2012 09 sub saharan africa economy

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Sub-Saharan Africa

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2012 09 sub saharan africa economy

  1. 1. SUB-SAHARAN AFRICA (SSA) KE NAKO IT’S NOW OR NEVER proposed by Matthieu Delouvrier September 2012
  2. 2. What do we see today? 2
  3. 3. SSA countries are ranking at the top Ten fastest growing countries* (Annual average GDP growth rate in %) 2001-2010 2011-2015 (f) Angola 11.3 China 8.7 China 10.5 Ghana 8.5 Myanmar 10.3 Zambia 7.7 Nigeria 8.9 Rwanda 7.4 Chad 8.6 Guinea 7.4 Ethiopia 8.3 Mozambique 7.3 Kazakhstan 8.3 Niger 7.3 Mozambique 8.0 India 7.3 Cambodia 8.0 Sri Lanka 7.1 Rwanda 7.8 Uzbekistan 6.9 • Countries with population above 10 million Source: IMF WEO 3
  4. 4. The trend has been 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 4
  5. 5. Big industries are paving the way Total sales of Africa top 500 (US$ bn) Source: Jeune Afrique . Company sales in 2005-2010: . During the same period, the - Global Fortune 500: +20%, balance sheet of African banks - Africa top 500: +75%. has been multiplied by 2. 5
  6. 6. The technology (mobile) is breaking through Mobile: the door to modernity Source: MobileMarketingWatch . Africa has twice as many mobile . Access to mobile phone has phones as the USA. proven to be a strong help for . Kenya has become a global leader decreasing costs and improving in mobile banking (Mpesa…). efficiency. 6
  7. 7. Entrepreneurs are building success stories Mr. Dangote ranked 76th world richest* *Source: Forbes . Dangote: "We are going into . Current activities: something big. We are going cement, sugar, flour, salt…. into . Company expected to be listed on mining, petrochemicals, cemen the London Stock Exchange in 2013. t and infrastructure." 7
  8. 8. 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. 8
  9. 9. 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 9
  10. 10. 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. Consumer spendings (US$ 1tr) are . Passenger cars import in SSAequivalent to India, higher than increased by 25%+ in Q4 2011Russia. (YOY) and 250%+ for Rwanda.. Nestlé invested US$ 1 bn in 2011. 10
  11. 11. 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. 11
  12. 12. Eradication of poverty is still slow Extreme poverty headcount ratio (%) Sub-Saharan Africa East Asia & the Pacific Required Millenium Development Goal progressSource: World Bank 2012. The ILO* estimates that between . Despite a regular improvement since2000 and 2007, the working age 2000, most countries are not on trackpopulation grew by 96 million but to achieve the Millenniumonly 63 million jobs were created. Development Goals by 2015.* International Labour Organization 12
  13. 13. 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. 13
  14. 14. What are the drivers of change? 14
  15. 15. 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 . On average, external debt is aroundwith external trade oriented policies 25% of GDP (250% in advancedresulted in a dramatic improvement of economies).SSA countries solvency. 15
  16. 16. 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$ 20 billion. average return on investment is the highest in the world. 16
  17. 17. 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. 17
  18. 18. There is a dramatic shift in trading partners Destination of SSA exports Excluding oil exporting countries Oil exporting countries Source: IMF. New partners - BIC: trade, not aid. . Diversification of partners has beenResources driven. an engine for growth: reduction of. Current switch from Europe to BICs. export volatility, better terms of. Intra-African trade still low. trade, scale economies. 18
  19. 19. Investment in infrastructure has been crucial The future new air terminal in Lomé, Togo. Infrastructure contributed to 50% of . Amounts invested in infrastructureSSA past growth. should double, bringing an additional. Current annual spendings: US$ 45 bn. growth of 2% per year. 19
  20. 20. 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 around 25,000$ compared tomajor minerals like copper, lead, zinc. 125,000$ in developed. Guinea: 30% of the world bauxite countries»*, showing that Africa isreserves. underexplored. * Collier and Venables, 2008 20
