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12 September 2006

Joel Chimhanda Founder & CEO JC Capital – Sandton Jo ’ burg SA. Regional Economic Integration Intra-Africa Region Trade Competitive FDI Concessions . 12 September 2006. Agenda. A case for Africa ’ s Regional Integration Africa ’ s Key Statistics & Economic Indicators

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12 September 2006

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  1. Joel Chimhanda Founder & CEO JC Capital – Sandton Jo’burg SA Regional Economic Integration Intra-Africa Region Trade Competitive FDI Concessions 12 September 2006

  2. Agenda 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 1 2 3 4 5 6 7 8

  3. A Case for Regional Integration in Africa • Small national economies with uneconomical market size to support profitable/competitive production; limited/ outdated prodn structures • Conflict still affecting 70-100 mln Africans; clear hope to see end • Difficult trading environments, regulatory constraints and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

  4. Africa’s Startling Statistics & Economic Indicators • 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!

  5. Africa’s Top 10 Economies by GDP

  6. Share in Global Exports

  7. Africa’s Economic (GDP) Growth Rates

  8. Africa’s Global Exports Growth Rate

  9. Africa’s Share in Global GDP, Population & Trade

  10. Africa’s Share of Global Resources Reserves

  11. Benefits of Regional & Economic Integration • 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.

  12. Types of Integration • 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.

  13. Why Africa Has Lagged to Attract FDI! • 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

  14. Lessons Learnt on Liberalization in Asia • 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 %

  15. Africa’s Political Transformation to Global Leader • 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

  16. HIV/AIDS in Sub-Saharan Africa • 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

  17. Africa’s Youth Contribution to reduce HIV/AIDS

  18. Youth Contribution -HIV Aids Challenges in Africa • 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

  19. “….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, Sandton Postal: PO Box 783327, Sandton, 2146 Switchboard: +27 11 883 3574 Mobile: +27 82 778 8113 Fax: +27 11 784 0814 E-mail: joel.chimhanda@jccapital.co.za Web address: www.jccapital.co.za

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