent country.
The irony of such a statement is that SACU is an apartheid-created relic, designed to
ensure that South Africa would have a captive market for its agricultural and
non-international competitive manufactured products. The economic dependency of the BLNS
states on South Africa was part of the strategy to ensure South Africas economic
hegemony. If the BLNS states experience economic deterioration as a result of the EU/SA
FTA, who will buy South Africas non-international competitive manufactured products?
By placing integration at the global level a priority, South Africa risks national and
regional economic destabilization. It is doubtful that under such circumstances the
capitalist core would come to its rescue.
The ultimate goal of the EU was to have South Africa be the model for the creation of
regional economic partnership agreements (REPA) with its ACP partners under the Lomé
Convention (Lomé V). Eventually these arrangements would become reciprocal FTAs, thus
ending the long-standing practice of the Lomé Convention that allows the ACP partners to
have preferential access to EU markets. Within the neo-liberal/globalisation paradigm, the
ACP countries, divided into regions, were to become merely markets for absorbing EU goods.
As a result of tremendous resistance from the ACP countries, the EU was forced to abandon
these plans and keep in place the existing Lomé arrangement until December 31, 2000.
Another chance that many African countries feel they must take is joining the World Trade
Organization (WTO). The WTO is one of the most vivid examples of globalization and
neo-liberalism at its best. The WTO will basically allow the capitalist core to have
greater access to the trade regimes of the periphery. Through the multilateral liberalism
that will be overseen by the WTO, it is estimated that Africa could lose an estimated $2
billion annually in revenue. Knowing this, why have African countries chosen to join the
WTO? Largely because of fears that they will become further marginalized within the world
economy if they dont.
In essence, African countries find themselves between a rock and a hard place: they stand
to become more marginalized within the world economy if they both open their trade regimes
to the world economy, or keep them closed. Indeed, this is an interesting paradox.
Political Instability
A prerequisite for regionalism is political stability. Political instability has
implications for both economic stability and the commitment that countries can make to the
regional agenda. The continent is currently very unstable. Countries involved in civil
wars (i.e. Angola), regional wars (i.e. those involved in the Democratic Republic of the
Congo -DRC), or that have internal political conflicts (Sierra Leone, Zimbabwe), are all
having a negative impact on the regional agenda. Zimbabwe is a case in point. Between its
involvement in the war in the DRC and the internal instability caused by the recent crisis
over the land, Zimbabwe has not been able to pay its debt to its regional neighbors, its
exports to and imports from its regional neighbors have declined, and foreign investors
have fled the country. The South African rand has decreased in value in response to the
crisis, and other countries have begun to complain about the economic impact
Zimbabwes decline is having on their economies, including foreign investment.
Zimbabwes third largest sector for revenue, tourism, has collapsed. Zimbabwes
economic deterioration, therefore, has serious implications for both SADC and the Common
Market for Eastern and Southern Africa (COMESA). In the latter organization Zimbabwe is
considered to be one of the regional giants. Economic instability in Southern Africa will
in turn have implications for the capitalist core, who see Southern Africa as an important
market for their products.
The political instability in Africa has resulted from both the consequences of the
development of the monopoly one-party state and the neo-liberal/globalization orthodoxy.
In many cases, the conflicts are a consequence of the fight over limited resources.
At the first economic conference of COMESA, held in February 2000, Daniel Arap Moi,
President of Kenya noted that, The free movement of goods is impossible where
nations are at war or where political conflicts and violence are found (Daily Mail
and Guardian Online, 2000). This reality was reiterated by President Frederick Chiluba of
Zambia when he stated that, Under conditions of war, insecurity and political
despair a consistent development programme cannot be possible, not to mention full
participation in economic integration
We have a duty to change the conditions we live
in within our nations, and within Comesa and Africa as a whole. No one else will do it, no
one will do it for us
we ourselves must do it (Daily Mail and Guardian
Online, 2000).
THE PRACTICE OF REGIONALISM IN AFRICA
In this section a general overview is given of the practice of regionalism in Africa,
which is followed by a case study of the Southern African Development Community (SADC).
