Key messages
• E-commerce is likely to be a significant driver and outcome of intra-African trade. The pub-lic and private sectors are increasingly adopting e-commerce platforms—governments deliver services through them, electronic marketplaces aggregate consumer and producer demand as well as trade-related services, traditional busi-nesses have incorporated e-commerce into their business models and operations and indi-vidual entrepreneurs and small businesses use social media platforms to engage with market opportunities.
• Opportunities and challenges of e-com-merce in Africa interplay with other policy issues. These include the Boosting Intra-African Trade action plan, AfCFTA phase II issues and policy issues such as data, gender, inclusion, cybercrime, taxation, informal trade, consumer protection, the digital divide, digital identity and e-transaction laws.
• The e-commerce policy landscape is evolv-ing with policies and strategies at regional and national levels. Cooperation between African countries can prevent barriers in digital space from being erected through varied regu-latory approaches and can inhibit the fracturing of African countries by technology giants.
• Consistent rules across the African continent could create an environment where firms (whether digital or not) can compete fairly and can simplify cross-border and national e-commerce.
• A gap in digital infrastructure and literacy and disparities in access to technologies and the cost of using them determine the extent to which e-commerce will be adopted and, by extension, enable intra-African trade.
• An important step for e-commerce develop-ment in Africa is the African Digital Trade and Digital Economy Strategy mandated by the AU Executive Council in January 2019. This strategy seeks to enable AU member States to
fully benefit from the fourth industrial revolu-tion and facilitate the implementarevolu-tion of the African Continental Free Trade Area; it will be presented to the AU Assembly for adoption in February 2020.
Policy recommendations
Three policy options are identified for e-commerce in the AfCFTA:
• An e-commerce protocol as an instrument within the AfCFTA agreement.
• An African digital economy strategy covering the governance of cross-border e-commerce and related issues.
• E-commerce perspectives integrated into exist-ing AU instruments.
Regardless of the approach taken for e-commerce in the AfCFTA, African countries can support the development of e-commerce through investing in digital policy capacities, e-readiness evaluations, research agendas for academics and researchers and technical assistance.
The ninth edition of Assessing Regional Integration in Africa (ARIA IX) is a joint publication of the Economic Commission for Africa (ECA), the United Nations Conference on Trade and Development (UNCTAD), the African Union Commission (AUC), and the African Development Bank (AfDB).
The report was prepared under the overall guid-ance of Vera Songwe, ECA Executive Secretary, with oversight by Stephen Karingi, Director, Regional Integration and Trade Division.
The core team preparing the report consisted of David Luke, Coordinator of ECA’s African Trade Policy Centre (ATPC), Joy Kategekwa, Head of UNCTAD Regional Office for Africa, and Jamie MacLeod, ATPC Trade Policy Expert.
Chapter leads contributing to the report were:
Francis Ikome (ECA), Guillaume Gérout (ECA), Melaku Desta (ECA), Martin Kohout (ECA), Hamed El Kady (UNCTAD), Ermias Biadgleng (UNCTAD), Caroline Ncube (University of Cape Town), Elizabeth Gachuiri (UNCTAD), Martine Julsaint-Kidane (UNCTAD) and Ifeyinwa Nwanneka Ogo (ECA).
They received support from Emmanuel Chinyama (ECA), Jane Karonga (ECA), William Davis (ECA), Christian Knebel (UNCTAD), Robert Tama Lisinge (ECA), Nadira Bayat (ECA), Komi Tsowou (ECA), Maximiliano Mendez-Parra (ODI), Wafa Aidi (ECA), Simon Mevel (ECA), Lily Sommer (ECA), Mintewab Gebre Woldesenbet (ECA consultant), Leyou Tameru (I-ARB Africa), Marisella Ouma (ICTSD), Nozipho Freya Simelane (ECA), Lashea Howard-Clinton (ECA), Nathalie Bernasconi (IISD), Beatrice Chaytor (AUC) and Million Habte (AUC).
