COMESA Aiming high to a deeper integration

COMESA members are set on making something out of their regional bloc, but they have their work cut out for them, Niveen Wahish reports from Sharm El-Sheikh

Not many know that it costs $1500 to move a car from Japan to Abidjan and $5000 to move it from Abidjan to Addis Ababa. These figures were cited by Amr El-Barbary, managing director of Citadel Capital this week at the Third COMESA Investment Forum that ended Tuesday in Sharm El-Sheikh. He was pointing to what is keeping African inter-regional trade from growing beyond its current levels of nine per cent versus regional trade among emerging Asian countries that is estimated at 58 per cent of their total trade. While Côte d'Ivoire, where Abidjan is located, may not be a member of the Common Market for Eastern and Southern Africa (COMESA), the example reflects inherent problems on the continent that COMESA members have to tackle.

Foremost among these problems is the lack of adequate infrastructure. COMESA members are only too aware of the challenges. "We have identified investment in infrastructure as a top priority. Without adequate infrastructure, trade cannot be carried out," Welshman Ncube, Zimbabwean minister of industry and commerce and chairman of the COMESA Council of Ministers, said told the conference. Infrastructure, he said, includes everything from transport, communications and information technology, to energy and ports.

Likewise, Sindiso Ngwenya, secretary-general of COMESA, told Al-Ahram Weekly that, "Infrastructure comes first; if you do not have roads you can not move goods." He pointed out that there is a change of mindset in Africa nowadays. "Unlike in the past when governments wanted to make sure first that people would use roads before building them, Africans now realise that once roads are in place they will immediately attract traffic," he said.

Another top challenge, according to Ncube, is food security. "To address the global food security challenge it is important to invest more and more in agriculture as well as in the value addition to agricultural products." In fact, as Ngwenya told a press conference, only 10 per cent of COMESA's arable land is in use. He also said that technology would be needed to maximise the output of these lands as well as infrastructure for storage and manufacturing.

But to tackle these challenges attracting investment is a must. And this is where another major challenge lies ahead for the bloc. Economist Dambisa Moyo told conference participants that Africans needed to remember that they are competing over investment with the rest of the world. She highlighted four indices that investors use as guidelines and where African countries need to improve their position. These include the Transparency International Corruption Perception Index where most African countries rank among the worst performers. Another index is the World Economic Forum's Competitiveness Index where African countries also rank low. She lamented that only 19 countries in Africa have credit ratings. "While not perfect, credit ratings are the first things investors check out." The fourth index is the World Bank's Doing Business Survey. This survey shows Africa among the most difficult places to invest.

Moyo also said that it is not enough for a country to tackle these issues on its own. Investors do not find small countries attractive, she said. They want to invest in huge markets, thus the importance of integration. COMESA members have begun to work along those lines. The bloc is in now the process of embarking on a common investment zone to create "uniform, predictable rules for investment," according to Ncube. The technical work for the new zone has been finalised, according to Egyptian Minister of Investment Mahmoud Mohieldin. Once six out of the group's 19 members endorse it, it will be launched.

Mohieldin said this new initiative would harmonise "the rules of engagement to facilitate capital flows". It would also guarantee commitment by member countries. The launch of the common investment zone will compliment work in progress regarding the establishment of a free trade area and a customs union among the bloc.

Nkosana Moyo, vice-president of the African Development Bank (ADB) is all for the idea of integration but he is also more ambitious. He not only wants to see a harmonisation of laws but a removal of barriers amongst member countries. A large population, he said "does not make a difference if borders exist," he said. The COMESA region boasts a population of 400 million and a combined GDP of $450 billion.

But Sindiso Ngwenya, secretary- general of COMESA, told Al-Ahram Weekly that the bloc carried out a pilot project last December to create a one stop border post between Zambia and Zimbabwe to clear customs and immigration. That border post is operational now, he said. It was developed to ensure that travellers do not stop at two border posts to clear customs and immigration. "We had to start with a pilot project to learn lessons so as to invest in the rest of the region without making mistakes," Ngwenya said.

Moyo of ADB also wants to see greater effort directed at attracting domestic and not just foreign investments. "Let's look inwards first, to make sure things work for us before looking outside."

But Egyptian Minister of Investment Mohieldin does not see a contradiction between seeking domestic and foreign investment. He explained that foreign direct investment (FDI), even in small amounts, brings with it benefits such as the know-how. He said that in many countries it has been found that more than 80 per cent of their exports originated from FDI. What is important, he said, is to get "responsible investment, local or foreign, to cater for the needs of the people." He added that Asian emerging markets have succeeded in attracting domestic and foreign savings by ensuring political stability, fighting corruption, investing in infrastructure and human capital, and by providing macro stability.

Participants were unanimous as to the potential for Africa to attract investment but lamented its inability to fully tell its story. The flow of information about Africa is lacking, Lisa Lambie, managing director of Cordiant Capital, a leading global emerging market fund manager, told participants at one of the conference panels. She pointed out to the Weekly that Africa includes 36 per cent of emerging market countries yet it receives only four per cent of international FDI. "International investors mostly think of Africa in the context of development and aid. They do not hear enough about the great business story that Africa is."

15 -21 April 2010 -- Issue No. 994