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Integration represents significant opportunities for landlocked and small island countries of southern Africa
“Regional integration offers southern African countries substantial potential from competition and scale effects, but the gains are not automatic; careful design and sustained implementation of the regional trade agreements (RTAs) are necessary to enhance their benefits … and implementation of regional programs requires adequate local capacity, in addition to financial resources.”
These are, among others, some of the key messages underscored by Kennedy K. Mbekeani, an Economist with the African Development Bank, in a Regional Integration Policy Paper titled “Intra-regional Trade in Southern Africa: Structure, performance and challenges”.
The paper describes the state of trade in the region and analyzes how regional trade agreements (RTAs) have boosted intra-regional trade. It also presents the evolution and composition of intra-regional trade during the three decades prior to 2008 and makes suggestions to improve trade performance.
The benefits of intra-regional trade are tangible. Trade among countries increased from US $11.6 billion in 2000 to US $29 billion in 2008. This was driven mainly by the region’s shift in sourcing imports from Europe to South Africa following the end of apartheid and the launching of the South African Development Community Free Trade Agreement (FTA). However, intra-regional trade has been declining since 2003. It contracted from 22% of total trade in 2002 to less than 15% in 2008. Even so, this is still above the level of intra-Africa trade, which has stagnated at around 10% of total African trade.
The study shows that southern Africa’s economies are too small and fragmented to achieve economies of scale on their own; and only regional integration could pool resources and enlarge markets, stimulating national production, trade and investment. This point is illustrated by the situation of landlocked countries and small island economies to which regional trade offers significant benefits. “As landlocked countries depend on coastal neighbours for transit and access to the sea, they cannot integrate into regional markets unless their neighbours implement policies that will facilitate cross-border trade. For example, Lesotho is entirely dependent on South Africa for transit routes to ports, while Swaziland depends on South Africa and Mozambique,” the paper argues.
For small island nations such as Madagascar, Mauritius and Seychelles, regional integration can alleviate problems of connectivity to the mainland and global markets. Those countries can provide important trans-shipment centres if a regional approach is taken to reduce high costs for shipping goods to and from them.
The paper notes that progress is being made in the region. The Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC) are leading regional integration in southern Africa. In addition, some countries belong to smaller groupings. Five members of SADC (Botswana, Lesotho, Namibia, South Africa and Swaziland) also belong to the Southern African Customs Union (SACU), while Tanzania is also a member of the East African Community (EAC).