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Sub-Saharan Africa (SSA) KE NAKO IT’S NOW OR NEVER

Sub-Saharan Africa (SSA) KE NAKO IT’S NOW OR NEVER. proposed by Matthieu Delouvrier. February 2013. Megatrend: it is the dawn of SSA. Working-age population worldwide. 36%. 11%. 33%. 28%. 18%. 15%. 7%. 23%. 21%. 14%. 9%. 22%. 17%. 12%. 34%. Source: United Nations. 2.

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Sub-Saharan Africa (SSA) KE NAKO IT’S NOW OR NEVER

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  1. Sub-Saharan Africa (SSA) KE NAKO IT’S NOW OR NEVER proposed by MatthieuDelouvrier February 2013

  2. Megatrend: it is the dawn of SSA Working-age population worldwide 36% 11% 33% 28% 18% 15% 7% 23% 21% 14% 9% 22% 17% 12% 34% Source: United Nations 2

  3. SSA GDP is in top 20 Some references (USD trillion in 2012) GDP current GDP current PPP Source: IMF WEO Oct 2012 3

  4. What do we see today? 4

  5. SSA countries show the highest growth Ten fastest growing countries* (Annual average GDP growth rate in %) 2001-2010 2011-2015 (f) • Countries with population above 10 million • Source: IMF WEO Oct 2012 5

  6. The trend is very supportive GDP growth of SSA countries (Annual GDP growth rate in %) Forecast Source: IMF WEO Oct 2012 6

  7. Big industries are paving the way Sales of SSA biggest companies (US$ bn) 7.3% 5.7% Source: The Africa Report - Top 500 Africancompanies . FTSE ASEA Pan Africa index increased by around 20% in 2012. . South Africa companies remain largely dominant. . Oil and mining: 33.2% of sales. 7

  8. Technology (mobile) is breaking through Mobile: the door to modernity Source: MobileMarketingWatch . Mobile phone is decreasing costs, improving efficiency. . Nigeria is distributing subsidized inputs to 1.5 million farmers through cell phones. . Africa has twice as many mobile phones as the USA. . Mpesa (Kenya) has become a global leader in mobile banking and is selling its technology to India. 8

  9. Entrepreneurs are building success stories Mr. Dangote ranked 76th world richest* *Source: Forbes . February 2013: signature of a strategic agreement with General Electric to collaborate on power, transportation and oil & gas. . Current activities: cement, sugar, flour, salt…. . Company expected to be listed on the London Stock Exchange in 2013. 9

  10. Entrepreneurs are dedicated to the continent Mr. Mo Ibrahim created his Foundation . The Mo Ibrahim Foundation was created in 2006 to stimulate good governance and leadership in Africa. . Mr. Mo Ibrahim made a remarkable success in mobile telecommunications with Celtel which was sold in 2005. 10

  11. 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 . 56% of movies in local language . Average DVD sale: 25-50,000 copies . 300 producers . Above 1,000 films per year . Average cost: US$ 20,000 per film 11

  12. The middle class is driving growth Middle class size in Africa (million) +60% Source: AfricanDevelopment Bank . Middle class expected to double in 20 years. . Consumer spending (US$ 1tr) similar to India, higher than Russia. . Passenger cars import in SSA increased by 25%+ in Q4 2011 (YOY) and 250%+ in Rwanda. . Nestlé invested US$ 1 bn in 2011. 12

  13. The overall security has improved Conflicts are regressing 1980-89 2000-09 Source: Uppsala University . Successful coups in Africa were down from 20 during 1980-89 to 7 during 2000-09. . The number of deaths by violence has decreased due to the reduction of conflicts and their intensity following the democratization of the continent. 13

  14. Growth is not inclusive enough Extreme poverty headcount ratio (%) Sub-SaharanAfrica East Asia & the Pacific Required Millenium Development Goal progress Source: World Bank 2012 . The ILO* estimates that between 2000 and 2007, the working age population grew by 96 million but only 63 million jobs were created. . Unemployment hits the youth. . Most countries are not on track to achieve the Millennium Development Goals by 2015. 14 * International Labour Organization

