World population
YEAR PEOPLE (bln)
1950 2.52010 6.82050 9
2
$16T$1T
$7T
Budget $40 000 000 000 000
Global needs/challenges
2
3
YEAR PEOPLE (bln)
`
`
1950 0.22010 0.952050 2.00
Africa population
5
Budget $1 000 000 000 000
Africa needs
The African context…
In 2013, Africa was the world’s fastest-growing continent at 5.6% a year
GDP is expected to rise by a...
Africa’s Share of Global Reserves and Production,
Selected Minerals (%)
7
Commodity Price Trends
Commodity Price Index, January 1980 – January 2011
Commodity Price Forecast
Source: World Bank, nominal USD, January 2014
Drivers of African commodity demand
■  Global population growth
■  Economic growth
■  Urbanization and labour force expans...
KPMG outlook for commodity demand
■  Mild acceleration in global growth due to demand in advanced economies
during 2014 wi...
KPMG outlook for commodity demand
(cont…)
■  Further tapering of Quantitative Easing (QE) in the US could potentially
nega...
Africa’s Resource Spread
Mineral Resource Deposits
Source: The Economist
Sources of Demand
Africa’s Main Export Destinations and Origin of Imports
2001, 2008 and 2011 (% share)
Top 10 African Exporters
Key Commodity Interest Areas:
America
Share of Top Five Exporting Countries and Top Five Export Products to the US under
A...
Key Commodity Interest Areas:
China
Special Economic Zones setup by PRC as of 2011
1. Chambishi, Zambia - copper and coppe...
The African Opportunity
increase diversification in export products
diversification of trade partners
promotion of regiona...
20
Algeria
Morocco
Tunisia
Mali
Cameroon
DRC
Gabon Congo
Nigeria
Niger
Chad
Libya
Egypt
Central
African
Republic
Angola
Ma...
21
Potential African Mining Destinations
Does Country Attractiveness attract FDI?
Types of Project Investment
Source:
IJonline
0
2,000
4,000
6,000
8,000
10,000
12,000
Mining
Oil&Gas
Power
Renewables
Socia...
Copper
Coal
Iron Ore
Manganese
Freight
Southern African Corridors
SADC RIDMP Projects by Sector
Botswana
A heavy haul railway line and a port at
Ponta Techobanine
((Mozambique, Botswana, Zimbabwe)
TransKalahari/Mamuno ...
Namibia
TransKalahari/Mamuno OSBP
(Botswana, Namibia)
Luanda‐Windhoek Corridor roads
(Angola, Namibia)
Trans‐Caprivi‐weste...
Tanzania
Transport Nakonde/ Tunduma OSBP
(Tanzania, Zambia)
Restructuring of Zambia’s railway systems
(Dar‐es‐Salaam Corri...
Zambia Transport Nakonde/ Tunduma OSBP Border Post
Tanzania, Zambia)
Restructuring of Zambia’s railway systems
(Dar‐es‐Sal...
West Africa
Nigeria High Speed Rail
Nigeria to build a 2,000 mile (3,218
km) nationwide high speed rail (HSR)
system.
New ...
Conducive Environment
  Provision of commercial security
  Management capacity and operational agreement
  Collaboratio...
Emerging market Political Risk
  Developing economies have had a rough ride since US Federal Reserve mooted a
wind-down o...
33
Considerations
  Healthy banking sector, GDP growth and political will are catalysts for local capital
investments
  Vie...
Thank you
Malcolm Pautz
KPMG Infrastructure and Major Projects
+27 79 512 9956
Malcolm.Pautz@kpmg.co.za
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Malcolm Pautz, KPMG - Africa Commodity Outlook

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Malcolm Pautz, KPMG Infrastructure and Major Projects delivered the presentation at the 2014 Heavy Haul Rail Africa Conference.