General Overview
Regionalism in Africa has been pursued for two reasons. The first is to enhance political
unity or the pan-African agenda. They second has been economic -- to foster growth and
development. Regionalism, especially market integration, has been seen as a way to solve
the problems created by small African economies. By integrating, it is argued, economies
of scale would be realized and enhanced industrialization would follow. The earlier
attempts at implementing market integration were inward-looking and relied on import
substitution industrialization (ISI). Trade regimes were highly protected and high priced
inefficient products proved to be no substitute for cheaper, efficient products from the
capitalist core. Protectionalism, in many cases, prevented countries from importing into
their countries inputs needed for enhanced industrialization. Increased intra-regional
trade, the major objective of market integration, was, for the most part, not realized,
partially because member countries produced similar products and therefore they did not
have comparative advantages. Another problem was the maintenance of tariff and nontariff
barriers to trade.
The 1980s witnessed a change in strategy in that with SAPs, countries
were forced to liberalize their trade regime. Unfortunately, this was unilateral
liberalization. In fact, during this period, the IFIs explicitly discouraged market
integration and encouraged African countries to unilaterally open their markets to the
world economy. Market integration in Africa was seen as being counterproductive to the
neo-liberal orthodoxy that promoted the ability of the capitalist core to have unlimited
ability to export to the African periphery in the name of efficiency and competition.
Although beginning in the early 1990s the IFIs began to support market integration,
unilateral liberalization has not, for the most part, resulted in increased intra-regional
trade. In explaining the failure of the member states of the Economic Community for West
African States (ECOWAS) to increase intra-regional trade, Otatunde B. J. Ojo notes that as
a result of the negative impact unilateral liberalization had on member countries during
the 1980s, including de-industrialization, there was no incentive for ECOWAS states to
further liberalize their trade regime. According to Ojo,
governments, already
losing revenue from the SAP-imposed liberalisation of external trade, have been in no mood
to implement free trade further even at the regional level
(OJO, 1999: 122).
As previously noted, market integration has failed on the continent. It
has failed for several reasons: (1) lack of comparative advantage and economies of scale;
(2) huge economic disparity between member states; (3) the unequal distribution of
benefits, resulting in the regional giant(s) been the main beneficiary of integration
efforts; (4) the implementation of SAPs that have been counterproductive to the regional
agenda; (5) overlapping membership in regional economic organizations resulting in
contradictions in policy objectives and goals; (6) lack of political commitment to
regionalism; (7) dependence on external donors to fund the regional agenda, thus giving
them the autonomy to determine policy; and (8) the failure to address the realities of the
African environment. With respect to market integration, several authors recently noted
that One thing, which at least seems to be obvious, is that actors in the South
should think very carefully about the fruitfulness of following the blueprint of the
European Union or other regional schemes from the North. If regional organisation is to
play a real role in the economies of the South it has to be embedded into the real life
context of these economies (BOAS et al, 1999: 1025).
By examining the Southern African Development Community (SADC), one can
see all the above-mentioned problems associated with regionalism on the continent.
THE CASE OF THE SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADC)
Historical Overview
SADC was officially created in April 1980 as the Southern African Development Coordination
Conference (SADCC). It was created with the major objective of decreasing regional
economic dependence on South Africa and fostering regional development. The nine members
were Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Zambia, and
Zimbabwe. These countries agreed to focus on regional development and cooperation instead
of market integration, since, they argued, regional development and cooperation had to be
the precursor to market integration. Market integration was to be a future goal.
The strategy of regional cooperation was underpinned by sectoral development. Each member
state was given a regional sector to coordinate. Currently there are fourteen sectors. A
priority for development in the early years of SADCC was the regional transport and
communication sector, since it was determined that a viable transport network was a
prerequisite for increased intra-regional trade.
In 1992, the SADC member states determined that the time had arisen to move toward market
integration. This decision was sparked by the changes occurring in South Africa and within
the world economy. With a prospective post-apartheid South Africa joining the
organization, SADCC knew it could no longer have as a major objective decreasing economic
dependence on the apartheid regime. Similarly, with enhanced globalization and the
creation of new trading blocs, the SADCC member states felt that market integration was
necessary in order to prevent the region from becoming further marginalized within the
world economy. This reassessment resulted in the birth of the organization as the Southern
African Development Community (SADC) with the major objective of fostering regional
development integration. By 1997, SADC had fourteen member states (the original nine plus
Namibia, South Africa, Mauritius, the Democratic Republic of the Congo, and Seychelles).
