BMI View: Communauté Économique et Monétaire de l'Afrique Centrale is one of Africa's least-integrated economic blocs, and we doubt that the group's six states will make much progress in addressing the legal, institutional, and infrastructural obstacles preventing a closer union.
Celebrations were held across the sub-region on March 16 to mark the 20th anniversary of the founding of the Communauté Économique et Monétaire de l'Afrique Centrale (CEMAC). The anniversary comes at an awkward time for the bloc, which is struggling to implement a cross-border freedom of movement agreement and has failed to prevent the violent implosion of the Central African Republic (CAR).
Cloyingly optimistic rhetoric cannot hide the fact that CEMAC faces a clear crisis of legitimacy. BMI believes that the bloc will remain one of Africa's least-integrated economic blocs and that its economies will significantly underperform their African peers.
| Overlapping Mandates |
|Central Africa - CEMAC & CEEAC|
Of the many challenges facing CEMAC, the most pressing is the situation in the CAR. A 2012 rebellion overthrew the impoverished country's autocratic president, and a wobbly interim administration has proved unable to prevent escalating sectarian clashes from leading to a massive humanitarian crisis. BMI predicts that the violence will scar the CAR's fragile economy for years to come (see 'Political Crisis Breeds Economic Disaster', February 18).
CEMAC's efforts to manage the crisis in its poorest member state have been an embarrassing failure. Troops deployed in the country were powerless to prevent the overthrow of President François Bozizé and have subsequently failed to establish a lasting peace. Regional inaction eventually led to a French military intervention, which highlights the bloc's dependence on its former colonial power (see 'Crisis Highlights Enduring French Role In Africa', December 6, 2013). When the CAR's interim president requests aid from regional partners she tends to bypass CEMAC in favour of the wider Communauté Économique des États de l'Afrique Centrale (CEEAC).
A Truly Central African Crisis
The situation is particularly embarrassing given that the CAR's capital is the seat of the CEMAC commission, the bloc's executive arm. After months of claiming that a move would be a blow to the CAR's struggling government, the institution eventually fled the country in December 2013. Bickering heads of state finally decided to establish a provisional headquarters to Gabon's Libreville, but delayed construction works have left the body homeless for months and most bureaucrats have returned to their home countries. The African Development Bank's 2003 evacuation of its Abidjan headquarters was also described as temporary, but the bank has only recently begun the process of returning to Côte d'Ivoire.
Weak Institutions, Little Integration
The low priority given to finding a new home for the commission speaks to the general powerlessness of CEMAC bodies, and BMI believes that feeble institutions will prevent any real economic integration. The bloc's economic organs are unable to impose themselves on member states, and this has made it impossible to impose common standards. The most jarring recent failure has been the inability of the commission to implement a treaty granting freedom of movement across the bloc. Equatorial Guinea and Gabon simply refused to act on their earlier commitment, and the remaining four states have been powerless to stop them. Jobs at key institutions are apportioned by nationality rather than merit and accusations of mismanagement have continued to plague the commission.
| A Trade Bloc With Little Trade |
|CEMAC - Export Destinations, % of Total Exports (LHS) & Key Trading Partners By State, % of Exports (RHS)|
Rules opening borders to goods and establishing common trade policies are also often flouted. This is one reason why the bloc is one of the least economically integrated in Africa; only 1.1% of goods exported by the six CEMAC states are sent within the common market. With the exception of Cameroon, most states are almost totally dependent on one or two foreign trade partners. Over 80% of Chad's exports are sent to the United States.
Poor infrastructure is also to blame. In a region where an estimated 80-90% of trade travels by truck there are only two fully tarred roads linking national or economic capitals; Yaoundé-Libreville and Yaoundé-Bata. Both routes are in poor repair and infrastructure planning is almost all conducted at the national level. A coordinated approach could provide significant benefits - especially to inland states - but leaders are unwilling to sacrifice national decision-making. A community-wide railway could be a potential game-changer for the regional economy, but BMI doubts that any significant moves will be made in this direction.
| Few Goods On Offer |
|CEMAC - Export Earnings on Selected Goods, US$mn|
A lack of economic complementarily is also to blame. Five of the six CEMAC states have economies that are heavily-dependent on oil exports. None are large producers of consumer products and all are dependent on imported capital goods. Better integration could allow the states to take advantage of economies of scale, and could encourage economic diversification but barriers to trade keep both foreign investors and local entrepreneurs isolated within individual markets.
| A Hostile Climate |
|CEMAC - 2013 Doing Business Ranking (of 188 economies)|
None of the CEMAC states have implemented the business-friendly reforms seen elsewhere in Africa and a heavy state presence has deterred investment outside of the resource sector. While poor business environments are a challenge in much of Francophone Africa, regulations within CEMAC are particularly byzantine . Starting a new business in Equatorial Guinea requires authorisation from the prime minister's office, while the World Bank estimates that the paperwork necessary for paying taxes in Chad take almost 800 hours per year.
Many Problems, Few Solutions
CEMAC's response to these overlapping challenges has shown a significant failure of leadership. National governments seldom cooperate and political leaders remain focussed on unnecessary vanity projects. Efforts to merge the bloc's two competing stock markets have come up against firm political opposition and African media quote local bureaucrats as saying that a high profile committee formed in September 2012 with the goal of rationalising this is a purely decorative measure designed to avoid external criticism of the current arrangement.
The bloc continues to pour money into Air CEMAC, a jointly-owned air carrier which has spent two years hiring staff and building a headquarters in Brazzaville but which does not own any aircraft. Given that the individual states each have their own national airlines, it is unclear whether there is a market for another state-backed carrier. Negotiations with SN Brussels, Royal Air Maroc, and South African Airways have all fallen through and talks with Air France are currently stalled. BMI doubts that the plan will be abandoned, and expects that more money will be devoted to a project that is of questionable commercial value.
Growth, But Relative Decline
Given our view that the CEMAC states are likely to remain poorly integrated, BMI's economic forecasts for the six countries are highly divergent. We expect rapid economic growth in the Republic of the Congo (Congo-Brazzaville) due to iron ore production and an expanding oil and gas sector. Cameroon and Gabon will both see more moderate growth supported by state-led diversification efforts, while Equatorial Guinea faces an economic crisis due to stagnating oil revenue (see 'Medium-Term Forecast Grim', February 6)
| Middling At Best |
|CEMAC- Nominal GDP, US$bn (LHS) & Share of Sub-Saharan African GDP, % (RHS)|
Overall, BMI expects the economy of the CEMAC states to fall behind other African trade blocs. We predict that the community's share of Sub-Saharan Africa's nominal GDP will fall from 7.3% in 2014 to 6.5% in 2018. Without significantly boosting regional integration, BMI predicts that this relative decline will continue over the duration of our long-term forecast to 2023.