  21. 21. 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). 21
  22. 22. 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. 22
  23. 23. Demography supports general productivity Dependency ratio Non working population (<15;64<) vs working population (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. SSA has the worst dependency ratio. . However, it is constantly decliningTwice as much as China. since 1985, giving a boost to Africa’s competitiveness. 23
  24. 24. 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 . Both trigger higher productivity.transport, food distribution and mostservices. . But urbanization is a big challenge. 24
  25. 25. 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. 25
  26. 26. 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. 26
  27. 27. 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. 27
  28. 28. 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. 28
  29. 29. What to do next? 29
  30. 30. There are so many things to do! Millenium Development Goals Food Housing Employment Education Social protection Public management HIV Justice Gender equality Corruption Security Fiscal policy Health care Regional integration CompetitivenessCapital availibility Entrepreneurship Infrastructure Natural resources 30
  31. 31. 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 31
  32. 32. 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 . Promote a non dogmatic. Another US$ 40 billion per year need approach, exploring all possibilities.to be mobilized. . Principle: bottleneck. Possible sources: China, investment hunting, defragmenting the space, costfunds, local financing… cutting. 32
  33. 33. 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 33
  34. 34. Africa is a continent, not a countryA Country Assessment Framework to measure diversity 34
  35. 35. The macro environment Insufficient Sufficient Level of growth 80 Cape Verde 1 Botswana 4Quality of economic and social policies 75 (Source: 2011 Mo Ibrahim index of African governance) Seychelles 70 South Africa Namibia High Ghana 65 Lesotho 60 Benin São Tomé and Príncipe Level of inclusion Senegal Tanzania Burkina Faso Uganda Zambia 55 Malawi Mali Mozambique Kenya Rwanda Average Swaziland Gabon 50 Gambia Madagascar Comoros Ethiopia Liberia 45 Burundi Togo Cameroon Niger Congo Angola Nigeria 40 Guinea Low Côte dIvoire Guinea-Bissau Equatorial Guinea 35 Eritrea 2 3 Central African Republic DR Congo Chad Zimbabwe 30 -5,0 -2,5 0,0 2,5 5,0 7,5 GDP growth (average 2011, 2012, 2013) – Current urban population increase (Source: World Bank data) 35
  36. 36. The business environment Low risk High risk Resource curse 20 Average 1 South Africa 4 40 Rwanda 60 Botswana High Ghana (Source: World Bank, 2011 figures)Ease of Doing Business 80 Namibia Zambia 100 Kenya private activity Ethiopia Incentive to 120 Uganda Swaziland Tanzania Madagascar Nigeria Average 140 Sierra Leone Mozambique Lesotho Mali Gambia Malawi Burkina Faso Gabon Senegal Liberia 160 Togo Cameroon Côte dIvoire Zimbabwe Burundi DR Congo Low Benin Angola Niger Guinea-Bissau 180 Central African Republic 2 Guinea Chad 3 Congo 200 1 10 100 Bubble: size of GDP Weight of natural resources in the GDP (Source: World Bank Data, 2010) 36
  37. 37. « 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 37
  38. 38. References. Africa’s natural resources in a global context, Raf Custers & Ken . Fulfilling Africa’s Potential, Goldman Sachs GlobalMatthysen, IPIS, August 2009. Economics, January 2011.. Land grab or development opportunity?, Lorenzo Cotula, Sonja . The Mining sector, an opportunity for Growth inVermeulen, Rebeca Leonard and James Africa?, Proparco, January 2011.Keeley, iied, FAO, IFAD, 2009. . Africa‘s Future and the World Bank‘s Support to It, World. Sustainability and security of the global food supply Bank, February 2011.chain, Rabobank, 2010. . It’s time for Africa, Africa attractiveness survey, Ernst &. The World Health Report, World Health Organization, 2010. Young, March 2011.. China, Africa and the International Aid Architecture, Deborah . Economic Report on Africa 2011, Economic Commission forBräutigam, African Development Bank Group, April 2010. Africa, African Union, March 2011.. Rising