The 1992 transformation of SADC into a development community must be placed in context,
especially since the organization was perhaps not ready for the transformation. When the
SADCC member states rejected the EU model of market integration, SADCC became the first
organization that had the courage to reject the model and break new ground with respect to
regionalism in the developing world. South Africas policy of regional
destabilization that lasted from 1980 to 1989, prevented the member states from actually
implementing this unique strategy. Consequently, in 1992, when the organization was
transformed into a development community, the fundamental reasons for the initial
rejection of market integration had not changed. The markets of the regional countries
remained undiversified and most countries had not developed comparative advantages. In
addition, the infrastructure of the region remained in need of great repair. Thus, without
goods to trade and an infrastructure to get the goods to the market, the member states
were fundamentally no better off in 1980, albeit regional destabilization had come to an
end. Therefore, the decision to move toward market integration seemingly was not
realistic. So why did the member states at this juncture resort to a strategy, market
integration, that had failed miserably on the continent?
Part of the answer rest with the fact that SADC remains dependent on its international
cooperating partners (governments, non-governmental organizations NGOs, and IFIs)
for the majority of its funding. Consequently, the member states have limited autonomy of
policy. Such partners had always seen South Africa as the engine for regional development
and the gateway to the regional market. When SADC was formed, it did not receive
overwhelming support from the West because South Africa was excluded as a member. With an
anticipated post-apartheid South Africa joining the organization, the SADC member states
were forced to redefine their goals and objectives. With South Africa at the helm, the
region was to integrate and provide the capitalist core with the long overdue regional
market. With a view to realizing this, the SADC member states have been involved in
negotiations for the creation of a FTA.
The impending establishment of a free trade FTA among the SADC member states poses
problems that may undermine the very purpose of its establishment. The FTA is scheduled to
go into effect September 2000. The blueprint for the FTA is contained in the SADC Trade
Protocol, approved by the Heads of State and Government at the SADC Summit held in Maseru,
Lesotho in August 1996. In November 1998, eleven member states began negotiations for the
creation of a FTA. The formal structure for negotiations is called the Tariff Negotiations
Forum (TNF).
The challenge before the SADC member states to implement market integration through the
creation of a FTA is daunting. They are faced with numerous and serious constraints,
including South Africa's regional economic hegemony and the recently signed EU/SA FTA. In
addition, the regional trade regime is competitive instead of complementary, and there
does not exist economies of scale in the region. Overlapping membership in regional
economic organizations adds more complexity to the notion of a FTA among the SADC members,
as does the seemingly questionable political commitment to market integration. Then once a
FTA is implemented, where will the resources come from to compensate countries from lost
customs revenue?
The remainder of this section will elaborate on some of the problems
the SADC member states are confronted with in trying to move toward market integration.
They include long-standing regional trade patterns; the current negotiations for a FTA;
and policies the member states will need to put in place in order to underpin a FTA.
Long-Standing Regional Trade Patterns
Long-standing regional trade patterns that are having an impact on the movement toward
market integration in Southern Africa include South Africa's regional hegemony,
overlapping regional economic organizations, and bilateral trade agreements.
South Africa's regional economic hegemony, as reveled by the pie chart below, is the major
constraint to market integration in Southern Africa. This hegemony is most pronounced when
placed within the context on intra-regional trade. South Africa's trade ratio with the
region is 6:1, a ratio that the South African government admits is untenably. It is indeed
ironic then that South Africa would negotiate a FTA with the European Union since the
agreement will no doubt exacerbate the current trade imbalance and further destabilize the
economic structures of the regional countries. As the regional giant, South Africa will
benefit the most from a SADC FTA.
The issue of market integration is made more complex by overlapping regional economic
organizations, including the Southern African Customs Union (SACU), the Common Market for
Eastern and Southern African Customs Union (COMESA), and the East African Cooperation
(EAC). All of the SADC member states, with the exception of Mozambique, are also members
of at least one of these organizations (see table below).
