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Impact through Food Investing October 2012
PRIVATE & CONFIDENTIAL This presentation contains confidential information that should not be shared with
other persons without the written permission of Silk Invest Limited
3
Africa’s Relevance & Convergence Drivers
Source: African Alliance; IMF; World Bank; Silk Invest Note: Average FDI in ‘00-’10; Population and GDP as of 2011
4% 4%
16%
5%
2%
17%
11%
6%
20%
0%
5%
10%
15%
20%
25%
Share of World GDP
Share of Average World
FDI
Share of World Population
Share of World
Africa India China
oGDP - Africa is one of the fastest growth regions in the world
oForeign Direct Investments - Africa attracts twice the level of FDI of India
oPopulation - 16% of world’s population with a deep consumer base
1 Rise of Africa’s Entrepreneurs
Convergence Is Being Driven by 4 Factors
2 Africa’s Rising Consumer Base
3 FDI and Remittances instead of Aid
4 Better Institutions
Africa is Relevant
4
Aliko Dangote (Dangote Cement)
Food & Cement
Sawiris Family (Orascom)
Construction, Telecom, Fertilizer
Mike Adenuga (Conoil, Globalcom)
Telecom, oil
Anas Sefrioui (Addoha)
Housing & Cement
Jim Ovia (Zentih Bank)
Financial Services
Raymond Ackerman (Pick n Pay Group)
Retailing
Africa’s Entrepreneurs 1
5
Source: World Bank; IMF; Silk Invest
194 272 322 293 230 181
264 340
456 654
911 1,051
35
43
63
105
152 185
-
200
400
600
800
1,000
1,200
1,400
1,600
1980 1990 2000 2010 2020 2025
Popu
latio
n in
mill
ions
Below Poverty Line Above Poverty Line & Below 5k GDP per capita Above 5K GDP per capita
Africa’s rising consumer base 2
From 300m consumers above poverty line in 1980 to over 750m today (2.5x since 1980) and over 1.2 billion in 15 years (1.5x from today)
FDI & remittances drive growth
6
Source: UCTAD; World Bank; Silk Invest
-
5
10
15
20
25
30
35
40
1980 1985 1990 1995 2000 2005 2011e
FDI flows (x Billion, USD)
North Africa Sub-Saharan Africa
-
5
10
15
20
25
30
35
40
1980 1985 1990 1995 2000 2005 2011e
Remittances (x Billion, USD)
North Africa Sub-Saharan Africa
3
7
Better Institutions
Source: IMF; BMCE; World Economic Forum Note: Debt is total of public and private debt; Reserves are IFS Reserves ex. Gold
235 224 218
50
20 20 1 3
39
18
-
50
100
150
200
250
Japan US EU Emerging Asia
Africa
Debt & Reserves as % of GDP
Debt as % of GDP Reserves as % of GDP
6.1
4.1
4.7
5.3
6.0
6.3
6.4
6.6
- 2.0 4.0 6.0 8.0
Brazil
Russia
Nigeria
Kenya
Ghana
Morocco
Ethiopia
Egypt
WEF rating of Property Rights
4
Still limited access to capital for companies
1%
3%
8%
9%
11%
11%
14%
20%
UK
Morocco
Egypt
South Africa
Ethiopia
Ghana
Nigeria
Kenya
0% 10% 20% 30%
Interest Rate Spread (%)
Source: World bank; Silk Invest Note: Interest Rate spread is defined as lending rate minus deposit rate
212%
96%
78%
172%
38%
33%
27%
40%
UK
Morocco
Egypt
South Africa
Ethiopia
Ghana
Nigeria
Kenya
0% 100% 200% 300%
Credit provided by banks (% of GDP)
8
9
The Food Sector is key
Africa’s most attractive growth opportunity
10
1 7
38 35
57
48 64
36
14
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
100%
Sub-Saharan Africa North Africa South Africa
Breakdown of Food sales channels
Supermarkets Grocery shops Open Markets
Source: Various sources; Silk Invest
Development of modern retail sector will act as a significant catalyst
•Only African fund focusing exclusively on value added food sector, not primary agriculture
•Potential targets in high added value food and beverages products and retail outlets
Target 25%+ IRR with focus on highest margin growth areas
•6 initial focus countries with 7 in second wave and maximum investment of 20% per country
•15-20 companies across sectors with focus on companies with clear competitive advantages
Diversified country and investment strategy
•Companies with strong management, established cash flows and solid organization
•High growth potential leveraging competitive positioning and trusted brands
Growth capital enabling companies to scale up
• Influential minority stakes, with legal protection on decision-making and exit
•Each firm will be managed by a dedicated director and supported by the investment committee
Active management and influential minority stakes
•Fund will contribute to improvement of Environmental, Social and Corporate Governance standards in Africa
•Food sector has a high development impact with a tax impact multiplier of 0.5 and a GDP multiplier of 1.5 of total sales
High ESG and development impact
Silk African Food Fund
11
12
PE challenges and Silk Invest’s approach Country Region Pan-Regional Political Risks
• Diversification but deeper infrastructure is necessary
One sector One theme Multi-sector Execution Risks
• Full economies of scope but may limit universe
Local Mix of local & HQ Distant HQ Team Dynamics
• Mix of central guidance and local management
Passive Active Minority Active Majority Partnership Model
• True partnership built on trust and adding value
Commodities Infrastructure Local Economy Investment Thesis
• Bias to consumer and limiting government risk
Venture SME Large Universe
• Deep universe but need for many transactions
13
Current Portfolio Companies
El Asly Egyptian Confectionary
Sundry Foods Nigerian QSR
NAS Foods Ethiopian Biscuits
14
Strong development impact
1.0
3.4 3.9
14.3
22.6
-
5.0
10.0
15.0
20.0
25.0
Direct Suppliers Suppliers of
Suppliers
Induced impact
Total Impact
Total Employment Impact of Unilever’s SA Operations •Study by Unilever in South Africa has quantified:
•Employment multiplier of close to 23 •Multiplier of total economy wide output is close to 3x sales
•Tax contribution of 50% and GDP impact is 150% of sales
Economic Impact
•Focus on locally produced products with strong competitive advantage in their home markets
•Result is an increased substitution of products which are currently imported from outside Africa
Local Added Value
