Monday, 21 November 2011

Africa wants to be Europe without the Euro

The Wall Street Journal today features a useful article examining the process towards - and motivations behind - regionalism in Africa:
For decades, African technocrats have admired Europe's common market, where open borders and the right to work in any member country are seen as the kind of steps that would boost trade in Africa as well. Those steps are also seen as lowering barriers that now deter investors, allowing smaller African states to thrive alongside larger neighbors.

Archie Machaka, who runs a trucking company based in Zimbabwe, says that what should be a 10-day trip to drive a truckload of copper from a mine in the Democratic Republic of the Congo to a container depot outside Johannesburg in South Africa sometimes takes six weeks. His drivers must wait for exit documents in the Congo that can take a month to process. Then a new customs policy in Zambia, designed to check those papers more thoroughly, can leave his trucks idling for three or four days.

The new border regime "was supposed to improve efficiency, but it's not really coming through," Mr. Machaka said.

Faced with such problems, African countries are seeking more ways to work together.

Since 2000, the Southern African Development Community, encompassing 15 countries from the Congo to South Africa, has been lowering import and export tariffs between members. It plans eventually to eliminate them altogether.

South Africa is particularly keen to boost regional trade as an antidote to sluggish demand from Europe, the country's largest trading partner.

Last month, South Africa's finance minister, Pravin Gordhan, said his country wanted to join with its neighbors to fund large-scale infrastructure projects—such as highways running north into the heart of the continent—and a regional power grid that could attract investment from private South African energy companies. South Africa's National Planning Commission earlier this month recommended synchronizing agricultural policies among southern African countries to share crop surpluses. It also encouraged simple manufacturing in South Africa's lower-wage neighbors to create regional supply chains.

The continent's most advanced regional trade bloc, the East African Community, already guarantees the right to work across Kenya, Uganda, Rwanda, Burundi and Tanzania. Those governments also coordinate some fiscal policies, for instance by releasing their federal budgets on the same day. National parliaments are working on legislation that would further synchronize immigration and tariff laws.

Closer ties are paying off for east Africa's biggest economy: Kenya. In 2010, the bloc surpassed the EU as the top destination for Kenyan exports.

"We want to develop this corridor vigorously and collectively," said Mugo Kibati, director of a government program to overhaul Kenya's economy by 2030 and former chief executive of East African Cables, a telecommunications and power-transmission company.

But Africa is backing away from one prominent aspect of Europe's economic union: a common currency.

An African currency was once seen as an ultimate goal of continental integration. By 2018, leaders in southern Africa had aimed to have a common currency in circulation from South Africa's Cape Town to Kinshasa in the Congo. Not anymore.

"I don't think anyone thinks this is realizable or in fact appropriate," Gill Marcus, governor of South Africa's reserve bank, said last week.

She and other officials have noted repeatedly that the euro zone couldn't reconcile feeble economies like Greece with powerhouses such as Germany. That relationship is akin to South Africa and neighboring Zimbabwe, where three years ago inflation hit an annual rate above 200 million percent. Zimbabwe has abandoned its own currency in favor of the U.S. dollar, halting an economic tailspin.

Even in west Africa, where 14 countries have used a common currency tied to the French franc and the euro since the end of World War II, officials have soured on a broader, independent monetary union. It would need to balance the likes of Nigeria, a significant oil exporter, with tiny Togo, an agrarian country with anemic growth rates.

Such vast discrepancies also mean forming an integrated market would be more difficult in west Africa. In addition to Nigeria's economic muscle and vast population, it's an English-speaking country in a generally Francophone region. A violent five-month power struggle in Ivory Coast earlier this year highlighted the risks countries in the region face in tying their fiscal well-being to one another.

Gains are being made nonetheless. A widening network of transborder highways has slashed the time it takes to transport goods across a region once infamous for its number of road blocks per mile.

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