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SUB-SAHARAN AFRICA (SSA)
KE NAKOIT’S NOW OR NEVER
February 2013
proposed by Matthieu Delouvrier
Working-age population worldwide
Megatrend: it is the dawn of SSA
Megatrend: it is the dawn of SSA
2
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
2100
0
1 000 000
2 000 000
3 000 000
4 000 000
5 000 000
6 000 000
7 000 000
More developed regions China India ROW SSA
(Tho
usan
ds)
Source: United Nations
7%
36%
28%
15%
9%
12%
23%14%22%
34%
11%
33%
18%
21%
17%
Some references
Source: IMF WEO Oct 2012
France 2.6
Brazil 2.4
India 1.9
Spain 1.3
SSA 1.3
Mexico 1.2
Korea 1.1
Indonesia 0.9
Turkey 0.8
SSA GDP is in top 20
SSA GDP is in top 20
India 4.7
Brazil 2.5
France 2.2
SSA 2.1
Mexico 1.7
Korea 1.6
Spain 1.4
Indonesia 1.2
Turkey 1.1
GDP current GDP current PPP
(USD trillion in 2012)
3
What do we see today?
4
Ten fastest growing countries*
• Countries with population above 10 millionSource: IMF WEO Oct 2012
Angola 11.3
China 10.5
Myanmar 10.3
Nigeria 8.9
Chad 8.6
Ethiopia 8.3
Kazakhstan 8.3
Mozambique 8.0
Cambodia 8.0
Rwanda 7.8
SSA countries show the highest growth
SSA countries show the highest growth
Iraq 11.0
Ghana 9.4
China 8.5
Mozambique 7.8
Guinea 7.6
Rwanda 7.6
Niger 7.4
Zambia 7.4
DR Congo 7.2
Cambodia 7.0
2001-2010 2011-2015 (f)
(Annual average GDP growth rate in %)
5
GDP growth of SSA countries
The trend is very supportive
The trend is very supportive
Source: IMF WEO Oct 2012
6
19801982
19841986
19881990
19921994
19961998
20002002
20042006
20082010
20122014
-2
-1
0
1
2
3
4
5
6
7
8
(Annual GDP growth rate in %)
Forecast
. South Africa companies remain largely dominant.. Oil and mining: 33.2% of sales.
Big industries are paving the way
Big industries are paving the way
Sales of SSA biggest companies (US$ bn)
. FTSE ASEA Pan Africa index increased by around 20% in 2012.
Source: The Africa Report - Top 500 African companies
7
2007 20110
100
200
300
400
500
600
South Africa SSA (excluding South Africa)
CAGR
7.3%
5.7%
. 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.
Technology (mobile) is breaking through
Technology (mobile) is breaking through
Mobile: the door to modernity
. Mobile phone is decreasing costs, improving efficiency.. Nigeria is distributing subsidized inputs to 1.5 million farmers through cell phones.
Source: MobileMarketingWatch
8
Entrepreneurs are building success stories
Entrepreneurs are building success stories
Mr. Dangote ranked 76th world richest*
*Source: Forbes
. Current activities: cement, sugar, flour, salt….. Company expected to be listed on the London Stock Exchange in 2013.
. February 2013: signature of a strategic agreement with General Electric to collaborate on power, transportation and oil & gas.
9
Entrepreneurs are dedicated to the continent
Entrepreneurs are dedicated to the continent
Mr. Mo Ibrahim created his Foundation
. Mr. Mo Ibrahim made a remarkable success in mobile telecommunications with Celtel which was sold in 2005.
. The Mo Ibrahim Foundation was created in 2006 to stimulate good governance and leadership in Africa.
10
The culture industry is not left over
The culture industry is not left over
The second largest film industry in the world
NOLLYWOOD: the star of Afrotainment
. 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
The middle class is driving growth
The middle class is driving growth
Middle class size in Africa (million)
. 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.
1990 2000 20100
50
100
150
200
250
300
350
157
204
326
Source: African Development Bank
12
+60%
The overall security has improved
The overall security has improved
Source: Uppsala University
1980-89 2000-09
Conflicts are regressing
. The number of deaths by violence has decreased due to the reduction of conflicts and their intensity following the democratization of the continent.
. Successful coups in Africa were down from 20 during 1980-89 to 7 during 2000-09.
13
Growth is not inclusive enough
Growth is not inclusive enough
Source: World Bank 2012
Extreme poverty headcount ratio (%)
. 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.
