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The Next Destination for Growth is not China or India… it’s AFRICA! Presented by Herta von Stiegel September 15, 2011

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Page 1: Herta von stiegel

The Next Destination for Growth is not China or India… it’s

AFRICA!

Presented by Herta von Stiegel

September 15, 2011

Page 2: Herta von stiegel

2

1,692

1,224

India

1,341

1,295China

Europe

738

719

North America

446

344

SouthAmerica

488

392

Global Population Growth 1950-2050Africa’s population is expected to double by 2050

Source: UN (Figures in millions), IMF

2,191

1,022

Africa

Population 2010

Population 2050

Population 1950

• Forecast population of 2.1bn by 2050• 29% of global mineral resources• 20% of the world’s land mass• 3% of global FDI• Labour force expected to grow at 4%

126

108Japan

Page 3: Herta von stiegel

Global Economic GrowthAfrica is poised for tremendous economic growth

Sources: The Economist, IMF World Economic Outlook Database 3

12 African economies are expected to grow close to or faster than the forecasted average of 6.6% per annum for all emerging and developing economies

Similarly, there are Asian countries, such as China and India, where growth rates are greater than the Asian average and among the highest globally

The focus then becomes choosing the pockets of growth that are sustainable and driven by favorable demographics and the potential for impact

Page 4: Herta von stiegel

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Africa and Climate ChangeThe continent with the lowest emissions stands to lose the most

Source: The Lancet Vol 373 May 16, 2009

Comparison of undepleted cumulative CO2 emissions by country for 1950–2000

Regional distribution of four climate-sensitive health consequences (malaria, malnutrition, diarrhoea, and inland flood-related fatalities)

Page 5: Herta von stiegel

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Renewable energy & clean technology• Essential for sustainable economic growth• Unreliable energy supply can stunt growth by 4% in SSA• Consumption of energy shows strong links to income per capita

Key Sectors for Growth and ImpactEnabling sectors that are key to poverty alleviation and economic growth

Source: How Exciting is Africa’s Potential, Goldman Sachs Strategy Series, Oct 2010; The Economics of Renewable Energy Expansion in Rural Sub-Saharan Africa, The World Bank, Jan 2010

SME Finance• Key to tackling poverty and fostering entrepreneurship• SME sector contributes more than 50% to gross GDP

Telecommunications• Driver of knowledge based activities • The mobile market has seen a cumulative 50% annual growth rate

over the last 5 years- Mobile phone usage increased by almost 20x between 2000 and 2008 in

the 11 largest African countries (‘African 11’)

Page 6: Herta von stiegel

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Africa 1994/95Africa 2010

Rule of Law and Good Corporate GovernancePrerequisites to attracting foreign investment

Source: Freedom House Countries are scored on a scale of 1-7. Combined average rating for civil liberties and political freedom are 3-5 for ‘partly free’ and 5-5-7 ‘not free’

.

Guinea’s presidential elections in November 2010 were considered the first democratic elections since gaining independence in 1958

Southern Sudan voted for its independence in January 2011 as mandated by a 2005 peace deal

Zimbabwe, Rep. of the Congo and Gabon are the only three countries to have regressed since 1995

There were several successful elections in 2010 such as Rwanda and Tanzania; 12+ elections are expected during 2011 overall

Partly Free

Free

Not Free

Page 7: Herta von stiegel

African Private Equity MarketAfrica is a growth area with historic IRRs* of 43.5% for private equity investments

* Ariya Capital research: sample of 40 mid-to-large sized deals in Africa between 2000 – 2007, HBS

African Private Equity Investments – 2000-2007 mid to large sized deals*

From 2002 to 2007, the average annual rate of return on capital was 65-70% higher than that of comparable firms in China, India, Indonesia, and Vietnam for 954 publically traded African companies

There is a significant opportunity to achieve superior financial returns AND positive social and environmental impact by investing in Africa

Page 8: Herta von stiegel

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Ariya Sustainability ModelA holistic approach to sustainable investment

* Bottom-of-the-Pyramid Consumer; typically earning ~<US$2 per day

Accountability • Measurement of social and

environmental impact • External monitoring

Investment analysis• ESG evaluation• Qualitative and quantitative

assessment

Sector• Poverty alleviation• Service enabler• Environmental sustainability

Geography • Defined by need and demand• Leapfrogging technology gaps• Preserve environmental capital

Economic impact

• Profitable, competitive and efficient business operations

• Demand-driven businesses for growing middle class and BOP* consumers

• SME development

• Increase tax revenue to governments

• Reduce gap in value of imports versus value of exports

Environmental impact

• Sustainable use of natural resources

• Promotion of environmentally sound products and services

• Resource stewardship

• Pollution prevention

• Investment in companies addressing climate change

• Carbon credits

Governance

• Management and structures

• Business ethics

• Management structures and ESG

• Compliance with local law and international standards

• Responsible corporate citizenship

• Certified environmental management systems

• Transparency

• Support of PRI, Equator Principles

Social impact

• Stakeholder engagement

• Community collaboration

• Job creation

• Skills development

• Human health and safety

• Economic inclusion and wealth creation at the BOP

• Introduction of new technologies

• Local ownership schemes