Regional integration remains critical in African efforts to achieve productive and sustainable development
ECA Deputy Executive Secretary and Chief Economist, Hanan Morsy at the COM2024. Photo: @ECA_OFFICIAL / X (Formerly Twitter) African states continue to trade more with the outside world than among themselves, a report by the Economic Commission for Africa (ECA) has found.
The report was presented by Stephen Karingi, ECA director, regional integration and trade division, at this year’s edition of the Conference of Ministers of Finance, Planning and Economic Development (COM2024) that took place in Victoria Falls, Zimbabwe. The week-long annual gathering of the African finance ministers took place from February 28-March 05, 2024.
The African share of global trade has remained at less than 3 per cent, driven largely by merchandise trade, the report showed. This is an indicator that African countries continue to trade less among themselves despite on-going efforts to change the trend.
According to the report, Africa’s regional integration agenda is progressing very slowly. Aside from progress in monetary and financial integration, African member states have not met the macroeconomic convergence criteria, while infrastructure development through the Programme for Infrastructure Development in Africa has achieved mixed results.
The report noted that while roads and information and communication technology (ICT) advanced, rail transport and energy infrastructure progressed little, as infrastructure financing continues to be a serious challenge for the continent.
The report, however, indicated that there has been some progress in the fulfilment of the first 10-year implementation plan (2014–2023) of Agenda 2063: The Africa We Want, of the African Union, including the adoption of the agreement establishing the African Continental Free Trade Area (AfCFTA) and the creation of the Single African Air Transport Market.
Launched in 2018 by African countries, the AfCFTA is a free trade area to create a single continental market with a population of about 1.3 billion people and a combined gross domestic product (GDP) of approximately $3.4 trillion. The agreement entered into force in 2019. At its full realisation, the AfCFTA, which has the mandate of eliminating trade barriers, is envisaged to bring together the 55 African Union member states.
But the report said there has been poor progress in other areas that are necessary for the success of the agreement establishing the AfCFTA, such as the ratification of the protocol to the treaty establishing the African Economic Community relating to free movement of persons, right of residence and right of establishment, and fostering peace, good governance and security.
“The rising number of unconstitutional government changes highlights the ongoing challenges afflicting African countries, including weak governance, persistent poverty and limited employment opportunities,” said Karingi, adding that the second 10-year implementation plan of Agenda 2063 will need to address those challenges directly.
“States should continue to take the necessary measures to ensure that the regulatory environment is conducive to the mobilisation of sustainable financing of infrastructure by the private sector,” he added.
Regional integration, he said, remains critical in African efforts to achieve productive and sustainable development.
Some of the key highlights of the report on regional integration include:
Trade Integration: Despite trade under the Agreement establishing the AfCFTA having officially started on January 1, 2021, the envisaged changes in intra-African trade are yet to appear. Intra-African trade as a share of global trade declined from 14.5 per cent in 2021 to 13.7 per cent in 2022.
Over the same period, intra-African exports declined as a percentage of total exports from 18.22 per cent to 17.89 per cent, and intra-African imports declined from 12.81 per cent to 12.09 per cent.
Monetary and financial integration: Of the primary criteria, the inflation criterion was met the least in 2022. Inflation remained elevated in many African countries in 2023: the African average was 18.5 per cent, and in 19 countries inflation was above 10 per cent. General government gross debt in 2023 averaged 65.2 per cent of GDP for Africa, compared with the 2022 average of 64.6 per cent
Single African Air Transport Market: Currently, 36 members of the African Union, accounting for 89 per cent of the intra-African air transport market, have joined it. The market is expected to increase the frequency of flights along existing air routes by 27 per cent and allow for gains through economies of scale of about $500 million from passenger fares, free competition, the opening of new commercial routes, environmental protection and the development of the private sector in civil aviation.
Information and communications technology: Africa has not performed well in bridging the gender digital divide: In 2023, 32 per cent women used the internet compared with 42 per cent of men, against a global average of 65 per cent of females and 70 per cent of males.
Energy: The proportion of the world’s population without access to electricity residing in Africa rose from 74 per cent before the COVID-19 pandemic to 77 per cent in 2020. Thirty nine African countries can provide cheap and reliable energy to their populations by using renewable sources, including green hydrogen production.
Infrastructure financing: Africa still faces a massive annual infrastructure financing gap estimated between $130 and $170 billion. Other innovative financing instruments include blended finance, green, social and sustainability-linked bonds and debt-for-nature swaps.
The report recommended that the second 10-year implementation plan of Agenda 2063 should address those challenges directly
As a result of the concerns raised by this report, the delegates agreed to make the drive towards the full implementation of the AfCFTA a priority. To this end, the 2025 edition of the conference, COM 2025, to be held in Ethiopian capital, Addis Ababa, will be held under the theme: “Advancing the implementation of the Agreement Establishing the AfCFTA: Proposing Transformative Strategic Actions”.
In making the case for the theme, ECA Deputy Executive Secretary and Chief Economist, Hanan Morsy, said that inter-regional trade in Africa stands at only 13 percent, compared to 55 per cent in Asia and 70 per cent in Europe.
She stressed that Africa has an opportunity to leverage the AfCFTA to break into supply chains that would not have been possible before. However, challenges remain in terms of regulatory reforms needed to advance the implementation of the agreement on non-tariff barriers, the high cost of doing business, political impediments and connectivity challenges.
“One of the things we can look to incorporate when we are talking about the AfCFTA is the need for regional integration to address the issue of food security and energy transformation,” said Morsy, noting that without addressing the huge energy gap, Africa cannot accelerate industrialisation and address food insecurity.
Morsy said African policymakers must consider the game changers for advancing the implementation of the free trade agreement, which include developing and advancing cross border payment systems, the high cost of transportation across Africa and using the AfCFTA agreement to advance the development of carbon markets.
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