Strengthening Regional Economic Integration for Africa’s Development - Part I. Ms Bineswaree Aruna Bolaky Africa Section Division for Africa, LDCs and Special Programmes 24 June 2011. Structure of presentation. Part 1 Brief History of Regional Integration in Africa
Ms Bineswaree Aruna Bolaky
Division for Africa, LDCs and Special Programmes
24 June 2011
Part II by my colleague-Ms Milasoa Cherel Robson
Recognizing the importance of regional integration to developing a strong,united Africa, the continent’s leaders have established a number of initiatives, the most notable of which include the following:
Some of the objectives of the first phase of the MIP are:
Three major theoretical motivations for the formation of trade blocs are the:
A. Allocation effects
BUT Aggregate figures hide important country variations Africa:Intra-african trade
Southern African countries are more integrated Africa:Intra-african trade
Agricultural goods much less trade-intensive within the region than are manufactured goods
Potential for increasing intra-African trade in agricultural goods remains largely untapped
Encouraging investment in agro-industries could generate important benefits for African economies
Intra-African trade in exports less concentrated than exports to rest of the world. 39 products account for two-thirds of intra-African trade. 7 products make up two-thirds of Africa’s exports to rest of the world
Intra-African trade more diversified than trade with rest of the world. This suggests that expanding intra-African trade
could yield significant benefits to African countries in terms of diversifying their production to non-traditional products especially manufactures
Intra-African trade though it is more diversified in terms of products traded than Africa’s trade with the rest of the world, however remains highly concentrated not only in geographical terms but also with respect to a few strategic commodities
Obstacles to intra-African trade
“Weak” attraction forces
Strong “opposing” forces
(c) High “trade” costs: transport, border and behind the border costs
(d) Institutional factors: corruption, poor economic policy, political tensions
Depending on sectors, the share of Africa in total cross-border M&A sales in Africa ranges between 17 per cent and 58 per cent.
Greenfield investments, in contrast, are rather small. Only the financial sector attracted greenfield investments from Africa representing more than 20 per cent of total greenfield investments in the period 2003–2007
Intra-African investment is (M&As) is highest in the services sector, where it accounts for 36 per cent of deals carried out in Africa, followed by manufacturing (30 per cent) and then the primary sector (26 per cent).
Low figure of intra-African
investment in agriculture- fear of losing control over land
Intra-African investments come from three main poles. The West African pole, dominated by Nigeria, has developed recently and is very active in mergers and acquisitions in Africa’s banking sector.
The Northern pole comprises the Libyan Arab Jamahiriya, Egypt and Morocco.
Since the end of apartheid, South Africa has been the major player in intra-African trade and investment.
West Africa is the main source of regional private investment flow into South Africa in 2000 and 2007, whereas South Africa’s private sector investment into West Africa was not as dominant. Instead, East Africa and Southern Africa were the main subregions hosting South African investment during this period.
The inflow of FDI over the years has come exclusively from the private sector, particularly Mauritius (East Africa). Similarly, the outflow of portfolio investment from South Africa has been mainly to West Africa (Ghana most recently).