2013 02 sub saharan africa economy
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  • 1. SUB-SAHARAN AFRICA (SSA) KE NAKO IT’S NOW OR NEVER proposed by Matthieu Delouvrier February 2013
  • 2. Megatrend: it is the dawn of SSA Working-age population worldwide 7 000 000 6 000 000 5 000 000 36% 11% (Thousands) 4 000 000 33% 3 000 000 28% 18% 2 000 000 7% 15% 23% 21% 1 000 000 14% 9% 22% 17% 12% 34% 0 2000 1950 1960 1970 1980 1990 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 More developed regions China India ROW SSA Source: United Nations 2
  • 3. SSA GDP is in top 20 Some references (USD trillion in 2012) GDP current GDP current PPP France 2.6 India 4.7 Brazil 2.4 Brazil 2.5 India 1.9 France 2.2 Spain 1.3 SSA 2.1 SSA 1.3 Mexico 1.7 Mexico 1.2 Korea 1.6 Korea 1.1 Spain 1.4 Indonesia 0.9 Indonesia 1.2 Turkey 0.8 Turkey 1.1 Source: IMF WEO Oct 2012 3
  • 4. What do we see today? 4
  • 5. SSA countries show the highest growth Ten fastest growing countries* (Annual average GDP growth rate in %) 2001-2010 2011-2015 (f) Angola 11.3 Iraq 11.0 China 10.5 Ghana 9.4 Myanmar 10.3 China 8.5 Nigeria 8.9 Mozambique 7.8 Chad 8.6 Guinea 7.6 Ethiopia 8.3 Rwanda 7.6 Kazakhstan 8.3 Niger 7.4 Mozambique 8.0 Zambia 7.4 Cambodia 8.0 DR Congo 7.2 Rwanda 7.8 Cambodia 7.0 • Countries with population above 10 million Source: IMF WEO Oct 2012 5
  • 6. The trend is very supportive GDP growth of SSA countries (Annual GDP growth rate in %) Forecast 8 7 6 5 4 3 2 1 0 -1 -2 1980 1985 1990 1995 2000 2005 2010 2015 Source: IMF WEO Oct 2012 6
  • 7. Big industries are paving the way Sales of SSA biggest companies (US$ bn) 600 500 CAGR 400 7.3% 300 200 100 5.7% 0 2007 2011 South Africa SSA (excluding South Africa) Source: The Africa Report - Top 500 African companies . South Africa companies remain . FTSE ASEA Pan Africa index largely dominant. increased by around 20% in 2012. . Oil and mining: 33.2% of sales. 7
  • 8. Technology (mobile) is breaking through Mobile: the door to modernity Source: MobileMarketingWatch . Africa has twice as many mobile . Mobile phone is decreasing phones as the USA. costs, improving efficiency. . Mpesa (Kenya) has become a . Nigeria is distributing subsidized global leader in mobile banking and inputs to 1.5 million farmers is selling its technology to India. through cell phones. 8
  • 9. Entrepreneurs are building success stories Mr. Dangote ranked 76th world richest* *Source: Forbes . February 2013: signature of a . Current activities: strategic agreement with General cement, sugar, flour, salt…. Electric to collaborate on . Company expected to be listed on power, transportation and oil & the London Stock Exchange in 2013. gas. 9
  • 10. Entrepreneurs are dedicated to the continent Mr. Mo Ibrahim created his Foundation . Mr. Mo Ibrahim made a . The Mo Ibrahim Foundation remarkable success in mobile was created in 2006 to telecommunications with Celtel stimulate good governance and which was sold in 2005. leadership in Africa. 10
  • 11. The culture industry is not left over NOLLYWOOD: the star of Afrotainment The second largest film industry in the world. Second largest employer in Nigeria . 300 producers. 56% of movies in local language . Above 1,000 films per year. Average DVD sale: 25-50,000 copies . Average cost: US$ 20,000 per film 11
  • 12. The middle class is driving growth Middle class size in Africa (million) 350 326 300 +60% 250 204 200 157 150 100 50 0 1990 2000 2010 Source: African Development Bank. Middle class expected to double in . Passenger cars import in SSA20 years. increased by 25%+ in Q4 2011. Consumer spending (US$ 1tr) similar (YOY) and 250%+ in Rwanda.to India, higher than Russia. . Nestlé invested US$ 1 bn in 2011. 12
  • 13. The overall security has improved Conflicts are regressing 1980-89 2000-09 Source: Uppsala University. The number of deaths by violence . Successful coups in Africa werehas decreased due to the reduction of down from 20 during 1980-89 to 7conflicts and their intensity following during 2000-09.the democratization of the continent. 13
