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  • (Might make this a more interesting graphic. A map of Africa showing the different regions where the commodity is found, with the number denoting % of global of production. The bar chart is very boring)
  • Europe has always been important. US and Europe both significant growth in trade. US: 35bn 2000, 125.8bn 2011. Europe: 87bn in 2000, over 300bn un 2011China: 7.3bn in 2000 to 166.3bn in 2011. India: USD 5bn in 2000 to 57bn in 2011.
  • Despite increasing EM trade, only SELECT countriesLimited to primary commodities
  • (1) razia khan, standard chartered bank

    1. 1. African Economic Overview & the Roleof the Private SectorRazia KhanAsia House, LondonOctober 2012
    2. 2. New narrative on AfricaAfrica is changing. Africa is a growth region Recent headlines  AfDB: „Africa‟s GDP could grow tenfold by 2060‟  5.0%: The IMF‟s (downwardly revised) growth forecast for Sub-Saharan Africa in 2012  „Resilience in crisis‟  FT: „Retailers cash in on spending power of Africa‟s growing middle class‟  FT: „Former colonial master appeals to Angola for funds‟ Source: Standard Chartered Research 2
    3. 3. Africa – sound recovery, relative resilienceDespite risks to global growth, Africa’s prospects are still viewed positivelyReal GDP growth % y/y 8 7 6 SSA 5 4 World 3 2 1 0-1-2 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012f Source: IMF WEO April 12 & July 2012 IMF forecast updates 3
    4. 4. The 7% Club‟ – Doubling in size every decadeAfrica dominates list of world’s fastest-growing Drivers of African growth are diverseeconomies 2001 – 2010 2011 – 2015f Angola 11.57 China 8.74 China 10.49 Ghana 8.55 Myanmar 10.35 Zambia 7.67 Chad 9.03 Rwanda 7.44 Sierra Leone: 30% Nigeria 8.98 Niger 7.40 (iron ore) 30 Ethiopia 8.39 Mozambique 7.34 20 30 % Ghana: 8.5% (oil) 10 Kazakhstan 8.31 India 7.33 15 0 10 East Africa: Diversified Cambodia 8.05 Sri Lanka 7.14 2012 14.4 and new oil discoveries: 5 % 8.5 % Average growth: 0 Mozambique 8.01 Uzbekistan 6.86 2011 2012 2012 2013 Rwanda 7.82 DR Congo 6.85 5.6% 6.8% Sources : IMF, excludes countries will less than 10mn population Source : SCB Research 4
    5. 5. Structural drivers of African growth – the demographic dividendSub Saharan Africa – more than 1bn people by Africa’s demographic dividend2020 2,000  Strong consumption growth  Less age dependency 1,800  Higher returns 1,600Million people 1,400 Africa has the demographic advantage – working age population (% of total) 1,200 70 1,000 Europe 65 800 Asia USA 600 60 Latin America 400 55 Sub Saharan Africa 200 50 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source :UN population stats 5
    6. 6. Nigeria – 4th most populous country in 2050, 3rd globally by 2070Top 10 most populous countries in 2010 Top 10 most populous countries in 2050 China India India China USA USA Indonesia Nigeria Brazil Indonesia Pakistan Pakistan Nigeria Brazil Bangladesh Bangladesh Russian Federation Philippines Congo Japan Million (DRC) Million 0 500 1,000 1,500 0 500 1,000 1,500 2,000 Source: UN World Population Prospect 6
    7. 7. Half of the world‟s most populous countries will be in Africa 2010 2050 21001 China 1,341,3 India 1,692.0 India 2 569.72 India 1,224.6 China 1,295.6 China 1 586.93 US 310.4 US 403.1 Nigeria 1 024.54 Indonesia 239.9 Nigeria 389.6 US 705.65 Brazil 194.9 Indonesia 293.5 Tanzania 449.06 Pakistan 173.6 Pakistan 274.9 Indonesia 421.77 Nigeria 158.4 Brazil 222.8 Pakistan 417.58 Bangladesh 148.7 Bangladesh 194.4 DR Congo 314.09 Russian Federation 143.0 Philippines 154.9 Brazil 313.610 Japan 126.5 DR Congo 148.5 Philippines 277.611 Mexico 113.4 Ethiopia 145.2 Bangladesh 275.112 Philippines 93.3 Mexico 143.9 Uganda 246 .613 Viet Nam 87.8 Tanzania 138.3 Kenya 237.614 Ethiopia 83.0 Russian Federation 126.2 Ethiopia 236.615 Germany 82.3 Egypt 123.5 Mexico 216.016 Egypt 81.1 Japan 108.5 Iraq 208.817 Iran 74.0 Viet Nam 104.0 Egypt 198.418 Turkey 72.8 Kenya 96.9 Zambia 190.219 Thailand 69.1 Uganda 94.3 Sudan 189.020 DR Congo 66.0 Turkey 91.6 Niger 188.1 Source: UNPD 2010 and 2011 revisions, population in millions, ‘high fertility case’ 7
