Wrong regional integration and why small should be the new big thing for East Africa
Africa is obsessed with regional, political, and economic
integration. Over the last 30 years, our governments have created many
regional trade blocks; some of which overlap. For example, Uganda is a
member of the EAC, PTA, COMESA and KBO while Tanzania belongs to all
these and SADC.
These trade blocks are intended to lead to a political and economic
union – a super-state on a regional and later continental scale.
Although fashionable, this trend will in the long term do more harm than
Consider the proposal for an East African political federation. It
has many obvious advantages: it could bolster the economic and military
position of the region and provide a large geographical area and
population for trade.
But these advantages carry long-term liabilities: gigantic political
systems and their bureaucracies are inherently resistant to change. This
makes policy and institutional innovation – the stuff our poor
countries need desperately to grow fast, difficult.
Fragmentation, with all its day-to-day disadvantages carries a
strategic benefit; it allows a large number of political laboratories
where innovation can be tested.
There is a reason why big entities resist innovation. By its very
nature, innovation is risky. Only one out of every ten new ideas
suggested is superior to the one it seeks to replace.
Yet building a politically weighted majority in a large and diverse
political entity and turning the wheels of a huge bureaucracy towards
reform is a slow and agonizing process. Bigness also makes it difficult
to reap the full potential of reform.
Yet, after having taken time and hard work to gather support for an
innovation, and even longer to secure its implementation, a large
political entity may discover that the change is worse than the status
quo. The effect of such a bad innovation on a politically and
demographically large society can be devastating.
Therefore large political units are structurally wired to resist
reform. If one has to take risk, it is better to do it with a
politically and geographically smaller entity. One only has to look at
the politics of passing and now implementation of Obamacare in the U.S.
All political systems are capable of making self-defeating policies.
If such policies are designed and implemented by a large political
federation, it would be extremely difficult to reverse them in the event
This is especially so in our countries, which are ethnically and
religiously diverse and, therefore, political consensus is difficult.
It is different in fragmented polities. You only need one of them to
attempt an innovation. If it succeeds, it will spread to others through
So the hurdle of experimentation and the costs of mistakes are
limited to one small entity while the benefits of success can easily be
realised by all through imitation.
Look at Africa in 1986: it was stuck with rigid foreign exchange rate
and trade policies, numerous public enterprises and elaborate
regulatory procedures. The World Bank and IMF were pushing reform but
there was resistance everywhere.
Then presidents Jerry Rawlings in Ghana and Yoweri Museveni in Uganda
accepted the reforms and even defended them. All of a sudden, Uganda
and Ghana began growing fast and being praised as innovators. It did not
take long for other governments in Africa to see the costs of staying
the course and the benefits of reform.
Today, Rwanda is leading in many reforms – clean cities, national
medical insurance, etc. Many mayors of African cities are flocking
Kigali to observe and learn.
Just imagine if Rwanda had politically integrated with Uganda in
1994; it would have been mired in our institutionalised corruption and
incompetence, and an important laboratory for policy and institutional
innovation would have been closed.
This brings me to the second aspect of integration – a customs union
with common external tariff. University of Oxford economist, Tony
Venables, has argued that integration tends to benefit those countries
whose economies are closest to the global average.
In a customs union of rich countries, those are that are poorer – in
the case of the European Union, Ireland, Greece and Portugal. In a poor
countries customs union, the richer countries are instead closest to the
global average – Kenya in the EAC.
According to Venables, integration among rich countries tends towards
income convergence; in the EU, Ireland, Greece and Portugal for
example, would tend to catch up with France and Germany. Among the poor
countries integration leads to income divergence, in the EAC, Kenya
would reap the benefits and thus leave Rwanda and Tanzania behind. Why?
A common external tariff in rich countries keeps labour-intensive
goods from poor countries out of the free trade area. So the
beneficiaries are countries with the lowest labour costs – the poorer
members. The reverse is the case in poor countries. The common external
tariff keeps cheap goods from outside the trade block, thus protecting
the factories of the countries with the highest skills – in the case of
the EAC, Kenya. This also means that Rwandan consumers begin subsidising
Kenyan manufacturers. It will not take Rwandans long to realise that
the customs union forces them to buy poor quality goods from Kenyan at a
price higher than what free international trade would offer.
More critically, trade requires that countries produce different
products, which they can exchange. All too often, poor countries tend to
produce the same products – Uganda, Kenya, Rwanda all produce and
export coffee, tea and maize and these days packed passion, apple,
orange and mango juice.
The best opportunities for trade for these countries do not exist
among themselves but are external to their trade block – to the EU,
China and America. Therefore integration does not enhance regional trade
but rather discourages international trade.
Integration in East Africa has, therefore, to be built on an entirely
different platform – one that recognises these factors. Poor countries
don’t need institutionalised integration with secretariats and central
They need things like the `Coalition of the Willing’ in EAC where
they come together to realise clearly defined time-bound goals like
joint infrastructure projects, removal of visa requirements and work
A common external tariff should be built at industry level on a quid
pro quo basis. For example, if Kenya’s textile industry is to be given
protection in the EAC market, Rwanda should enjoy the same with its
computer industry, Uganda with steel, Burundi with perfumes and Tanzania
This way, other countries will not feel Kenya is ripping them off.
Short of such a creative application of regional integration, it will be
difficult to remove the frustrations and bickering that have made many
of these measures fail to work in the past.