The core team would like to acknowledge the support of ATPC colleagues, in particular, Senait Afework, Haimanot Assefa, Eden Lakew, Batanai Chikwene, Souleymane Abdallah and Heini Suominen.
The core team is also grateful to the African Union Trade and Industry Commissioner Albert Muchanga for his oversight and direction. African Union Commission colleagues, including Prudence Sebahizi, Youssouf Hamid Takane, Halima Noor and Khauhelo Mawana, provided valuable inputs to the report. Inye Nathan Briggs of the AfDB anchored the AfDB’s oversight of the report.
The following contributed to the consultations on the report concept note, technical inputs, peer review and validation of the report findings:
Rosemina Nathoo (CTPL), Meaza Ashenafi (for-merly ECA), Won Kidane (Seattle University), Peter Oluonye (ECOWAS), Ahmed Suliman (formerly ECA), Victor Konde (ECA), Pierre Runiga (ARIPO), Fernando dos Santos (ARIPO), Jonathan Aremu (consultant), Makane Mbengue (University of Geneva), Sarah Brewin (IISD), Suzy Nikièma (IISD), Falou Samb (Special Advisor to the President of Senegal), Rosebela Oiro (CAK), Adano Roba (CAK), Magui Angele Koubitobo Batisseck (OAPI), Mulalo Hardin Ratshisusu (ACF), Colette van der Ven (Sidley Austin LPP), Sandra Akite (UNCTAD), Sirack Kasshun (UNCTAD), Elisabeth Tuerk (UNCTAD), Pilar Fajarnes (UNCTAD), Luisa Rodriguez (UNCTAD), Torbjorn Fredriksson (UNCTAD), Laura Paez Heredia (ECA), Adeyinka Adeyemi (ECA), and Shamnaaz Begum Sufrauj (ECA).
A special mention goes to Bruce Ross-Larson and his team from Communications Development Incorporated for professional editing for the report, and to Carolina Rodriguez and her team from Dilucidar Pte Ltd for providing infographics.
The Publication Section of ECA are thanked for the translation, design, printing and distribution of ARIA IX.
Finally, ATPC would like to acknowledge the sup-port of Global Affairs Canada to its work pro-gramme through a partnership that stretches back to 2004.
Acknowledgements
The signing of the African Continental Free Trade Agreement (AfCFTA) by 52 African Union member states marked a historic milestone for economic integration in Africa. By 1 April 2019, just over a year after the signing ceremony, the threshold of ratification by 22 countries required for the agreement’s entry into force had been reached. The speed of this ratification process is unprecedented in AU history.
The significance of this achievement is not to be underestimated. The vision of African conti-nental integration to which the AfCFTA contributes is more than 50 years old and, as demon-strated in this and previous editions of this report, embodies great opportunities for Africa’s structural transformation, economic diversification and development.
The momentum behind the African Continental Free Trade Agreement initiative inspires the focus of this ninth edition of the flagship Assessing Regional Integration in Africa (ARIA IX) report, which asks, “What’s next?”
With the phase I negotiations of the agreement now concluded, we must harness its opera-tionalization and use it for further advancing Africa’s economic integration. This will involve finalizing the remaining technical work of the phase I negotiations to promptly ensure that the goods of African businesses, traders and consumers flow freely and that service suppliers are unhindered. It will also involve enlarging the number of countries signing, ratifying and depositing ratification instruments. The impressive 24 countries that have ratified it, repre-senting 44 per cent of African Union member States, should now be joined by the rest of the continent to move forward collectively, and meaningfully, in trade integration.
But it is not enough merely for the African Continental Free Trade Agreement to be opera-tional and encompassing. It must also change lives, reduce poverty and contribute to eco-nomic development. For this, complementary measures are needed. This report considers a breadth of such measures within the context of AfCFTA national strategies for implementing the agreement.