    8. 8. Africa is urbanising faster, creating scale economiesUrbanisation and rising income Making infrastructure investment more affordable 3,000 GDP per 60 head 2,500 50USD (constant 2009 prices) 2,000 40 % of population Urbanisatio 1,500 n rate 30 1,000 20 500 10 0 0 1980 1990 2000 2010 2020 2030 8
    9. 9. Africa is commodity-rich… Platinum 82.0% Cocoa 66.0% Coltan 57.3% Diamond (gemstone) 56.7% Palladium 42.9% Gold 19.1% Tea 13.0% Oil 12.0% Aluminum 10.7% Copper 6.0% Nickel 4.6% Coal 4.2% Share of world production (%) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Source: Standard Chartered Research, World Bank. BP 9
    10. 10. …but consumption, not commodities, drive growthPre-crisis, net exports subtracted from growth. Relationship between terms of trade and growth isnot immediately evident. Unlike in previous commodity booms, African poverty is falling. 20 8 Angola 16 Investments Private % Real GDP growth Exports consumption 12 6 8 The Gambia Tanzania Sierra Leone 4 Uganda Zambia Nigeria Kenya Ghana 4 Mauritius S Africa Botswana Cameroon Cote dIvoire 0Percentage Points 0 50 100 150 200 250 300 350 400 Terms of trade index (2000=100) 2 0 0.45 2,000 Poverty Rate, USD 1/day 1,900 -2 0.40 1,800 Real GDP GDP per Capita (RHS) Imports -4 growth 0.35 Government 1,700 consumption -6 0.30 1,600 2003 2004 2005 2006 2007 2008 2009 2010 2011 1970 1980 1990 2000 2010 Source: IMF Regional Economic Outlook 2011, ‘African poverty is falling…much faster than you think’ Sala-i-Martin, Pinkovskiy 10
    11. 11. Africa has an immense agricultural potentialThe Green revolution has yet to reach Africa Africa has vast available landAgric. Yields in EM 60,000 China India 150 % of potential arable* land Africa Latam 120 South-East Asia Mid-east 50,000 90 in use 60 30 40,000 0 Africa Asia Middle-EastHa per ha 30,000 ….and water resources 20,000 5,000 Water per capita in m3 4,000 3,000 10,000 2,000 1,000 0 0 1961 1967 1973 1979 1985 1991 1997 2003 Africa Asia Middle-East •Note that the proportion potentially arable land presently in use may exceed 100% in (semi) arid regions where irrigation practices are common •Sources: FAO (Terrastat, Aquastat) 11
    12. 12. The rise of the African ConsumerRising middle-class* How large is Africa’s middle class? The 120 debate 107  Using a broader definition of „Middle Class‟, an African Development Bank study suggested that by 100 2010, Africa‟s middle class had risen to 313mn or 34% of the continent’s population  This compares with 111 mn people (26%) in 80 1980, 151 mn people (27%) in 1990, and 196 mnMillion people (27%) in 2000 57  The AfDB defines „middle class‟ as those living on 60 USD 2-USD 20 a day  It includes a measure of the „floating middle class‟ – those living on more marginal incomes (USD 2- 40 32 USD 4 a day) who might be slip back into poverty in the even of sustained economic underperformance 20  The AfDB forecasts that Africa‟s middle class will grow to 1.1bn, or 42% of Africa’s population, by 2060 0  More than a handful of African economies are already middle income countries 2009 2020 2030 * Defined by OECD as households with daily expenditures between USD10 and USD100 per person in purchasing power parity terms Source: OECD, United Nations 12
    13. 13. Estimated size of the informal sector‘Shadow Economy’ estimates as % of measured GNP Zimbabwe Tanzania Nigeria Zambia Senegal Informal economy Formal economy Uganda Ghana Botswana Cameroon South Africa Source: Standard Chartered Global Research, Shadow Economy study cited in ‘Africa Rising’ 13
    14. 14. Africa: lower debt ratios than mature economiesDebt ratios in rated sovereigns compare favorably to OECD countriesGeneral government debt , % of GDP (2011) Japan Greece Portugal United States France United Kingdom Germany Seychelles Cape Verde Spain Netherlands Kenya Ghana South Africa Mozambique Lesotho Uganda Namibia Zambia Angola Gabon Rwanda Nigeria Cameroon 0 50 100 150 200 250 Source: FitchRatings 14
    15. 15. Improving business climate indicatorsAfrica’s reform momentum persists On a 5Y basis, African countries remain among% of SSA countries with at least 1 “Doing Business” reform the top reformers Top 10 performers with the biggest 5-year cumulative change 80 in Doing Business indicators between 2006 and 2011 70 Ranking Countries 5Y average GDP growth 1 Georgia 5.3% 60 2 Rwanda 7.5% 50 3 Belarus 7.3% 4 Burkina Faso 5.1% 40 5 Saudi Arabia 2.7% 30 6 Mali 5.0% 7 Kyrgyz Republic 4.2% 20 8 Ghana 6.5% 10 9 Croatia 1.0% 10 Kazakhstan 6.2% 0 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 Source: World Bank Doing Business Report 2011 & 2012, IMF WEO Oct 2011 15
