A new study by global payments technology company Visa has placed South Africa first among 11 African countries in terms of economic integration.
The first Visa Africa Integration Index, which was launched on Wednesday, measures the degree of economic integration within key trade corridors of sub-Saharan Africa, which comprises West Africa, East Africa and Southern Africa.
The study found that, at the end of 2012, South Africa was by a large margin the most integrated economy, with a global integration score of 39.1 out of 50.0 and a regional integration score of 24.2 out of 50.0, which produced a final index of 63.3 out of 100.
This marked an improvement from 61.1 at the start of 2011.
Kenya came in second place with a score of 53.9, while Ghana achieved third place, scoring 52.1.
Gordon Institute of Business Science Visiting Professor of Economics Adrian Saville said, despite Africa still being the least integrated region in the world, there had been improvement.
While gains in integration in Zimbabwe and Angola amounted to improvement of less than 1% a year, improvements in other countries were swift and substantial. Rwanda’s index score rose by almost 20% between 2011 and 2012, while Ghana, Nigeria and Zambia achieved single-digit improvements in economic integration.
A second line of integration analysis also pointed to exceptionally low levels of intra-Africa flows and regional integration, which was a key reason for Africa’s poor economic record.
World Bank data showed that Africa’s intra-regional trade was 13.1% of its total trade in 2011, well below the global average. By contrast, in South East Asia and Europe, intra-regional trade accounted for 50.2% and 72.1% of total trade, respectively.
“The continent’s low level of integration with the rest of the world and, more importantly, with one another, points to an opportunity for large and sustainable gains in prosperity,” Saville noted.
He said Africa needed to trade and become more integrated in global value chains if it was to harness its natural potential and stimulate wealth and prosperity.
“This also means improving integration within Africa; building economies of scale and competitiveness in global markets, and weighing in alongside the likes of Asia,” Saville stated.
Discussing the rationale behind the index, Visa acting sub-Saharan Africa GM Mandy Lamb said there had been growing evidence that suggested that cross-border interactions drove economic growth and socioeconomic advancement.
“Our objective was to construct an index for a number of selected sub-Saharan African countries to measure their global and regional integration based on recent data. 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.
“We hope the index provides another constructive contribution for policymakers when making strategic economic decisions,” added Lamb.
She further said that the release of the index was particularly timely, given the release of the ‘Africa Competitiveness Report 2013’ last month.
The report put forward that closer regional integration would be crucial in addressing underlying weaknesses in Africa's long-term competitiveness and ensuring that the continent delivers on its massive growth promise.