Friday, June 21, 2024
InterviewCOMESA: INTEGRATING MEMBER STATES’ ECONOMY

COMESA: INTEGRATING MEMBER STATES’ ECONOMY

Since its inception three decades ago as one of the African Union’s reliable Regional Economic Communities (RECs), the Common Market for Eastern and Southern Africa (COMESA) has been working to integrate its member states economically through its 11 institutions. From the largest countries tied to hydro-political issues, Ethiopia and Egypt, to the smallest African nations like Comoros and Eswatini, the Common Market consists of 21 countries under its trade agreement.

With less than 10 percent of trade among African states and countries in the COMESA bloc not performing better, Africa is blamed for not integrating regionally when it comes to trade. Despite the African Union’s (AU) recognition of eight blocs to work on the economic integration of the countries, their decades-long efforts failed to free the countries from dependence on other developed nations.

One of the institutions under COMESA, the COMESA Competition Commission (CCC), celebrated a decade of service in protecting consumers from anti-competitive practices in Lilongwe, Malawi, earlier this month. In the midst of the CCC’s 10th anniversary, The Reporter’s Samuel Bogale sat down with Christopher Onyango (PhD), director of trade and customs at the COMESA Secretariat, to talk about issues revolving around regional integration and the way forward in changing the narrative. EXCERPTS:

The Reporter: How has COMESA been promoting regional integration among its members and beyond?

Christopher Onyango (PhD): COMESA has structures and organs formed by member states to oversee the implementation of these programs and activities. We have the Heads of State Summit, which has the highest authority. Below is the Council of Ministers, which basically consists of ministers for trade.

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We then have the sectorial ministers as well, and below them is what we call an intergovernmental committee that comprises permanent secretaries of ministers responsible for coordination of COMESA activities, in most cases the ministers of trade, but in some cases it could be the minister of foreign affairs. We have the technical committees, which cut across all the various programs and activities. Under the trade division, we have the trade and customs committee that oversees all trade and customs in Africa.

Negotiations take place at some committees or working groups. They go through that level. So this institutional structure is very important, as it is the one day that we use outreach for member states.

Apart from using that institutional structure, we also conduct several workshops, seminars, and system activities across all members in all areas. That depends on the availability of resources as well as demands from member states, because there could be different kinds of support and demands.

Most of the time, development partners fund our programs. The membership contribution is less and mostly covers administrative costs for the secretariat.

There are claims that trade among African nations is inadequate and that their customs laws are stringent. Do you concur with this assertion? If so, why do you believe this to be the case?

Let me say that intra-COMESA and intra-African state trade is still so low that it couldn’t go over 10 percent of the total trade. In most African countries, trade is basically less than 10 percent, and in COMESA, it is about 10 percent. It is very unfortunate, given the resources.

There are a number of factors that are creating this from a general perspective, and I think one of them is the structural rigidity in Africa. What I mean is that our economy specializes in the production of raw materials as opposed to value addition. We sell our products as raw, and we do very limited value addition as manufacturing is very low. That’s one of the challenges that we have, because raw materials do not only generate sufficient revenues as opposed to manufactured products but also do not have the potential to create and equip our people with employment opportunities.

Countries sell the raw materials to Europe and buy value-added ones like shoes, for instance. Ethiopia has a very strong leather product, and I know you have a lot of challenges with synthetics, which are taking over. We add very limited value to the leather products. We’d rather sell it and buy the finished product.

We lose a lot of value because manufacturing capacity is very low.

The other factor is the physical infrastructure, which is limiting transport. There is poor connectivity. If I want to go to Tunisia, in most cases, I would rather go to Europe first before going to Tunisia, which is a COMESA member country, because of the restrictive practices that exist there. Even for roads, there are a lot of disconnections, including within countries themselves. I’m sure all our countries have those kinds of problems. We cannot trade with each other because of the instances in many countries where a huge supply of harvest products is available but is destroyed for lack of roads. It is even more prevalent within countries as well.

