Presentation by Thierry Tanoh on May 8, 2010 at London Business School's Africa Day Conference.

1. Africa Evolves
But it needs you
Thierry Tanoh
IFC Vice President
May 2010

2. Here’s an ordinary map of the world

3. POPULATION

4. GROSS DOMESTIC PRODUCT

5. …Africa represents a very small part of the
global economy
 With the exception of South Africa, Sub-Saharan Africa has largely been off the radar screen for
global investors. In many respects, this can be explained by its numerous small (often
subscale) markets, challenging macroeconomics and demographics and history of instability.

6. Poverty at $1.25 a day (PPP) (% of population)
60
50
51 %
40
40 %
30
17 %
20
10
4% 8%
4%
0
East Asia & Pacific
Europe & Central
Asia Latin America &
Caribbean Middle East & North
Africa South Asia
Sub-Saharan Africa
6

7. ENERGY CONSUMPTION (INCLUDING
OIL)

8. CHILD MORTALITY

9. POPULATION LIVING WITH AIDS

10. TOTAL SPENDING ON HEALTH CARE

11. SATELLITE PHOTO OF EUROPE AND AFRICA AT NIGHT

12. SATELLITE PHOTO OF THE WORLD AT
NIGHT

13. Africa 2009
• A relatively prosperous decade
 Increasing political stability
 Improved macroeconomic performance
 Improved investment climate
• The global financial crisis is a setback, but not a reversal of long
term trend
• Africa’s low level of development and infrastructure create
opportunities for foreign investors

14. Long-term Story: More Stability and Growth
Long term acceleration of growth in Africa
GDP Growth - Africa GDP per Capita
7 1800
1600
6
Result of the Peace Dividend 1400 EAP
5
Constant 2000 US$
1200
4 1000
800 Africa
3
600
2 400
200 South Asia
1
0
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
-1
Sub-Saharan Africa East Asia & Pacific
-2 South Asia
•GDP per capita now starting to rise, potential to achieve increases of other emerging regions
14

15. Africa has become more open to trade over time…
Exports and Imports Rising Trade as % of GDP (2007)
38 100
36 90
34
80
32
70
30
60
% of GDP
28
50
26
40
24
22 30
20 20
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
10
Exports of goods and services (% of regional GDP) 0
Imports of goods and services (% of regional GDP) Africa MENA LAC EAP ECA SAS
•Trade in Africa has increased significantly and continuously in the last 20 years, and the region is
among the most open to trade in the world, second only to EAP in terms of trade as a share of GDP.
Source: World Bank
16

16. …but Intraregional Trade in Africa is too low…
80 Intraregional Exports as a Share of Total Exports
Intraregional Trade as a Share of Total Trade
2004-06 average 1960-2006
70
60
50
40
30
20
10 Africa
0
Africa Developing Developing Developed Developed
America Asia America Europe
Imports Exports
•Despite a doubling in the last 20-25 years, intraregional trade in Africa remains too low, at less than 10% of
total trade vs. over 45% in developing Asia
•Colonial rulers followed an extractive and outward-oriented trade pattern and did not encourage trade
links between African countries (UNCTAD – Economic Development in Africa Report 2009)
17

17. …and Africa’s Economies Are Small Relative to
Other Fast-Growing Regions…
Asia's largest economies dwarf those in Africa:
Top ten economies in Africa vs Asia, GDP current US$ billions
5,000
4,500
Africa
4,000 Asia
3,500
3,000
2,500
2,000
1,500
1,000
500
-
18

18. Improving Investment Climate
Sub-Saharan Africa has accomplished a rapid increase in the total number of reforms per
year from just 16 in Doing Business 2006 to 67 in Doing Business 2010
Total Number of Reforms per Region
80
70
60
50 Sub Saharan Africa
East Asia
40 South Asia
Latin America and the Caribbean
30 Eastern Europe and Central Asia
Middle East and North Africa
20
10
0
DB06 DB07 DB08 DB09 DB10 Source: IFC and World Bank

19. IMPACT OF GLOBAL FINANCIAL
CRISIS
21

20. Global Crisis: Short-term Setback
How is the Global Crisis Affecting Sub-Saharan Africa?
On the downside
•Falling commodity prices
•Declining capital flows
•Falling demand for commodity exports
•Declining remittances
•Declining tourism
On the upside
•Limited direct financial contagion
•Relief for oil and food importers
•Reduced pressure on food prices
•V-Shaped recovery?

