connecting for growth, economic inclusion & prosperity integration index... · 15 visa...

Connecting for Growth, Economic

Inclusion & ProsperityVISA Africa Integration Index | 4th Edition, 2017

Dr Adrian Saville | @AdrianSaville

Professor in Economics, Finance and Competitive Strategy, GIBS

May 2017

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Paths to Prosperity

1945-1985 Japan 15x 1966-2015 South Korea 20x 1976-2015 Chile 20x

Data via World Bank (2015), IMF (2015) and Angus Maddison via Maddison Project (2014) http://www.ggdc.net/maddison/maddison-project/home.htm

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0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Per

cap

ita

inco

me

($ p

er p

erso

n i

n 2

00

0 p

rice

s)

Africa (sub-Saharan)

World

From Left Behind

Adapted and extended by Adrian Saville, Cannon Asset Managers (2014) from Angus Maddison (2008)

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To Leading

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Economic Growth (% p.a.): 2001-2015

Ethiopia

Rwanda

Sub-Saharan Africa

World

Ethiopia 9.2% p.a.

4x per capita

Rwanda 7.6% p.a.

9½ year doubling time

World Bank (2017)

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Broader Basis: Sustained & Inclusive

1.7

-1.1

1.3

2.8

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

World Sub-Saharan Africa

Growth in Per Capita Income: 1980-2015

1980-1999 2000-2015

World Bank (2017)

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Education Health Openness

The Six Pack & Prosperity

Savings & Investment Demography Policy & Institutions

David Landes (1998) Wealth & Poverty of Nations; Daron Acemoglu and James Robinson (2012) Why Nations Fail; Abhijit Banerjee and Esther Duflo (2011) Poor Economics; Ruchir Sharma (2012) Breakout Nations

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The Six Pack & Prosperity: Primary Key Ingredient



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Gross Domestic Fixed Investment Half The Miracle

y = 0.2904x - 3.8707

R² = 0.5164

0

2

4

6

8

10

12

15 20 25 30 35 40 45

Real G

DP

Gro

wth

(A

vera

ge %

, 2001-2

010)

Investment Share of GDP (Average %, 2001-2010)

GDFI

Adrian Saville, Citadel Investment Services (2017)

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Gross Domestic Fixed Investment Half The Miracle

0

2

4

6

8

10

12

15 20 25 30 35 40 45

Real G

DP

Gro

wth

(A

vera

ge %

, 2001-2

010)


GDFI


Investment Rates 2011-2015

Botswana 34.1% | Ethiopia 36.1% | Namibia 28.3%

Ghana 27.5% | Rwanda 25.6% | Uganda 26.6%

Tanzania 30.0% | Zambia 35.3%

34.1 % Botswana

36.1 Ethiopia

28.3 Namibia 27.5 Ghana

25.6 Rwanda 26.6 Uganda

30.0 Tanzania

35.3 Zambia

21.4 Kenya 24.1 World

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• Openness & connectedness

• Historically misunderstood, mis-measured & data gaps

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Connectedness Squares The Circle

y = 0.2904x - 3.8707

R² = 0.5164

0

2

4

6

8

10

12

15 20 25 30 35 40 45

Real G

DP

Gro

wth

(A

vera

ge %

, 2001-2

010)


R² = 0.4985

0

10

20

30

40

50

60

70

80

90

100

100 1,000 10,000 100,000

TC

IP (

Co

nn

ect

ed

ness

) Sco

re

GDP per Person ($)

GDFI TCIP


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Mis-Measured:

Trade & Capital

Misunderstood:

Globalization

Missing:

Poor Numbers

But Mis-Measured, Misunderstood & Missing

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Mis-Measured: Trade & Capital Flows Matter

Adrian Saville (2016); 142 country study

y = 519x – 16,137

R² = 0.3618

0

10,000

20,000

30,000

40,000

50,000

60,000

0 20 40 60 80 100

GD

P p

er

Cap

ita (

$, 2015)

Trade and Capital (TC) Score

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y = 724x – 27,808

R² = 0.5236

0

10,000

20,000

30,000

40,000

50,000

60,000

0 20 40 60 80 100

GD

P p

er

Cap

ita (

4, 2015)

TCIP Score

Information & Movement Of People Matter More

Adrian Saville (2016); 142 country study

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The world has more barriers than ever before: ¾ of all border

walls and fences were erected after the year 2000.