The Heavy Haul Rail Africa Conference 2014 covers all the relevant issues including government and resource sector perspectives on future developments in heavy haul rail infrastructure, opportunities to source relevant funding, regulatory progress, challenges in planning and construction, rolling stock requirements, maintenance and capacity enhancement.

For more information about the event, please visit: http://www.railconferences.com/hhrafricaconference

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Malcolm Pautz, KPMG - Africa Commodity Outlook

  1. 1. World population YEAR PEOPLE (bln) 1950 2.52010 6.82050 9
  2. 2. 2 $16T$1T $7T Budget $40 000 000 000 000 Global needs/challenges 2
  3. 3. 3
  4. 4. YEAR PEOPLE (bln) ` ` 1950 0.22010 0.952050 2.00 Africa population
  5. 5. 5 Budget $1 000 000 000 000 Africa needs
  6. 6. The African context… In 2013, Africa was the world’s fastest-growing continent at 5.6% a year GDP is expected to rise by an average of over 6% a year between 2014 and 2024 Africa’s dependence on primary commodity exports leaves it vulnerable to global market fluctuations Africa’s institutional, regulatory, and administrative reform processes is only halfway along Commodity-based industrialization is still largely undeveloped
  7. 7. Africa’s Share of Global Reserves and Production, Selected Minerals (%) 7
  8. 8. Commodity Price Trends Commodity Price Index, January 1980 – January 2011
  9. 9. Commodity Price Forecast Source: World Bank, nominal USD, January 2014
  10. 10. Drivers of African commodity demand ■  Global population growth ■  Economic growth ■  Urbanization and labour force expansion ■  Availability of comparatively cheap resources ■  Increasing / increased political stability (less sanctions) ■  Global Economic ties
  11. 11. KPMG outlook for commodity demand ■  Mild acceleration in global growth due to demand in advanced economies during 2014 with some acceleration in 2015 and 2016 ■  Cyclical swing in advanced economies boosting trade and exports in emerging markets ■  However, Emerging markets will remain under pressure – US tapering effect and Chinese growth and domestic troubles ■  Global inflationary pressures are anticipated towards end of 2014 ■  Result in increase in certain commodity prices – although US tapering effect could have a negative on commodity pricing ■  Expectation of inflationary pressures could lead to increased interest rates in 2015 and 2016, tampering global growth and increased inflation over 2017 to 2018.
  12. 12. KPMG outlook for commodity demand (cont…) ■  Further tapering of Quantitative Easing (QE) in the US could potentially negatively affect base metals prices (such as copper) in the future ■  Base metals prices are expected to remain static, but could decline due to weaker-than-expected demand over the medium term ■  Reversal could occur when production of goods increase because of global growth ■  Generally – it is expected global growth will push up overall demand for commodities in the short term – resulting in higher prices ■  Over the medium and long term, prices are expected to slow with supply imbalances catching up with demand as well as further QE tapering
  13. 13. Africa’s Resource Spread
  14. 14. Mineral Resource Deposits Source: The Economist
  15. 15. Sources of Demand Africa’s Main Export Destinations and Origin of Imports 2001, 2008 and 2011 (% share)
  16. 16. Top 10 African Exporters
  17. 17. Key Commodity Interest Areas: America Share of Top Five Exporting Countries and Top Five Export Products to the US under AGOA, 2011 (%)
  18. 18. Key Commodity Interest Areas: China Special Economic Zones setup by PRC as of 2011 1. Chambishi, Zambia - copper and copper related industries. 2. Lusaka, Zambia - garments, food, appliances, tobacco and electronics. (classified as a subzone of the Chambishi zone) 3. Jinfei, Mauritius - manufacturing (textiles, garments, machinery, high-tech), trade, tourism and finance. 4. Oriental, Ethiopia - electrical machinery, construction materials, steel and metallurgy. 5. Ogun, Nigeria, - construction materials, ceramics, ironware, furniture, wood processing, medicine, and computers. 6. Lekki, Nigeria - transportation equipment, textiles, home appliances, telecommunications, and light industry. 7.  Suez, Egypt - petroleum equipment, electrical appliance, textile and automobile manufacturers.