Global Interest in Farmland, World Bank, September 2010. . Africa Progress Report 2011, Africa Progress Panel, April 2011.. Sub-Saharan Africa: Resilience and Risks, Regional Economic . Sub-Saharan Africa: Recovery and New Risks, Regional EconomicOutlook, International Monetary Fund, October 2010. Outlook, International Monetary Fund, April 2011.. African acceleration, Société Générale, October 2010. . Africa’s pulse, World Bank, April 2011.. Top Banques, African Business, October 2010. . The Middle of the Pyramid: Dynamics of the Middle Class in Africa, African Development Bank, April 2011.. The struggle underground, The Africa Report, October 2010. . Foreign aid, trade and development, The strategic presence of. Anticipated trends in the use of global land and water resources, F. China, Japan and Korea in sub-Saharan Africa, Dr. JohanNachtergaele, J. Bruinsma, J. Valbo-Jorgensen, and D. Lagerkvist, The Swedish Institute of International Affairs, April 2011.Bartley, FAO, 2010. . Agribusiness for Africa’s prosperity, UNIDO, May 2011.. China in Africa, A Macroeconomic Perspective, Benedicte VibeChristensen, December 2010. . Transformation through Infrastructure, Issues and concept Note, World Bank, June 2011.. Africa, The new frontier for growth, Accenture, 2010. . African Agriculture: From Meeting Needs To Creating Wealth, Mo. Africa’s Infrastructure, A Time for Transformation, Vivien Foster Ibrahim Foundation, 2011.and Cecilia Briceño-Garmendia, World Bank, Agence Française deDéveloppement, 2010. . Private equity and investment in Africa, Yingni Lu and John Battersby, SouthAfrica.info, July 2011.. Africa’s impressive growth, The Economist, January 2011. 38
  39. 39. References. Africa, The bottom billion becomes the fastest billion, Renaissance . Sub-Saharan Africa: Sustaining Growth amid GlobalCapital, July 2011. Uncertainty, Regional Economic Outlook, International Monetary Fund, April 2012.. Africa in 50 Years’ Time, The Road Towards InclusiveGrowth, African Development Bank, September 2011. . How can Africa compete with China, Marcelo Giugale, Huffington Post, April 2012.. Rising Global Interest in Farmland, World Bank, September 2011. . Africa Losing Billions of Dollars Due to Trade Barriers, Mohammed. Sub-Saharan Africa: Sustaining the Expansion, Regional Economic Suleman, allafrica.com, April, 2012.Outlook, International Monetary Fund, October 2011. . The New Business of Africa: Markets and People transforming the. Growth and poverty reduction in Africa in the last two continent, Fair Observer, May 2012.decades, Andy McKay, University of Sussex, December 2011. . Jobs, Justice and Equity, Africa Progress Panel, June 2012.. Africa’s population, Miracle or Malthus, The Economist, December2011. . Waking up to the maths of malaria, Ed Cropley, AlertNet, June 2012.. World Investment Report, UNCTAD, 2011. . Sub-Saharan Africa Region, Global Economic Prospects, World. Classement des Banques, Jeune Afrique, 2011. Bank, June 2012.. Yes Africa can, World Bank, 2011. . Assessing Africa’s Policies and Institutions, CPIA Africa, World. The Africa Competitiveness Report 2011, Africa Bank, June 2012.Commission, World Economic Forum, 2011. . The Millennium Development Goals Report, United Nations, July. Will the lion roar in 2012?, African Business, January 2012. 2012.. Growing with Africa’s consumers, Bain & Company, February 2012. . African Economic Outlook 2012, OECD, 2012.. Defragmenting Africa, Marcelo Giugale, Huffington Post, February . Global Development Finance 2012, World Bank, 2012.2012. . Inclusive Wealth Report 2012, UNEP, UNU-IHDP, 2012.. BRICs’ Philosophies for Development Financing and Their . Assessing Progress in Africa toward the Millennium DevelopmentImplications for LICs, Nkunde Mwase and Yongzheng Goals, MDG Report 2012, Economic Commission for Africa, AfricaYang, International Monetary Fund Working Paper, March 2012. Union, African Development Bank, UNDP, 2012.. Economic Report on Africa 2012, Economic Commission for . Africa Human Development Report 2012, UNDP, 2012.Africa, African Union, March 2012. . World Development Indicators, World Bank, 2012.. Building Bridges, Africa attractiveness survey, Ernst &Young, March 2012. 39

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