African Development Report 2014 – “Leveraging Regional Integration for Inclusive Growth”

Africa’s regional integration has been a key economic and political aspiration since the independence decade of the 1960s – some 50 years ago.
It is also an important pillar for the work of the African Development Bank, which is celebrating its 50th Anniversary as Africa’s premier development finance institution during 2014.
It is thus opportune for the African Development Report 2014 to once again reexamine the imperative of regional integration for Africa’s development: looking at what has changed in terms of argument and facts on the ground in the past half century, and to what extent the pursuit of closer economic and political integration is still relevant for the continent.

The Report comprises six chapters:

1. the relevance of regional integration in a changed global context; 
2. the importance and role of regional economic communities;
3. the impact of regional infrastructure;
4. the implications of the interregional migration of factors of production, notably labour; 
5. regional financial integration and the platforms required to raise its impact on regional commerce and economic growth and; 
6. how best to link Africa to global production and trade through regional value chains.

The Report’s main conclusion is that regional integration is still a relevant pillar for Africa’s development, although the global context has changed greatly since the continental goal was first introduced in the 1960s. The challenge going forward is not so much the formulation of new policies but rather the implementation of those formulated in the recent past. This will require political resolve and heightened institutional capacities. The policy arguments and main messages of the Report are summarized below:

• Africa’s overlapping memberships in regional economic communities is not a critical constraint to advancing the integration agenda. What is most crucial is the presence of functioning formal structures that ensure that the regional relationships have real meaning. For RECs to undertake inclusive regional integration policies, it requires greater commitment from member states in implementing them at the national level.
• African countries must be better linked through roads, railways, ICT, power infrastructure networks, and ports and harbours. But regional infrastructure development facilitates inclusive growth only when it supports productive employment, poverty alleviation and the reduction of inequality.
• A “coalition of the willing” approach should be encouraged in advancing the management of regional migration, instead of merely relying on immigration control. RECs should recognize regional qualifications, encourage regional pooling of skills and coordinate annual immigration quotas according to skills gaps in national labour markets. Additionally, regional policies should include equitable access to quality public health care and education for migrants as a key provision. Reducing the costs of remittances would also improve the prospects for recipient economies and the people left behind.
• The development of cross-border banking, capital markets as well as other regional financial infrastructure in Africa could lead to the economies of scale required for economic takeoff. This will require a stable economic environment and the use of rigorous standards that should not undermine institutions’ capacity to innovate and meet the needs of the underserved.
• Firms are now seeking their comparative advantages in niches that supply only portions of the global demand for goods and services. In light of Africa’s recent high growth, a number of opportunities for local firms to increase their supply of inputs into regional retail supply chains and commercial food activities have arisen. The growth of trade generates in turn domestic employment. Regional value chains can be a key avenue for inclusive growth in Africa.