•The fund will play an active role in the management of the portfolio companies
•Special focus on strengthening environmental, social, safety, and corporate governance standards
Knowledge Transfer
•Fund will help companies to enter other African countries and facilitate regional trade
•Focused sector fund will benefit from synergies between portfolio companies and will transfer of know-how and technology
Regional Synergies & Trade
Impact Examples
15
Impact
Direct Employment
Indirect Employment
GDP Impact
Tax Revenues
Typical Portfolio Company with $5-10m investment supports:
500 employees
5000 employees assuming 10x multiplier
Revenues of $10m translate into $30m GDP impact
$10m sales means $5m direct taxes and $15m indirect taxes
Conclusions
16
o Africa is relevant for global growth and sustainability
o Its all about the entrepreneurs
o Foreign investment will accelerate growth and
formalization
o The food industry is the foundation of consumerism
o Investing in the food industry has a strong
development impact
Thank you
United Kingdom 4 Lombard Street EC3V 9HD London Tel: +44 207 933 8610 www.silkinvest.com
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South Africa* 37 Kingfisher Drive 0240 Hartebeespoort Tel: +27 122 441 110 www.silkinvest.com
Egypt 24 Iskandar Al-Akbar Street 11341 Heliopolis, Cairo Tel: +202 2417 6826 www.silkinvest.com
Morocco Imm. TAYA. Lottissement les Arènes, Rue N2 3eme, Bureau N12, MAARIF 20100, Casablanca Tel: +212661249239 www.silkinvest.com
United Arab Emirates DIFC Gate Village 4, Level 3 Dubai, UAE Tel: +971 4 4019789 www.silkinvest.com
Kenya Eden Square, Chiromo Road Nairobi, Kenya Nairobi Tel: +254 20 367 3000 www.silkinvest.com
Disclaimer Silk Invest Limited is regulated by the UK Financial Services Authority. Silk Invest Limited is a registered investment adviser with the U.S. Securities and Exchange Commission. This presentation is for informational purposes only and is being furnished on a confidential basis to a limited number of eligible investors. This presentation is not an offer to buy or sell or a solicitation of an offer to buy or sell any interests or to participate in any trading strategy. Any such offering may be made only by a private placement memorandum ("Memorandum") or Prospectus related thereto and the information contained herein will be superseded in its entirety by such Memorandum or Prospectus. The information contained herein is confidential and may not be reproduced or distributed in whole or in part. All information herein must be treated as confidential or legally privileged information that is intended for the addressee(s) only. You are advised to exercise caution in relation to its contents. If you are in any doubt about any of the contents of the document, you should obtain independent professional advice.This document does not constitute an offer for sale of any security or fund mentioned herein and is for information purposes only on Silk Invest funds. Silk Invest has a number of funds (“funds”) on its platform. Information on these funds should be read in conjunction with the Offering Memorandum or Prospectuses. Silk Invest funds may invests in speculative investments and involve a high degree of risk. An investor could lose all or a substantial portion of his/her investments in frontier markets. An investment in the frontier markets is not suitable for all investors. Silk Invest funds may execute a substantial portion of trades on poorly regulated emerging market stock exchanges as well as OTC products. Silk Invest funds may be illiquid and there may be significant restrictions on transferring interests in such the funds. Silk Invest’s fees are higher than fees for mutual funds as they include a performance incentive. The contents of this document have been approved by Silk Invest’s compliance officer. This summary is not a complete list of the risks and other important disclosures involved in investing in any Silk Invest fund, details of which can be found in the Offering Memorandum or prospectus. This material is for information purposes only. It does not constitute an offer to or a recommendation to purchase or sell any shares in any security. Investors should consider the investment objectives, risks and expenses of any strategy or product carefully before investing. Past Performance: The performance data quoted represents past performance. Past performance is not an indication of future performance, provides no guarantee for the future and is not constant over time. The value of an investment may fluctuate and may be worth more or less than its original cost when redeemed. Current performance may be lower or higher than the performance data quoted. Specific product cited represent Luxemburg registered and audited UCIT funds which are unavailable to U.S. investors. This document relates to a financial product which is not subject to any form of regulation or approval by the Dubai Financial Services Authority (“DFSA”). The DFSA has no responsibility for reviewing or verifying any prospectus or other documents in connection with this financial product. Accordingly, the DFSA has not approved this document or any other associated documents nor taken any steps to verify the information set out in this document, and has no responsibility for it. The financial product to which this document relates may be illiquid and/or subject to restrictions on its resale. Prospective purchasers should conduct their own due diligence on the financial product. If you do not understand the contents of this document you should consult an authorised financial adviser *The South Africa address is the private address of the Investment Director Chris Muller and is for investment research only, it is not for South African investors. The address is not an office or branch of Silk Invest.
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