International Trade Effects of Regional Economic Integration In Africa: The Case of the Southern African Development Community (SADC)

Empirical studies on regional economic integration process in Africa exhibit sluggish progress, and there by limited level of intra-trade. The existing literature in Africa, particularly in the Southern African regional integration bloc, has neglected the effects of regional economic integration dealing with disaggregated data. This study analyzes trade creation and diversion effects of the Southern African Development Community (SADC) using disaggregated data. The investigation estimates an augmented gravity model using panel data and random effect estimator methods applying instrumental variables where needed. The results show that intra-SADC trade is growing in the fuel and minerals and the heavy manufacturing sectors while it displays a declining trend in the agricultural and light manufacturing sectors. This implies that SADC has displaced trade with the rest of the world in both fuel and minerals and the heavy manufacturing sectors. SADC has served to boost trade significantly among its members rather than with the rest of the world. Countries participating in SADC have moved toward a lower degree of relative openness with the rest of the world in these sectors of trade. However, the increasing trend of extra-SADC trade bias over the sample period in both the agricultural commodities and light manufacturing sectors means that there has been a negative trade diversion effect which implies that the value of trade between members and non-members has been increasing (and not falling as would be the case with trade diversion) for the two sectors. These results seem to suggest that SADC countries retained their openness and outward orientation despite signing the trade protocol for enhancing intra-SADC trade