  • 14. Growth is not inclusive enough Extreme poverty headcount ratio (%) Sub-Saharan Africa East Asia & the Pacific Required Millenium Development Goal progressSource: World Bank 2012. The ILO* estimates that between . Unemployment hits the youth.2000 and 2007, the working age . Most countries are not on track topopulation grew by 96 million but achieve the Millennium Developmentonly 63 million jobs were created. Goals by 2015.* International Labour Organization 14
  • 15. Political and civil rights are not progressing Classification of countries 2012 18% 43% 39% 2002 17% 47% 36% Free Partly free Not free Source: Freedom House . During the last ten years, political . On the other side, many elections and civil freedom has not improved held in 2011 showed that peaceful significantly. political alternation is possible. 15
  • 16. What are the drivers of change? 16
  • 17. Macro policies have produced results Foreign exchange reserves / External debt 70% 60% 50% 40% 30% 20% 10% 0% 1990 2011 Foreign exchange reserves / External debt External debt / GDP Source: IMF, World Bank data. Debt reduction strategies together . All recent sovereign bond issues arewith external trade oriented policies oversubscribed.resulted in a dramatic improvement of . 9 sovereign wealth funds created. 10SSA countries savings and solvency. to be created soon. 17
  • 18. Foreign financing to SSA has surged Destination of funds: public vs private Source: IMF. Foreign flows: x10 in 10 years. . Funds going to the private sector:. Remittances: over US$ 30 billion per average return on investment is theyear. highest in the world. 18
  • 19. Intra-African foreign direct investment is emerging Number of projects. The share of intra-African investment . Leading investors come from Southhas more than doubled in the last 8 Africa, Nigeria and Kenya.years at the expense of developedmarkets. 19
  • 20. There is a dramatic shift in trading partners Destination of SSA exports Excluding oil exporting countries Oil exporting countries Source: IMF. Current switch from Europe to BICs. . Diversification of partners has beenTrade, not aid. Resources driven. an engine for growth: reduction of. Intra-African trade still low despite export volatility, better terms ofefforts of economic communities. trade, scale economies. 20
  • 21. Investment in infrastructure has been crucial The future new air terminal in Lomé, Togo. Infrastructure contributed to 50% of . Improving infrastructure halfway toSSA past growth. regional best practice (Mauritius). Current annual spendings: US$ 45 bn. would increase GDP by 4.4%*. * World Economic Forum 2013 21
  • 22. Africa has a buried treasure A vast potential in underground resources Oil 10% Gold 40% Share of world reserves Chromium 80% & to Platinum 90% Source: Mc Kinsey Global Institute, June 2010 . «African subsurface per ground km² is. Africa is not richly endowed with estimated at around $25,000 comparedmajor minerals like copper, lead, zinc. to $125,000 in developed. Africa’s mining sector accounts for countries»*, showing that Africa isjust 10% of the world production. underexplored. * Collier and Venables, 2008 22
  • 23. Africa can help feed the world SSA: 45% of the potential available land Global surface in millions of ha 438 326 89 456 736 2,047 Sub Saharan Africa Rest of the world Latin America 46% Mena Asia 54% Source: FAO, Fischer and Shah 2010 Potential arable land Cultivated land. Productivity can be boosted: no . Africa is ripe for a green revolutioncountry in Africa is now achieving and the first stage of this revolution ismore than 30% of the potential yield the land rush we are witnessing now.on currently cultivated areas (World Bank). 23
  • 24. Labor productivity has been unleashed Evolution of productivity 1 Used working age population (15-64) as a proxy for labor force Source: Conference Board World Economy Database; McKinsey Global Institute. For the first time since the . This gives scope for increased pereighties, productivity of labor capita revenues.increased, and at a higher pace thanlabor force. 24
