Towards a new african economy - An analysis by I&P / Investisseurs & Partenaires

TOWARDS A NEW AFRICAN ECONOMY November 2012

SUMMARY

Part 1

Sustained economic growth in Sub-Saharan Africa (SSA)

Part 2

… Remains to sustain

Part 3

But economic growth which seduces and promotes the development of Capital Investment

Part 4

And that stimulates the development of African business

2 NOVEMBER 2012 - TOWARDS A NEW AFRICAN ECONOMIC

1 SUSTAINED ECONOMIC GROWTH IN SUB-Saharan

AFRICA (SSA)


SUSTAINABLE ECONOMIC GROWTH

• African growth is characterized by good macroeconomic indicators o Inflation decreasing: 15% in 2000 to 8.1% in 2011

o Mastery of foreign debt from 63% of GDP in 2000 to 22.2% in 2012

• And is based on several structural phenomena, demographic and geographic 1. export growth

2. improved terms of trade,

3. strong domestic demand

o final consumption up

o growth of public and private investment

5. significant population growth and increasing urbanization

6. transfers significant and steady migrants

The real GDP of Sub-Saharan Africa (SSA) has increased on average by 3.4% per year between 1990 and 2010, from 273 to USD 573 billion.

NOVEMBER 2012 - TOWARDS A NEW AFRICAN ECONOMIC 4

1. EXPORT GROWTH

+ 117% between 2000 and 2010.

They represent 33% of GDP in 2011, against 26% in 1990.

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

50

100

150

200

250

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Ind

ice

Bas

e 1

00

en

20

00

Sources : World Bank Indicators, CNUCED

Exportations de biens et services (% du PIB)

Indice du volume des exportations(2000=100)


2. THE IMPROVEMENT IN THE TERMS OF TRADE

+ 60% between 2000 and 2010

80

90

100

110

120

130

140

150

160

170

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Ind

ice

bas

e 1

00

en

20

00

Source : CNUCED 2011

Improvement in the terms of trade in SSA


… SOURCE INPUT LARGEST CURRENCY

Between 2004 and 2012, foreign exchange reserves in Sub-Saharan Africa

increased by 60%.

0

2

4

6

8

2004 2005 2006 2007 2008 2009 2010 2011 2012

Mo

nth

s o

f im

po

rts

of

goo

ds

and

se

rvic

es

Source : World Economic outlook avril 2012 (IMF)

Foreign exchange reserves of Sub-Saharan countries


3. INCREASE THE FINAL HOUSEHOLD CONSUMPTION

+ 4,4% per year between 2000 and 2010

0

50

100

150

200

250

300

350

400

450

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

En m

illia

rds

USD

co

nst

ants

Source : Africa Development Indicators, 2011

Final consumption expenditure in Sub-Saharan Africa


… PUBLIC AND PRIVATE INVESTMENT AND STRENGTHEN THE DOMESTIC DEMAND.

+ 109% in 10 years

10%

11%

11%

12%

12%

13%

13%

14%

14%

15%

15%

0

20

40

60

80

100

120

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

En M

illia

rds

USD

co

nst

ants

Source : World Bank Indicators, 2012

FBCF du secteur public et privé

FBCF du secteur privé, en % du PIB

Public and private investment


4. TRANSFERS OF MIGRANTS

Important source of income for local households, they amounted to USD 21.6 billion

in 2010, nearly half of public development assistance flows.

0%

1%

1%

2%

2%

3%

3%

0

5

10

15

20

25

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Mill

iard

s U

SD

Source : UNCTAD 2011

Remittances from migrants in the direction of Sub-Saharan countries

En USD courants

En % du PIB


MAJOR POPULATION GROWTH, ESPECIALLY IN THE CITY, WHICH RESULTS IN AN INCREASE IN BUSINESS

71% over the past 20 years Urbanization: 36% in 2011 against 28% in 1990

69,4%

69,6%

69,8%

70,0%

70,2%

70,4%

70,6%

70,8%

0

100

200

300

400

500

600

700

800

900

1000

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Mill

ion

s

Source : World Bank Indicators

Population totale

Population urbaine

Taux d'activité


2 GROWTH TO SUSTAIN


GROWTH IN SUB-SAHARAN AFRICA REMAINS HETEROGENEOUS, FRAGILE AND INSUFFICIENT

• Heterogeneous growth: 48 sub-Saharan African countries do not face the same problems of development o The difference in GDP between middle-income countries and fragile states has doubled in 20 years