Further, the main focus of this report—and of what’s next for the African Continental Free Trade Agreement—concerns the phase II negotiations scheduled to commence later in 2019.
This comprehensive and deep agreement goes beyond mere tariff liberalization to include investment, competition policy and intellectual property rights, far-reaching and transform-ative topics that are the subject of the phase II negotiations. Provisions on investment—its promotion, facilitation and protection—can allow the AfCFTA to galvanize the investments needed to restructure Africa’s economies. Provisions on competition policy can enable fair competition and market outcomes that stimulate industrialization, competiveness and devel-opment. And provisions on intellectual property rights can incentivize increased innovation, ensure a level playing field and support trade, while protecting policy space for African gov-ernments. This report gives rich treatment to the substantive analyses of those topics.
Foreword
Finally, the potential of the African Continental Free Trade Agreement after operationaliza-tion and after conclusion of the phase II negotiaoperationaliza-tions requires attenoperationaliza-tion. This report offers that, considering both how the agreement can help achieve the deeper forms of integration called for by African Heads of State and Government, and also how the modes and means of trade are changing in an increasingly digitizing world. The last chapter of the report deliber-ates how African countries can prepare for the digital economy. In doing so, it asks whether policy makers should consider e-commerce as a negotiating topic in the AfCFTA, following its prominence in other negotiating fora.
ARIA IX is buttressed with deep and ground-breaking research into topics of considerable interest for African policy makers, trade negotiators, partners and development stakeholders.
For the first time in the ARIA series, the African Union Commission, Economic Commission for Africa, and African Development Bank are joined by the United Nations Conference on Trade and Development in preparing this edition. We believe that the rich and actionable research on the issues covered by the report can advance Africa’s development, both in the context of the African Union Agenda 2063 and the United Nations Sustainable Development Goals.
We commend it and its findings to those seeking to support Africa in its regional integration, economic transformation and development.
Moussa Faki Mahamat
Chairperson African Union Commission
Vera Songwe
Under-Secretary-General United Nations Executive Secretary Economic Commission
for Africa
Akinwumi Adesina
President African Development
Bank Group
Mukhisa Kituyi
Secretary-General United Nations Conference on Trade and Development
Regional integration remains an economic and political priority for African leaders and policy mak-ers, as evidenced in their adoption and implemen-tation of many regional integration programmes both at continental and regional levels. The regional economic communities (RECs) now play a key role in promoting Africa’s regional integra-tion agenda. In the long term, an African Economic Community (AEC) is envisaged. This vision arose during the formative years of the Organization of African Unity (OAU), took shape as a system-atic political programme embodied in the 1980 Lagos Plan of Action and was given legal expres-sion in the 1991 Abuja Treaty. Its importance was reaffirmed by various continental integration ini-tiatives—the 2000 constitutive act of the African Union, the 2012 Boosting Intra-African Trade action plan and, most recently, the agreement estab-lishing the African Continental Free Trade Area (AfCFTA), signed in 2018. The vision has evolved to reflect new approaches (such as Agenda 2063), while the pathway to it has been updated with new steps—the AfCFTA, for example, was not fore-seen in the original stages set by the Abuja Treaty.
The vision thus endures, upholding the idea that integration, by driving efficiency both within the continent and globally, enhances the continent’s competitiveness.
The RECs have been building blocks for the African Economic Community throughout the history of integration in Africa. Although they have sim-ilar objectives, the RECs were established inde-pendently of each other and differ in both structure and activity. And their integration has proceeded unevenly. Some have achieved tangible out-comes in key areas of integration, as this chapter will show, while others struggle to meet even the basic objectives of the Abuja Treaty. Despite this mixed picture, monitoring the implementation of the provisions of the Abuja Treaty has remained a
priority for many RECs, as well as the African Union Commission.
