The African risk / reward

627 views

Published on

Objective Capital's Africa Resources Investment Congress 2011
Ironmongers' Hall, City of London
14-15 June 2011
Day 1: Africa Resources
Speaker: Matthew Searle, Business Monitor International

Published in: Travel, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
627
On SlideShare
0
From Embeds
0
Number of Embeds
98
Actions
Shares
0
Downloads
18
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

The African risk / reward

  1. 1. AFRICA RESOURCESINVESTMENT CONGRESS The African risk / reward Matthew Searle – Business Monitor InternationalIRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY-WEDNESDAY, 14-15 JUN 2011www.ObjectiveCapitalConferences.com
  2. 2. Business Monitor International Africa’s Growth Boom: Key Drivers And Risks Matthew Searle, Sub‐Sahara Africa Analyst M tth S l S b S h Af i A l t Business Monitor International
  3. 3. Business Monitor International SSA As A Region Will Be Top Performer GDP Growth Rates, % chg y‐o‐y 15.0 10.0 5.0 .0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -5.0 -10.0 SSA Asia Developed World Emerging Europe Latin America MENA Source: Central Banks, Statistical Agencies, BMI Forecasts 3
  4. 4. Business Monitor International …if we exclude South Africa… if we exclude South Africa 15.0 …SSA (ex SA) will be fastest growing  region in the world after 2013 region in the world after 2013 10.0 5.0 50 .0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 -5.0 Resilient during the worst of the downturn  resulting from GFC resulting from GFC -10.0 SSA (ex South Africa) Asia Developed World Emerging Europe Latin America MENA Source: Central Banks, Statistical Agencies, BMI Forecasts 4
  5. 5. Business Monitor International 8 Of 20 Fastest Growing Economies  8 Of 20 Fastest Growing Economies In The World In 2011‐201512 012.0 Average Annual Real GDP Growth 10.0 % chg y‐o‐y, 2011‐2015 8.0 6.0 4.0 2.0 .0 Source: BMI Forecasts 5
  6. 6. Business Monitor InternationalInvestor Interest: Eurobond Yields Heading Investor Interest: Eurobond Yields Heading 25 Lower Investors see African countries as more akin to Brazil than Venezuela… I t Af i ti ki t B il th V l 20 15 1000  10 basis  250‐300 basis  points 5 0 Ghana 2017 Brazil 2017 Gabon 2017 Venezula 2016 Source: Bloomberg 6
  7. 7. Business Monitor International FDI On The Up FDI On The Up 20000 FDI Into Africa Has Been On The Rise  FDI Into Africa Has Been On The Rise Since 2000. 15000 US$mn 10000 5000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: IMF 7
  8. 8. Business Monitor International What will drive this growth? What will drive this growth? 1. Resources 1 Resources 2. Agriculture 3. The Consumer – 8
  9. 9. Business Monitor International Driver 1: Resources Driver 1: ResourcesResource Current Producers Growth Prospects In…Platinum & Palladium South Africa, Zimbabwe ZimbabweDiamonds Botswana, Namibia, South Africa ZimbabweGold South Africa, Ghana, Mali Côte d’Ivoire, DRC, Tanzania Copper Zambia Zambia, Botswana, DRCCoal South Africa Mozambique, South AfricaIron OreIron Ore South Africa South Africa Guinea, Sierra Leone Guinea Sierra LeoneRare Earth Minerals ‐‐‐‐‐‐‐ DRC, Mozambique Nigeria, Angola, Sudan, Gabon,  Ghana, Uganda, Tanzania?, Ghana Uganda Tanzania?Oil Equatorial Guinea,  Côte dIvoire,  Mozambique? Republic of Congo, CameroonGas Cameroon Tanzania, Mozambique 9
  10. 10. Business Monitor International Driver 2: Agriculture Driver 2: Agriculture Is already an important part of many African economies: 60 50 Agriculture As % of GDP In Selected SSA Countries 40 30 20 10 0 Ethiopia Nigeria Ghana Kenya Mozambique Tanzania Zambia Source: Central Banks, Statistical Agencies 10