  15. Political and civil rights are not progressing Classification of countries 2012 2002 Source: Freedom House . During the last ten years, political and civil freedom has not improved significantly. . On the other side, many elections held in 2011 showed that peaceful political alternation is possible. 15

  16. What are the drivers of change? 16

  17. Macro policies have produced results Foreign exchange reserves / External debt Source: IMF, World Bank data . Debt reduction strategies together with external trade oriented policies resulted in a dramatic improvement of SSA countries savings and solvency. . All recent sovereign bond issues are oversubscribed. . 9 sovereign wealth funds created. 10 to be created soon. 17

  18. Foreign financing to SSA has surged Destination of funds: public vs private Source: IMF . Funds going to the private sector: average return on investment is the highest in the world. . Foreign flows: x10 in 10 years. . Remittances: over US$ 30 billion per year. 18

  19. Intra-African foreign direct investment is emerging Number of projects . Leading investors come from South Africa, Nigeria and Kenya. . The share of intra-African investment has more than doubled in the last 8 years at the expense of developed markets. 19

  20. There is a dramatic shift in trading partners Destination of SSA exports Excluding oil exporting countries Oil exporting countries Source: IMF . Current switch from Europe to BICs. Trade, not aid. Resources driven. . Intra-African trade still low despite efforts of economic communities. . Diversification of partners has been an engine for growth: reduction of export volatility, better terms of trade, scale economies. 20

  21. Investment in infrastructure has been crucial The future new air terminal in Lomé, Togo . Infrastructure contributed to 50% of SSA past growth. . Current annual spendings: US$ 45 bn. . Improving infrastructure halfway to regional best practice (Mauritius) would increase GDP by 4.4%*. * World Economic Forum 2013 21

  22. Africa has a buried treasure A vast potential in underground resources Oil 10% Gold 40% Share of world reserves Chromium & Platinum 80% to 90% Source: Mc Kinsey Global Institute, June 2010 . Africa is not richly endowed with major minerals like copper, lead, zinc. . Africa’sminingsectoraccounts for just 10% of the world production. . «Africansubsurface per ground km² isestimatedataround $25,000 compared to $125,000 in developed countries»*, showingthatAfricaisunderexplored. * Collier and Venables, 2008 22

  23. 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 46% Sub Saharan Africa Latin America Mena Asia Rest of the world 54% Potential arable land Cultivated land Source: FAO, Fischer and Shah 2010 . Africa is ripe for a green revolution and the first stage of this revolution is the land rush we are witnessing now. . Productivity can be boosted: no country in Africa is now achieving more than 30% of the potential yield on currently cultivated areas (World Bank). 23

  24. Labor productivity has been unleashed Evolution of productivity 1 Usedworkingage population (15-64) as a proxy for labor force Source: ConferenceBoard World EconomyDatabase; McKinsey Global Institute . This gives scope for increased per capita revenues. . For the first time since the eighties, productivity of labor increased, and at a higher pace than labor force. 24

  25. Demography supports general productivity Dependency ratio Non working population (<15;64<) for 100 people atworkingage(15-64) Source: United Nations . Today, SSA has the worst dependency ratio. Twice as much as China. . However, it is constantly declining since 1985, giving a boost to Africa’s competitiveness. 25

  26. Urbanization is stimulating growth The development of cities in Africa . The advantages of the city: it is more cost-efficient to manage transport, food distribution and most services. . Labor is available. . If urbanization triggers higher productivity, it is a big challenge. 26

  27. Efforts are made for better education Secondary school gross enrolment rates Source: United Nations, Renaissance . SSA at the level of Mexico, Turkey in 1975. . But there are still concerns about quality: facilities, teachers. 27

  28. Better health fosters productivity Fighting against malaria: a prominent example In Ghana, the miningcompanyAngloGold Ashanti investedaround US$ 7 million in a comprehensive program against malaria with the followingresults: 2005 2009 1,146 Cases in AngloGold’s hospital (number per month) 6,603 9,800 Drug expenditures (US$ per month) 55,000 282 Work days lost (number per month) 6,983 . Experience shows that investment in water, sanitation and health yields between 4$ and 60$ per 1$ invested. . In Africa, Malaria mortality rate was reduced by 33% since 2000. . Life expectancy at birth in SSA: 49.5 in 1990; 49.7 in 2000; 54.2 in 2010. 28