The historic signing of the African Continental Free Trade Area Agreement in Kigali, Rwanda, on 21 March 2018 represents the most remarkable pro-gress in Africa’s integration since the 2017 publica-tion of the previous Assessing Regional Integrapublica-tion in Africa report (ARIA VIII). Another continental-level achievement was African countries’ endorsement of the Kigali Consensus on migration and mobil-ity—which urges all the RECs to develop and implement protocols on the free movement of per-sons and recommends that a roadmap be devel-oped for implementing the Joint Labour Migration Programme in Africa. Regional-level integration progress during the same period included the July 2018 expansion of COMESA from 19 to 21 mem-bers through the admission of Tunisia and Somalia and the implementation of ECOWAS’s Common External Tariff by all its member States, except one.
But impediments to continental and regional inte-gration linger, notably Africa’s huge infrastructure deficit, limited macroeconomic convergence and ongoing peace and security threats. These chal-lenges must be steadfastly addressed to reap the benefits of integration, including the AfCFTA.
This chapter updates and analyzes current trends in regional integration in Africa. It highlights the major shifts since the publication Aria VIII in the areas of macroeconomic convergence; trade and market integration; migration and free movement of persons, goods and services; infrastructure inte-gration and financing, including for landlocked countries; health; governance, peace and security and mining. The section on migration discusses enhancing labour mobility through cooperation in education and skills formation. The section on landlocked countries features the Vienna Program of Action.
Chapter 1
The Status of Regional Integration in
Africa
Macroeconomic convergence and monetary and financial integration
Macroeconomic policy convergence and finan-cial and monetary integration promote efficiency, public accountability and economic growth and sustainable development. Macroeconomic con-vergence is defined as a reduction of disparities in economic indicators, such as inflation, growth levels and per capita income. The reason to pur-sue macroeconomic convergence is to prompt the members of economic groupings to react simi-larly to such economic variables as price stability, budget deficits and debt-to-GDP ratios—this ben-efits the whole region.
Regional groupings employ macroeconomic policy convergence mechanisms to prepare for monetary integration. The European Monetary Union, for example, used macroeconomic convergence crite-ria in preparation for the introduction of the euro.
Regional groupings also benefit from the macro-economic stability brought about by the “good”’
macroeconomic behaviour rewarded by incentives for macroeconomic convergence criteria.
The 1991 Abuja Treaty set out the vision of African financial and monetary integration. In the sixth phase under the treaty, after an African common market was established, an African monetary union was to be realized through the creation of a single African central bank and a single African currency.
The vision saw the continent moving as one from a common market to a monetary union. In practice, that has not happened. Several RECs have moved individually towards financial and monetary union, while others have not. RECs may later consolidate to achieve continental financial and monetary
inte-gration, thereby re-aligning with the intentions of the Abuja Treaty, but in the meantime, several are achieving deeper integration through financial and monetary integration.
Three monetary unions are currently operating in Africa—the West African CFA franc, covering most francophone countries in West Africa; the Central African CFA franc, covering six countries of Central Africa, and the Common Monetary Area, linking Eswatini, Lesotho, Namibia and South Africa. None of the monetary unions is conterminous with any of the eight AU-recognized RECs—each is a dis-tinct island of deeper integration within one of them. Nevertheless, future monetary unions are envisaged for the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), the Economic Community of Central African States (ECCAS), the Economic Community of West African States (ECOWAS) and the Southern African Development Community (SADC).
Five of the eight RECs have set macroeconomic and monetary convergence targets aimed at harmo-nizing economic indicators. However, the member countries within these RECs have not converged enough. Coordinating the endorsed programmes to facilitate meeting targets set by both the RECs themselves and the AU has proved challenging, resulting in a mixed picture with some countries progressing more than others.
Table 1.1:
SADC macroeconomic convergence targets, 2008–18
INDICATORS 2008 2012 2018
Inflation (% a year) Single digits 5 3
Fiscal deficit (% of GDP) 5 3, with a range of 1% 3 as anchor, with a range of 1%
Public debt (% of GDP) 60 60 60
Current account deficit (% of GDP) 9 9 3
Source: SADC document—RISDP.
