Africa in Today's Financial Markets


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Africa in Today's Financial Markets

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Africa in Today's Financial Markets

  1. 1. AFRICA IN TODAY’S FINANCIAL MARKETSPresentation at the Africa Debt Capital Markets21 June 2011<br />African Development Bank Group<br />Prof. MthuliNcube<br />Vice President & Chief Economist<br />
  2. 2. OUTLINE<br />2<br />
  3. 3. Africa’s Sustained Economic Expansion<br />GDP Growth: Africa’s growth record has been significant after the crisis<br />Trade : Recovery and high demand led to favorable terms of trade<br />Inflation: Inflationary pressures have remained relatively contained<br />Source: AfDB AEO<br />3<br />
  4. 4. The Libya and Côte d’Ivoire Effects<br />Growth rate (%)<br />4<br />
  5. 5. Disparities in Economic Performance in 2011<br />GDP growth 0.7%<br />North Africa<br />West Africa<br />GDP growth 5.9%<br />Central Africa<br />East Africa<br />GDP growth 5.3%<br />GDP growth 6.7%<br />Southern Africa<br />GDP growth 4.5%<br />5<br />
  6. 6. Nigeria<br />6.9%<br />Ethiopia<br />10%<br />Liberia7.3%<br />Ghana<br />12%<br />DRC<br />8.4%<br />Tanzania<br />6.9%<br />The 10 Fastest Growing African Countries in 2011<br />Angola7.3%<br />Mozambique<br />7.7%<br />Zimbabwe<br />7.8%<br />Botswana<br />6.9%<br />6<br />
  7. 7. Tunisia<br />1.1%<br />Libya<br />-19%<br />Egypt<br />1.6%<br />Côte d’Ivoire<br /> -7.3%<br />Benin<br />2.5%<br />The 10 Slowest Growing African Countries in 2011<br />Comoros<br />2.5%<br />Madagascar<br />0.6%<br />Swaziland<br />1.9%<br />South Africa<br />3.6%<br />Lesotho<br />2.9%<br />7<br />
  8. 8. Tunisia: Unemployment Triggered the Revolution<br />Growth rate (%)<br />8<br />
  9. 9. Drivers of Growth<br />External<br />Internal<br />Domestic consumer demand<br />Commodity prices<br />Good macroeconomic policies and management<br />Prices of agricultural export<br />Growth sectors: Agriculture, services, construction and manufacturing<br />9<br />
  10. 10. Inclusive Growth<br />Africa’s slow poverty reduction relative to other developing regions<br />High inequality<br />Youth unemployment<br />Financial Inclusion<br />Foster human development<br />10<br />
  11. 11. Financial Flows to Africa: Considerable slowdown of foreign investment in Africa after the crisis<br />11<br />
  12. 12. <ul><li>Growing financial markets driven by improved macroeconomic fundamentals, increased political stability, high commodity prices and robust domestic demand.
  13. 13. Increasing trading volumes and capitalization in stock markets – highest returns in the world.
  14. 14. Nascent but buoyant bond and private equity markets.
  15. 15. Growing investment rates supported by strong emerging middle class. </li></ul>Source: IMF WEO, AfDB AEO<br />12<br />
  16. 16. <ul><li>African capital markets have developed steadily over the years with 29 stock exchanges (from only 7 in 1988)
  17. 17. However, African capital markets remain narrow and illiquid compared to developed economies and other emerging countries
  18. 18. Factors affecting their growth include:
  19. 19. Low income levels
  20. 20. Ineffective collateral registration systems
  21. 21. Weak judicial institutions
  22. 22. Exposure to external shocks
  23. 23. Weak human capital and financial infrastructure
  24. 24. Limited portfolio choice options
  25. 25. Inadequate monetary policy and capital account </li></ul> regimes<br /><ul><li> Financial literacy
  26. 26. Inadequate pension fund reform</li></ul>13<br />
  27. 27. Selected African Stock Exchanges<br />Source: Bloomberg<br />14<br />
  28. 28. 15<br />Sovereign Rating of Selected African Countries as at March 2010<br />
  29. 29. 16<br />
  30. 30. Snapshot of African Bond Performance ( 2 months - April/May 2011)<br />Source: Reuters; Standard Bank Research<br />17<br />
  31. 31. Fundraising in Africa reached a peak of 31 funds and a capital of $ 11.4 billion in 2007<br />Expansion illustrated through Top 5 Africa-Focused Funds Currently Raising<br />Source: Prepin Private Equity Market in Africa October 2010<br />
  32. 32. Potentials for African Capital Markets<br />Rising entrepreneurship activity<br />Growing Middle Class<br />Infrastructure Bonds<br />Diaspora Bonds<br />Extractive Industries<br />Agriculture<br />Clean Energy<br />Emerging Partners (BRICs, Korea, Turkey)<br />19<br />Public-Private Partnerships (PPPs)<br />New Technologies – “EG Mobile Banking” <br />