• In a world of “insane inequality”, migration is the most

powerful tool around for fighting poverty.

• Closed borders are one of the biggest barriers to global

equality. Someone who lives in Nigeria and has exactly the

same skill set and education as someone who lives in the

UK or the US, earns about eight-times less.

• … if developed countries were to take in just 3% more

immigrants, the world’s poor would have over $300 billion

more to spend.

• … there is a huge body of research that shows how carefully

managed global migration and ethnic diversity strengthens

a country's long-term economy.

Rutger Bregman, Utopia for Realists, 2014

via bit.ly/2qIMPW5

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Mis-Measured:

Trade & Capital

Misunderstood:

Globalization

Missing:

Poor Numbers

Mis-Measured, Misunderstood & Missing

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Misunderstood

0 10 20 30 40 50

Immigrants

Phone Calls

DirectInvestment

Exports

Pankaj Ghemawat via TED http://bit.ly/13Fah9W

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Misunderstood

0 10 20 30 40 50

Immigrants

Phone Calls

DirectInvestment

Exports

Pankaj Ghemawat via TED http://bit.ly/13Fah9W

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Mis-Measured:

Trade & Capital

Misunderstood:

Globalization

Missing:

Poor Numbers

Mis-Measured, Misunderstood & Missing

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Missing

So geographers, in Afric maps,

With savage pictures fill their gaps,

And o'er uninhabitable downs

Place elephants for want of towns.

Jonathan Swift (1667-1745), On Poetry: A Rhapsody

Young (2012) for 47 Africa countries (1991-2004), more

than half of the data points for specific economic

indicators were missing & 15 countries had no data for

any year for key indicators.

Jerven (2013) notes even where numbers are available,

figures often are misstated because of capacity

constraints or large “informal” economies that perform

differently from the more readily measured “formal”

economy.

Reliable statistics are basic to the operation of

governments, vital to non-governmental organizations

and invaluable to business. One of the most urgent

challenges in African economic development is to

bolster statistical capacity.

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The VISA Africa Integration Index


First three editions covered 11 countries ½

region’s population and ¾ of output

Fourth edition extended to 19 economies ¾

of population and nine-tenths output in four

regions, namely:

• Central Africa, which includes Angola,

Cameroon and the Democratic Republic

of Congo

• East Africa, covering Ethiopia, Kenya,

Madagascar, Mauritius, Rwanda,

Tanzania and Uganda

• Southern Africa, which includes

Botswana, Mozambique, Namibia,

South Africa, Zambia and Zimbabwe

• West Africa, which includes Côte

d’Ivoire, Ghana and Nigeria

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Step 1 Step 2 Step 3

Depth

→ Trade →

Depth Measure → Capital →

→ Information → →

VISA Africa

Integration

Index

→ People →

Breadth

→ Trade →

Breadth

Measure

→ Capital → →

→ Information →

→ People →

VISA Africa Integration Index ConstructionFilling Gaps in Data & Knowledge

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VISA Africa Integration Index ConstructionPillar Component Depth Scaling Component Breadth Scaling Component

Trade (T) Merchandise trade Domestic GDP Export destination

Services trade Domestic GDP Product or service type

Spend on freight, forwarding and courier services Domestic GDP Not relevant

In-country transactions on foreign bank cards Total card spend Foreign issuer

Road, rail and air infrastructure Global scale Not relevant

Capital (C) Foreign direct investment (FDI) stocks Domestic GDP Home country

Foreign direct investment (FDI) flows Gross fixed capital formation Home country

Foreign portfolio investment (FPI) stocks Domestic GDP Home country

Foreign portfolio investment (FPI) flows Gross fixed capital formation Home country

