Central African Economic and Monetary Community - Explained
What is the Central African Economic and Monetary Community?
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Table of ContentsWhat is the Central African Economic and Monetary Community?What does the Central African Economic and Monetary Community Do? The Central African Customs and Economic Union (UDEAC)The Birth of CEMACCEMAC structure and decision-making proceduresThe Conference of Heads of StateThe Monetary and the Economic UnionThe CEMAC CommissionThe CEMAC Parliament and the Court of JusticeThe Ministerial CouncilsAcademic Research for Central African Economic and Monetary Community (CEMAC)
What is the Central African Economic and Monetary Community?
The Central African Economic and Monetary Community (CEMAC) is generally defined as an African Union Economic Community that facilitates Central African Regional Economic Cooperation. It aims at achieving collective sovereignty, increasing the living standard of its people and maintaining economic stability through harmonious cooperation. With a population of around 37 million people, it covers a total area of approximately 3 million square kilometers. It covers together with the larger Central African Economic Community and the mostly inactive Economic Community (ECCAS). The ECMAC primarily comprise of 6 states which include: Gabon, Cameroon, Central African Republic (CAR), Chad, the Republic of Congo, and Equatorial Guinea.
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What does the Central African Economic and Monetary Community Do?
Gabon, Cameroon, Central African Republic, Chad, the Republic of Congo, and Equatorial Guinea decided to give a further boost to their regional economic cooperation in the sense of a general reinstallation of regional cooperation on the African continent in the 1990's. The Douanire Union of the States of Central Africa (UDEAC), which was largely neglected, was established after their independence in the 1960's, they decided to replace it with a new regional community. The CEMAC was established in 1994 and came into force in 1999 following the ratification of the Treaty. The re-start of Central African regional cooperation entailed a general review of UDEAC's system and goals and changes to the regional and global context. It included institutional restructuring and the establishment of new common institutions. The forerunners: The Federation of Equatorial French Africa (AEF) CEMAC has often been described by all six members as a young organization founded in 1994 and operational since the treaty was ratified in 1999. Nevertheless, the historical origins can indeed be traced back to the early post-colonial or even colonial period. In the French colonial era, the first steps towards regional integration were laid. Although the AEF had been disbanded in 1958, the newly independent States had revived their concept of regional cooperation between them during the 1960s, as their members gained semi independence. The first efforts made by the AEF to form the community failed because it lacked commitment and the young states were uncertain about accepting any type of heteronomy once again.
The Central African Customs and Economic Union (UDEAC)
was established in 1964 by Cameron, Gabon, the CAR, Chad and the Congo-Brazzaville Republic, and became operational in 1966; Equatorial-Guinea decided to join the Community in 1984. The Union undoubtedly succeeded in:
- Completing several infrastructure and construction projects.
- Harmonizing the national tax and customs systems.
- Consulting and collaborating regularly with the policy makers of newly established states.
Despite its many accomplishments, it lacked in operational capacities which include:
- Member states' lack of commitment
- Financial deficits as a result of unequal contribution payments and 1980's economic crises.
- Lack of communication and cooperation among members.
- Inadequate control of successful decision and guideline implementation.
All these made its progress slow and finally it became totally inactive.
The Birth of CEMAC
In 1994, the member countries of UDEAC decided to provide new impetus to their regional cooperation in accordance with the general revival of regionalization initiatives on the African continent; after which they agreed to launch a full process of reform. The CEMAC produced thereafter was to substitute and reinforce the customs union. The treaty of NDjamna concluded in 1999 established the Community as its main aims for converging and monitoring national economic policies, coordinating sectoral policies and creating a single market gradually. In July 1996, in Libreville, Gabon, an additional protocol to the treaty was concluded concerning the institutional and legal system of the state.
CEMAC structure and decision-making procedures
The functional architecture of CEMAC is much more complex than that of its predecessors, even though it was built on the foundations of its predecessor. The CEMAC is focused on four major bodies, in addition to the Executive Secretariat, the Ministerial Councils and the Conference of Heads of State. Although there are several other regional bodies, the four major bodies include:
- The Monetary Union (UMAC).
- The Economic Union (UEAC).
- The Parliament.
- The Court of Justice.
In the framework of the common legal system provided for, under the treaty of N'Djamna, each of these four bodies has the same legal force in relation to a special convention as the treaty.
The Conference of Heads of State
The political leaders of Members gathered every year in the Conference of Heads of State are given the main decision-making power ( which are taken by consensus) and the presidency of the Conference shall revolve and each year shall, by alphabetical order, be entrusted to the head of state of another Member State. The principal role of the Conference is to establish the central principles and structures of the Society; it, however, also determines whether new members should be admitted or not. It appoints the heads of most of the bodies of the Community, including the executive secretary and his deputy, the governor, the vice-governor and general secretary of the BEAC and the directors of any of its affiliated bodies.
