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
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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 SSA
20 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 were
has decreased due to the reduction of down from 20 during 1980-89 to 7
conflicts 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
progress
Source: World Bank 2012
. The ILO* estimates that between . Unemployment hits the youth.
2000 and 2007, the working age . Most countries are not on track to
population grew by 96 million but achieve the Millennium Development
only 63 million jobs were created. Goals by 2015.
* International Labour Organization
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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 are
with external trade oriented policies oversubscribed.
resulted in a dramatic improvement of . 9 sovereign wealth funds created. 10
SSA 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 the
year. highest in the world.
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19. Intra-African foreign direct investment is emerging
Number of projects
. The share of intra-African investment . Leading investors come from South
has more than doubled in the last 8 Africa, Nigeria and Kenya.
years at the expense of developed
markets.
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 been
Trade, not aid. Resources driven. an engine for growth: reduction of
. Intra-African trade still low despite export volatility, better terms of
efforts 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 to
SSA 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 compared
major minerals like copper, lead, zinc.
to $125,000 in developed
. Africa’s mining sector accounts for countries»*, showing that Africa is
just 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 revolution
country in Africa is now achieving and the first stage of this revolution is
more 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 per
eighties, productivity of labor capita revenues.
increased, and at a higher pace than
labor 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 declining
ratio. 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 manage
transport, food distribution and most . If urbanization triggers higher
services. 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 about
1975. 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 investment
reduced 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.
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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 has
the world, mostly selling grown at the same pace as all African
commodities, 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 as
relatively unattractive against all . Major factors: political
regions. 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
Security
Capital availibility Fiscal policy
Competitiveness
Health care Regional integration
Infrastructure Natural resources Entrepreneurship
SSA needs faster, more inclusive growth
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33. Implement a new public management method
SSA’s absorption capacity is far too low
SSA needs to implement Foreign/local funds and
countless 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: bottleneck
to be mobilized. Possible sources: hunting, defragmenting the space
China, 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 country
A Country Assessment Framework
to measure diversity
36

37. The macro environment
Insufficient Sufficient
Level of growth
80
Cape Verde
Botswana
1 4
Quality 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 d'Ivoire
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 Africa
Ease 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 d'Ivoire 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 Aegis
Matthieu Delouvrier
Swensee
md@swensee.com
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40. References
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Matthysen, IPIS, August 2009. 2011.
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Swedish Institute of International Affairs, April 2011.
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40

41. References
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