While SACU is already involved in market integration as a customs
union, the other two organizations, like SADC, are in the process of moving toward market
integration. SACU, which includes South Africa and the BLNS states (Botswana, Lesotho,
Namibia, and Swaziland) is the oldest customs union in the world. As an apartheid relic,
the BLNS countries remain connected to a structure that has resulted in the economic
development of South Africa at their expense. Consequently, the economic structures of the
BLNS states remain undeveloped and economically dependent on South Africa. The rules and
regulations guiding SACU, as well as COMESA and the EAC, are fundamentally at odds with
those guiding SADC. Consequently, continued membership in overlapping regional economic
organizations raises questions about the commitment member states have toward SADC market
integration.
Regional Bilateral Trade Agreements
Botswana |
Malawi |
Mozambique |
Malawi |
South
Africa |
South
Africa |
Zimbabwe |
Malawi |
|
Botswana |
||
Mozambique |
||
Namibia |
South
Africa |
Zimbabwe |
Malawi |
South
Africa |
|
Mozambique |
Botswana |
|
Zimbabwe |
Malawi |
|
Namibia |
According to the SADC Trade Protocol, not only are bilateral trade agreements legal, but
they may remain in place as long as such agreements are more advantageous to member states
than those offered under the FTA. As a result, negotiations are continuing for the
creation of additional bilateral agreements while FTA negotiations are taking place. Under
these circumstances, member states will not be required to implement all the provisions of
a FTA.
UNCTAD, in a recent study on trade in the SADC region, identified numerous untapped
trading opportunities. Specifically, the study argues that these untapped trading
opportunities exist for non-SACU SADC countries to increase their exports to the SACU
countries. This is possible if SACU, instead of sourcing specific products from the West,
imports them from its SADC neighbors. Sectors where trade can be enhanced include food,
petroleum, resource-intensive basic manufactures, and miscellaneous manufactures (Von
KIRCHBACH and ROELODSEN, 1998). The study notes, however, that "Despite the growth in
intra-SADC trade, it is not self-evident that a free trade area would necessarily expand
the trade of the member countries with each other." (Von KIRCHBACH and ROELODSEN,
1998).
With respect to the potential for increased intra-regional trade, the South Africa
Department of Trade and Industry argues that Given the prevailing trade imbalance in
the region and the fact that it is unlikely to be alleviated in the short to medium term,
even if attempts to develop and diversify the region's industrial base are successful the
region should explore ways of increasing trade in non-traditional tradables. The potential
for the importation of water and energy by South Africa from the rest of the region should
be explored. Given the abundant endowments of these resources in the region and South
Africa's diminishing domestic resources, accompanied by rising demand, energy and water
emerge as areas where intra-regional trade may be enhanced and the current trade imbalance
redressed. (SADC Briefing, 1999: 7).
Given the somewhat limited prospects for serious increased trade in the SADC region, what
are the prospects for the creation of a FTA?
Negotiations for the Creation of a FTA
One of the most controversial issues involving the trade negotiations has been how to deal
with sensitive sectors. This is especially difficult because these are the sectors that
are regionally competitive. They include (1) motor vehicles; (2) textiles, clothing,
footwear and leather; and (3) sugar. The sugar industry will be examined to illustrate
some of the problems the member states are trying to resolve. In addition, the issue of
trade offers with be examined in order to explain some of the problems negotiators are
experiencing in this area.
The major problem with the sugar industry is that a large majority of
SADC countries produce sugar, although only four are major producers. As a result, there
exists competition among the countries for market access. Although South Africa produces
the largest amount of sugar annually (an estimated 1.2 million tons), Zimbabwe is the most
efficient regional producer. Given this reality, SACU has proposed a regional sugar
protocol that would introduce sugar quotas into the region and protect the sector against
other regional producers. The SACU proposal calls for The sharing of growth in the
SACU market, divided amongst all SADC sugar-producing countries according to net surpluses
exported to the world market. In order to address concerns about the possible adverse
effect of a fall in the SACU market growth after the initial 3-year access period, SACU
offered to guarantee a minimum annual growth of 45,000 tons.
For the first year, SACU proposed that SACU's market share of 45,000 tons would be
distributed as follows: "40,000 tons to SACU suppliers, 3,000 t to Zambia, 2,000 t to
Zimbabwe and zero allocations to Malawi, Mauritius, Mozambique and Tanzania."
