Why Regional Integration Is Not A Solution To Africa's Underdevelopment

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Why Regional Integration Is
Not A Solution To
Africa’s
Underdevelopment


by


 

Moeletsi Mbeki

South African Institute of International Affairs (Johannesburg)

June 2004

 

 

About
three years ago, the Organisation of African Unity (OAU) vanished and was
replaced by the African Union. The OAU was formed in 1963 with the specific
mission of liberating those parts of
Africa
that remained under colonial rule and apartheid domination. There were others
who wished for the OAU to be more ambitious and bring into being a ‘united
states of Africa’.

Today,
Africa’s model for regional integration is no longer the
United States of America
but rather the European Union. This should immediately tell us something about
regional integration, at least in Africa – it is not a home-grown product but
tends to be a copy of other people’s efforts. As with all imitations, regional
integration in Africa
is a superficial movement that is unlikely to achieve many of its architects’
stated objectives.


Lessons from European integration

European integration, a process that is far from complete, was a result of the
recognition by Europe’s
leaders that, if their countries did not do something to modify the founding
principles of sovereign rights of states,
Europe sooner or later would
tear itself apart. In less than three generations between 1870 and 1945, two of
Europe’s most powerful states, France and Germany, fought three wars, each more
devastating than the one before.

The
advent of nuclear weapons brought the message home to Europeans that urgent
steps needed to be taken to avert another war between European powers. Regional
integration was seen as an inevitable road.

Western Europe, especially after the Second World War, was faced with another
threat, the threat of being engulfed by Soviet communism and by home-grown
communist insurrections in such important countries as France, Spain, Italy and
Greece. Emerging from the war, Europe did not have the power to defend itself so
it turned to the United States, both for military protection and for assistance
to regenerate its shattered economy.

The
Americans were glad to help as they also felt that Soviet expansionism,
especially into the industrial heartlands of Europe, threatened their interests
as well. To the Americans, the many countries of Europe that were forever at one
another’s throat could not be strong partners in its struggle against the Soviet
Union. The Americans therefore demanded a strong element of regional integration
from Europe as a condition for providing it with the nuclear umbrella.

Even
before regional integration initiatives got under way, Europe had developed
entrenched states that had been in existence for a number of centuries. These
states were in physical control over their entire territories and, above all,
controlled their political, social and economic systems.

Secondly, by the mid-20th century European societies had achieved similar levels
of economic development, and their populations enjoyed similar standards of
living. There were of course exceptions, such as the Iberian Peninsula and parts
of southern Europe that were lagging behind. But these could be pulled up by the
rest of Europe at a minimum cost through all sorts of targeted subsidies.

This
industrial uniformity made it possible for Europe to implement trade
liberalisation measures, the cornerstone of regional integration, with
relatively little fear and likelihood of some countries’ economies and
industries being swamped by those of their more developed partners.


African states not African creations

African states as we know them today were not created by Africans. With a few
exceptions, such as Egypt, Ethiopia, Liberia and perhaps South Africa, African
states were created by European imperial powers at the Berlin Conference of
1884-85. Africans did not gain control of these foreign-created states until
recently, in the 1960s.

African states therefore suffer from a number of important handicaps. They
suffer from weak allegiance by their citizens to these states. This explains why
African countries during the past 30 years have been centres of many conflicts,
in particular civil wars, inter-tribal wars, violent communal conflicts and
pogroms, wars of secession, and, more recently in the Great Lakes region of
central Africa, attempts at genocide.

These
great conflicts have been accompanied by vast population movements in and out of
different national boundaries.
Africa,
not surprisingly, is host to the largest number of refugees and internally
displaced persons in the world.

Secondly, because these states have only recently been captured by African
rulers, African elites perceive sovereignty as a valuable economic asset because
it enables them to enrich themselves. This further exacerbates the weak
allegiance of the populous towards these states as the process of elite
self-enrichment undermines the ability of these states to deliver services to
the general population.

An
important aspect of conflicts in
Africa,
unlike conflicts of the past in
Europe, has been the almost
complete absence of inter-state wars. As we saw in the case of Europe, fear of
devastating inter-state wars was one of the driving forces behind European
regional integration. This is not the case in
Africa.
During the past 50 years there has been only two inter-state wars among African
countries. These were the war between
Tanzania and Uganda in the
1970s and the war between Ethiopia and Eritrea in the 1990s. The latter war
could in fact be considered to have been the continuation of the secessionist
war of Eritrean rebels from Ethiopia.

From
this brief discussion of the experiences of Europe and Africa with state
formation and development, it should be clear that regional trade integration
cannot, at this stage in Africa’s history, be a major driving force behind
Africa’s corporate co-operation. Regional trade integration was also not a
driving force behind corporate co-operation in Asia and in Latin America and
Asia either. One of the oldest regional organisations in
Asia
– the Association of South East Asian Nations (Asean) – was inspired more by
fear of communism than by economic development objectives.


Constraints to African regional trade integration

We
have seen that European countries, big and small, achieved a high level of
industrialisation and economic development long before regional trade
integration was high on their agenda. It was political and security issues
rather than economic development issues that drove European integration.

In
Africa we have a different starting point. As argued above, there are no
political or security issues behind African regional integration. Attempts to
introduce these issues – as happened with the Southern African Development
Community (SADC) when Rwanda and Uganda invaded the DRC – only led to SADC’s
near collapse. African countries have been engaged in attempts at regional
integration for economic reasons.