The other one is the restrictive laws and regulations that we have in place; among them are customs. The countries close their areas even where we do not have lots of regulations. You may also find that many countries do not have competition-related authorities to ensure fair trade practices. There are border-related restrictions that hinder the free flow of goods across countries.

The prevalent issue of governance is another problem that we can’t run away from. We have so many inter- and intra-national conflicts that disrupt economic elections. Political instability and the issue of limited political goodwill and motivation among most governments to live up to the agreement that they signed at the regional level are major factors. That’s why you have to spend so much time trying to sensitize people. Signing was very easy.

What do you think would solve these limitations and problems?

It’s not easy. There is no one answer to it, but I think continental integration is a key factor. Of course, it is now being treated under the AU framework, and the AU looks at those sectors, including integration governance. It’s one way of trying to get leaders together to agree and understand, and creating that motivation among them would be very important.

But the key is that collaboration among political leaders is essential to driving Africa in the right direction.

It is said that African states trade more with their former colonial powers. Is this a political decision, or were the states searching for products with added value and their colonial neighbors happened to have them?

Let me not say it is political. It’s a hangover of colonization. If you look at many countries, those which are colonized by France and Belgium drive by right, and the lines may be different in other countries. The language is also different. Trade is everything; it isn’t coming at this moment even for them. It is the beginning.

It is colonization of the mind in trade that you think anything that is useful and modern must come from outside, not made within. We have that mentality that anything that comes from outside is good, not our own. Within the collaborative framework, there are a lot of initiatives, including promoting our own, without looking at what is coming from outside.

In some regions of the continent, there has been talk of currency unification. It includes the establishment of a central bank for East Africa. What stage is it currently in?

My own view about it is that it is a bit of a challenge to fully implement or have a common currency for two reasons. First of all, the free trade area gives you all the benefits that you require for trade to be an engine of economic growth. Reduce tariffs and non-tariff barriers in many forms so that the free flow of goods can be achieved.

There are those aspirations, and some of the aspirations that we hear are to motivate the continued integration of the sectors. It requires a lot of consultation, progress, and questions to move to a common monetary system.

For me, it isn’t very urgent, because what I need is to know if I can access products from whatever country they are in with whatever currency. All you need to do is make the payment systems easily convertible. Can I pay with Ethiopian Birr when I am in Kenya? The financial sector is very sensitive. We don’t have the capacity, and we really are fragile in terms of money.

How about relaxing customs, which was part of the initiative for unification? Is that feasible?

A customs union is feasible and may not have a problem. Having one currency doesn’t seem feasible. Having a customs union association where there is one country charging the same tariff within the region is feasible. When investors come, they look at Africa as one market for their products, both to buy from and to invest in. The moment you maintain different levels of tariffs, you make it more complex for potential investors to come in. That is why the customs union is much more feasible. It also requires a lot more questions because you have to unify many of the instruments.

Why is it not moving forward if it is feasible?

It is slow because import revenue is a very important source of income for many countries, and it becomes difficult to harmonize the level of tariff to charge for products coming from outside the country because of the diversity. The level of dependence on import taxes is high. Some countries also have not developed strong bases for generating internal revenues like value-added tax and excise taxes. Many countries don’t have it, and many countries rely on import duties.

About eight blocs exist in Africa. However, the implementation of the African Continental Free Trade Area (AfCFTA) does not appear to be satisfactory. Why don’t the blocs recognize this?

Since the Abuja Treaty in 1991, it has been envisaged that it would be easy to attain an African economic bloc through regional economic communities. Eight have been established since then, so it is a good thing because you learn from those economic blocs how to liberalize and how to make commitments that ease border restrictions within the regional economic blocs. It was a very good tool to integrate Africa.

For the AfCFTA to work, in fact, it would have been very easy to negotiate it through these RECs because we’d have agreed by just going as a bloc. For instance, 21 nations agreed on COMESA. The challenge is the multiplicity of memberships, which might slow it down. You find one country belonging to two or three RECs. They may not necessarily have the same trade instruments in terms of commitments. That slows down the process, but negotiations are ongoing.