  19. 19. The African Opportunity increase diversification in export products diversification of trade partners promotion of regional / intra-African trade commodity-based industrialization implementation of strategic trade and infrastructure policies Development of value-add capabilities within the continent
  20. 20. 20 Algeria Morocco Tunisia Mali Cameroon DRC Gabon Congo Nigeria Niger Chad Libya Egypt Central African Republic Angola Madagascar Mauritius Seychelles Comoros Sudan North Benin Mauritania Burkina Faso Ghana Senegal Guinea Sierra Leone Liberia Equatorial Guinea Namibia Botswana Zambia South Africa Lesotho Swaziland Mozambique Zimbabwe Malawi Tanzania Kenya SomaliaUganda Rwanda Burundi Ethiopia Djibouti Sudan South São Tomé and Principe Cape Verde Guinea-Bissau TogoCôte d’Ivoire The Gambia Eritrea Copper Coal Iron Ore Manganese Africa’s Mineral Deposits Precious metals
  21. 21. 21 Potential African Mining Destinations
  22. 22. Does Country Attractiveness attract FDI?
  23. 23. Types of Project Investment Source: IJonline 0 2,000 4,000 6,000 8,000 10,000 12,000 Mining Oil&Gas Power Renewables Social&Defence Telecoms Transport Water Mining Oil&Gas Power Renewables Social&Defence Telecoms Transport Water Mining Oil&Gas Power Renewables Social&Defence Telecoms Transport Water Mining Oil&Gas Power Renewables Social&Defence Telecoms Transport Water Africa & Middle East Americas Asia & Pacific Europe Global Equity Investments by Region/Sector - Primary and Secondary Markets 2013 to Sept Primary market Secondary market Refinancing USDm
  24. 24. Copper Coal Iron Ore Manganese Freight Southern African Corridors
  25. 25. SADC RIDMP Projects by Sector
  26. 26. Botswana A heavy haul railway line and a port at Ponta Techobanine ((Mozambique, Botswana, Zimbabwe) TransKalahari/Mamuno OSBP (Namibia, Botswana) Botswana 8 projects Botswana has 2 cross border projects with Mozambique/ Namibia Techobanine Heavy Haul Railway (Techobanine) (Mozambique, South Africa, B o t s w a n a , Z i m b a b w e , Swaziland) Botswana has 1 cross border projects with DRC/Swaziland/ Tanzania/Zambia Botswana has 3 cross-border projects with South Africa Kinshasa-llebo railway link (DRC, Tanzania, Zambia, Zimbabwe, South Africa) Trans Kalahari Railway (Namibia, Botswana) Botswana has 4 cross-border projects with Zimbabwe New Transport Projects
  27. 27. Namibia TransKalahari/Mamuno OSBP (Botswana, Namibia) Luanda‐Windhoek Corridor roads (Angola, Namibia) Trans‐Caprivi‐western Zambia Railways from Kolwezi (DRC), through Solwezi (Zambia) to Mongu, Sesheke (Zambia) and Katima Mulilo (Namibia) (DRC, Zambia, Namibia) Katima Mulilo/Wenela OSBP (Zambia , Namibia) Oshikango‐Santa Clara OSBP – Border Post (Angola, Namibia) Trans Kalahari Railway (Botswana, Namibia) Ariamsvlei OSBP Border Post (Namibia, South Africa) New Transport Projects
  28. 28. Tanzania Transport Nakonde/ Tunduma OSBP (Tanzania, Zambia) Restructuring of Zambia’s railway systems (Dar‐es‐Salaam Corridor. From the Zambian Copper Belt to south‐western Tanzania. (Tanzania, Zambia) Construction of Mtwara – Songea – Mbambabay railway line with Spurs to Mchuchuma/ Liganga (Tanzania, Malawi, Mozambique and Zambia) Establishment of Cargo Freight Station (CFS) – Kisarawe Upgrading of Dar Es Salaam (DSM)- Isaka (ISK) railway line to standard gauge and construction of Isaka – Keza Kigali (Rwanda)/ Musongati (Burundi) railway Line Tanzania Railways Limited Revival Mtwara Port and EDZ development (Tanzania (benefiting countries include Malawi, Mozambique and Zambia)Kinshasa- llebo railway link: construction (Tanzania, DRC, Zambia, Zimbabwe, South Africa) New Transport Projects