The Monetary and the Economic Union
The two main pillars of the Community which are supposed to guide and establish the process of regionalization are the Monetary Union UMAC and the Economic Union UEAC, hence, making UMAC rely on the predefined UDEAC structure. The main institution of UMAC continues to be the BEAC which produces a common currency Franc CFA and ensures its stability through monetary, exchange and reserve definition and management in the Member States. The other core element of CEMAC, the UEAC economic union, is less advanced at present and is still being developed. Notwithstanding a very detailed body of legislation, the implementation of UEAC has so far been slower than expected and is currently behind schedule.
The CEMAC Commission
The CEMAC Executive Secretariat is the central management and administrative body. In 2007, the Heads of State decided to transform the Secretariat in the Commission in order to make it a stronger and sufficiently independent institution. The Commission is comprised of an equal number of commissaries from every Member State headed by a President and a Vice-President following the example of the European Union. Four Commissioners in the areas of common market, infrastructures and sustainable development, human rights & good governance and economic and monetary policies were appointed as the First Commission in June 2008. They were responsible for all policy matters. For a period of four years, Commissioners shall be appointed by the Conference of the Heads of State.
The CEMAC Parliament and the Court of Justice
The other two CEMAC institutions are the Community Parliament and the Court of Justice. These institutions present a supranational democratic dimension that has not existed before and which seems to have broken with the intergovernmental tradition of UDEAC. The Court of Justice located in NDjamna, which has been established since the year 2000, is made up of a Judicial Chamber and an Audit Chamber which contains legal audit functions; whose activities are headed and overseen by a First President. It consists of two courts, each consisting of six judges, serving a judicial role and an audit role. CEMAC's budget and accounts are monitored by the Judicial House to comply with CEMAC treaties and agreements and the Audit House.
The Ministerial Councils
The implementation of the two Unions has two Ministerial Councils: the UMAC Ministerial Committee, and the UEAC Ministerial Council. The meetings of each Member State consist of three ministers each and are held twice a year. Both councils have a key role to play in maintaining the leadership of the two Unions and fostering progressive policy harmonization. In addition, the UMAC Ministerial Committee oversees the activities of the BEAC, authorizes the Bank's budget and accounts and reviews its annual report. The committee members observe a unanimous decision or a 5/6 vote. As far as the UEAC Ministerial Council is concerned, decisions are usually taken by consensus or by a simple or qualified majority in accordance with the matters in question.
Academic Research for Central African Economic and Monetary Community (CEMAC)
- Determinants of bank long-term lending behavior in the Central African Economic and Monetary Community (CEMAC), Constant, F. D., & Ngomsi, A. (2012). Review of Economics & Finance, 2, 107-114. This article states the determinants of long term bank loans in the context of CEMAC (Central African Economic and Monetary Community). The objective of this paper is to test the macroeconomic determinants and common level of behaviour of long-term bank loans. The authors collect a sample of 6 countries and use them in the model. The findings are that the ability of a bank to make an extension in the business loans of long-term is subject to the GDP growth, size, capitalization and whether the long-term liabilities are available. It shows the significance of supply-side constraints in making an extension to the vital credit of long-term to firms.
- Monetary union membership in West Africa: A cluster analysis, Tsangarides, C. G., & Qureshi, M. S. (2008). World Development, 36(7), 1261-1279. This research uses clustering algorithms to certain variables based on the convergence criteria and the optimal currency theory to examine how suitable the countries of West African region are for forming the WAMS (West African Monetary Zone), offered monetary unions and ECOWAS (Economic Community of West African States). The author finds significant differences in the economic features of member countries, especially countries of WAMZ. In case of considering the countries of central and west Africa together, the authors observe important heterogeneities in the zone of CFA franc. On the other hand, the countries of the WAMZ and central Africa have a few interesting similarities as well.
- On the adequacy of monetary arrangements in SubSaharan Africa, BnassyQur, A., & Coupet, M. (2005). World Economy, 28(3), 349-373. The authors collect a sample of seventeen countries and evaluate the economic rationale in Sub-Saharan Africa for monetary unions using the cluster analysis. The variables are based on the literature of fear-of/floating and the optimum currency area theory. The findings are that we cannot view the franc zone of CFA as an optimum currency area. Countries of UEMOA and CEMAC are not a part of the same clusters and we can define the UEMOA core on economic grounds. These results favour to include Sierra Leone, Ghana and Gambia in the extended arrangement of UEMOA and The Gambia, instead of a monetary union creation around Nigeria. The data doesnt support the WAMZ creation around Nigeria.
- African regional agreements: impact on trade with or without currency unions, Carrre, C. (2004). Journal of African Economies, 13(2), 199-239. This study estimates the effects of the regional agreement on trade of members in Sub-Saharan Africa, managing other traditional determinants for comparing the corresponding impacts of the currency unions and the agreements of preferential trade. The author takes the period of 1962 to 1996 and estimates the average effects of every regional agreement on the period of implementation. He, then, shows the evolution of these effects. He designs a Model of Augmented Gravity, depending on a transport cost function where special dummies allow separating the effects of trade creation and diversion. The trade agreements of the African region show a great rise in trade between members, though by trade diversion in the start.