Information (I) Internet users Population Share of population

Mobile cellular subscribers Population Share of population

Trade in printed publications Population Not relevant

Social network users Population Share of population

Spend on data services and information Domestic GDP Not relevant

Education spend Domestic GDP Not relevant

People (P) Immigrants (foreign born) and emigrants Population Home country and host country

Tourists (arrivals and departures) Population Home country and host country

International students Tertiary education enrolments Home country

International flights Total flights Destination

Foreign bank cards versus domestic bank cards Ratio Share of market

Transactions on foreign bank cards Total bank card transactions Share of market

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Why Depth & Breadth Matter

atlas.cid.harvard.edu (2016); export composition of Nigeria and Kenya

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VISA Africa Integration Index ConstructionPillar Component Depth Scaling Component Breadth Scaling Component

Trade (T) Merchandise trade Domestic GDP Export destination

Services trade Domestic GDP Product or service type

Spend on freight, forwarding and courier services Domestic GDP Not relevant

In-country transactions on foreign bank cards Total card spend Foreign issuer

Road, rail and air infrastructure Global scale Not relevant

Capital (C) Foreign direct investment (FDI) stocks Domestic GDP Home country

Foreign direct investment (FDI) flows Gross fixed capital formation Home country

Foreign portfolio investment (FPI) stocks Domestic GDP Home country

Foreign portfolio investment (FPI) flows Gross fixed capital formation Home country

Information (I) Internet users Population Share of population

Mobile cellular subscribers Population Share of population

Trade in printed publications Population Not relevant

Social network users Population Share of population

Spend on data services and information Domestic GDP Not relevant

Education spend Domestic GDP Not relevant

People (P) Immigrants (foreign born) and emigrants Population Home country and host country

Tourists (arrivals and departures) Population Home country and host country

International students Tertiary education enrolments Home country

International flights Total flights Destination

Foreign bank cards versus domestic bank cards Ratio Share of market

Transactions on foreign bank cards Total bank card transactions Share of market

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0.0

10.0

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70.0

80.0

90.0

100.0

Cen

tral A

fric

a

An

go

la

Cam

ero

on

DR

C

East

Afr

ica

Eth

iop

ia

Ken

ya

Mad

ag

asc

ar

Mau

riti

us

Rw

an

da

Tan

zan

ia

Ug

an

da

So

uth

ern

Afr

ica

Bo

tsw

an

a

Mo

zam

biq

ue

Nam

ibia

So

uth

Afr

ica

Zam

bia

Zim

bab

we

West

Afr

ica

Cô

te d

’Ivo

ire

Gh

an

a

Nig

eri

a

VISA Africa Integration Index (2016)

VISA Africa Integration Index

Benchmark = 100.0

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0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Cen

tral A

fric

a

An

go

la

Cam

ero

on

DR

C

East

Afr

ica

Eth

iop

ia

Ken

ya

Mad

ag

asc

ar

Mau

riti

us

Rw

an

da

Tan

zan

ia

Ug

an

da

So

uth

ern

Afr

ica

Bo

tsw

an

a

Mo

zam

biq

ue

Nam

ibia

So

uth

Afr

ica

Zam

bia

Zim

bab

we

West

Afr

ica

Cô

te d

’Ivo

ire

Gh

an

a

Nig

eri

a



Benchmark = 100.0

VISA Index Average 54.5

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0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Cen

tral A

fric

a

An

go

la

Cam

ero

on

DR

C

East

Afr

ica

Eth

iop

ia

Ken

ya

Mad

ag

asc

ar

Mau

riti

us

Rw

an

da

Tan

zan

ia

Ug

an

da

So

uth

ern

Afr

ica

Bo

tsw

an

a

Mo

zam

biq

ue

Nam

ibia

So

uth

Afr

ica

Zam

bia

Zim

bab

we

West

Afr

ica

Cô

te d

’Ivo

ire

Gh

an

a

Nig

eri

a



Benchmark $10,100

VISA Index Average 54.5

Panama $13,200

Philippines $2,900

Romania $8,900

Per Capita $1,600

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Rising Connections --- But Only Halfway There

