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Africa Emerges as Most Dynamic Economic Region by 2050
- 1. AFRICA: THE INVESTORS’ CENTURY October2014
- 2. Africa: the Great Transition PAGE 2
- 3. A New World: the most Dynamic region of the World, with South Asia PAGE 3 -4% -2% 0% 2% 4% 6% 8% 10% 12% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: World Bank Indicators Real GDP growth Sub-Saharan Africa World 6,7% 5,1% 4,7% 4,0% 3,1% 1,8% 1,6% 0% 1% 2% 3% 4% 5% 6% 7% Source : World Bank Indicators GDP average annual growth rate (2000 -2012)
- 4. A Very Structural Growth •A sounder macro economic environment •Inflation and externalpublic debtfalling •Improvingbusiness environment •Sounderpublic policies •The racetowardsAfrica •The risingworld demandfor rawmaterials: 30 % of the world mineralreserves, 40 % of gold reserves, 60 % of cobalt reserves, 72% of chrome reserves, 65 % odfdiamondreserves… •12% of the world hydropowerpotential(95% untapped) •The rush for land: 60% of the world uncultivatedlands, i.e240 millions hectares, 4 times Morocco–and a hugereserveof productivity •The rush for manpower •Eighty years of growth ahead of us: the great peoplement •The time of the demographicdividend: 2.1 billion Africansby 2050, but a slowingnatality •The time of cities: alreadyclose to 50% of the population living in cities, and 80% by 2050 •The time of agriculture: more people living in rural areas by 2050 thannow! PAGE 4
- 5. A HugeRise of the Demand PAGE 5 5% yearlyaveragegrowthof domesticconsumptionsince2000 Corporateinvestment multipliedby 2,5 times duringthatperiod 15% annualgrowthof imports for the tenpastyears - 100 200 300 400 500 600 700 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Constant USD billion Source: World Bank Domesticdemandtrend Gross fixed capital formation Household final consumption expenditure
- 6. An ongoingmajor Shift of the World EconomicCenter PAGE 6 By 2050, the africanGDP shouldat least bemultipliedby 7, reachingthe currentchineseGDP. Africashouldbethe world mostdynamiceconomicregionof the threecomingdecades. Sub-Saharan Africa 0% 5% 10% 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 Source: "EconMap", CEPII 2014 Real GDP growth Sub-Saharan Africa Brasil India China Russia USA Sub-Saharan Africa 0 5000 10000 15000 20000 25000 30000 35000 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 Constant USD billion Source: "EconMap", CEPII 2014 Real GDP trend by region Sub-Saharan Africa Brasil India China Russia USA
- 7. AfricanMiddle Classes willmove the Earth PAGE 7 TheAfricanmiddleclassshouldtripleandreach1,1milliardpeopleby2060.TheAfrican«GlobalMiddleClass»(income>10dollars/day)willgrowby90%by2030,anditsmarketvalueisestimatedat940billiondollars. Sub-Saharan Africa 0 500 1 000 1 500 2 000 2 500 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 Million Source: UNCTAD Population in million inhabitants Brasil China India Russia Sub-Saharan Africa USA 0% 10% 20% 30% 40% 50% 60% 2000 2010 2020 2030 2040 2050 2060 Source: African Development Bank Middle Class trend in Sub-Saharan Africa (as a % of the population) First poverty line (1,25 dollars) Second poverty line (between 1,25 and 2 dollars) Middle Class (> 4 dollars)
- 8. Investorshave startedacknowledgingthe Situation PAGE 8 Foreingdirect investment has been multipliedby 6,6 since2000, and has reached45 billion dollars in 2012. 0% 1% 2% 3% 4% 0 5 10 15 20 25 30 35 40 45 50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 USD billion Source: UNCTAD ForeignDirect Investments(FDI) towardsSub-SaharanAfrica Foreign Direct Investment (in USD) % of total FDI in the world
- 9. A Single Continent? PAGE 9
- 10. A very differentiated Economic Performance PAGE 10 Lowermiddleincomecountries(AfriqueduSud,Ghana,Sénégaletc.)havegrownonaverageby3%yearlythosetwentypastyears,against1,3%forthefragilestates(Guinée,Libéria,Togoetc.) Sub-Saharan Africa 0 500 1000 1500 2000 2500 3000 3500 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: World Bank Indicators Trend of GDP per capita (in constant USD) Low-income countries Middle-income countries Oil-exporting countries Fragile States Sub-Saharan Africa 0 50 100 150 200 250 300 350 400 450 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 USD billion Source: World Bank Indicators GDP growth in Sub-Saharan Africa by income groups Low-income countries Middle-income countries Oil-exporting countries Fragile States
