12 september 2006 regional economic integration intra-africa region trade competitive fdi...
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12 September 2006
Regional Economic IntegrationRegional Economic Integration
Intra-Africa Region TradeIntra-Africa Region Trade
Competitive FDI Concessions Competitive FDI Concessions
Joel ChimhandaFounder & CEO
JC Capital – Sandton Jo’burg SA
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A case for Africa’s Regional Integration
Africa’s Key Statistics & Economic Indicators
Why Integration, What Form of Integration
Benefits of Regional & Economic Integration
Share in Global Exports
Why Africa Has Lagged to Attract FDI
Lessons Learnt From Asia
Youth Contribution to Economic Prosperity – HIV Aids
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3
4
5
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7
Agenda
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► Small national economies with uneconomical market size to support profitable/competitive production; limited/ outdated prodn structures
► Conflict still affecting 70-100 mln Africans; clear hope to see end
► Difficult trading environments, regulatory constraints and inconsistent legislation
► Uncompetitive cost of doing business due to poor infrastructure
► Uncompetitive investment concessions/ climate to attract global FDI, lowest literacy skills, technological proliferation, tele-density, employment
► Poor local savings culture, undeveloped capital markets and externalization of wealth by both foreign and African politicians and businessmen
► HIV Aids hit Sub Sahara Africa hardest – prohibitive cost per capita
A Case for Regional Integration in Africa
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► Africa lags behind the rest of the world in a number of areas, and a quick glance at its statistics may make for bleak reading: BUT!
Africa’s Startling Statistics & Economic Indicators
Statistic Benchmark Africa
Per capita income US$ 5,000 < US$ 500
Average output/ worker > US$ 20,000 US$ 2,100
Agricultural productivity (yield)
4.8 Mt 1.4 Mt
Average capital per worker US$ 60,000 US$ 5,000
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Africa’s Top 10 Economies by GDP
- 50 100 150 200 250
South Africa
Egypt
Algeria
Morrocco
Lybia
Nigeria
Tunisia
Ivory Coast
Kenya
GDP $ Bln
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Share in Global Exports
6%
6%
18%
70%
0% 20% 40% 60% 80%
Africa
DevelopingAmerica
DevelopingAsia
DevelopedWorld
Share in Global Exports
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Africa’s Economic (GDP) Growth Rates
0% 2% 4% 6% 8% 10% 12% 14% 16%
Angola
Mozambique
Tanzania
Botswana
Lesotho
Swaziland
South Africa
DRC Congo
Mauritius
Namibia
Zambia
Malawi
% Growth Rate
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Africa’s Global Exports Growth Rate
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
China
India
USA
Spain
Italy
UK
France
Germany
% Exports Grow th Rate
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Africa’s Share in Global GDP, Population & Trade
0%
10%
20%
30%
40%
50%
60%
70%
LatinAmerica
NorthAmerica
EasternEurope
Africa AsiaPacif ic
WesternEurope
Africa's GDP
Africa Population
Africa's Major TradingPartners
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Africa’s Share of Global Resources Reserves
0% 20% 40% 60% 80% 100%
Chrome
Manganese
Platinum
Gold
Diamonds
Vanadium
Alumino Group
Silicates
Ziranium
% of Global Mineral Reserves
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► Gains from new trade opportunities
► Larger markets
► Increased competition
► Increased return on investments
► Facilitation of larger Foreign Direct Investment (FDI)
► Facilitation of industry locations
► Broadening of consumer market
► Economies of scale in terms of labour
► Economies of scale in terms of profit margins and volume of goods produced
► Increased competition that improves quality of goods and prices.
Benefits of Regional & Economic Integration
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► Preferential Trade Area: Lower tariffs on imports produced by other members
► Free Trade Area: No tariffs on imports produced by other members
► Custom Union: Common tariffs imposed on non-members. Members can cede sovereignty to a single customs administration.
► Common Union: When the customs Union allows free movement of factors of production
► Economic Union: When a common market has unified monetary and fiscal policies, including a common currency.
