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Visa Africa Integration index launched in Ghana

By Myjoyonline.com
Business & Finance Visa Africa Integration index launched in Ghana
DEC 18, 2014 LISTEN

Visa in Ghana today launched the  Visa Africa Integration Index  that measures the degree of economic integration amongst key economic regions in sub-Saharan Africa, namely West Africa, East Africa and Southern Africa.

Together with its partners, global payments company Visa touches 500 million people in Africa.

Rationale
Ade Ashaye, Country Manager for Visa in West Africa, said: “There is growing evidence that cross-border interaction, or openness, drives economic growth and socio-economic advancement.

“Our objective was to construct an index for a number of selected sub-Saharan African countries to measure their global and regional integration. The Index is built from country-level macroeconomic data, and a wealth of proprietary data drawn from  Visa in sub-Saharan Africa , that sum to more than 4 million observations measured across 19 elements.  The final outputs are economic integration scores at the country and regional levels measured on a semi-annual basis for the period 2011-2013. We want to better understand Africa to help unleash the enormous growth potential in electronic payments on the continent, now the heart of the developing world.”

It is widely expected that buoyant economic growth will continue for the foreseeable future and it is likely that the African economy will achieve a growth rate approaching 5.5 percent in 2014. With a collective gross domestic product (GDP) of over $1.9 trillion – a figure that is expected to exceed $2.6 trillion by 2020.

Study Methodology
The study offers a detailed analysis of key country clusters in sub-Saharan Africa, revealing strengths and areas of growth potential.  

The clusters are:
●       West Africa: Ghana and Nigeria
●       Southern Africa: South Africa, Angola, Mozambique, Zimbabwe and Zambia

●        East Africa: Kenya, Uganda, Rwanda and Tanzania

The 11 constituent countries are highly representative of the region, with a combined population of 437 million people, or 55 percent of the total population at the end of 2012. The study was carried out in conjunction with Professor Adrian Saville, Visiting Professor of Economics at the Gordon Institute of Business Science (GIBS) in Johannesburg.

Four key metrics to measure integration were used: the flow of goods and services or trade (T), financial integration and the movement of capital (C), the flow of information and knowledge (I) and the movement of people (P).

This TCIP model assigns a numeric value to the level of integration, with the global median score being 100.

Findings
West Africa cluster
Visa Africa Integration Index Score
Nigeria
40.5
Ghana
52.5
East Africa cluster
Visa Africa Integration Index Score
Kenya
55
Uganda
48.3
Rwanda
47.1
Tanzania
45.6
Southern Africa cluster
Visa Africa Integration Index Score
South Africa
66.7
Mozambique
42.5
Zambia
37.2
Zimbabwe
31.2
Angola
30.5
Professor Saville said that Africa is still the least integrated region in the world, but there are signs of change. “While improving off a modest base, the countries that make up the Index have undergone positive structural transformation over the past decade.

“The Index offers both recent and robust evidence of this: all 11 countries show improvements in economic integration over the period measured, namely the four half-year periods that make up 2011 and 2013.”

Ghana
Ghana's Visa Africa Integration Index score has risen consistently over the period of the survey resulting in achieving the highest score in the region and the third highest of the countries in the study.

Said Ashaye: “Ghana has made substantial progress in recent years - especially toward its regional integration where is has increased in the period measured, but still has a way to go in terms of greater global integration.”

Ghana also has seen a rise in its global integration score from 2011 to 2013, albeit slightly less impressive than the country ' s regional score. The slight rise can be attributed almost entirely to a small increase in capital flows.

This is on the back of growing economic prospects coupled with improving macroeconomic management in Ghana. New oil discoveries, a vibrant mining sector and growing agribusiness have all contributed toward greater breadth in capital flows.

But Ghana ' s relatively strong  Visa Africa Integration Index  score is based largely on its regional integration, and obviously its growing linkages and exchanges with Nigeria.

“This is not surprising given Ghana is making economic gains from the exciting new market opportunities in the West African region.

“These developments bode well for Ghana and the broader West African region, and increased regional integration will allow Ghana to benefit enormously from Nigeria ' s extensive market,”  Ashaye noted.

Depth and Breadth of Integration
The analysis also considers the depth and breadth of integration, and how integrated each country is globally and regionally. Measuring economic integration by way of depth and breadth provides for a more granular description and better understanding of the nature of integration beyond conventional economic measures.

In terms of “depth”, a country is considered to be “deeply integrated” if the economy is particularly open and highly connected to the rest of the world. However, integration only becomes “deep and broad” if a highly connected economy is engaged with a wide variety of counter parties across the different strands of its global relationships.                 

South Africa scores highest amongst the 11 countries for global integration with a score of 42.6 out of 50. Kenya scores highest for regional integration, scoring 27.5 out of 50, narrowly ahead of Ghana.

But all of these countries – South Africa, Ghana, Kenya and the other eight – are a long way off the global median of 50.                                   

The same observation holds for the underlying depth and breadth pillars that make up the Index.

While South Africa scores highest for global depth (48.3 against the global median of 50) and global breadth (36.9); Mozambique scores highest for regional depth (27.3); and Kenya has the highest score for regional breadth (40.9).

Notably, none of these scores achieves the global median of 50. Therefore, while the economic transformation among these African countries is impressive, the Index results flag the need for further structural improvements.

Conclusion
“Findings around openness and increased integration have important implications for the socio- economic advance of African economies based on at least two structural drivers. Firstly, African economies are substantially unconnected to the rest of the world. Secondly, African economies largely are unconnected to each other.

“Africa stands to gain from a sustained structural benefit brought about by the opening up of African economies to each other and to the world at large. Visa is also working hard with its partners to drive cross-border integration to open up the money flows across the region,” said Ashaye.

He added that Visa expects the Index to continue provide insights on Africa's regional integration and enable us to track changes and progress over time.

“The Index offers Visa an academically rigorous foundation to understand how we can serve Africa better.  We also hope the Index provides another useful tool for policymakers when making strategic economic decisions,” Ashaye  concluded.

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