Stanlib Update
Alan BothaSenate Conference, November 2013
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Africa: An Investor Perspective
David MakoniSenate Conference, November 2013
Presentation Outline
➜ Introduction to STANLIB
➜ Presentation Disclaimer
➜ Africa in the Global Context
➜ Evolving Perceptions of Africa
➜ Reasons for Shifting Perceptions
➜ Thoughts on Successful Investing
➜ The Lingering Challenges
01Introduction to STANLIB
A Leading Africa-Focused Investment Business
Don’t choose a company focused on performance, choose a focused company that performs.
92Morningstar Awards
LARGEST MANAGEMENT Company in Africa(Manco)
Scale
R504bn ASSETS UNDER MANAGEMENT AND ADMINISTRATION
30 June 2013
80Investment professionals with over 1000 years of collective investment experience
Experienced Team
OLDEST EXISTING UNIT TRUST IN SOUTH AFRICA STANLIB EQUITY FUND
Experienced Team
7Local Presence in African Countries
In-country businesses
72Raging Bull Awards
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STANLIB’s Geographic Presence and Ambitions
First Asset Manager to manage money in South Sudan
South Sudan
STANLIB was the first asset manager to set up shop in 2002
Uganda
Running the largest Unit Trust in Kenya
Kenya
AUM of E4.0 billion and largest fund manager with local presence
Swaziland
STANLIB launched the first unit trust in Lesotho as part of the Lesotho Government’s privatisation initiative
Lesotho
Current physical presenceMarkets serviced from other jurisdictionsPotential presence
Tanzania
South Africa
Ghana
Nigeria
W
S
E
Launched the first Property Unit Trust in Namibia in 2007
Namibia
Currently has the biggest unit trust platform in the country and running the biggest Money Market Fund in Botswana
Botswana
Largest Management Company in Africa
E=East Africa; S=Southern Africa; W=West Africa
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The views expressed in this presentation are solely mine and do not in any way represent the official views of STANLIB.
DISCLAIMER
Africa in the Global Context
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Africa In The Global Context….
➜ 54 distinct countries
➜ Collective GDP of USD1.8 trillion in 2011
➜ Roughly equal to GDP of Brazil or Russia
➜ USD2.6 trillion in collective GDP by 2020
➜ USD860 billion combined consumer spending power in 2008
➜ USD1.4 trillion in consumer spending by 2020
➜ Accounts for 60% of world’s total uncultivated arable land;
➜ 10% of the world’s oil reserves and 90% of its chromium and platinum group metals
➜ 316 million mobile phone subscribers signed up in Africa between 2000 and 2010;
➜ Average government debt-GDP (%) for sub-Saharan Africa reduced to 31% in 2010
Africa’s Geographic Size
Map source: World WatchSource: McKinsey & Co
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Africa Suffers From Excessively Negative Global Perception…
➜ Under-reporting of Africa’s success stories by the global media (The ‘Bad News is Good News’ syndrome)
➜ Versus sustained promotion of other developing regions as only viable ‘can-do-no-wrong ‘ economic propositions (BRICS, South-East Asia, etc.)
➜ Endless projection of Africa as a ‘basket case’ by global aid agencies in order to justify the existence of the global ‘Aid Complex’
➜ Historical prejudices towards black Africans by other nationalities
➜ Lingering (and justifiable) memories of past policy mistakes and leadership short-comings on the continent
➜ With some exceptions, the overall trend is one of positive change and development
02Evolving Perceptions of Africa
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Previous Perceptions of ‘Hopelessness’…
…Have Shifted to Optimism and Opportunity…
Source: Various Publications20
21
Nestle Looks to Africa to Boost Growth
Global food producer Nestlé is hoping
emerging markets will contribute about 50% of
sales by 2020, with Africa's contribution
growing to more than 10%, CEO Paul Bulcke
said yesterday.Consumer goods companies are
increasingly seeking to tap into the growing
African market of 1billion people. (Financial Times)
Wal-Mart Completes Massmart Purchase
“Doug McMillon, the President and CEO of Wal-
Mart International Inc., said, ‘With the closing of
our investment in Massmart, we are very excited about our entry
into South Africa and the broader African
continent…’”(Wal-Mart Stores Inc.
website)
Korean Companies Invest in Africa
South Korean mining, electronics, power
generation and telecommunications
companies are looking to invest more in African
countries, as these markets expand at an
accelerated pace. In May 2012, Samsung said it aimed to realize US$5
billion dollars in revenue by 2015 from sub-
Saharan Africa. (Reuters)
“American Firms Waking Up to African
Opportunities”
“American companies are starting to wake up to huge investment opportunities in Africa”, chairman of US Export-Import Bank, Fred Hochberg, said in Johannesburg yesterday. The bank’s loans to Africa have more than doubled from $14 billion in 2009 to $33 billion in 2011. (Source: Yahoo! News)
Hence Major Global Firms Showing Growing Confidence…
June 2011June 2011 August 2012August 2012May 2012May 2012 August 2012August 2012
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Shoprite Takes On the DRC!
Africa’s largest supermarket group,
Shoprite, entered the Democratic Republic of
the Congo (DRC) with the opening of a
supermarket in the capital Kinshasa. The
South African company has been planning to enter the DRC since 2007, according to a report by Cedric Bra,
retailing analyst at Euromonitor.
Nakumatt Pushes Further into Africa
Kenya-based supermarket chain Nakumatt on
Saturday took another step towards its goal of becoming a Pan-African
retailer when it opened its first outlet in Tanzania.
The company now has a presence in four African countries, namely Kenya,
Uganda, Rwanda and Tanzania. An outlet in Burundi is also on the
cards.