  29. 29. Zambia Transport Nakonde/ Tunduma OSBP Border Post Tanzania, Zambia) Restructuring of Zambia’s railway systems (Dar‐es‐Salaam Corridor. From the Zambian Copper Belt to south‐western Tanzania. (Tanzania, Zambia) Construction of Mtwara – Songea – Mbambbay railway line with Spurs to Mchuchuma/ Liganga (Tanzania, Malawi, Mozambique, Zambia) Mtwara Port and EDZ development Katima Mulilo/Wenela OSBP Transport boarder post (Between the towns of Sesheke and Katima Mulilo) (Zambia, Namibia) Mwami‐Mchinji OSBP Transport Border post (Malawi, Zambia) Trans‐Caprivi‐western Zambia Railways from Kolwezi (DRC), through Solwezi (Zambia) to Mongu, Sesheke (Zambia) and Katima Mulilo (Namibia) (Zambia, Namibia) Kasumbalesa OSBP Transport Border post (DRC, Zambia) Chingola‐Solwezi Railway Extension (Zambia, Angola) Kolwezi- Dilolo Road Rehabilitation (DRC, Zambia, Angola) Kinshasa- llebo railway link: construction (Tanzania, DRC, Zambia, Zimbabwe, South Africa) New Transport Projects
  30. 30. West Africa Nigeria High Speed Rail Nigeria to build a 2,000 mile (3,218 km) nationwide high speed rail (HSR) system. New Rail Projects Ghana Eastern Railway Line Project Tema and Tokaradi Port Upgrade
  31. 31. Conducive Environment   Provision of commercial security   Management capacity and operational agreement   Collaboration between public and private sector addressing liquidity challenge prevalent in the supply-chain   Governance trends: –  preserve existing jobs and aim to create new and local participation –  have environmental protection plan –  be social conscious –  maintain proper commerciality and –  potential stake in projects
  32. 32. Emerging market Political Risk   Developing economies have had a rough ride since US Federal Reserve mooted a wind-down of its money printing   This has had detrimental effect on market bonds and equities   Political risks to FDI go beyond tax hikes or payment risks and extend to expropriation of assets, threats to staff or plant and inventory damage   Traditionally these risks to FDI have been judged by deep local know-how or by government insurance bodies or bespoke political agencies   Recent study shows that a 1% rise in political risk spread leads to a drop in FDI of 12%, or some USD305million on average   Lets not forget CHINA
  33. 33. 33
  34. 34. Considerations   Healthy banking sector, GDP growth and political will are catalysts for local capital investments   View going forward – make infrastructure, energy and project finance more attractive to larger pools of investment capital   A new market has emerged which is more conservative, more collaborative and willing to innovate to draw in new sources   Institutional investors seeking to scale up their investment flows, need to invest in internal competency (esp construction risk), get their heads around illiquidity of assets and political framework and find the right investment structure.   Governments need to create the right environment, ensure transparency, address market failures, monitor performance and collect data.   Establishment of great collaboration between African countries for the promotion and enhance great accessibility to markets through rail infrastructure
  35. 35. Thank you Malcolm Pautz KPMG Infrastructure and Major Projects +27 79 512 9956 Malcolm.Pautz@kpmg.co.za
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