Clearly unhappy with this offer, the non-SACU SADC countries presented
a counter proposal at the 13th TNF in Cape Town during September 1999 that stated that
Market access should be reserved to non-SACU countries on the
basis of a 5% share of the total SACU consumption. This would represent an annual tonnage
of 75,000 tons and would secure a reasonable initial access into the SACU market.
As from year 2 and the ensuring year, the 75,000 tons would be
increased to take into account the actual growth in the SACU market.
The 75,000 tons would be shared among the non-SACU countries who
would agree among themselves on the initial quotas.
A reallocation formula would be provided for in the case of
shortfalls by individual countries.
To further illustrate how far apart the SACU and non-SACU countries are on this issue,
Zimbabwe, which was only allocated 2,000 tons under the SACU proposal, indicated that it
felt it should have market access of 85,000 tons. And Tanzania "sought clarification
because it did not see logic prevailing when SACU reserves for itself a quota of 40,000
tons."
In response to the non-SACU countries, "SACU recapped its earlier position that there
will not be a free market access on sugar, a fact which underlies the very need for an
arrangement."
The creation of a trade offer is a long and arduous process. Specific guidelines must be
followed regarding categories for tariff reductions, their pace, and time frame. In
addition, each offer must be placed within the context of 21 sections and 97 chapters for
negotiations.
Trade Offers : Sections of Chapters for Negotiations
The first trade offer presented to the Trade Negotiation Forum (TNF) was by SACU. As
evident by the controversy over sugar in the region, the SACU five have in many respects
acted as one unit. Notwithstanding the fact that the SACU offer was supposed to represent
the position of all five member countries, it appears that the offer was drafted by South
Africa with little, if any, input from the other SACU members. Consequently, during
negotiations, several SACU countries distanced themselves from the offer. According to a
Zimbabwean government official, I think SA did its own offer and they tabled it. For
the BLNS states there was not consultation to cover their various interests within the
offer itself to the extent that they almost wanted to say in one of the TNF's that the
SACU offer, we were not agreeable to that. Some of the positions that are being taken
there up to now, when we discuss sensitive areas like sugar, motor vehicles, we would find
more often than not, Botswana and Namibia, they would pull-out of the SACU position and
they would tell you its not our position.
Since the SACU offer did not represent the interests of all the BLNS
countries, they began talking about the need for the non-SACU SADC countries to treat the
BLNS countries differently than South Africa, since South Africa was classified as a
developed country and they were classified as developing countries. Given the reality of
the huge economic disparity between South Africa and the BLNS countries, the non-SACU SADC
representatives at the negotiations initially thought that the BLNS countries went along
with the SACU offer because South Africa had offered them something beneficial in return.
As negotiations continued , however, it became clear that not only was SACU not united in
the trade offer, but also that South Africa had not made a special offer to the BLNS
countries. The request for differential treatment by the BLNS countries resulted in
Mozambique also requesting such treatment. This complicated the negotiations tremendously
and many countries were angry at the fact that they had spent time and money developing
their individual offers and now they were being requested to develop separate offers for
the BLNS countries, all because South Africa had taken the liberty to develop a SACU offer
without consulting the BLNS states.
The member states finally reached an agreement on this issue at the 13th TNF, held in Cape
Town in September 1999. The member countries agreed that South Africa would be treated
differently from the rest of the SADC countries. Consequently, each of the non-SACU SADC
countries would have two separate trade offers: one for South Africa and one for the other
SADC countries.
At the 14th TNF, held in Dar es Salaam, November 3-5, 1999, Mauritius, Tanzania, and
Zimbabwe presented their differentiated trade offers. These countries now have two
separate offers on the table: one for South Africa (the original offer) and one for the
other SADC countries. Zimbabwe's two offers are as follows:
Policies Needed to Underpin a FTA
Policies needed to underpin a FTA discussed in this section include: compensatory policies
for revenue losses and foreign investment.
In a recent study conducted by the Centre for Research and Finance in Southern Africa, it
was determined that with a FTA, the following customs revenue losses will be experienced:
The countries most affected will be Malawi, Mauritius, Zambia, and Zimbabwe. Where will
revenue come from to compensate these countries for their losses? While it has been
proposed that most would have to be sourced from restructuring and expanding the tax
system in these countries, in reality this is not likely to happen. Nor is South Africa
likely to provide any compensation to these countries for their losses.
