RENAISSANCE CAPITAL - CFA Institute

RENAISSANCE CAPITAL FRONTIER, EMERGING AND CONVERGING MARKETS

The emerging markets investment firm

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EMERGING MARKETS — SPOTLIGHT ON AFRICA CHARLES ROBERTSON

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GDP GROWTH KNOWS NO RELIGIOUS, ETHNIC, CLIMATE OR

CONTINENTAL BARRIERS

2

0

5,000

10,000

15,000

20,000

25,000

30,000

1

1820

1825

1830

1835

1840

1845

1850

1855

1860

1865

1870

1875

1880

1885

1890

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1900

1905

1910

1915

1920

1925

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1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

Catching up is a global phenomenon - per capita GDP since 1820

United Kingdom

France

Germany

United States

Argentina

Chile

Japan

South Korea

Thailand

Singapore

India

YET 10 AFRICAN COUNTRIES ACHIEVED AT LEAST 7%

GROWTH SINCE 2000 (ENOUGH TO DOUBLE GDP IN A

DECADE)

The emerging markets investment firm 3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0Over 2003-12 - each of these grew by an average 7.0%

WHY NOW ?


CUTTING AFRICAN DEBT IN HALF


0

20

40

60

80

100

120

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

SSA

G-7Public debt as % of GDP

BANKING STILL HAS ROOM TO BOOM


0

20

40

60

80

100

120

140

160

180

200

220

(% o

f G

DP

)

Private sector debt in 2011 (household and corporate) as % of GDP (Source, IMF)

High debt in rich countries and ... China

African countries have low debt levels

THE RISE OF FOREIGN DIRECT

INVESTMENT BEGAN BEFORE CHINA

7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

FDI into Africa (% GDP)

Africa (LHS)

ACTUALLY MOST GROWTH HAS COME FROM SERVICES


53

16

14

8

7

1

0 10 20 30 40 50 60

Services

Agriculture

Mining and quarrying

Construction

Manufacturing

Gas, electricity and water

Sector share of change in real GDP, 2002-2009

EASE OF DOING BUSINESS REFORMS –

DAYS TO START A BUSINESS (WB, 2014)


0

20

40

60

80

100

120

140

160

180

Ven

ezue

laE

q G

uine

aB

razi

lC

ongo

, Rep

Zim

babw

eE

ritre

aA

ngol

aN

amib

iaC

had

Bot

swan

aG

abon

Mal

awi

Sw

azila

ndS

udan

Chi

naK

enya

Uga

nda

DR

CLe

soth

oN

iger

iaG

ambi

a, T

heIn

dia

Tanz

ania

Alg

eria

CA

RP

akis

tan

SA

Djib

outi

Gui

nea

Cam

eroo

nE

thio

pia

Rus

sia

Ger

man

yG

hana

Gre

ece

Moz

ambi

que

Sie

rra

Leon

eU

KM

ali

Mor

occo

Tuni

sia

Ban

glad

esh

Cap

e V

erde

Gui

nea-

Bis

sau

Côt

e d'

Ivoi

reE

gypt

Mad

agas

car

Zam

bia

Mau

ritiu

sS

eneg

alB

urun

diU

SA

Rw

anda

2004 2014

PERHAPS IT IS DEMOGRAPHICS


-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

2000 2010 2020 2030 2040 2050

15-24 years olds (source UN)

Eastern Europe

Eastern Asia

South Asia

SE Asia

SSA

Latam + Caribbean

Northern Africa

EDUCATION IS A CRUCIAL FACTOR


0

10

20

30

40

50

60

70

80

90

100Around 1975

Around 1990

Around 2005

Secondary school enrolment (UN)

AFRICA GDP IN 2012


Morocco

Tunisia

Algeria Egypt

Libya

W.S Niger

Mauritania Chad

Mali Sudan

C.V

Burkina Faso Eritrea

GambiaSenegal

South Sudan Djib.

G-B

Guinea Nigeria

S-L Ghana Ethiopia

Benin

Lib. SomaliaTogo Uganda

Cote D'Ivoire

CAR Kenya

Rw.

B.

Cameroon

1 box = US$1bn Tanzania

1 box = total GDP less than US$0.5bn STP Eq Guinea

Blank box = No available GDP data

Gabon

Nigeria - as per Renaissance assumptions post the 2012 GDP revision DRC

LEGEND Seychelles

Congo

Strong autocracy Malawi

Strong democracy

Weak autocracy

Weak democracy Madagascar

Zambia Moz.

Mauritius

Angola

Zimbabwe

Swazil.

Botswana

Namibia

South Africa $419bn and Nigeria $370bn we assume after the GDP revision, compared with Thailand ($377bn), Colombia $378bn and Venezuela $337bn

Egypt at $257bn and Nigeria at $273bn before the GDP revision, compre with Singapore at $270bn and Geece at $271bn

Angola at $121bn or Morocco at $100bn compare with Bangladesh at $118bn, Hungary at $129bn or Vietnam at $135bnSouth Africa

Les.

AFRICA IN 2010 BY POPULATION


Tunisia

Morocco Egypt

Algeria Libya

W.S Niger

Mauritania Chad

C.V Mali Eritrea

Senegal Burkina Faso

Gambia Djib.

Sudan

G-B

Guinea

Cote D'Ivoire Ethiopia

Sierra Leone Ghana Cen. A R South Sudan Som.

Liberia Benin Nigeria

Togo

Uganda

Kenya

Cameroon

Rwanda

Eq G.

STP Tanzania

LEGEND Gab.