0.0

10.0

20.0

30.0

40.0

50.0

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70.0

80.0

90.0

100.0

Cen

tral A

fric

a

An

go

la

Cam

ero

on

DR

C

East

Afr

ica

Eth

iop

ia

Ken

ya

Mad

ag

asc

ar

Mau

riti

us

Rw

an

da

Tan

zan

ia

Ug

an

da

So

uth

ern

Afr

ica

Bo

tsw

an

a

Mo

zam

biq

ue

Nam

ibia

So

uth

Afr

ica

Zam

bia

Zim

bab

we

West

Afr

ica

Cô

te d

’Ivo

ire

Gh

an

a

Nig

eri

a

VISA Africa Integration Index: 2011 and 2016

2011 2016

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30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0

2011 H1 2011H2 2012 H1 2012 H2 2013H1 2013H2 2014 H1 2014 H2 2015 H1 2016 H1 2016 H2

VISA Africa Integration Index: Global & Regional Sub-Indices

VISA Africa Integration Index Global Integration Score Regional Integration Score

Global & Regional Integration

Visa Confidential32

Finding Neighbours Is Key

0

10

20

30

40

50

60

70

80

Europe South-East Asia North American Free Trade Area Sub-Saharan Africa

Intra-Regional Trade % GDP (2011-2015)

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Connections To Neighbours Vary

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

Cen

tral A

fric

a

An

go

la

Cam

ero

on

DR

C

East

Afr

ica

Eth

iop

ia

Ken

ya

Mad

ag

asc

ar

Mau

riti

us

Rw

an

da

Tan

zan

ia

Ug

an

da

So

uth

ern

Afr

ica

Bo

tsw

an

a

Mo

zam

biq

ue

Nam

ibia

So

uth

Afr

ica

Zam

bia

Zim

bab

we

West

Afr

ica

Cô

te d

’Ivo

ire

Gh

an

a

Nig

eri

a

VISA Africa Integration Index: 2016 Regional Integration Score

Benchmark = 100.0

Visa Confidential34

Rising Integration & Growing Prosperity

Angola

Botswana Cameroon

Côte d’Ivoire

DRC

Ethiopia

Ghana

Kenya

Madagascar

Mauritius

Mozambique

Namibia

Nigeria

Rwanda

South Africa

Tanzania

Uganda

Zambia

Zimbabwe

y = 0.0675x + 2.6

R² = 0.1102

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

-10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0

Ch

an

ge in

Per

Cap

ita In

com

e (

% p

.a. P

PP

)

Change In VISA Africa Integration Index (Points)

Change in VISA Africa Integration Index and Growth in Income Per Person:

2011-2016


Key Results & Findings

• Collectively integration is low (globally)

• Base is modest but integration is rising

• Over past five years, greatest gains by the

East African economies of Ethiopia, Kenya,

Mauritius, Rwanda and Uganda

• Other gainers are Ghana (West Africa),

Zambia (Southern Africa) and Cameroon

(Central Africa)

• Regional integration lags global integration

• Country circumstances vary widely

• Collectively, high correspondence between

integration and per capita income

improvements

• Fills gaps in measurement & knowledge

and affords keen insights from policy to

business

Rank

Visa Africa

Integration Index

Score

Country

1 79.3 South Africa

2 71.6 Mauritius

3 67.8 Namibia

4 65.5 Kenya

5 64.3 Rwanda

6 62.8 Côte d’Ivoire

7 61.8 Zambia

8 61.4 Botswana

9 60.5 Ghana

10 59.8 Uganda

11 58.0 Ethiopia

12 57.8 Tanzania

13 47.9 Cameroon

14 45.8 Mozambique

15 42.7 Madagascar

16 34.9 Zimbabwe

17 33.1 Nigeria

18 32.0 Angola

19 28.5 Democratic Republic of Congo

Thank You!

connecting for growth, economic inclusion & prosperity integration index... · 15 visa...

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