21. Lower GDP Growth Rates Across the Region
Growth Differential - 2008 vs 2009 - Sub-Saharan Africa
20.0
15.0
10.0
5.0
%
0.0
Burkina Faso
Botswana
Niger
Chad
Cameroon
Lesotho
Uganda
Mali
Madagascar
Senegal
Kenya
Malawi
Togo
Angola
Benin
Cape Verde
Comoros
Cote d Ivoire
Ethiopia
Gabon
Rwanda
Zambia
Guinea
Guinea-Bissau
Sudan
Namibia
Zimbabwe
Nigeria
Tanzania
Mauritius
Ghana
Mauritania
Mozambique
Sierra Leone
Swaziland
Eritrea
Gambia, The
Burundi
South Africa
Congo, Dem. Rep.
Congo, Rep.
Seychelles
Equatorial Guinea
Central African Republic
-5.0
-10.0
-15.0
2008 2009
•Growth will decelerate significantly in 2009, but contractions are expected in only 7 resource
dependent countries: Angola, Equatorial Guinea (oil), Botswana (diamonds), Seychelles (tourism),
Namibia (mining, diamonds), and Zimbabwe (11-year contraction…)
23

22. Sharp Withdrawal of Foreign Credit in Q4 2008
BIS Lending to Developing Cross Border Claims – from
Countries (% of total) mid-08 peak to end-08
trough
Sub-Saharan Africa
2.8% Emerging Europe
12.2%
Asia ex-Japan
39.8% Emerging Europe Asia
15.5%
Latin America
MENA
Sub-Saharan Africa
Latin America
29.8%
Sub-Saharan Africa
-60% -50% -40% -30% -20% -10% 0%
Source: Standard Chartered
25

23. Remittances slowing down significantly…
Growth Rate of Remittances to Source of Remittances to
Sub-Saharan Africa
Sub-Saharan Africa
60
Other
50 47.3 High
Income
GCC 8%
40
34.5
8% Western
30 Developing Europe
Growth rate (%)
Countries
10% 44%
20
10 6.5
4.4
US
0 31%
2006 2007 2008 2009 2010
-10
-8.3
-20
•In 2008, remittances were equal to 2/3 of FDI and ½ of ODA. They are projected to decline 8.3% in 2009
before recovering in 2010
•The fall in remittances is a result of the sharp contraction in the US and Western Europe (75% of remittances
to Sub-Saharan Africa)
26

24. A mild recovery expected for Africa in 2010
Net FDI per Region
140 450
South Asia
Forecasts
120 LAC 400
EE and Central Asia
350
100 East Asia and Pacific
Middle East
300
80 Africa
USD (Billion)
USD (Billion)
250
60
200
40
150
Africa
20
100
- 50
1998
1992
1993
1994
1995
1996
1997
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
(20) -
27

25. V-shaped recovery?
High Growth Interrupted by Crisis
GDP Growth in Sub-Saharan Africa (% per year)
7
6 2011 = 5.2%
5
4
2010 = 3.7%
% per year
3
2
V-Shaped Recovery?
1
2009 = 1%
0
-1
-2
Source: World Bank
28

26. IFC IN AFRICA
29

27. IFC in Sub-Saharan Africa
Algiers
Mediterranean
Rabat Sea Beirut
Jerusalem Amman
Cairo
Dubai
Sana’a
Dakar
Ouagadougou N’Djamena
Freetown
Addis Abala
Monrovia Lagos
Abidjan Accra
Douala
Nairobi INDIAN
Kigali OCEAN
Kinshasa
ATLANTIC
OCEAN
Lusaka
Antananarivo
Johannesburg
Maputo
IFC Hubs
IFC Country Offices Cape Town
30

28. Focusing Where We Are Needed Most
The strategic pillars for Africa, launched in 2004
• Enhancing support to SMEs (financing and advisory services)
• Improving investment climate
• Developing projects more proactively in the priority sectors
(infrastructure, agribusiness, health and education)
FY09 results for Sub-Saharan Africa
• 32% increase in investment volume and 60% increase in number of
projects compared to FY08
• 93 projects for a total investment of US$ 1.82 billion, more than
90% in IDA countries
• Projects in 30 countries compared to 25 in 2008
31

29. IFC Rapid Growth in Africa:
Evolution of investments in SSA
100
2000
Total financing 93 94
1800 Number of projects 87
Number of projects, IDA countries
1600
Number of countries benefiting from financing
1400
US$ Millions
1200 55
52
47 49 *projected
1000
38
800
32
28 30 30
26 27 27
600 25
20 21
17 17
400
13
10
9
1824 2,083
200 1379
700 1379
405 444
140
0
2003 2004 2005 2006 2007 2008 2009 2010*
32

30. Key Factors for IFC Business Success in Africa
• Increased resources and focus on Africa
• Focus on key sectors and impediments to investment
 Investment climate
 Financial markets
 Extractive industries
 Infrastructure
• Information and communications technology
• Power
• Transport
• Ports
• Increased on-the-ground presence
 Leveraging advisory services business to enter new markets
33

