While the Economic Community of Central African States (Communauté Économique et Monétaire de l’Afrique Centrale, CEMAC) has a functioning monetary union as well as a range of regional financial institutions and bloc-wide economic policies in place, progress towards greater economic integration has faced a number of significant challenges. Authorities are working to find solutions to these challenges and taking steps towards integration, including boosting freedom of movement within the bloc, strengthening financial institutions and addressing trade barriers.
CEMAC, established in 1999 to replace the Central African Customs and Monetary Union, has already achieved major steps towards economic integration, most notably in the form of the creation of a currency union, under which all member states use the Central African CFA Franc.
Movement of capital is also free within the bloc, and the member states share a central bank, the Bank of Central African States, based in the Cameroonian capital, Yaoundé; an associated supervisory banking body, the Central African Banking Commission; a regional development institution, the Central African Development Bank; and a stock market, the Libreville-based Stock Exchange of Central Africa (Bourse Régionale des Valeurs Mobilières d’Afrique Centrale, BVMAC). A unified tariff policy on imports from outside of CEMAC and a bloc-wide value-added tax rate are also in place, as is a common agricultural policy.
Obstacles to Greater Integration
Despite these achievements, the bloc’s founding goals of bringing about the physical, economic and monetary integration of member states have yet to be fully realised, and not all regional institutions function as well as they might. In 2013 CEMAC Commission President Pierre Moussa said that integration efforts to date were not “sufficiently perceptible in the daily lives of the population of Central Africa, nor sufficient to meet their expectations”, while the IMF in its August 2014 staff report on common policies in the zone argued that “limited regional integration and weak coordination of development policies undermine competitiveness and growth potential”.
The fact that reality has not yet met the rhetoric of the bloc’s objectives is not unique to the CEMAC zone, with several of Africa’s economic and monetary unions still hampered by limited harmonisation and low levels of intra-regional trade. Integration efforts face many challenges, such as the wide economic disparities between the bloc’s member states, with some states significant oil producers, while others rank amongst the poorest countries in the world. According to World Bank data for 2014, the $18,400 GDP per capita of the bloc’s wealthiest member, Equatorial Guinea, stands at nearly 50 times that of the poorest member, the Central African Republic, on $380.
Furthermore, a range of constraints on intra-regional trade persist, and as a result levels for such trade remain low, at around 3% of total trade by member states. These include the poor state of regional road transport and logistics links, as well as the continued existence of numerous trade barriers between member states. The IMF says that boosting trade via greater regional integration could raise regional GDP growth by two percentage points. Observers also argue that government subsidies and other market interventions also distort competition between member states. In response to the IMF’s 2014 report, the CEMAC authorities said they would continue to work to bring down trade barriers.
As a result, the bloc has struggled to implement some steps towards further integration. For example, plans to allow for freedom of movement within the bloc have long remained on the backburner, amid concerns in Equatorial Guinea and Gabon – the two wealthiest states in the bloc on a per capita basis – that they could face an influx of citizens from poorer member states. For instance, in 2013 CEMAC heads of state agreed to abolish visa requirements within the bloc and allow freedom of movement, but Equatorial Guinea subsequently blocked its implementation.
However recent events demonstrate that such obstacles can be overcome. In an important step towards deeper integration, member states in May 2015 again agreed to implement freedom of movement within the bloc for holders of biometric identity cards and passports, effective immediately. At the meeting at which the decision was taken, heads of member states also agreed to pursue further efforts in order to create a fully integrated community area.
Efforts are also under way to improve the functioning of existing regional institutions. The BVMAC, for example, is intended as a regional stock market, and Cameroon has maintained its own exchange, the Douala Stock Exchange, and has opposed efforts to promote BVMAC listings on its territory. Many observers – including the IMF – have called for the two institutions to merge and industry figures say the dispute could be resolved by closer regulatory integration of the markets. To this end, the BVMAC is launching a programme to open local branches of the exchange in each of the bloc’s member states (see Banking & Financial Services chapter).
The bloc is also seeking to bolster economic and fiscal harmonisation, again with variable success. As part of efforts to maintain economic stability and further pursue economic integration, the bloc has set itself a number of economic and fiscal convergence targets, including a debt cap of 70% of GDP. In 2011, regional governments also adopted six directives on the harmonisation of public finances, aimed at promoting good fiscal management standards across the bloc. In 2013 the CEMAC Department of Economic, Monetary and Financial Policy created a Directorate of Public Finances in order to guide the policies of members in these areas.
Despite such efforts, full harmonisation remains some way off. In March 2015 a group of economic experts convened by the UN Economic Commission for Africa and the government of the Republic of the Congo noted that CEMAC member states were meeting convergence criteria as regards levels of public debt, but were failing to meet criteria related to inflation, budget balances and arrears management.
In its 2014 report, the IMF criticised the fact that member states could fail to meet convergence targets without sanction, and called for regional institutions to play a larger role in the preparation of national budgets. It also called for additional steps to be taken towards economic integration and harmonisation, including the adoption of a comprehensive regional medium-term debt strategy, and suggested changes to fiscal targets, including a reduction of the debt cap. Despite the fiscal challenges, Gabon and Cameroon have implemented a strategy for normalization in the enforcement of quality standards, notably for the importation of products. Some 29 standards were adopted in May 2015 and the goal is to implement 1000 before the end of the year.
Keenly aware of the potential benefits of regional development, international donors are working to support integration efforts. In June 2015 the EU committed to giving €254m by 2020 towards supporting integration in Central Africa, covering the six CEMAC member states as well as five others. Under the initiative, efforts to boost political integration and cooperation in peace and security will receive €43m of support, while regional economic integration and trade will receive €211m in assistance. An additional €88m will also be provided to support the sustainable development of natural resources and biodiversity in the two blocs, bringing total aid under the initiative to €350m, up from €165m under the previous European Development Fund. In 2012 the EU also agreed to provide €68m for a Support Programme for Trade and Regional Integration primarily covering regional macroeconomic convergence and competitiveness, the transition towards a common market as well as infrastructure.