Angola - CSL Conference Lagos Nigeria 29 Sept 2010


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Angola - CSL Conference Lagos Nigeria 29 September 2010

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Angola - CSL Conference Lagos Nigeria 29 Sept 2010

  1. 1. Nigeria Investor Conference – September 2010 Angola, a phoenix rises
  2. 2. Where is Angola?  Bordered by the DRC to the North, Zambia to the east and Namibia in the south.  Cabinda – exclave to the north  1.25m km2, approx 1.35x the size of Nigeria, about equal to SA  Tropical climate in the top half to semi-arid in south and along the coast
  3. 3. Angola – structurally similar to West Africa  Banking – early stage of development  Many banks, little lending  State patronage/protectionism (Big man era)  Big public and informal sectors  Industrial monopolies/duopolies abound  Better fiscal management since end of Civil War; corruption an issue  Chronic lack of infrastructure  Currency: Managed float versus dollar
  4. 4. Bull Case Increasing Political Stability Strongest non-oil economy in Africa - 5yr average of 14.5% (Source IMF) Rising FDI into non-oil sector: US$3.3bn in 2009 (Source: ANIP) Demographics favour an emerging ‘middle class’ Natural resources: 4Exploited: Petroleum( 9.5bn barrels in reserve), diamonds (4th largest producer globally) 4Unexploited: Iron ore, phosphates, copper, feldspar, gold, bauxite, uranium, gas (11 trillion cubic feet) Agricultural potential: 435m ha of arable land; Only 3m ha currently under cultivation 41000ml of rainfall a year; 50% of food imported Tourism potential: 41600 km of coastline
  5. 5. Angola’s diamonds 14% Global market share by value 11% Global market share by carats produced Significant upside: Cutting and polishing would add some 4-500% value addition Emerging markets key: Emerging middle classes in China and India
  6. 6. Developmental issues Protectionist culture: key sectors closed to investment Bureaucratic, corruption, lack of transparency Weak legal environment: 4Ranked 181 on Doing Business’ “Enforcing contracts” Poor skills base: 467% literacy; Ranked 178 on Doing Business’ “Employing workers” Poor infrastructure Power problems Most expensive city in the world after Tokyo and Oslo in 2009
  7. 7. Economic Trends
  8. 8. Impact of credit crunch Negatives Positives  Drop in oil Revenues and resultant  Ties with the IMF restored: budget deficit US$1.8bn made available;  US$6bn in payments to creditors  Sovereign credit rating obtained: outstanding B+ rating awarded by S&P and Fitch  US$5bn drop in foreign currency  Tighter corporate governance; reserves Zero-tolerance towards corruption and fraud reiterated  26% devaluation in the currency to AKZ95:US$1  Improving accountability:  Restrictive monetary policy Sonangol and BNA publish accounts implemented  Accounting controls beefed up:  Slowdown in economic activity; E &Y appointed to audit the state particularly construction budget (2010 US$35bn)
  9. 9. Demographic trends defined by war  Majority (70%) of population lives in cities  Forced urban drift during war  Partially explains consumption trends, high cost of living and low standards of living  Trend reversing as agricultural areas rehabilitated
  10. 10. Geopolitics and international trade Exports of Exports of Tier 1 $18bn $11bn Imports Imports Imports Tier 2 of $2bn of $1bn of $1.1bn Tier 3
  11. 11. Relations with China 912 770: number of barrels of crude exported to China daily in June 2010;  US$4.5bn: Oil backed loans forwarded to the Angola government from 2004-7  US$1bn: Additional loan via Ex-Im Bank China to fund agricultural development.  100: The number of Chinese firms in Angola of which (50 classified as significant size)
  12. 12. BVDA – The next BIG stock market  BVDA US$16m equity invested by Sonangol et al in 2005  Capacity for 35 brokers  3 Brokers Licensed: 4Baluarte – Brazilian broker (16 November 2006) 4Golden Broker (BNI) 4Novação Corretora  Unlicensed brokers include 4BFI 4Savings 4BFA (2nd largest bank, $6bn total assets), 4Old Mutual Namibia 4Imara Securities Angola  Full staff complement hired and trained in Brazil and Portugal
  13. 13. Stock Market Potential Key Interpretation:  Potentially 3rd largest market in Sub Saharan Africa after Nigeria and SA  Countries undervalued (below red line)include Nigeria, Tunisia, Cote d’Ivoire, Botswana, Tanzania and Uganda; Zim is an outlier due to GDP being understated.
  14. 14. Listable companies
  15. 15. Banking Sector  The Banking sector is booming  Three new banks opened in 2009 taking number to 23  Penetration levels low at circa 20%  Scrum at the BNA; both local and foreign players; Nedbank, Investec  Valor Banco (#23) to launch in Q1 2011  Standard Bank is the first Anglo Saxon Bank to be granted a retail banking license in Q4 2009; Rollout in progress.  BNA to resume de-dollarisation, as financial crisis eases.  Monetary policy loosening started.
  16. 16. Breweries Sector – Cuca (BGI)  Angola's Monopoly brewer is operating at full capacity.  The entry of SABMiller and Unicer will add 4m HL to the sector's capacity, currently being met by imports.  Portuguese brewer Unicer imports 1m HL into Angola annually  Total lager consumption is 8m HL  Fourth highest per capita consumption in Africa
  17. 17. Telecommunications Sector  There are 9m active subscribers in Angola: Unitel has 6m and Movicel has 3m.  At 50%, penetration levels in Angola offer more upside  Partly attributable to high urban population (estimated at 70%)  ARPU’s are the highest in Africa at $27/month per user  Entry of Orange is rumored