Congo Dem Rep of Congo Burundi

Strong autocracy

Strong democracy

Weak autocracy

Weak democracy Seychelles

Angola

Malawi Madagascar

Zambia

Mrt.

Nmb. Bts. Mozambique

Zimbabwe

Swz.

Lesotho

South Africa

CORRUPTION LINKED TO PER CAPITA GDP


0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Qat

arS

inga

pore

Uni

ted

Sta

tes

Aus

tria

Bel

gium

Irela

ndJa

pan

Taiw

anS

pain

Kor

ea (S

outh

)C

zech

Rep

ublic

Om

anLi

bya

Pol

and

Rus

sia

Bel

arus

Arg

entin

aC

uba

Uru

guay

Gab

onR

oman

iaB

razi

lJa

mai

caFY

R M

aced

onia

Chi

naTu

rkm

enis

tan

Ukr

aine

Gua

tem

ala

Arm

enia

Ang

ola

Jord

anIn

done

sia

Bol

ivia

Hon

dura

sIn

dia

Phi

lippi

nes

Mol

dova

Pak

ista

nN

icar

agua

Nig

eria

Cam

eroo

nM

aurit

ania

Hai

tiC

had

Ken

yaU

gand

aM

ali

Sie

rra

Leon

eM

ozam

biqu

eE

thio

pia

Erit

rea

Libe

riaZi

mba

bwe

Corruption index Per capita GDP

WHAT HAPPENS NEXT ?


A TYPICAL FORECAST WOULD BE THIS


-2

-1

0

1

2

3

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5

6

7

8

1980

1981

1982

1983

1984

1985

1986

1987

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1989

1990

1991

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2003

2004

2005

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2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Real GDP % change and 10-year moving average (IMF)

SSA GDP

SSA 10 year rolling average GDP

AFRICA AS INDIA AS ASIA


-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0Real GDP % change 1960-2043 (IMF, Renaissance, Reserve Bank of

India)

India 1960-2013

SSA

Developing Asia 1980-2013

Linear (India 1960-2013)

Linear (SSA )

FASTEST BILLION - NIGERIA


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2012

2013

2014

2015

2016

2017

2018

2019

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2021

2022

2023

2024

2025

2026

2027

2028

2029

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2032

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2035

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2037

2038

2039

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2041

2042

2043

2044

2045

2046

2047

2048

2049

2050

Nigeria GDP in $bn (2012 dollars)

Germany

Brazil / UK

Russia / Italy

India Spain

Indonesia Saudi Arabia

SA

Japan When will Nigeria overtake the 2012 GDP of the following?

CONCLUSIONS


• SSA has been following the Indian growth trajectory for 30 years, with a 20 year lag. This tells us that the next 20 years will be even better for SSA. Moreover India has itself been following Developing Asia with a ten year lag, implying good African growth out until the 2040s.

• In constant prices, and assuming Africa does no better than India/Developing Asia, this means the

continent should grow from $2 trillion in 2012 to $29 trillion by 2050. • With higher growth should come a deepening and widening of democracy across the continent.

Corruption will decrease as per capita incomes grow. • Africa will move up the value-added curve, from resources and services which help drive growth

today, to service exports, textiles and increasingly heavy industry from the 2020s. Assuming a rise in private sector debt/GDP to 100% by 2050 implies a 30-40 fold rise in the stock of bank credit in constant 2012 dollars. An agriculture productivity boom is possible if Cerrado techniques are adopted across the Guinea Savannah.

• Infrastructure needs are affordable – SSA oil production revenues of over $220bn easily exceed the

annual $90-100bn estimated infrastructure needs. India tells us that however much is invested, still it may not fully meet demand. But in addition, governments will want to boost domestic savings, widen and improve education systems, yet try to ensure budget and external deficits do not widen so much that there is risk of a 1980s debt crash.

• There is a great opportunity to deliver a better performance in the coming 40 years than Asia achieved over the last 40 years.

AFRICA GDP IN 2050


GDP of AFRICA in 2050 (US$bn, in 2012 dollars) with each box representing $20bn of GDP - as forecast by Renaissance Capital, with colours reflecting Renaissance Capital forecasts of political change

Morocco

Tunisia Egypt

Algeria

Libya

Chad

WS Niger EritreaSudan Djib.

Mauritania

C.V Mali Somalia Senegal

Gambia Ethiopia

Burkina Faso South Sudan Benin Nigeria CAR

G-B

Guinea

Ghana Togo Cote D'Ivoire

S-L

Liberia

Uganda Kenya

STP Rwanda

Cameroon

LEGEND ST&P Burundi

Eq GuineaStrong autocracy Tanzania

Strong democracy

Weak autocracy

Weak democracy Gabon DRC

Congo

Seychelles

Malawi Mad.

Zambia

Moz.

Angola Mauritius

Zimbabwe

Botswana

1 box = US$20bn

Namibia Swazil.

SA

Les.

THE FASTEST BILLION


www.fastestbillion.com Available also on Amazon November 2013

PRIVATE & CONFIDENTIAL

Twitter : @RencapMan @NdebeleNothando @YvonneMhango

Charles Robertson Global chief economist [email protected]

http://www.fastestbillion.com/

http://www.fastestbillion.com/


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EUROPEAN INVESTMENT CONFERENCEBeyond Austerity: Opportunities for European Investors in the Global Market

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EUROPEAN INVESTMENT CONFERENCEBeyond Austerity: Opportunities for European Investors in the Global Market

14–15 November 2013London, United Kingdom

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RENAISSANCE CAPITAL - CFA Institute