- Estimating the macroeconomic effects of monetary unions: the case of trade and output, Anyanwu, J. C. (2003). African Development Review, 15(23), 126-145. This paper evaluates different paradigms and theories concerning output and trade in monetary unions. The author analyses the African regional economic groupings case using empirical and theoretical evidence, particularly, of the ECOWAS (Economic Community of West African States) and WAEMU (West African Economic and Monetary Union). The descriptive stats show greater room for betterment, specifically in fiscal discipline, price stability and large intra-trade. The findings are that the monetary union benefits the bilateral trade and particularly, the economic growth. The results are in favour of the Hypothesis that the significant useful monetary union effects appear through the credibility of the central bank.
- The economic effects of integration in the Central African Economic and Monetary Community: some general equilibrium estimates for Cameroon, Bakoup, F., & Tarr, D. (2000). African Development Review, 12(2), 161-190. This paper examines the effect of the CEMAC, quantitatively, on the largest member, i.e. Cameroon. The findings are that it is going to gain around 0.41-0.62 of GDP. The part of the agreement which calls for more tariff preferential reduction is immiserizing, though, given the intra-regional imports low level, the effect is quantitatively, too small. Almost 3 quarters of the profits come from Cameroons tariff reduction. It can marginally get even more from complete CEMAC unilateral trade liberalization as compared to the gains from CEMAC implementation arrangements. In short, Cameroon can get regional market power.
- Africa's record of regional co-operation and integration, Mistry, P. S. (2000). African Affairs, 99(397), 553-573. This paper highlights the successive efforts of Africa since the 1960s (African countries started getting independence) to obtain regional economic integration. The research explores the reasons for leach of success by Africa, relatively, in getting the integration objective. It is signing many regional treaties with increasing ambition and frequency. It is taking many initiatives to revitalize and revamp the agreements of integration. The findings are that African leaders can learn and apply the lessons from the historical experience. This is because they are again trying to obtain integration objectives being overly ambitious before they make sure that their attempts will finally be fruitful.
- Real and monetary policy convergence: EMU crisis to the CFA zone, Asongu, S. A. (2013). Journal of Financial Economic Policy, 5(1), 20-38. The main lesson to learn from the crisis of the EMU is that the regional monetary arrangements are not robust to a number of shocks and bring serious disequilibrium. This paper aims to examine this disequilibrium with the zones of CFA, CEMAC and UEMOA. The author also mentions the convergence speed and average time required to get a hundred percent convergence. With the zone of CEMAC, no convergence is there in any form. The member countries are suggested working to harmonize the cross-state differences in institutional and structural features which hinder the monetary policies effectiveness. The author gives warning signs to the zone of the CFA in the context of the Eurozone crisis.
- Challenges for regional integration in Sub-Saharan Africa: Macroeconomic convergence and monetary coordination, Maruping, M. (2005). Africa in the World Economy: The National, Regional and International Challenges (FONDAD The Hague 2005), 129-155. Many sub-Saharan countries of Africa are members of 1 or more sub-regional or regional arrangements to promote economic integration, cooperation or coordination among all the related member countries. Many of the regional economic blocs are at different stages of progress and implementing these regional arrangements. The scope of bloc covers many political, socioeconomic and developmental aspects, including the socio-economic strategy coordination intra-regional trade and the progress of the shared environment and physical infrastructure. Some also cover problems of common interest in the domains of defence, political, economic, social, public governance and security dimensions. Hence, they can meet the challenges of regional integration.
- Currency unions in Africa: is the trade effect substantial enough to justify their formation?, Masson, P. R. (2008). World Economy, 31(4), 533-547. The author quantifies the welfare impacts of establishing currency unions for the regional economic community of Africa and the African Union, itself estimating that trades are doubled by the currency unions. The author shows the political rise in the trade as small and lesser than the one resulting from the Euro adoption. Even if the improved African trade is allowed, it cannot overturn the negative evaluation of African currency unions, because of asymmetric terms-of-trade shocks of countries and the extent of fiscal discipline.
- Does foreign direct investment reduce poverty in Africa and are there regional differences?, Gohou, G., & Soumar, I. (2012). World Development, 40(1), 75-95. The research has been carried out to re-evaluate the relation in African welfare/property reduction and FDI (Foreign Direct Investment) inflows. The authors use the Human Development Index (HDI) of the UN development program and net inflows of FDI per capita. The findings are that there is a significant and positive relation between African poverty reduction and net inflows of FSI, but there are huge differences in regions of Africa. The FDI has a great effect on welfare in underdeveloped countries as compared to developed countries. However, in West Africa, the relationship is ambiguous. Overall, the results are robust to several model specs.