- 11. And a veryDiverse Continent •By 2050, SSA’spopulation willhave increasedby 1,1 billion people , creatingverydiverse regions •First profile: the «Giants», whichpopulation willbeover 100 million people •Nigéria: 440 millions inhabitants, 29% of Africa’sGDP, 40% of the oilreservesof the continent •EAEC: a regionof 520 millions people withEthiopia, Tanzania, Ouganda, Kenya. A relativelyspread demographicand economicpotential •DRC: 150 million people by 2050 –and Kinshasa: 10 million citizens SustainableGiants? •A manageablesize? •A hugechallenge for investment PAGE 11
- 12. A veryDiverse Continent (continued) •Second profile: The bright second tier (between 40 and 60 million inhabitants by 2050) •Ghana, Côte d’Ivoire, l’Angolaetc. •Smaller size, fast growth •Important political regional role, agents of regional integration What about South Africa? •A challenged leadership •An important transformation of the economic model •Huge social challenge for the most unequal country of Africa, where one person out of which lives with AIDS •Third profile: the small countries, exposed to all the ups and downs… •A scattered group of dependent countries, that might achieve success without regional influence. •The most exposed group to political volatility and expanded fragility PAGE 12
- 13. New Visions of Africato emerge? •Anglophones vs Francophones: a distinction lessand lessrelevant, althoughstrongcultural, politicaland legaldifferencesstillremain •An emerging‘’afro-asiatic’’ co-prosperityzone? •And a new ‘’afro-atlantic’’co-prosperity zone? PAGE 13
- 14. A Continent at Risk? PAGE 14
- 15. A Giant withFeetof Clay •Growing Inequalities… •The second highest level of inequality in the world after Latin America… •Among the ten countries in the world where inequalities have grown faster, six are in SSA: Namibia, South Africa, Lesotho, Botswana, Sierra Leone and the Central African Republic •… And Insufficient Growth… •By 2030, 45 million jobs will be created at the current pace of growth, but 110 million people will arrive at working age… •Manufacturing growth still slow, and agricultural productivity increasing also slowly… •Fiscal revenues will not allow to maintain the investment levels that are necessary to raise out of absolute poverty the majority of the continent and to educate, feed and care 1.3 additional Africans by 2050 •…Could increase Political and Social unrest, and hit Success Stories •Local conflicts can easily spread regionally •Continental and regional migrations as well as rush for natural resources increase conflicts •Local structural weaknesses can hit the rest of the continent: health disasters… •The Urbanization Process as the core Challenge •One billion additional urban dwellers by 2050? •A difficult process for land-tenure, governance and environmental reasons •A double challenge: welcoming and becoming competitive PAGE 15
- 16. And a still Narrow as well as Chaotic Economy •Few large corporations •Shallow financial markets •Limited services and suppliers availability •Infrastructure shortages •Low global productivity •And important remaining governance challenges PAGE 16
- 17. Towardsthe EnvironmentalCollapse? •WhatistheCostofGrowth? •ThevalueoftheAfricannaturalassetshasdecreasedby5%between1995-2005,andifoneincludesthedemographicgrowth •Land,grasslands,andforestsvaluehasdeclinedbyrespectively17%,55%et42%. •TheSustainabilityChallenge •21%ofAfricanlandisproperforagriculturebut20%isalreadyseriouslydegradatedornotusableanymore •Iflanddegradationcontinues,agriculturalproductivitymightdecreaseby17%to30%upto2020,and50% by2060. •Between2000and2010,3,4millionshectaresofforesthavedisappearedyearly,3xtheworldaverage •70%orhalieuticreservesarefullyoroverused •375millionsmillionpeopleareaffectedbyhydricstress,and500millionswillbeby2030,includingtheimpactofclimatechange PAGE 17
- 18. «Real Savings» declining PAGE 18 -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source : World Bank Adjustednet savings, or «real savings», (as a % of GDP)
- 19. WhatConsequences for Investment? PAGE 19
- 20. Still, Go for Africa… •For all itsrisksand unknownfeatures,Africaisreallythe new world economicfrontier •Profitabilityof investmentsmaybehigh •The humanand environmentalimpacts of investmentsmaybeequallyhigh •This isa place to makea difference PAGE 20
- 21. FOLLOW THE TEN COMMANDEMENTS 1)Spread yourrisks 2)Fear Marketsand theirvolatility, thisisstillthe time for privateequity 3)Do not feedthe Bubble 4)Invest in the Fundamentals: people, demand, good policies… 5)Followthe Locals, and learnfromthem–trust SMEs 6)Do not feargreenfields, theyare in manycases the onlywayforward 7)IntegrateChaos in yourStrategy 8)BewareGovernments(at least someof them) 9)Look long term, and integratestructural social, environmentaland governanceanalysisand responsibility 10)Do not acceptCorruption PAGE 21
- 22. Thankyoufor yourattention! Investisseurs & Partenaires jm.severino@ietp.com 01 58 18 57 10 www.ietp.com