• A fragile growth: balance of commodity exports weakens undiversified by exposing them to the volatility of world economies o Outside of South Africa, Sub-Saharan Africa achieve at least 75% of their exports with only 8 products

o In six of them, one type of export accounts for 85% of total exports

• Insufficient growth: the development gap with other regions of the world remain significant o In 2011, the African HDI remains below 52% in the North American HDI, against 56% in 1980


1. GROWTH UNEVENLY DISTRIBUTED

The International Monetary Fund distinguishes 4 groups of countries:

• Oil countries: Angola, Cameroon, Chad, Congo, Equatorial Guinea, Gabon, Nigeria

• Middle income countries: Botswana, Cape Verde, Ghana, Lesotho, Mauritius, Namibia, Senegal, Seychelles, South Africa, Swaziland, Zambia

• Low-income countries: Benin, Burkina Faso, Ethiopia, Gambia, Kenya, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, Sierra Leone, Tanzania, Uganda

• Fragile States: Burundi, Central African Republic, Comoros, Democratic Republic of Congo, Côte d'Ivoire, Eritrea, Guinea, Guinea-Bissau, Liberia, Togo, Zimbabwe


TESTIFY IN THE GAPS BETWEEN GROWTH RATE OF THESE GROUPS OF COUNTRIES…

15

> 10 percentage points as between 2000 and 2005

-10,0

-5,0

0,0

5,0

10,0

15,0

20,0


Rate of GDP growth in SSA

Pays pétroliers

Pays à revenu intermédiaire

Pays à faible revenu

Etats Fragiles

Afrique subsaharienne

NOVEMBER 2012 - TOWARDS A NEW AFRICAN ECONOMIC

…AND GDP GROWTH FOR 20 YEARS.

16

From 1990 to 2010, the GDP gap between middle-income countries and fragile states has nearly doubled, reaching USD 201 billion in 2010 against 104 in 1990.

0

50

100

150

200

250

Mill

iard

s


Real GDP (2000) in SSA

Pays pétroliers

Pays à revenu intermédiaire

Pays à faible revenu

Etats Fragiles


2. A FRAGILE GROWTH…

• Exports from Sub-Saharan Africa are largely composed of unprocessed raw materials. This strategy has important disadvantages o Dutch disease: over-appreciation of the exchange rate which hampers the export manufacturing sectors

o Grabbing investment and neglect other productive sectors (more)

o Exposure to the downturn in international prices

o Weak effects of trainings

o Kleptocracy - civil wars

• In addition, sub-Saharan Africa is experiencing a very important infrastructure needs. o In particular, it needs to increase its 7000 MWatt annual capacity of electricity generation

o The World Bank estimates the necessary investment to $ 93 billion per year, 40% for energy


... BASED PRIMARILY ON EXPORTS OF RAW MATERIALS

18

0

10

20

30

40

50

60

70

80

90

0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

80,00%

90,00%

100,00%

Tan

zan

ia

Mad

agas

car

Djib

ou

ti

Nam

ibia

Zim

bab

we

Som

alie

Co

ngo

, De

m. R

ep

.

Mal

awi

Mo

zam

biq

ue

Gam

bia

, Th

e

Cam

ero

on

Togo

Seyc

hel

les

Leso

tho

Bu

run

di

Rw

and

a

Mal

i

Sao

To

mé

et

Pri

nci

pe

Co

te d

'Ivo

ire

Cap

e V

erd

e

Gh

ana

Mau

rita

nie

Co

ngo

, Re

p.

Ch

ad

No

mb

re d

e p

rod

uits re

pré

sen

tant 7

5%

de

s exp

ortatio

ns

In t

he

sh

are

of

exp

ort

s

Source : Africa Development Indicators – Factoid 2011

Diversification of exports from SSA countries in 2009

Part du top 3 des produits exportés dans lesexportations totales

Nombre de produits représentant plus de75% des exportations

For 3/4 of SSA countries, the first three products exported are raw materials, averaging 2/3 of exports.