  • 25. Demography supports general productivity Dependency ratio Non working population (<15;64<) for 100 people at working age (15-64) 100 90 Brazil 80 Western Europe 70 China India 60 Sub-Saharan Africa 50 40 30 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 Source: United Nations. Today, SSA has the worst dependency . However, it is constantly decliningratio. Twice as much as China. since 1985, giving a boost to Africa’s competitiveness. 25
  • 26. Urbanization is stimulating growth The development of cities in Africa. The advantages of the city: it is more . Labor is available.cost-efficient to managetransport, food distribution and most . If urbanization triggers higherservices. productivity, it is a big challenge. 26
  • 27. Efforts are made for better education Secondary school gross enrolment rates Source: United Nations, Renaissance. SSA at the level of Mexico, Turkey in . But there are still concerns about1975. quality: facilities, teachers. 27
  • 28. Better health fosters productivity Fighting against malaria: a prominent example In Ghana, the mining company AngloGold Ashanti invested around US$ 7 million in a comprehensive program against malaria with the following results: 2005 2009 Cases in AngloGold’s hospital (number per month) 6,603 1,146 Drug expenditures (US$ per month) 55,000 9,800 Work days lost (number per month) 6,983 282. In Africa, Malaria mortality rate was . Experience shows that investmentreduced by 33% since 2000. in water, sanitation and health yields. Life expectancy at birth in SSA: 49.5 between 4$ and 60$ per 1$ invested.in 1990; 49.7 in 2000; 54.2 in 2010. 28
  • 29. Trade integration is slowly taking off Total bilateral African trade Source: Ernst & Young’s 2012 Africa attractiveness survey. Total respondents: 505 2002 2003 2004 2005 2006 2007 2008 2009 2010. Africa has integrated with the rest of . Nevertheless, intra African trade hasthe world, mostly selling grown at the same pace as all Africancommodities, faster than with itself. trade at 17% a year for the last 10 years. 29
  • 30. Perception is still a big obstacle Perception of Africa relative to other regions Africa is less attractive than… Africa is more attractive than… Asia North America Middle East Western Europe Latin America Eastern Europe Central America Former Soviet States -50 -40 -30 -20 -10 0 10 20 30 40 Respondents with no presence in Africa Respondents wth a presence in Africa Source: Ernst & Young’s 2012 Africa attractiveness survey. Total respondents: 505 . It is the contrary for investors having. For investors with no presence in knowledge of Africa.Africa, the continent is still viewed asrelatively unattractive against all . Major factors: politicalregions. instability, corruption, difficulty of doing business. 30
  • 31. What to do next? 31
  • 32. So many things to do! - The governance challenge Education Food Millenium Development Goals HIV Employment Housing Corruption Social protection Public management Justice Gender equality SecurityCapital availibility Fiscal policy Competitiveness Health care Regional integration Infrastructure Natural resources Entrepreneurship SSA needs faster, more inclusive growth 32
  • 33. Implement a new public management method SSA’s absorption capacity is far too low SSA needs to implement Foreign/local funds andcountless projects to boost its partners are increasingly development available  Despite this very favorable context, the result has been disappointing: too many projects take too long to implement when they do not fail.  Governments need to implement a new management method focused on the rapid execution of development projects with the creation of highly specialized teams: Project Delivery Squads 33