Investment is another major problem for FTAs. There is a direct
correlation between trade and investment. It is through increased investment that
countries are able to diversify their export markets and therefore increase intra-regional
trade. Such investment, however, is usually made in the more developed member state(s). In
this case, it is anticipated that the majority of such investment will be made in South
Africa, resulting in greater regional polarization. If policies are not put in place for
all member states to share in the benefits of market integration, there is a great
probability that they will either withdraw from the organization or become non-active
members.
Market Integration in SADC?
It is therefore for all the above-mentioned reasons, that market integration is not viable
at this juncture in the SADC region. The current negotiations over the FTA point to the
growing competition in the region. Market integration will likely exacerbate this problem,
leaving most of these countries more vulnerable to neo-liberalism and globalization than
presently exists.
THE WEAVE-WORLD OF REGIONALISM AND GLOBALIZATION
In light of the failure to date of regionalism in Africa, numerous scholars have made
recommendations for the way forward. Two of these recommendations will be examined in this
section, along with a third that stems from the theory and practice of regionalism in
Africa as discussed in this paper.
External Guarantors
The failure of market integration in Africa and the realities of the world economy
resulted in Jeffery Fine and Stephen Yeo proposing a new paradigm for regional integration
in Africa. The new paradigm argues that regional integration should be anchored in an
external guarantor, such as the European Union. The argument for such an arrangement is
premised on the notion that Previous attempts at regional integration, at least in
SSA, have failed to realize even a modest part of their stated aims
Renewed efforts
along these traditional lines are not advisable, for two reasons. First, closer
integration in terms of freer flows of goods and services is now more likely to result
from unilateral tariff reduction that confer most-favoured-nation status on ones
neighbours. Second, there are unlikely to be any significant immediate economic gains (at
least in the short run) from access to a larger local market and the removal of trade
distortions. Certainly such gains would not justify a major effort to shore up existing
regional entities that, for reasons argued earlier, are inappropriately structured, since
they were designed to pursue a very different approach to economic development (FINE
and YEO, 1997 : 437).
With sustained economic growth as the ultimate rationale for closer regional integration,
Fine and Yeo note that We depart from traditional approaches to regional integration
by suggesting that its virtues lie not in its ability to stimulate new trade, but rather
in its ability to provide a framework for locking in sound and stable macroeconomic
policies that will in turn induce faster accumulation, and more effective utilization of
physical and human capital (FINE and YEO, 1997 : 449).
Such stable macroeconomic policies would be overseen by an external
guarantor such as the EU.
The external guarantor model has it roots in the West African Economic
and Monetary Union (UEMOA). UEMOA was established in 1993 by France and the countries who
were members of the West African Economic Community (CEAO) and the West African Monetary
Union (UMOA). These countries included Benin, Burkina-Faso, Côte dIvoire, Mali,
Mauritania, Niger, Senegal, and Togo. UEMOA replaced both CEAO and UMOA. The currency
(CFA) of these countries is linked to the French franc (FINE and YEO, 1997 : 449).
According to Fine and Yeo, Using the pretext of Maastricht, France could have
commenced withdrawal, through a variety of means, from an arrangement that had proven
increasingly costly to maintain in recent years. Instead, it has moved in the opposite
direction, embedding an expanded role in a new international treaty for which it acts as
the ultimate guarantor. Furthermore, the commitment is open-ended, involving the
establishment of new multilateral institutions and surveillance of macroeconomic policies
whose credibility ultimately rests on France herself. In short, Frances role as
guarantor appears significantly greater than under the previous monetary agreement
(FINE and YEO, 1997 : 451).
In analyzing this model, Colin McCarthy acknowledges that
Bringing the European Union in as an external power through agreements that will
ensure sound macroeconomic policies in SSA countries does remind one of the politically
indigestible suggestions in some circles that the economic problems of Africa could be
solved through the recolonization of the continent (Mc CARTHY, 1999:
42).
Nonetheless, he argues that the idea makes eminent sense (Mc CARTHY, 1999:
42).