Macroeconomic convergence in RECs
The Southern African Development Community aimed for a common market by 2015, a mone-tary union by 2016 and a single currency by 2018.
These targets proved overly ambitious. Now pol-icy makers face the challenge of seeing whether the macroeconomic convergence framework for-mulated in the 2004 Regional Indicative Strategic Development Plan1 (RISDP) can still be achieved at a later date. Table 1.1 shows the macroeconomic variables selected by the SADC region as its priority indicators.
In 2017, SADC’s average inflation decelerated to 9.4 per cent. It was expected to decline further to 7 per cent in 2018–19, as domestic food conditions improve due to a bumper harvest and exchange rates stabilize. By September 2018, the average had fallen to 8.4 per cent, 12 of 15 SADC members were achieving single-digit inflation and 7 of them were achieving the convergence target of less than 5 per cent. Only one member had achieved the
conver-gence target for 2017–2018 of less than 3 per cent inflation (Southern Africa Economic Outlook, 2018).
The Economic Community of West African States Heads of States and Governments realigned the ECOWAS convergence criteria in 2014 to pur-sue merging the West African Monetary Zone (WAMZ)2 and West African Economic and Monetary Union (WAEMU)3 countries into a single monetary zone by the start of 2020. The new primary criteria require member countries’ budget deficits not to exceed 3 per cent of GDP, average annual inflation not to be more than 5 per cent by 2019 and gross reserves not to be less than 3 months of imports.
The secondary criteria require the public debt-to-GDP ratio not to exceed 70 per cent, central bank financing of budget deficits not to exceed 10 per cent of the previous year’s tax revenue and nominal exchange rate variation to stay within +/− 10 per cent (Business News Staff, 2014; ECOWAS, 2017).
Despite progress, challenges remain, particularly in the choice of an exchange rate regime, the mone-tary policy framework and the choice of the cen-tral bank model for the future common monetary
87%
* 20% 20%
80%
73% 73%
53%
67%
73%
67%
80%
0 10 20 30 40 50 60 70 80 90
Budget defit Average
annual inflationGross reserves Public debt-to-GDP
ratio
Central Bank financing of budget deficitsa
Exchange rate variation
PRIMARY CRITERIA SECONDARY CRITERIA
2016 2017
Figure 1.1: ECOWAS states’ meeting macroeconomic convergence targets, 2016–2017
Per cent Figure 1.1:
ECOWAS States meeting macroeconomic convergence targets, 2016–17
Source: Compiled from various sources (ECOWAS website, 2017; IMF database, 2018; AfDB website, 2018; and UNCTAD, 2019). *2017 data not yet available for central bank financing of budget deficits.
area. The number of ECOWAS countries achieving the primary criteria on the average inflation rate and gross external reserves fell in 2017, while the number of countries satisfying the secondary crite-ria on ratio of public debt and exchange rate vari-ation rose (2017 data on central bank financing of budget deficits was not yet available) (Figure 1.1).
The East African Community anticipates intro-ducing a common currency to replace the national currencies of member countries by 2024. Progress includes: harmonizing monetary policy frameworks and exchange rate operations, rules and practices governing bank supervision and integrating the payment systems, financial markets and financial reporting. The convergence criteria adopted by the EAC are a headline inflation ceiling of 8 per cent, a reserve cover of 4.5 months of imports, a 3 per cent of GDP fiscal deficit ceiling, including grants and a 50 per cent of GDP (net present value) ceiling on gross public debt (Trademark East Africa, 2017).
Member States also need to manage fiscal deficits to meet the convergence criterion and to ensure the stability of the future monetary union (EAC,
n.d.). In both 2016 and 2017, the EAC members did fairly well in meeting the inflation target and least
n.d.). In both 2016 and 2017, the EAC members did fairly well in meeting the inflation target and least