  • 34. Innovate in infrastructure finance Infrastructure density in SSA is weak (as a percentage of the density of other low income countries) 100% 90% 80% 70% 60% 50% 40% 30% 20% Source: Economic Commission 10% for Africa, African Union 2012 0% Télécom main-line Paved-road density Total road density Power generation Mobile density Improved water Internet density Electricity coverage Improved sanitation capacity density. Another US$ 40 billion per year need . Principle: bottleneckto be mobilized. Possible sources: hunting, defragmenting the spaceChina, investment funds, local… (create regional spaces), cost cutting. 34
  • 35. Care about cities, strengthen local governments Urban rural population are growing in SSA 2,000,000 1,800,000 1,600,000 1,400,000 Urban = 36% of total Thousands 1,200,000 1,000,000 800,000 600,000 400,000 200,000 — 1960 2025 1950 1955 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2030 2035 2040 2045 2050 Rural population Urban population Source: United Nations data . Urban planning, land use. Urban population growth: 3.7%. regulation, property rights… are. People need urgently needed.housing, water, power, food, jobs… Revolutions come from cities 35
  • 36. Africa is a continent, not a countryA Country Assessment Framework to measure diversity 36
  • 37. The macro environment Insufficient Sufficient Level of growth 80 Cape Verde Botswana 1 4Quality of economic and social policies 75 (Source: 2012 Mo Ibrahim index of African governance) Seychelles 70 South Africa Namibia High Ghana 65 Lesotho 60 Benin São Tomé and Príncipe Tanzania Level of inclusion Zambia Senegal Burkina Faso 55 Mali Malawi Uganda Mozambique Gabon Kenya Rwanda Average Swaziland 50 Gambia Niger Comoros Madagascar Ethiopia Liberia 45 Togo Cameroon Burundi Angola Guinea Congo Nigeria 40 Guinea-Bissau Equatorial Guinea Côte dIvoire Low 35 2 Central African Republic Zimbabwe 3 Chad DR Congo Eritrea 30 -5.0 -2.5 0.0 2.5 5.0 7.5 GDP growth (average 2011, 2012, 2013) minus current urban population increase (Source: World Bank data) 37
  • 38. The business environment Low risk High risk Resource curse 20 Average 1 4 40 South AfricaEase of Doing Business (world ranking) Rwanda Ghana 60 High Botswana (Source: World Bank, 2012 figures) 80 Namibia Zambia 100 private activity Kenya Incentive to 120 Swaziland Uganda Ethiopia Tanzania Nigeria Average Lesotho Madagascar 140 Sierra Leone Mozambique Liberia Gambia Togo Burkina Faso Mali 160 Malawi Burundi Angola Senegal Cameroon Côte dIvoire Gabon Low Benin Zimbabwe DR Congo 180 Niger 2 Guinea-Bissau Central African Republic Guinea 3 Chad Congo 200 1% 10 % 100 % Bubble: size of GDP Weight of natural resources in the GDP (Log) (Source: World Bank Data, 2010) 38
  • 39. « The risk of not going to Africa is to find that it is too late to get there ». Lord Boateng, former British High Commissioner in South Africa and director of AegisMatthieu DelouvrierSwenseemd@swensee.com 39
  • 40. References. Africa’s natural resources in a global context, Raf Custers & Ken . It’s time for Africa, Africa attractiveness survey, Ernst & Young, MarchMatthysen, IPIS, August 2009. 2011.. Land grab or development opportunity?, Lorenzo Cotula, Sonja . Economic Report on Africa 2011, Economic Commission for Africa, AfricanVermeulen, Rebeca Leonard and James Keeley, iied, FAO, IFAD, 2009. Union, March 2011.. Sustainability and security of the global food supply . Africa Progress Report 2011, Africa Progress Panel, April 2011.chain, Rabobank, 2010. . Sub-Saharan Africa: Recovery and New Risks, Regional Economic. The World Health Report, World Health Organization, 2010. Outlook, International Monetary Fund, April 2011.. China, Africa and the International Aid Architecture, Deborah . Africa’s pulse, World Bank, April 2011.Bräutigam, African Development Bank Group, April 2010. . The Middle of the Pyramid: Dynamics of the Middle Class in Africa, African. Rising Global Interest in Farmland, World Bank, September 2010. Development Bank, April 2011.. Sub-Saharan Africa: Resilience and Risks, Regional Economic . Foreign aid, trade and development, The strategic presence ofOutlook, International Monetary Fund, October 2010. China, Japan and Korea in sub-Saharan Africa, Dr. Johan