  11. 11. Business Monitor International Agriculture cont Agriculture cont. • Informal subsistence farming is a large part of this Informal subsistence farming is a large part of this • Economic growth will be recorded merely by incorporating  data from informal farming activities into GDP accounting • By including in the formal economy, should improve access  to bank finance • Thi l This, along with increased foreign investor interest will drive  ith i df i i t i t t ill d i productivity gains as farmers use better inputs, technology  and methods 11
  12. 12. Business Monitor International Agriculture cont Agriculture cont. Case Study: Case Study: In Nigeria, the agricultural sector: • Employs 58% of workforce (2007) p y ( ) • Accounts for > 40% of the economy • Uses <1% of bank credit • Large productivity gains to be reaped 12
  13. 13. Business Monitor International Driver 3: Consumption Africa’s younger, larger, richer population will demand  more goods and services:1200 42 40001000 3500 41 3000 800 40 2500 600 2000 39 400 1500 1000 200 38 500 37 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total Population mn LHS % Of Population Aged Btwn 15‐39 SSA GDP Per Capita, US$ Source: World Bank; Central Banks, Statistical Agencies, BMI Forecasts 13
  14. 14. Business Monitor International Consumption cont. Consumption cont• Roads and rail will improve distribution networks taking goods Roads and rail will improve distribution networks taking goods  and services to far‐flung consumers more efficiently• Urbanisation• Proliferation of telecommunications – mobile and internet – will  connect more people to suppliers of goods and services• Growth in mobile banking/conventional banking services will Growth in mobile banking/conventional banking services will  facilitate transactions and help circulate cash around the  economy 14
  15. 15. Business Monitor International Consumption cont. Consumption contMobile banking stands to be a massive boost to consumption: Safaricom’s M‐PESA  mobile banking service  transferred US$570mn in Mar 11. in Mar‐11 US$9.9bn since 2007 Source: Safaricom 15
  16. 16. Business Monitor International Let’s not get too carried away… Source: BMI 16
  17. 17. Business Monitor International Key Weakness 1: Political Risk K W k 1 P li i l Ri k Business Monitor Political Risk Ratings Business Monitor Political Risk Ratings 80 70 60 50 40 30 20 10 0 Total Policy Making Process  Security/External  Policy Continuity Social Stability Threats SSA Average Global Average 17
  18. 18. Business Monitor International Key Weakness 1: Political Risk K W k 1 P li i l Ri k Business Monitor Political Risk Ratings Business Monitor Political Risk Ratings 80 14 70 12 60 10 50 8 40 6 30 4 20 10 2 0 0 Total Policy Making Process  Security/External  Policy Continuity Social Stability Threats SSA Average Global Average Difference Source: BMI 18
  19. 19. Business Monitor International Social Stability: Food Price Inflation Social Stability: Food Price Inflation FAO Food Price Index FAO F d P i I d High Weightings Of Food In The CPI  High Weightings Of Food In The CPI250.0 Basket = Risk Botswana Cote dIvoire200.0 Uganda Zimbabwe150.0 Kenya Cameroon100.0 Ghana Tanzania Zambia 50.0 Nigeria Senegal 0.0 00 Ethiopia Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Mozambique 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Source: FAO, National Statistical Agencies 19
  20. 20. Business Monitor International Social Stability: Demographics Social Stability: Demographics 1200 42 Total Population mn LHS % Of Population Aged Btwn 15‐39 RHS 1000 41 800 40 600 39 400 38 200 37 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020• Employment needs to be created.• Price growth needs to be contained through prudent policy• Broadly, countries’ citizens will need to participate in growth Source: World Bank; BMI Forecasts 20