31. BUSINESS OPPORTUNITIES IN
AFRICA
34

32. Where do We see
opportunities
•Health and Education?
•Natural Resources
•Agribusiness
•Financial markets
•Infrastructure
35

33. FDI is Critical for Africa
Extractive Industries have been Primary Target for Foreign Investors
• In Africa, FDI inflows in 2007 rose to a historic high of $53 billion. The inflows were supported by
a continuing boom in global commodity markets.
• Cross-border M&As in the extraction industries and related services continued to be a significant
source of FDI, in addition to new inbound M&A deals in the banking industry.
• Nigeria, Egypt, South Africa and Morocco were the largest recipients. These cases may illustrate
a trend towards greater diversification of inflows in some countries, away from traditional sectors.
36

34. Fighting the Food Crisis in Africa
• Rising food prices may send 100
million people back into
poverty, especially in Africa.
• More investment is required in
supporting farmers’
infrastructure
• Access to finance is critical
• Technical assistance support is
required to ensure success of
investments
37

35. Africa Overview: Financial Markets Development –
Market Size
• With the exception of South Africa, African financial systems are small
– relatively and absolutely – when measured by size of liquid liabilities.
Financial Depth (liquid liabilities as a % of GDP (left) and log of liquid liabilities (right))
38

36. Low Levels of Access to Financial Services
Share of Households with Access to a Financial Account
African households have a low level of access to financial services according to World Bank data for
2003-04. Only South Africa and Botswana have higher levels, similar to those in Italy, Chile, or Russia
Source: Africa Competitiveness Report 2009
39

37. Access to services, in percentage of population (PPI, 2002/2006/2006)
100
91 90
89 88
90 87 87
84
82
78
80
74 75
70
58
60
49 Electricity
50 Improved water source
41 Improved sanitation facilities
40 36
35
30
25
20
10
0
EAP ECA LAC MENA SA SSA
40

38. Africa’s Infrastructure Deficit
Upper Middle Income Sub-Saharan Africa
Countries
Access to Electricity 87 15
Network (% of pop.)
Access to Improved 93 64
Water (% of pop.)
Access to Improved 86 37
Sanitation (% of pop.)
Road Density (Km 92 33
road/1000 people)
Internet Users 13* 4
(per 100 persons)
Africa’s poor infrastructure has direct impact on:
 Health and education
 Manufacturing productivity
 Ability to move up the value chain
 Ability to access markets
41

39. Transport Costs Hamper Competitiveness
Inland Transport Costs and Port Handling Fees
for Import and Export Monthly Labor Cost Per Worker
ECA
LAC South Asia
East Asia
ddddddddddddddddd
dddddddddd
Africa
•Africa has the highest inland transport costs and •Labor costs in Africa are 10% higher than those in
port handling fees for export and imports in the East Asia. South Asia has a strong comparative
world, much higher than in East Asia, Latin advantage with almost 40% lower labor costs
America, and South Asia •On top of higher labor costs, Africa is at a clear
disadvantage on the level of skills
•There is a clear case for investments in infrastructure and education. Africa needs to create its own class of
higher skilled workers rather than relying on labor-intensive workers.
Source: Africa Competitiveness Report 2009
42

40. Electricity: Africa’s Big Bottleneck
Total electricity generation capacity, in million kilowatts:
 Europe: 782 GW (1,308 W/per capita)
 Sub-Saharan Africa (ex S. Africa): 27 GW (33 W/capita)
Over 500 million people in Africa without power
Business managers cite top 3 major constraints as:
 Lack of confidence in courts
 Lack of access to finance, or cost of finance
 Lack of power
Yet, only 7% of Africa’s huge hydropower potential
has been harnessed; and only 57 MW out of 9,000
MW geothermal potential.
43

41. Power Outages are a Big Burden for African Firms
Share of Working Hours Lost due to Power Outages
12% of working hours lost
due to power outages
•Twelve percent of working hours are lost due to power outages in Africa - another fundamental
reason for the need to increase investment in infrastructure utilities
Source: Africa Competitiveness Report 2009
44

42. Africa: Low Infrastructure Investment
•Annual investment about US$10 billion p.a.
•Estimated requirement US$20 billion p.a. – plus another
US$17 billion p.a. for operations and maintenance
•Of this US$10 billion, only about 30% has come from the
private sector:
Private Sector Investment in SSA 1990-2005
Telecoms Energy Transport Water Total
Number of projects 146 82 82 22 332
$ million 32,769 7,649 10,031 146 50,595
…and 50% of the above amounts went to South Africa
29

43. Thank You
46