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Angola - CSL Conference Lagos Nigeria 29 Sept 2010


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Angola - CSL Conference Lagos Nigeria 29 September 2010

Angola - CSL Conference Lagos Nigeria 29 September 2010

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  • 1. Nigeria Investor Conference – September 2010 Angola, a phoenix rises
  • 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. 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. 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. 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. 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. Economic Trends
  • 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. 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. 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. 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. 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. 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. Listable companies
  • 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. 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. 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