It is
argued that most African countries are small, poor, underdeveloped and therefore
lack domestic markets. To compensate for these shortcomings, the argument goes,
it is necessary that African countries eliminate barriers to trade amongst
themselves. Through this route, African countries will be able to develop
enterprises with the requisite economies of scale to make them competitive in
the world markets, it is said.

The
experience of Europe however shows that this argument is flawed. If we take the
example of relatively small European countries – Sweden, Switzerland, the
Netherlands, Denmark, Belgium – these countries developed world-class companies
long before European integration became reality. Some of the large multinational
corporations developed in these small countries easily come to mind: Electrolux,
Volvo, Saab, Nestle, Philips, Unilever, Royal Dutch/Shell, ABB, Heineken,
Carling, Norsk Hydro, Roche, Maersk, UBS, ABN-AMRO to name but a few.

The
examples listed above demonstrate that it is not the size of a country’s
populations that determines whether a country industrialises or not. It is
rather a country’s skills pool and its control over its economic and social
policies that in the final analysis determines whether a country industrialises
or not.

Key
to development

The
single most important factor that determines whether a country develops or not
is the degree to which the country concerned is able control its political,
economic and social space and therefore its policies. This is still not the case
with most African countries. African social, economic and, to a large extent,
political policies are not controlled by Africans or, more accurately, by
Africa’s rulers. They are controlled rather by foreign actors who manage these
policies to the benefit of foreign actors. The following are amongst the most
important non-African actors that determine African policies.


*Foreign multinational corporations.

The
most striking examples today are the oil companies which run massive extractive
industries in Africa which have almost zero linkages to the local economies
where they operate besides a trickle of royalties that goes to pay for imports
to finance elite consumption and to fuel corruption and repression.


*Multi-lateral financial institutions.

Through various forms of conditionality these dictate the economic and social
policies of African states.


*Other foreign state and non-state actors.

Because of their role as donors and/or creditors these have extensive leverage
and therefore influence over the social and economic policies of African states.

Another important factor that determines whether a country develops or not is
its ability to generate a meaningful economic surplus on one hand and, on the
other hand, its ability to direct a large part of that surplus to productive
investment rather than merely to private consumption. A large part of
Sub-Saharan Africa’s surplus leaves the continent as debt repayment,
expatriation of profit, capital flight, etc.

One of
the most disgraceful but under-reported scandals in Africa is the extent to
which African elites export capital from the continent. According to the United
Nations, nearly 40 percent of
Africa’s
private wealth is kept by its owners outside the continent compared to only 3
percent of South
Asia’s private wealth and 6 percent of East Asia’s. The small economic surplus
that remains, as we have seen, goes to finance elite consumption and to pay for
the running of the largely unaccountable state.

These
are some of the factors that explain the inability of Sub-Saharan African states
to train and retain the skilled people they need in order to embark on a
sustainable industrialisation drive comparable to that of, for example south and
east Asia.

During
the last 40 years or so, vast amounts of time and money have been expended on
promoting regional integration in
Africa,
largely to no avail. The pathetically low trade flows among African countries –
excluding South
Africa – have largely remained unchanged from what they were a generation ago,
despite all the energy that has been devoted to regional cooperation and
integration over the years.

If we
examine what happened in western Europe in the past, and what is happening in
Asia now, it would appear that two engines drive development and
industrialisation. These are, firstly, policies that promote capital
accumulation and investment in social capital – healthcare, education, public
housing and social peace.

The
first policies lead to another outcome that was the second main driver of west
European industrialisation and development in the past and of Asian
industrialisation today, that is, competitiveness in world markets.

These
are the factors that explain why small countries in Europe were able to achieve
the same level of development as big countries long before European integration
appeared on the horizon after the Second World War.

A
similar message applies to
Africa.
It is the developmental domestic policies and practices of individual countries
that will drive
Africa’s development
in the first instance, not how neighbours cooperate. What happens between
neighbours is important mainly for reasons of political stability, but what will
drive African economic development is the quality of relations between
individual African countries and the world market. (African markets are of
course subsumed in world markets.)

Similarly, it was the ability of small countries in Europe to compete in world
markets that made it possible for them to achieve the same levels of development
as those of large countries which had the advantage of bigger domestic markets.

Way
ahead

This
exposition has been an overview of the general conditions especially in
Sub-Saharan Africa. There are however some exceptions. These are most
prominently South
Africa and Mauritius.
These two countries are developing industrial economies that if they are
sustained over a significant period could become important drivers for African
development not because of regional integration but because of their emerging
role as foreign investors in the rest of Africa.

As a
matter of fact Mauritius is a good illustration of the relative unimportance of
regional integration in the development process. At independence in the 1960s,
Mauritius was a typical African country – small land mass, small population,
single crop economy (sugar) which accounted for most of export earnings and
formal employment, multi-ethnic society, low per capita incomes. Today Mauritius
is, next to South Africa, the richest non-oil producing country in Africa. It
boasts an economy that is almost as diversified as that of South Africa –
Africa’s economic giant – and per capita incomes that now surpass South
Africa’s. This phenomenal achievement was not driven by regional integration; it
was driven largely by competitively priced, high quality clothing and textile
exports to world markets. Recently Mauritius has emerged, like South Africa, as
an important foreign investor in other African countries.


Moeletsi Mbeki is deputy chairman of the South African Institute of
International Affairs, an independent think-tank based at the University of the
Witwatersrand. This is an expanded version of a discussion paper presented at an
UNCTAD conference held in Germany in February 2004

 

 

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