SUMMIT TV: Visa introduces African integration index

MANDY Lamb is Visa’s acting general manager for sub-Sahara Africa.

SUMMIT TV:  Global card company Visa has launched what it calls the first African integration index. The index measures the degree of economic integration within key trade corridors of the sub-Saharan African continent. While the index shows that South Africa’s integration is improving, there are still low levels of integration among other African countries. Joining me on News Leader with more is Visa sub-Sahara Africa acting general manager, Mandy Lamb.

Mandy, first of all — why launch the index? How does Visa benefit from an economic integration index?

MANDY LAMB: First and foremost, I think, there’s been a lack of solid, robust data across the African continent for a number of years. For us, we sit on this bedrock of amazing information around the flow of information and the flow of people. Part of the reason for formulating the index was to provide some thought leadership around Africa and to understand how we as a company operating on the sub-continent can actually provide more insights to our products and services that ultimately are going to bring about socioeconomic advance to the continent.

STV: So you take the data that comes out of this and you can actually apply it to your business model in Africa.

ML: We probably can, absolutely. We implement infrastructure in terms of our systems; we implement products and services, mobile technologies, things that are going to uplift the social status of the economy, but also bring about economic advance. We’ve seen that through multiple points of research, such as movies research, that we actually contribute positively to the economy through electronic payments.

STV: Because it gets money into the system.

ML: Correct. It takes out that black economy to some degree.

STV: If our integration is improving in South Africa but the rest of the sub-continent is below par, does that indicate that there’s one-way trade from South Africa going out or does it indicate that South Africa is trading with others but necessarily with our neighbours?

ML: When we look at this index, we look at four factors. We look at trade — goods and services — we look at capital flows, the flow of information, social media and a variety of things as well as the flow of people. When you look at the global average of a company that is well integrated both globally and regionally, they should hit about the 100 mark in terms of an index number. From South Africa’s standpoint, that was the highest country at 63.3, which means we are still below average. All other countries were lower than that in terms of the index. South Africa’s integration is driven by still great connections globally but much lower on the regional front, so we as South Africa can improve in terms of finding regional neighbours and trading on the actual continent, and then we also measure the breadth and depth — so are we trading just one product, multiple products? Are we flowing a variety of things across borders as opposed to just a narrow focus in our integration?

STV: So how did our score of 63.3 compare with the score from developed countries such as the UK or Germany?

ML: Countries like Germany, Singapore is a good example, very regionally integrated and would score way over 100. So that 100 is really the mark that you’re aiming for, so you can see that we are sub-optimal in terms of our integration and many countries stand out in terms of good global integration but the regional piece is the trick and the nut that we need to crack over time.

STV: Any surprises, because something that stood out for me was that Ghana scores higher than Nigeria and I would have thought that Nigeria being so big and being so prevalent in Africa would have scored better than Ghana.

ML: Ghana in the West Africa cluster was a surprise, 0that it scored slightly higher than Nigeria. What is good is that it’s found Nigeria as a regional trading partner, and we’ve also seen of late the index, looking at the last four quarters over the last two years, was that Ghana has found oil again; it’s got a good agri business sector; it’s got good mining and it’s finding its partners in terms of those core resources from a regional standpoint and not looking straight to the UK and the US in terms of who it should be trading and partnering with.

STV: Unsurprisingly, Kenya was the top scorer in East Africa followed by Uganda.

ML: There, I think, a lot of the contributing factors. Whilst we didn’t delve into the exact reasons as to why each country necessarily stood out, we can provide some insights and some of the thinking there is around the East African community and the good work the East African cluster has done in terms of integrating more regionally.

STV: To what extent do you think our colonial boundaries stand in the way of this regional integration and regional trade, where we may trade more with our former colonisers than we do with our neighbours, so you’ll have lusophone countries trading with Portugal, francophone countries trading with France and, of course, us perhaps trading with the UK and Europe.

ML: There are various reasons as to why countries would stick with historical relations and language is most certainly one of those that stood out as a key factor. So Portuguese communities tending to deal more with each other, given the language barriers and yes, there is legacy, history in terms of policy frameworks, trading treaties and a variety of things that would contribute to why certain economies do trade with each other, but it’s also the flow of people, so you’re starting to talk about policies around the movement of people, the movement of people because of visa applications and a variety of smaller aspects that have a major impact on the level of regional integration of these economies.

STV: And to what extent do you think that regulations and trade barriers stand in the way? So perhaps tariffs between countries stand in the way of more economic freedom.

ML: Those are certainly contributors. The research didn’t particularly look into those key factors but I think what it can inform is debate policy formulation and when it comes to the electronic payments world, which is where Visa operates, most certainly we stand for consistency of our standards and what we call inter-operability. So everyone can have the same experience across the sub-continent whichever country they go into, and we’d hope that this would inform more of that policy framework and formulation over time.

STV: Are we moving in the right direction? Are you seeing it starting to happen, particularly as we see more Africans coming and working in South Africa, South Africans expanding further into the continent as well?

ML: The overall move, if you look at the past two years of data in the index, is that there is a positive upward trend in terms of integration. It’s by no means a negative story that we’re sitting below the average. There are definite signs across the sub-continent of improvement in terms of both global and regional, but regional, even highlighted in the Africa Competitiveness Report. That level of integration is crucial to Africa’s growth potential and fulfillment of this growth promise that is in the continent.

STV: Is it also very much reliant on companies and banks expanding into the continent because of course banks use the card payment system — they use Visa or MasterCard to facilitate payment? So, as we see South African banks and African banks moving further into the continent, do you think we will facilitate it better?

ML: For sure. Our client is a business-to-business entity but very much a consumer brand as well, is that we want to be able to inform our banking partners about what it will take to advance the economy in which we want to operate. Things like financial literacy and final inclusion are things that we would work with our banks on when entering these economies. This index can give us that breadth and depth of information around what it is that we need to slowly start working on in terms of operating more successful financial services propositions in those economies.

SUMMIT TV: Visa introduces African integration index