* International Labour Organization14
Sub-Saharan Africa
East Asia & the Pacific
Required Millenium Development Goal progress
Political and civil rights are not progressing
Political and civil rights are not progressing
Source: Freedom House
2012
2002
Classification of countries
. During the last ten years, political and civil freedom has not improved significantly.
17%
18%
47%
43%
36%
39%
Free Partly free Not free
. On the other side, many elections held in 2011 showed that peaceful political alternation is possible.
15
What are the drivers of change?
16
Macro policies have produced results
Macro policies have produced results
Source: IMF, World Bank data
1990 20110%
10%
20%
30%
40%
50%
60%
70%
Foreign exchange reserves / External debt External debt / GDP
Foreign exchange reserves / External debt
. 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
Foreign financing to SSA has surged
Foreign financing to SSA has surged
Source: IMF
. Foreign flows: x10 in 10 years.
. Remittances: over US$ 30 billion per year.
. Funds going to the private sector: average return on investment is the highest in the world.
Destination of funds: public vs private
18
Intra-African foreign direct investment is emerging
Intra-African foreign direct investment is emerging
. The share of intra-African investment has more than doubled in the last 8 years at the expense of developed markets.
. Leading investors come from South Africa, Nigeria and Kenya.
Number of projects
19
There is a dramatic shift in trading partners
There is a dramatic shift in trading partners
Destination of SSA exports
Excluding oil exporting countries Oil exporting countries
. 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.
Source: IMF
20
Investment in infrastructure has been crucial
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
Africa has a buried treasure
Africa has a buried treasure
A vast potential in underground resources
. Africa is not richly endowed with major minerals like copper, lead, zinc. . Africa’s mining sector accounts for just 10% of the world production.
. «African subsurface per ground km² is estimated at around $25,000 compared to $125,000 in developed countries»*, showing that Africa is underexplored.
* Collier and Venables, 2008
22
Gold 40%
Chromium&Platinum
80% to 90%
Oil 10%
Share of world reserves
Source: Mc Kinsey Global Institute, June 2010
Africa can help feed the world
Africa can help feed the world
SSA: 45% of the potential available land
. Productivity can be boosted: no country in Africa is now achieving more than 30% of the potential yield on currently cultivated areas (World Bank).
. Africa is ripe for a green revolution and the first stage of this revolution is the land rush we are witnessing now.
23
Global surface in millions of ha
438 326 89 456 736
Sub
Sa
hara
n A
fric
a
Latin
Am
eric
a
Men
a
Asi
a
Res
t of
the
wor
ld
2,047
Source: FAO, Fischer and Shah 2010
54%
46%
Potential arable landCultivated land
Labor productivity has been unleashed
Labor productivity has been unleashed
. For the first time since the eighties, productivity of labor increased, and at a higher pace than labor force.
. This gives scope for increased per capita revenues.
Evolution of productivity
1 Used working age population (15-64) as a proxy for labor forceSource: Conference Board World Economy Database; McKinsey Global Institute
24
Demography supports general productivity
Demography supports general productivity
Dependency ratio
. 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.
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
2060
2070
2080
2090
2100
30
40
50
60
70
80
90
100
Brazil
Western Europe
China
India
Sub-Saharan Africa
Source: United Nations
Non working population (<15;64<) for 100 people at working age (15-64)
25
Urbanization is stimulating growth
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
Efforts are made for better education
Efforts are made for better education
Source: United Nations, Renaissance
. SSA at the level of Mexico, Turkey in 1975.
. But there are still concerns about quality: facilities, teachers.
Secondary school gross enrolment rates
27
In Ghana, the mining company AngloGold Ashanti invested around US$ 7 million in a comprehensive program against malaria with the following results:
Better health fosters productivity
Better health fosters productivity
. 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.
. Experience shows that investment in water, sanitation and health yields between 4$ and 60$ per 1$ invested.
Fighting against malaria: a prominent example
28
Cases in AngloGold’s hospital (number per month)
2005
6,603
2009
1,146
Drug expenditures (US$ per month) 55,000 9,800
Work days lost (number per month) 6,983 282
Trade integration is slowly taking off
Trade integration is slowly taking off
Total bilateral African trade
. 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.
Source: Ernst & Young’s 2012 Africa attractiveness survey. Total respondents: 505
29
2002 2003 2004 2005 2006 2007 2008 2009 2010
Former Soviet StatesCentral AmericaEastern Europe
Latin AmericaWestern Europe
Middle EastNorth America
Asia
-50 -40 -30 -20 -10 0 10 20 30 40Respondents with no presence in Africa Respondents wth a presence in Africa
Perception is still a big obstacle
Perception is still a big obstacle
Perception of Africa relative to other regions
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.