  29. 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 the world, mostly selling commodities, faster than with itself. . Nevertheless, intra African trade has grown at the same pace as all African trade at 17% a year for the last 10 years. 29

  30. Perception is still a big obstacle Perception of Africa relative to other regions Africaisless attractive than… Africais more attractive than… Source: Ernst & Young’s 2012 Africa attractiveness survey. Total respondents: 505 . For investors with no presence in Africa, the continent is still viewed as relatively unattractive against all regions. . It is the contrary for investors having knowledge of Africa. . Major factors: political instability, corruption, difficulty of doing business. 30

  31. What to do next? 31

  32. So many things to do! - The governance challenge Education Food Millenium Development Goals HIV Employment Housing Corruption Social protection Public management Justice Genderequality Security Fiscal policy Capital availibility Competitiveness Regionalintegration Health care Infrastructure Natural resources Entrepreneurship SSA needs faster, more inclusive growth 32

  33. Implement a new public management method SSA’s absorption capacity is far too low SSA needs to implement countless projects to boost its development Foreign/local funds and partners are increasingly 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 33

  34. Innovate in infrastructure finance Infrastructure density in SSA is weak (as a percentage of the density of otherlowincome countries) Source: Economic Commission for Africa, African Union 2012 . Another US$ 40 billion per year need to be mobilized. Possible sources: China, investment funds, local… . Principle: bottleneck hunting, defragmenting the space (create regional spaces), cost cutting. 34

  35. Care about cities, strengthen local governments Urban rural population are growing in SSA Source: United Nations data . Urban planning, land use regulation, property rights… are urgently needed. . Urban population growth: 3.7%. . People need housing, water, power, food, jobs… Revolutions come from cities 35

  36. Africa is a continent, not a country A Country Assessment Framework to measure diversity 36

  37. The macro environment Insufficient Sufficient Level of growth 1 4 High Quality of economic and social policies (Source: 2012 Mo Ibrahim index of African governance) Average Level of inclusion Low 2 3 GDP growth (average 2011, 2012, 2013) minus current urban population increase (Source: World Bank data) 37

  38. The business environment Low risk High risk Resource curse 1 4 Average High Ease of Doing Business (world ranking) (Source: World Bank, 2012 figures) Incentive to private activity Average Low 2 3 % % % Weight of natural resources in the GDP (Log) (Source: World Bank Data, 2010) Bubble: size of GDP 38

  39. « The risk of not going to Africais to findthatitistoolate to getthere ». Lord Boateng, former British High Commissioner in South Africa and director of Aegis Matthieu Delouvrier Swensee md@swensee.com 39