    16. 16. Shifting pattern of trade flows, away from mature economydependenceVarying trade exposure to euro area Developing countries are more important% of total exports directed to the euro area % of Africa’s trade 100 Zambia 80 Developed Angola world 60 Senegal 40 Kenya emerging 20 countries Tanzania 0 South Africa 1995 1997 1999 2001 2003 2005 2007 2009 2011 Nigeria Uganda % share of total African exports Ethiopia Ghana 70 Gambia 60 US 50Côte dIvoire 40Sierra Leone 30 Eurozone Cameroon 20 10Mozambique Asia 0 0 10 20 30 40 50 60 70 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Sources: IMF, BIS, Standard Chartered Research 16
    17. 17. Rapid growth in Africa‟s trade with emerging powersAfrica ‘s Bilateral trade Sources: Reuters, IMF DOTS, Xinhua. Standard Chartered Research 17
    18. 18. China-Africa bilateral tradeComparison of China-Africa trade in 2004 versus 2011 (USD) CHINA Algeria Sudan Ghana Nigeria Uganda DR Kenya Congo Tanzania Angola Zambia 50mn All Africa 500mn South 5,000mn 2004 29,461,610 Africa 2011 166,319,379 50,000mn Sources: Xinhua, Standard Chartered Research 18
    19. 19. FX volatility, inflation, interest rate trendsInflation – a mixed picture Frontier FX – less exposed than in 2008% change y/y (2006=100) 35 200 GHS 30 Uganda 180 ZMK 25 160 UGX 20 Ghana 140 Kenya 15 120 NGN 10 KES 100 5 Nigeria South Africa 0 80 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Sources: Reuters, National Sources, Standard Chartered Research 19
    20. 20. Africa vulnerability matrixAfrica vulnerability matrixA snapshot of how indicators have changed since the global crisis Exports to Euro Area Fiscal balance as % Current Account FX reserves & Foreign investors – share of total of GDP Dependence on balance import cover Pre- – significant ownershipCountry exports Pre-crisis vs. post- donors Pre-crisis vs. post crisis vs. post-crisis of domestic capital (Avg. 2007-2011) crisis trend crisis trend trend marketsAngola 13%   Botswana 52%   Cote d‟Ivoire 41%   Ghana 33%   Kenya 17%   Nigeria 22%   Sierra Leone 47%   South Africa 21%   Tanzania 19%   Uganda 23%   Zambia 4%    Sources: IMF, DoTS, WEO, National Sources, Standard Chartered Research 20
    21. 21. Political risk, market riskVarying trade exposure to euro area Progress, but democracy is still ‘delicate’Years current government is in power Between 19-25% of elections in Africa are affected by Angola violenceEquatorial Guinea Zimbabwe Cameroon Uganda 19-25% Burkina Faso Chad Gambia Swaziland Rwanda Congo DRC Kenya Namibia Seychelles Mozambique Mauritius Tanzania Sierra Leone Ghana Nigeria South Africa Gabon Côte d’Ivoire Zambia Senegal 0 5 10 15 20 25 30 35 Sources: Africa Progress Report 2012, USIP 2010,Standard Chartered Research 21
    22. 22. Africa offers higher returns on investment25 Africa20 Asia and Pacific15 Europe Latam All10 5 0 2007 2008 2009 2010 2011 Source: US Department of Commerce, Standard Chartered Research 22
    23. 23. Size of African economies today vs. futureUSD bn, Results of growth simulation based on current GDP trends1,2001,000 2030 GDP 977 2011 GDP 800 740 600 422 400 247 251 200 167 99 109 92 55 84 39 60 41 36 31 26 24 23 0 19 South Africa Nigeria Angola Ghana Kenya Ethiopia Cameroon Côte Tanzania Equatorial d’Ivoire Guinea Source: Standard Chartered Research 23
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Singapore: This document is being distributed in Singapore by SCB not be reproduced, redistributed, amended, modified, adapted, transmitted in any waySingapore branch, only to accredited investors, expert investors or institutional investors, as without the prior written permission of Standard Chartered Bank.defined in the Securities and Futures Act, Chapter 289 of Singapore. Recipients in Singaporeshould contact SCB Singapore branch in relation to any matters arising from, or in Data available as of 28 August 2012. This document is released on 30 August 2012 Document approved by: Razia Khan, Regional Head of Research, Africa