Africa is less attractive than… Africa is more attractive than…
30
What to do next?
31
Millenium Development Goals
Public management
EmploymentSocial protection
Health care
Gender equalityJustice
Capital availibility
Education
Infrastructure
Corruption
Regional integration
Food
Fiscal policy
So many things to do! - The governance challenge
So many things to do! - The governance challenge
Competitiveness
Natural resources
Housing
Security
Entrepreneurship
HIV
32
SSA needs faster, more inclusive growth
SSA needs to implement countless projects to boost its
development
Foreign/local funds and partners are increasingly
available
Implement a new public management method
Implement a new public management method
SSA’s absorption capacity is far too low
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
Innovate in infrastructure finance
Innovate in infrastructure finance
. 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.
Pave
d-ro
ad d
ensi
ty
Tota
l roa
d de
nsit
y
Télé
com
mai
n-lin
e ...
Mob
ile d
ensi
ty
Inte
rnet
den
sity
Pow
er g
ener
ation
c...
Elec
tric
ity
cove
rage
Impr
oved
wat
er
Impr
oved
san
itati
on
0%
20%
40%
60%
80%
100%
Infrastructure density in SSA is weak
(as a percentage of the density of other low income countries)
34
Source: Economic Commission for Africa, African Union 2012
Care about cities, strengthen local governments
Care about cities, strengthen local governments
Source: United Nations data
Urban rural population are growing in SSA
20 0
6925
396
33 1
8043
366
55 6
4370
609
89 7
0911
1 73
713
9 41
417
1 14
120
6 32
224
8 40
729
8 40
235
7 52
042
6 52
250
5 55
059
5 54
469
7 09
081
0 15
293
4 34
21
068
752
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
—
500,000
1,000,000
1,500,000
2,000,000
Rural population Urban population
Thou
sand
s
Urban = 36% of to-tal
. Urban population growth: 3.7%.
. People need housing, water, power, food, jobs…
. Urban planning, land use regulation, property rights… are urgently needed.
35Revolutions come from cities
Africa is a continent,not a country
A Country Assessment Framework to measure diversity
36
Angola
Benin
Botswana
Burkina Faso
Burundi Cameroon
Cape Verde
Central African RepublicChad
Comoros
Côte d'Ivoire
DR Congo
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Ghana
GuineaGuinea-Bissau
Kenya
Lesotho
LiberiaMadagascar
MalawiMali Mozambique
Namibia
Niger
NigeriaCongo
Rwanda
São Tomé and PríncipeSenegal
Seychelles
South Africa
Swaziland
Tanzania
Gambia
Togo
Uganda
Zambia
Zimbabwe
30
35
40
45
50
55
60
65
70
75
80
-5.0 -2.5 0.0 2.5 5.0 7.5
The macro environment
The macro environment
1
2 3
4
Qua
lity
of e
cono
mic
and
soc
ial p
olic
ies
(Sou
rce:
201
2 M
o Ib
rahi
m in
dex
of A
fric
an g
over
nanc
e)
GDP growth (average 2011, 2012, 2013) minus current urban population increase(Source: World Bank data)
Level of growthInsufficient Sufficient
Le
ve
l o
f in
clu
sio
nL
ow
Hig
h
Average
37
Angola
Benin
Botswana
Burkina FasoBurundi
Cameroon
Central African RepublicChad
Côte d'Ivoire DR Congo
Ethiopia
Gabon
Ghana
GuineaGuinea-Bissau
Kenya
Lesotho
Liberia
Madagascar
Malawi MaliMozambique
Namibia
Niger
Nigeria
Congo
Rwanda
Senegal
Sierra Leone
South Africa
Swaziland
Tanzania
Gambia Togo
Uganda
Zambia
Zimbabwe
20
40
60
80
100
120
140
160
180
2001 10 100
The business environment
The business environment
1
2
Ease
of D
oing
Bus
ines
s (w
orld
rank
ing)
(Sou
rce:
Wor
ld B
ank,
201
2 fig
ures
)
Weight of natural resources in the GDP (Log)(Source: World Bank Data, 2010)
Resource curseLow risk High risk
Inc
en
tiv
e t
o
pri
va
te a
cti
vit
yL
ow
Hig
h
Bubble: size of GDP
Average
Ave
rag
e
38
3
4
%%%
« The risk of not going to Africa is to find that it is too late to get there ».
Lord Boateng, former British High Commissioner in South Africa and director of Aegis
Matthieu [email protected]
39
40
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41
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References