Promoting Africa’s Recovery and Long-term Growth through Regional Integration

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Regional integration can, if properly harnessed, become a vital factor in recovery and long-term growth of African countries. This view is reflected in a number of papers presented during the first day of the African Economic Conference taking place in Tunis from 27 to 29 October 2010. Wide-ranging discussions among participants at in this conference, co-organized by the African Development Bank (AfDB) and UN Economic Commission for Africa (ECA), highlighted the key role of the development of professional services, such as accounting, transfers of funds and engineering, in the process of regional integration. Indeed, as indicated in the paper presented by Mrs. Nora Dihel of the World Bank, a decline in the cost of transfers and the existence of high quality accounting are factors that can increase the volume and quality of intra-African trade, and thereby boost regional integration. The discussions also showed that transnational financial institutions are indispensable. For her part, Mrs. Inutu Lukonga of the International Monetary Fund (IMF), who presented a paper on the issue, there are only 18 African financial conglomerates operating in more than four (4) countries. An increase in the number of these conglomerates could, if accompanied by strict regulations, become a catalyst for integration, along with other pillars of regional integration such as infrastructure, trade and private sector development to which the African Development Bank pays special attention. This is because, for the AfDB, regional integration is a priority challenge at the core of its strategy to contribute to poverty reduction and sustainable development in its Regional Member Countries (RMCs). The Bank focuses mainly on the construction of infrastructure, capacity building and several other issues, including good governance and climate change. The infrastructure sector alone received 52.1% of ADB investments in 2009. Roads, ports, airports, railway, water, electricity, New Information and Communication Technologies (NICT): no aspect of the infrastructural superstructure has been neglected. On the continent, the currently available resources are far from covering the financing requirements of the sector. Even though nearly 93 billion dollars will be needed each year over the next decade to catch up on Africa’s lag in infrastructure, only half of this amount is currently available. In its capacity as leader in infrastructure in the New Partnership for Africa’s Development (NEPAD), the AfDB Group has made considerable efforts to accelerate integration between countries of the same region and between the different regions of the continent; for example, the construction of transnational roads in the Dakar-Cairo, Tripoli-Windhoek, and Lagos-Mombassa corridor projects. The AfDB Group is currently working to provide the missing links of these roads so as to give 15 of the 53 landlocked countries access to the sea. The challenge is all the more significant as these 15 countries account for one-third of the continent’s economy and 40% of its total population.  

Roads are essential in linking production and consumption areas on the continent. Only 40% of Africans living in rural areas have access to 2 kilometres of road throughout the year, as against 65% in other developing countries (Source: Africa Infrastructure Country Diagnosis). The state of the roads in Africa is such that it now takes 1 hour to travel 12 kilometres, as against 60 kilometres per hour for other regions in the world. AfDB’s ambition is to reverse this trend by creating better conditions for the movement of goods on the continent – a key factor of economic growth and direct foreign investments.
Giving fresh impetus to intra-African trade

In general, the Bank Group mobilizes substantial resources to facilitate the transportation of people and goods in Africa. This is evident in its support for airport and railway projects on the continent; examples include the Airport Capacity Improvement and Expansion Project in Morocco estimated at 98.07 million Units of Account (UA) and the Sidi Kacem-Meknes Railway Rehabilitation Project in Morocco estimated at UA 196.83 million.  Through these operations and many others, the AfDB seeks to give fresh impetus to cross-border economic, commercial and political relations. Indeed, it has been established that the most credible alternative for African countries is to come together and create markets that can attract investors. While the Bank gives top priority to transport infrastructure, it does not neglect the water and electricity sectors. In this regard, AfDB’s policy seeks to help regional member countries ensure access to water and electricity for the greatest number of Africans. The objective of the Rural Water Supply and Sanitation Initiative (RWSSI) is to ensure access to drinking water for nearly 271 million Africans by 2015. Some of the 60 trans-border basins identified in Africa also receive financial and technical support from the Bank, which strongly encourages African countries to develop irrigation and make it an asset in the quest for food security.

In 40 years, only 4 million hectares have been irrigated in Africa, as against 25 million in China and 32 million in India. The Bank’s agricultural strategy gives pride of place to the harnessing and control of surface water, as well as to the construction of agricultural infrastructure. The same attention is paid to the energy sector.  Currently, 47 sub-Saharan African countries together produce only 68 gigawatts of energy, which is equivalent to Spain’s electricity production. Not only is electricity not available, but it is also very expensive: 1 kilowatt/hour costs 0.18 dollar in Africa.

Convinced that there can be no economic take-off without energy, the AfDB has committed substantial resources to make electric power available in Africa, while promoting interconnection projects between several countries. Between 2006 and 2008, nearly 3,154 km of power transmission lines were constructed on the continent under Bank operations. These operations helped to connect at least 16 million people.  

Private sector Support to Regional Integration

As regards ICTs, the AfDB Group has embarked on the development of optic fibres on the continent. This is the case with optic fibre cables, Main One, deployed in West Africa. AfDB-financed roads have also been developed over the past few years so as to allow for the installation of optic fibre below the surface. In addition, the AfDB Group has made efforts to support private sector mobile telephone operators.

With private investment of nearly 20 billion dollars between 1992 and 2005, the number of mobile telephone subscribers in Africa rose from 10 million in 2000 to 180 million in 2007. The average cost of communication in Africa, estimated at 12.5 dollars per month, remains six times more expensive than in Bangladesh, India and Pakistan. By encouraging regional integration, the AfDB Group is convinced that Africa will become as competitive as the other regions of the world. The Bank is doing all it can to increase intra-African trade, which currently accounts for only 13% of the continent’s overall trade.  

In order to support its RMCs hard hit by the financial crisis, the AfDB has created a trade finance facility, with a package of more than one billion dollars. It continues to encourage member countries to simplify formalities, particularly at the borders, to ensure free flow of goods and services.

Africa will successfully address this problem only through united and supportive action; there is no alternative to regional and continental integration.