Lagerkvist, The Swedish Institute of International Affairs, April 2011.. African acceleration, Société Générale, October 2010. . Agribusiness for Africa’s prosperity, UNIDO, May 2011.. Top Banques, African Business, October 2010. . Transformation through Infrastructure, Issues and concept Note, World. The struggle underground, The Africa Report, October 2010. Bank, June 2011.. Anticipated trends in the use of global land and water resources, F. . African Agriculture: From Meeting Needs To Creating Wealth, Mo IbrahimNachtergaele, J. Bruinsma, J. Valbo-Jorgensen, and D. Bartley, FAO, 2010. Foundation, 2011.. China in Africa, A Macroeconomic Perspective, Benedicte Vibe . Private equity and investment in Africa, Yingni Lu and JohnChristensen, December 2010. Battersby, SouthAfrica.info, July 2011.. Africa, The new frontier for growth, Accenture, 2010. . Africa, The bottom billion becomes the fastest billion, Renaissance. Africa’s Infrastructure, A Time for Transformation, Vivien Foster and Capital, July 2011.Cecilia Briceño-Garmendia, World Bank, Agence Française de . Africa in 50 Years’ Time, The Road Towards Inclusive Growth, AfricanDéveloppement, 2010. Development Bank, September 2011.. Africa’s impressive growth, The Economist, January 2011. . Rising Global Interest in Farmland, World Bank, September 2011.. Fulfilling Africa’s Potential, Goldman Sachs Global Economics, January . Sub-Saharan Africa: Sustaining the Expansion, Regional Economic2011. Outlook, International Monetary Fund, October 2011.. The Mining sector, an opportunity for Growth in Africa?, Proparco, January . Growth and poverty reduction in Africa in the last two decades, Andy2011. McKay, University of Sussex, December 2011.. Africa‘s Future and the World Bank‘s Support to It, World Bank, February . Africa’s population, Miracle or Malthus, The Economist, December 2011.2011. 40
  • 41. References. World Investment Report, UNCTAD, 2011. . African Economic Outlook 2012, OECD, 2012.. Classement des Banques, Jeune Afrique, 2011. . Global Development Finance 2012, World Bank, 2012.. Yes Africa can, World Bank, 2011. . Inclusive Wealth Report 2012, UNEP, UNU-IHDP, 2012.. The Africa Competitiveness Report 2011, Africa Commission, World . Assessing Progress in Africa toward the Millennium DevelopmentEconomic Forum, 2011. Goals, MDG Report 2012, Economic Commission for Africa, Africa Union, African Development Bank, UNDP, 2012.. Will the lion roar in 2012?, African Business, January 2012. . Africa Human Development Report 2012, UNDP, 2012.. Growing with Africa’s consumers, Bain & Company, February 2012. . World Development Indicators, World Bank, 2012.. Defragmenting Africa, Marcelo Giugale, Huffington Post, February 2012. . World Investment Report, UNCTAD, 2012.. BRICs’ Philosophies for Development Financing and Their Implications forLICs, Nkunde Mwase and Yongzheng Yang, International Monetary Fund . Is Africa’s Recent Economic Growth Sustainable?, Ifri October 2012Working Paper, March 2012. . Global Trends 2030, Alternative Worlds, National Intelligence. Economic Report on Africa 2012, Economic Commission for Africa, African Council, December 2012.Union, March 2012.. Building Bridges, Africa attractiveness survey, Ernst & Young, March 2012.. Sub-Saharan Africa: Sustaining Growth amid Global Uncertainty, RegionalEconomic Outlook, International Monetary Fund, April 2012.. How can Africa compete with China, Marcelo Giugale, HuffingtonPost, April 2012.. Africa Losing Billions of Dollars Due to Trade Barriers, MohammedSuleman, allafrica.com, April, 2012.. The New Business of Africa: Markets and People transforming thecontinent, Fair Observer, May 2012.. Jobs, Justice and Equity, Africa Progress Panel, June 2012.. Waking up to the maths of malaria, Ed Cropley, AlertNet, June 2012.. Sub-Saharan Africa Region, Global Economic Prospects, WorldBank, June 2012.. Assessing Africa’s Policies and Institutions, CPIA Africa, World Bank, June2012.. The Millennium Development Goals Report, United Nations, July 2012. 41