  40. References .Africa’s natural resources in a global context, Raf Custers & Ken Matthysen, IPIS, August 2009. . Land grab or development opportunity?, Lorenzo Cotula, Sonja Vermeulen, Rebeca Leonard and James Keeley, iied, FAO, IFAD, 2009. . Sustainability and security of the global food supply chain, Rabobank, 2010. . The World Health Report, World Health Organization, 2010. . China, Africa and the International Aid Architecture, Deborah Bräutigam,African Development Bank Group, April 2010. . Rising Global Interest in Farmland, World Bank, September 2010. . Sub-Saharan Africa: Resilience and Risks, Regional Economic Outlook, International Monetary Fund, October 2010. . African acceleration, Société Générale, October 2010. . Top Banques, African Business, October 2010. . The struggle underground, The Africa Report, October 2010. . Anticipated trends in the use of global land and water resources, F. Nachtergaele, J. Bruinsma, J. Valbo-Jorgensen, and D. Bartley, FAO, 2010. . China in Africa, A Macroeconomic Perspective, Benedicte Vibe Christensen, December 2010. . Africa, The new frontier for growth, Accenture, 2010. . Africa’s Infrastructure, A Time for Transformation, Vivien Foster and Cecilia Briceño-Garmendia, World Bank, Agence Française de Développement, 2010. . Africa’s impressive growth, The Economist, January 2011. . Fulfilling Africa’s Potential, Goldman Sachs Global Economics, January 2011. . The Mining sector, an opportunity for Growth in Africa?, Proparco, January 2011. . Africa‘s Future and the World Bank‘s Support to It, World Bank, February 2011. . It’s time for Africa, Africa attractiveness survey, Ernst & Young, March 2011. . Economic Report on Africa 2011, Economic Commission for Africa, African Union, March 2011. . Africa Progress Report 2011, Africa Progress Panel, April 2011. . Sub-Saharan Africa: Recovery and New Risks, Regional Economic Outlook, International Monetary Fund, April 2011. . Africa’s pulse, World Bank, April 2011. . The Middle of the Pyramid: Dynamics of the Middle Class in Africa, African Development Bank, April 2011. . Foreign aid, trade and development, The strategic presence of China, Japan and Korea in sub-Saharan Africa, Dr. Johan Lagerkvist, The Swedish Institute of International Affairs, April 2011. . Agribusiness for Africa’s prosperity, UNIDO, May 2011. . Transformation through Infrastructure, Issues and concept Note, World Bank, June 2011. . African Agriculture: From Meeting Needs To Creating Wealth, Mo Ibrahim Foundation, 2011. . Private equity and investment in Africa, Yingni Lu and John Battersby, SouthAfrica.info, July 2011. . Africa, The bottom billion becomes the fastest billion, Renaissance Capital, July 2011. . Africa in 50 Years’ Time, The Road Towards Inclusive Growth, African Development Bank, September 2011. . Rising Global Interest in Farmland, World Bank, September 2011. . Sub-Saharan Africa: Sustaining the Expansion, Regional Economic Outlook, International Monetary Fund, October 2011. . Growth and poverty reduction in Africa in the last two decades, Andy McKay, University of Sussex, December 2011. . Africa’s population, Miracle or Malthus, The Economist, December 2011. 40

  41. References . World Investment Report, UNCTAD, 2011. . Classement des Banques, Jeune Afrique, 2011. . Yes Africa can, World Bank, 2011. . The Africa Competitiveness Report 2011, Africa Commission, World Economic Forum, 2011. . Will the lion roar in 2012?, African Business, January 2012. . Growing with Africa’s consumers, Bain & Company, February 2012. . Defragmenting Africa, Marcelo Giugale, Huffington Post, February 2012. . BRICs’ Philosophies for Development Financing and Their Implications for LICs, Nkunde Mwase and Yongzheng Yang, International Monetary Fund Working Paper, March 2012. . Economic Report on Africa 2012, Economic Commission for Africa, African Union, March 2012. . Building Bridges, Africa attractiveness survey, Ernst & Young, March 2012. . Sub-Saharan Africa: Sustaining Growth amid Global Uncertainty, Regional Economic Outlook, International Monetary Fund, April 2012. . How can Africa compete with China, Marcelo Giugale, Huffington Post, April 2012. . Africa Losing Billions of Dollars Due to Trade Barriers, Mohammed Suleman, allafrica.com, April, 2012. . The New Business of Africa: Markets and People transforming the continent, Fair Observer, May 2012. . Jobs, Justice and Equity, Africa Progress Panel, June 2012. . Waking up to the maths of malaria, Ed Cropley, AlertNet, June 2012. . Sub-Saharan Africa Region, Global Economic Prospects, World Bank, June 2012. . Assessing Africa’s Policies and Institutions, CPIA Africa, World Bank, June 2012. .The Millennium Development Goals Report, United Nations, July 2012. . African Economic Outlook 2012, OECD, 2012. . Global Development Finance 2012, World Bank, 2012. . Inclusive Wealth Report 2012, UNEP, UNU-IHDP, 2012. . Assessing Progress in Africa toward the Millennium Development Goals, MDG Report 2012, Economic Commission for Africa, Africa Union, African Development Bank, UNDP, 2012. . Africa Human Development Report 2012, UNDP, 2012. . World Development Indicators, World Bank, 2012. . World Investment Report, UNCTAD, 2012. . Is Africa’s Recent Economic Growth Sustainable?, Ifri October 2012 . Global Trends 2030, Alternative Worlds, National Intelligence Council, December 2012. 41

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