► Political union: This is the ultimate integration, when an economic union is fully integrated to become one nation.
Types of Integration
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► Poor Governance and High Corruption
► Lack of Consistent and Sustainable Policies
► Inadequate protection of intellectual property
► Unfavourable/ unstable tax regimes
► Excessive levels of corruption/ regulation or political risk
► Poor levels of skills development and technology proliferation
► Macro economic policy failures
► Rule of Law – weak or judiciary systems subject to political interference
► Poor infrastructure and high cost of doing business in Africa
Why Africa Has Lagged to Attract FDI!
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► Bretton Wood (IMF/ WB) liberalisation alone does not attract FDI
► Strong Investment in Human and IT Capital required
► Governance and Transforming Leaders – Kwame Khurumah, Nelson Mandela, Jomo Kenyatta, Patrice Lumumba, Martin Luther King, Indira Ghandi, Malcolm X
► Africa Intra-Regional investment is a critical success factor “Viable Economics & Social Relevance”
► High national or regional domestic saving culture
► Global Coffee Industry – US$50 bln (Africa realise less that 1 bln)
► Global Sugar Industry – 90% Controlled by Cartel on Quota System
► AGOA – Tax Saving on Failed/ Uncompetitive US Industries
► Cost of doing business – SA @ 14% compared to 6 – 8 %
Lessons Learnt on Liberalization in Asia
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► Great Grand Father Politics – Liberation Fathers Kenyatta, Kaunda, Nyerere, Mugabe, Machel, Nkurumah, Lumumba, Banda, Mandela
► Grandfather Politics – Nationalistic - Mbeki, Chissano, Kibaki, Kabila (Joseph), Kagame, Mogae…
► Father Politics – AU & Nepad Peer Review Aspirants
► Son Politics – Pan-African Collaborate to distinguish Africans as equal, competent and responsible citizens
► Grandson Politics – African Political Value Systems informed by Africa’s Heritage - equivalent and successful Asia, Chinese, Japanese, Indian
► Great Grand Son Politicians – Global Leaders of the World – G8 of the future
Africa’s Political Transformation to Global Leader
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► Sub-Saharan Africa has the highest HIV prevalence rate
► Data collated for the end of 2005 revealed that:
► 25 million Africans were living with HIV at the end 2005
► 2,7 million new infections occurred that year
► 2 million AIDS deaths were reported in 2005 alone
► 12 million children have been orphaned by the disease
► Southern Africa exhibits highest HIV prevalence rate in the world
+20% (Rates exceed values that were ever thought possible)
► East & West Africa has lower prevalence rate 6.0% and 6.8%source: UNAID Annual Report on HIV/AIDS
HIV/AIDS in Sub-Saharan Africa
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How different countries in Africa are affected by HIV
23.2%
33.4%
20.1%
24.1%
5.4%
7.1%
7.9%
6.5%
3.9%
African Country
Perc
en
tage P
revala
nce
Africa’s Youth Contribution to reduce HIV/AIDS
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► Most notably the cumulative impact of 20 million AIDS deaths on orphans, survivors, communities and national development
► Set back in economic development as a result of diminished labour force and decreased life expectancy
► As the epidemic matures the demand for health care rises significantly
► A study by the World Bank has revealed that the required number of beds for the treatment of AIDS patients in Swaziland is dramatically lower than what is needed
► Direct medical costs are reported to be US$ 30 per capita in Africa
► However overall health care spending is US$ 10 per capita for most African countries
Youth Contribution -HIV Aids Challenges in Africa
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“….We cannot solve problems by using the same kind of thinking we used when we created
them…”
Albert Einstein
Physical The Forum, 12th Floor, West Wing
Address: 2 Maude Street, SandtonPostal: PO Box 783327, Sandton, 2146Switchboard: +27 11 883 3574Mobile: +27 82 778 8113Fax: +27 11 784 0814E-mail: [email protected] address: www.jccapital.co.za
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