  21. 21. Business Monitor International Key Weakness 1: Political Risk K W k 1 P li i l Ri k Business Monitor Political Risk Ratings Business Monitor Political Risk Ratings 80 14 70 12 60 10 50 8 40 6 30 4 20 10 2 0 0 Total Policy Making Process  Security/External  Policy Continuity Social Stability Threats SSA Average Global Average Difference Source: BMI 21
  22. 22. Business Monitor International Policy Continuity Policy Continuity • DRC – Expropriation of First Quantum’s Frontier Mine in  2010 • Zimbabwe  Uncertain Indigenisation Policy Zimbabwe – Uncertain Indigenisation Policy • South Africa – Nationalisation is espoused by some  radical yet powerful elements • Guinea, Namibia, Sierra Leone – Proposals to up  government stakes in mining sector • Tanzania – Tanzania Supertax on mining profits on mining profits 22
  23. 23. Business Monitor International Key Weakness 2: Infrastructure  Key Weakness 2: Infrastructure Deficit World Bank estimates that Africa needs US$93bn pa to meet  its infrastructure requirements: • Additional 7 000 MW of power generation Additional 7,000 MW of power generation • 22,000 MW of transmission lines • Roads connecting capitals, ports, border crossings Roads connecting capitals, ports, border crossings • Roads connecting rural agricultural lands • Water, sanitation, housing • Telecommunications Source: World Bank 23
  24. 24. Business Monitor International BMI Infrastructure Key Projects Database BMI Infrastructure Key Projects Database 310 projects – US$300bn worth Upcoming, Ongoing Or Recently Completed Infra Projects In SSA Housing 2% Water Oil & Gas Pipelines Airports 7% 3% 10% Ports Roads & Bridges 9% 26% Power Plants &  Rail transmission grids 10% 33% Source: BMI 24
  25. 25. Business Monitor International AFRICA • 53 Countries • Over 3000 languages • Different Cultures And  Customs • Varying legal systems and Varying legal systems and  enforcement thereof • Varying degrees of political  and economic stability 25
  26. 26. Business Monitor International Take‐Aways • Countries in Africa Are Set To Grow Robustly Countries in Africa Are Set To Grow Robustly • Investor interest is picking up in Africa • Resources extraction, agriculture and consumer‐ Resources extraction agriculture and consumer facing industries will drive this growth • Political risk remains pertinent  most pressingly  Political risk remains pertinent – most pressingly in social stability and policy continuity • Infrastructure deficit is a constraint although  g steps are being taken to address this 26
  27. 27. Business Monitor International Thank You This can be your title page Business Monitor International msearle@businessmonitor.com
  28. 28. Business Monitor International Appendix: Real GDP Growth Appendix: Real GDP Growth 2007 2008 2009 2010e 2011f 2012f 2013f 2014f 2015f Angola 19.8 14.8 2.6 3.4 7.6 7.9 6.3 9.7 10.4 Botswana 4.8 2.9 ‐4.9 4.9 7.2 5.1 5.0 5.0 4.7 4.5 Cameroon 3.5 2.9 2.0 3.2 3.7 5.7 5.2 3.9 3.8 DRC 6.3 6.3 2.7 5.8 7.0 7.3 7.2 7.2 7.0 Ethiopia 11.5 11.6 8.6 8.7 8.5 7.6 7.0 6.5 5.5 Gabon 5.5 2.3 ‐1.0 4.0 4.5 5.1 5.3 4.0 3.6 Ghana 6.5 8.4 4.0 7.7 14.0 7.9 7.6 13.1 9.7 Kenya 7.0 1.6 2.5 5.2 5.2 6.3 5.9 5.4 5.2 Mauritius 5.5 5.1 3.1 4.1 5.0 5.1 5.3 5.4 4.8Mozambique 7.3 6.7 6.4 8.0 7.5 7.5 8.0 7.5 7.4 Namibia N ibi 5.4 54 3.3 33 ‐0.9 09 3.8 38 4.5 45 5.2 52 5.8 58 5.7 57 5.0 50 Nigeria 6.5 5.9 6.9 7.9 7.8 7.6 7.8 7.4 7.9 Rwanda 7.8 11.6 6.0 6.1 6.8 7.7 7.6 6.9 6.8South Africa 5.6 3.6 ‐1.7 2.8 3.5 4.0 4.3 4.2 4.0 Tanzania 7.1 71 7.4 74 6.0 60 6.4 64 6.2 62 6.5 65 6.3 63 6.2 62 6.2 62 Uganda 8.1 10.4 5.3 6.9 6.8 9.3 9.7 8.6 8.5 Zambia 6.2 6.0 6.3 6.8 7.3 7.2 6.1 6.1 6.0 Zimbabwe ‐6.9 ‐14.1 5.7 8.1 7.1 7.4 8.0 7.2 6.7 Source: BMI 28

×