While the idea of having external guarantors does raise the
controversial issue of the recolonization of Africa, the EU does not view
anglophone Africa in the same light as France views francophone Africa. One could
therefore not anticipate the EU investing in anglophone Africas economic survival to
the extent that France has invested in francophone Africas survival.
Regionalism from Below Back to Basics
Contrary to Fine and Yeo, for Morten Boas, Marianne H. Marchand and Timothy M. Shaw, the
first thing that must be done to solve the current problem facing the South in this
weave-world of regionalism and globalization, is to abandon the EU model. Next, regional
organizations, if they are going to play a real role in the economies of the
South, must be embedded into the real life context of these economies (BOAS et
al., 1999 : 1065). In many cases the authors note that regional organizations are out of
touch with the reality in Africa. Consequently, they fundamentally ignore the informal
economy. Boas et al therefore feel that the informal economy needs to be reattached to the
formal economy. After all, Quite often it is here, and not in the formal economy,
that we find considerable, albeit not always legal or sustainable, let alone desirable,
imagination, innovation and entrepreneurship. The informal second economy covers a whole
range of activities, from street vendors and small-scale informal cross-border trade to
the warlordism of Sierra Leone and Somalia and the large and intricate cross-border
smuggling of gem stones from Angola and Senegal, and drugs from Columbia, Nigeria and
Burma to products of child labour in myriad enterprises around parts of the South,
including ubiquitous Special Economic Zones
(BOAS et Al, 1999 : 1065)
Boas et al argue that states in the South should return to a Back to Basics
strategy of regionalism from below. Such a strategy should start with the actual
(formal and informal) trade flows and cooperation networks which already exist. As these
flows and networks exist mainly between neighbouring countries, we suggest that this
multitude of informal (and formal) cross-border trade activity should in fact constitute
the starting point for (formal) regional organisation. In this way, existing regional,
cross-border trading practices and related activities will inform the creation of formal
regionalisation schemes, while these regional institutions, in turn, could and often do
structure informal regional practices and activities (BOAS et al, 1999: 1066).
The need to reattach the informal sector with the formal is very apparent in Southern
Africa. For example, the SADC borders are so porous that, according to a recent USAID
study, there exists more informal trade between Malawi and its neighbors Zambia,
Mozambique, and Tanzania, than formal trade. In fact, the only area where formal trade was
larger than informal was Malawi's exports to Mozambique. Total formal exports were only
69.3 percent of informal exports and imports were 30.4 percent. Consequently, the
government of Malawi loses a significant amount of revenue as a result of informal trade.
While annual losses from agricultural trade are only estimated to be US$ 762,000, losses
from non-agricultural trade are estimated to be US$12 million, which was about 4 percent
of Malawi's 1996/97 budget. Since it is estimated that only 60 percent of informal trade
was actually recorded, revenue losses from agriculture goods, for example, could be as
high as US$ 1.3 million (MINDLE and MAKHMWA, 1998).
Notwithstanding the revenue losses to the government of Malawi, the income generated from
informal trade is significant for the traders and their families. In addition, food is
made available to communities that may not otherwise have it, and it is made available in
smaller quantities often at affordable prices. The informal agriculture trade sector is
consequently very important for enhancing food security. Specifically, 25 percent of the
value of the informal trade, or US$ 11 million, was income generated. In addition
The trade in agricultural commodities provided three types of opportunities: during
the period immediately after the harvest, it provided markets for surplus farm produce and
income for the local producers; during the long period between harvest and planting, the
trade provided the producers with opportunities to invest their capital in other
non-agricultural activities; and finally, the imports of grains, pulses and vegetables
provided food in low income households in the major towns such as Lilongwe, Blantyre, and
Zomba ((MINDLE and MAKHMWA, 1998).
The Malawi story is very similar to that of other SADC countries.