A year has passed since the AfCFTA became operational, but countries have taken inadequate steps to make it happen. What can COMESA do to expedite the countries’ actions?

It would have been very easy to negotiate the AfCFTA through the RECs because you’ll have blocs that have agreed, but that didn’t take place. If you have to bring 54 countries to the table, it’s not easy. In most cases, the delegations that go to those meetings are not necessarily the ones that negotiate at the RECs. Even in the same country, you may find that synchrony is not there.

We also have serious capacity concerns in member states because of the multiple negotiations that are going on. For instance, COMESA and other RECs hold many meetings, but countries aren’t dedicating professionals to the negotiations. They might have the capacity to train all the needed experts, but they don’t know how. Even in Ethiopia, you may have many professors, but they are teaching. They are not on the list of government experts for trade.

There are also serious capacity constraints, so we have to keep on investing. That’s one of the areas where the development partners come in to be able to train as many people as possible and sensitize them. Right now, even in my own country, there are people who don’t know about COMESA. It’s not that they don’t know, but they’re not engaged.

The other reason is because of the donors, which I want to link to the colonization issue. When this was talked about, all those development partners were looking at how they could get the chance to get in and how they could support the countries. So they shifted most of their support to the AfCFTA. The AfCFTA has not put in place structures to be able to reach and engage governments because it is so big. But if you are in COMESA, I don’t need to go to all the countries.

What is your view on Ethiopia being accused of having a small participation in regional trade activities?

Well, there are many reasons, but the obvious one is governance-related issues, depending on what the priorities are. For a long time, I thought Ethiopia had not been pro-market, but now it is. I know there is no single foreign bank in Ethiopia, so it is just those kinds of things.

Those are the realities that Ethiopia has to work on to be able to effectively participate in regional economic activities. Allow other members to also come and play a role in the domestic market. That is one of the reasons I can give.

Interestingly, Ethiopia is one of the COMESA members that has not joined the COMESA Free Trade Area (FTA). Although the FTA has not reduced 100 percent of tariffs, it is still 90 percent.

African countries have a combined gross domestic product (GDP) of USD 3.1 trillion, but COMESA countries comprise just 26 percent of that, with half the population of the continent. Why don’t COMESA bloc countries have a GDP at least equal to their population?

It is because of the level of poverty. The economic conditions are not good in these countries. You can count the number of countries with strong economic conditions. Take, for instance, the case of Ethiopia and its level of economic development.

Couldn’t it be solved through economic integration among the countries?

Yes, that’s why we are talking about opening up markets, adding value to products that we have instead of taking them out, and allowing for free movement of people across countries. One of the biggest restrictions that we may not have mentioned that the AfCFTA is going to face is the issue of connectivity and visa requirements for movement.

Many countries still have requirements for visas. It is extremely difficult. It’s like you’re a criminal sometimes. So those are the challenges to which we are saying no. Those are the things that should go. If it is difficult even for a journalist, what do you think the trader will go through? That is why we can’t trade with each other. Of course, the countries might have issues with security and other things, but there are better ways to do it.

Ethiopia’s stake in the COMESA bloc is immense, representing 20 percent of the population and one eighth of the bloc’s GDP. But during the CCC’s anniversary, there was no Ethiopian scheduled to tell Ethiopia’s side of the story in the two-day program. Is this a normal way of integrating regionally?

No, that isn’t normal. That’s one of the reasons we are engaging Ethiopia.

The Commission can’t go to all the countries at the same time. Do you think you can go far if you bring in the aspect of competition in countries like Ethiopia? It isn’t easy. Is there even an authority in Ethiopia? No. That is why it is a slow process. It makes sense if there is an authority.

When it comes to consumer protection, all of us are consumers. Ethiopia should eventually reinstate the competition authority as foreign companies are entering the market.

[speaker]
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