12 September 2006

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Regional Economic Integration Intra-Africa Region
Trade Competitive FDI Concessions
12 September 2006
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Agenda
A case for Africas Regional Integration Africas
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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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  production limited/ outdated prodn structures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

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Africas 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!

Statistic Benchmark Africa
Per capita income US 5,000 lt US 500
Average output/ worker gt 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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Africas Top 10 Economies by GDP

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Share in Global Exports

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Africas Economic (GDP) Growth Rates

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Africas Global Exports Growth Rate

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Africas Share in Global GDP, Population Trade

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Africas Share of Global Resources Reserves

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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.

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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.

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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

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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 US50 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 _at_ 14 compared to 6
  8

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Africas 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 Africas Heritage -
  equivalent and successful Asia, Chinese,
  Japanese, Indian
• Great Grand Son Politicians Global Leaders of
  the World G8 of the future

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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

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Africas Youth Contribution to reduce HIV/AIDS
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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

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.We cannot solve problems by using the same
kind of thinking we used when we created
them Albert Einstein
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