Regional Cooperation/Regional Integration Nexus
The weave-world of regionalism and globalization as explained in this paper does not
co-exist well within the African context. In fact, it appears to be counterproductive to
the African agenda of economic growth and development. Although both African leaders and
economic and political forces within the capitalist core must assume responsibility for
this incompatibility, African leaders must do their part to remedy the situation. Although
regionalism as currently practiced in Africa is definitely a problem, it does not mean,
however, that the regional agenda should be abandoned. What is means is that the
objectives of the regional agenda should re-defined to take into consideration African,
and not European, realities. Calls for the rejection of the EU model of market integration
is not new. The theoretical literature is replete with reasons why the EU model has failed
in Africa. Although African leaders criticize the IFIs for imposing the same medicine that
continues to make African economics sick, they in turn continue to impose the medicine of
market integration that only deepens the sickness of their economies. This does not mean
that market integration should be rejected out-right. What it suggests is that as the
benefits of structural adjustment would have perhaps been realized had SAP policies been
introduced incrementally; similarly, market integration could perhaps be realized if it is
implemented incrementally. This would require that African countries first put in place
the prerequisites for such integration.
How then can regionalism and globalization co-exist and lead to economic growth and
development in Africa? First and foremost, African leaders must discontinue the practice
of designing and/or supporting grandiose schemes based on the EU model. Lessons should be
learned from SADC when it rejected the EU model as a basis for enhancing regional growth
and development. Regional cooperation should be pursued as part of any regional economic
strategy. Both SADC and ECOWAS have experienced their greatest success, not in
implementing market integration, but in implementing regional projects designed to help
facilitate economic growth and development. The SADC Power Pool, for example, is
experiencing tremendous success in attempting to integrate the electrical power grids of
all the member states. This will not only serve to guarantee the availability of
electricity when states experience shortages, but it will also make available to the
larger population reliable and affordable electricity. This is development and
integration. In the case of both ECOWAS and SADC, the development of, or improvement in,
existing regional infrastructure enhances the ability of countries to have access to each
others markets, and it allows those historically marginalized because of poor
infrastructure, to become active participants in either their national or regional
economy. Again, this is both development and integration.
Regional cooperation should be accompanied by a strategy of regional integration, which,
as previously noted, is defined as a process by which a group of nation states
voluntarily and in various degrees have access to each others markets
and establish mechanisms and techniques that minimize conflicts and maximize internal and
external economic, political, social and cultural benefits of their interaction.
Both the formal and informal market is taken into consideration in this definition. With
respect to the latter, the idea by Boås et al to have the informal economy reattached to
the formal economy, leading to a strategy that considers studying the political economy of
the informal sector from below, is certainly worth considering. In Southern Africa, for
example, between the trade that transpires within the informal sector and that through
bi-lateral trade agreements, the region is significantly integrated. Why spend huge sums
of money negotiating for a FTA when in the end, member states have made it very clear that
only when the advantages of the FTA outweigh the advantages of bi-lateral agreements, they
will implement the former? In addition, it is very difficult to enforce FTA agreements in
Africa. Instead of fighting among themselves for access to regional markets, more time
could be spend planning for comparative advantages in anticipation of developing the
foundation for market integration.
It goes without saying that regional cooperation and regional integration can only be
implemented under conditions of political and economic stability. In addition, African
leaders must make a serious commitment to the regional agenda. This means the
rationalization of overlapping regional memberships, and using African funds, instead of
donor funds, to spearhead the regional agenda. Without economic autonomy, the capitalist
core will continue to dictate how best the weave-world of regionalism and globalization
can satisfy its objective of continued economic hegemony in Africa.
CONCLUSION
At the beginning of the new millennium it is imperative that African countries begin to
seriously redefine both the theory and practice of regionalism in Africa. Although market
integration, based on the EU model, has failed miserably on the continent, African
governments continue to adopt it, believing the strategy will enhance economic growth and
development. It has been argued in this paper that market integration in Africa has been
counterproductive to the regional agenda, and therefore, regionalism as currently
practiced in Africa is part of the problem and not part of the solution. One of the major
reasons for its failure rest with the fact that the strategy does not take into
consideration African realities.
Instead of market integration, it is proposed that African leaders adopt a strategy that
includes both regional cooperation and regional integration. Such a strategy, it is
argued, is more conducive to African realities, and could perhaps result in Africas
capacity to better co-exist within the weave-world of regionalism and
globalization. Although the implementation of the proposed regional cooperation/
regional integration nexus strategy will not solve Africas economic problems, it
will certainly not be counterproductive to the African regional agenda. If placed within
the context of African realities, regionalism in Africa can certainly be part of the
solution instead of part of the problem.