Dangote Becomes Largest African Investor in S.
AfricaDangote Industries
Limited has formally increased its stake in
Sephaku Cement, which is based in South Africa,
from 19.76 % to 64%. The transaction, which
comprises a R779 million investment into Sephaku, is the largest ever foreign direct investment by an
African company into South Africa.
Tiger Brands Buys 63% stake in Nigerian Flour
MillsConsumer goods firm Tiger Brands said on
Tuesday Nigerian authorities had cleared its R1.5bn purchase of a
majority stake in Nigeria’s Dangote Flour Mills. The deal is Tiger Brands' third and the biggest yet in Nigeria.
25 August 201025 August 2010 31 July 201231 July 201212 December 201112 December 2011 25 September 201225 September 2012
…and Africans Showing More Confidence in Themselves!
Source: BloombergSource: Daily Nation (Kenya) Source: FinweekSource: Business Day
03Why the Changing Perceptions?
Why the Growing Interest in Africa?
➜ Positive macro-economic growth prospects
➜ Improving political dynamics
➜ Fewer bullets, more ballots!
➜ Rapidly reforming business environments
➜ Positive demographic shifts
➜ Large youthful population, growing urbanisation, Diaspora influence
➜ Growing economic engagement with BRICSA
➜ Has created new business allies for the continent with a different risk appetite
➜ Compelling Western investors to play ‘catch-up’ to counter growing BRICSA influence
➜ Shifting mainstream perceptions of Africa globally
➜ Growing appreciation of Africa as a viable business proposition24
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Most of the World’s Ten Fastest-Growing Economies are African…
Annual average GDP growth, %
2001 - 2010† 2001 - 2015‡
Angola 11.1 China 9.5
China 10.5 India 8.2
Myanmar 10.3 Ethiopia 8.1
Nigeria 8.9 Mozambique 7.7
Ethiopia 8.4 Tanzania 7.2
Kazakhstan 8.2 Vietnam 7.2
Chad 7.9 Congo Brazzaville 7.0
Mozambique 7.9 Ghana 7.0
Cambodia 7.7 Zambia 6.9
Rwanda 7.6 Nigeria 6.8
Sources: Economist Intelligence Unit, 2012; International Monetary Fund (IMF)
† 2010 estimate ‡ Forecast
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Increased Urbanisation and a Growing Consumer Class
Sub-Saharan Africa: Urbanisation Rate (%): 2000-2050 Segment Income Market Value (2000-15, USD Billion)
Source: Accenture, 2011
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African Countries Becoming More Business-Friendly than Before
Number of key Doing Business reforms making it easier to start a business (2006-2013)
Source: World Bank Doing Business Report, 2013
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Growing Democracy: Fewer Bullets, More Ballots
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
5
10
15
20
25
30
35
Number of Democratic Countries in SSA*
Source: Fund for Peace; *Number of countries holding elections
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Positive Economic Outlook
Africa will continue to be fastest growing region in the world, after Asia
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Sub-Saharan AfricaCentral & Eastern EuropeDeveloping AsiaLatin America & the CaribbeanMiddle East & North Africa
Real GDP Growth (%): Developing Regions
Source: IMF World Economic Outlook, April 2013
04Thoughts on Investing in Africa
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Some Observations on Successful Investing in Africa
➜ Identify the opportunities first, then look to mitigating the risks
➜ The ‘glass is half-full’ (vs. ‘half-empty’!) approach
➜ Requires a mindset shift
➜ Do your homework extensively
➜ Thorough local market research critical
➜ Generalised pre-suppositions/anecdotes won’t cut it
➜ Be willing to put your money where your mouth is (No risk capital, no return!)
➜ Take a ‘portfolio’ approach to investing
➜ A multi-country focus is much better than a single-country bias for risk mitigation
➜ Never compromise your ethics
➜ A long-term approach is critical
➜ ‘Over-night success’ stories are few and far between
05What are the Challenges?
The Lingering Challenges
➜ Slow pace of economic diversification and industrialisation
➜ High reliance on primary commodities – agriculture, oil, raw minerals
➜ Agricultural potential still largely untapped, financial markets very shallow, etc.
➜ Low levels of formal employment
➜ Human development indicators still lagging
➜ Per capita incomes, access to education, health, sanitation, technology utilisation, etc.
➜ Poor infrastructure
➜ Unreliable electric power supply, ports, road and rail links
➜ Weak institutional capacity
➜ Public policy planning and execution, judicial, regulatory, customs and border management
➜ Political and economic reforms still need to be accelerated and sustained33
34
Human Indicators Lag Other Regions, Overall
Number of people in extreme poverty by region and selected countries, base case and accelerated progress scenarios, 2010-2050 (millions)*
Source: UNDP Human Development Report, 2013 *As per Human Development Report Office calculations. ‘Extreme poverty’ is defined as $1.25 to survive on a day in purchasing power parity terms.
35
Human Development Index (HDI) and Components by Region and HDI Group (2012)
Source: UNDP Human Development Report, 2013 *As per Human Development Report Office calculations.
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Electric Power Supply and Access to Technology
Internet Penetration Still Among the Lowest, After South Asia
Electric Power Generation Lags Other Developing Regions
37
Road Infrastructure
Middle East & North Africa
South Asia World Average East Asia & Pacific
Latin America & Caribbean
Sub-Saharan Africa
0
10
20
30
40
50
60
70
80
90
Paved Roads as % of Total Road Network
20052011
%
38
In conclusion…
“A good investor invests where the Alpha is. A great investor invests where the Alpha is going
to be.” – Michael McMillan
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THANK YOU
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