3. GROWTH UNEVENLY DISTRIBUTED THAT DOES NOT ALWAYS SUPPORTS DEVELOPMENT

• Sub-Saharan Africa has the rate of extreme poverty the most important in the world despite a decrease of 10 points in 20 years o Between 1990 and 2000, the share of population living on less than $ 1.25 / day increased from 56.5% to

47.5%

o However, population growth is the absolute number of poor has increased by 33% over the same period

• For growth generates human development, economic growth must be inclusive and redistributive. Countries as Equatorial Guinea illustrate that this is not always the case. Between 1990 and 2010: o per capita income has increased by 16

o while it remains the 13th country in life expectancy the lowest in the world (51)


WHICH RESULTED IN SIGNIFICANT INEQUALITIES

20

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%60,8%

20,9%

8,7% 4,7% 4,8%

36,5%

24,0%

9,9% 10,8% 18,8%

Source : AfDB Market Brief (2011)

Population and income distribution by classes in Africa

Population Revenu

In 2010, six of the most unequal countries in the world were in SSA, especially in southern Africa.

After Latin America, this is the second part of the world with the greatest inequality.


AND DOES NOT ALLOW THE SSA TO REDUCE THE GAP WITH THE BRICS AND OECD COUNTRIES

The gap in life expectancy has increased over the past 40 years,

from 14.6 years in 1970 to 19 in 2011.

0

5

10

15

20

25

30

1970 1980 1985 1990 1995 2000 2000 2005 2006 2007 2008 2009 2010 2011

Nu

mb

er

of

year

s

Source : UNDAES 2011

Difference in life expectancy

Différence AfSS - OCDE

Différence AfSS - Brésil

Différence AfSS - Chine

Différence AfSS - Inde


GROWTH STILL NOT ENOUGH

Life expectancy in SSA increased by 10 years since 1970 to $ 54 in 2011. However, this figure remains low compared to the performance of other regions.

40

45

50

55

60

65

70

75

80

85

1970 1980 1985 1990 1995 2000 2000 2005 2006 2007 2008 2009 2010 2011

Nu

mb

er

of

year

Source : UNDAES 2011

Life expectancy at birth

Brésil

Chine

Inde

AfSS

OCDE


…EFFECTIVELY FIGHT TO THE POVERTY REDUCTION

The development gap between SSA and other regions of the world just to subside despite an increase of 25% of the African HDI over the past 30 years.

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

1980 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011

Source : PNUD 2012

Human Development Index

Asie

Amérique du Nord

Afrique subsaharienne


FINALLY, THE AFRICAN GROWTH MUST BE INCLUSIVE

• Africa has the youngest population in the world and it is growing rapidly o 200 million inhabitants aged 15-24 years in 2011

o 10 million new entrants to the job market each year

o nearly a billion of jobseekers in 2040

• Mass unemployment coupled with a highly urban population may have serious consequences in political and social terms

• A generator inclusive job growth, requires the development of the private sector which is responsible for 90% of employment in developing countries


FOCUS AREAS OF INTERVENTION I&P

Categories Countries of operation in 2012

Petroleum Exporting Countries Cameroon

Middle-income countries

Ghana

Maurice

Namibia

Senegal

Low-income countries

Benin

Burkina Faso

Madagascar

Mali

Niger

Uganda

Fragile countries

Comoros

Congo, Democratic Republic of Congo

Ivoiry Coast

Mauritania

Togo


GROWTH RATE LOWER BUT ALSO VOLATILE THAN THE REST OF THE SUB-SAHARAN AFRICA

-1%

0%

1%

2%

3%

4%

5%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source : World Bank Indicators, 2012.

GDP Growth rate per Capita

I&P

AfSS hors I&P

Approx. 2.3% growth in 2010


STANDARD OF LIVING PER CAPITA ALMOST IDENTICAL

0

100

200

300

400

500

600

700

800

900

1000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

En U

SD c

on

stan

ts


GDP per Capita

I&P

AfSS hors I&P

< $ 900 per capita


3 AN ECONOMIC GROWTH WHICH SEDUCES AND PROMOTES THE DEVELOPEMENT OF CAPITAL

INVESTMENT


3 MAJOR EVENTS ARE TO NOTE

1. The sector increased significantly and knows good prospects

2. The distribution of capital investment improves and targets change

3. Increased Foreign Direct Investment


1. CAPITAL INVESTMENT PROGRESS IN AFRICA

• Over the period 2008-2011, SSA has received an average 4.4% of the funds raised for all emerging countries, representing 3.1% of the investment (the major remaining area of Asia)

• With over less than 100 million and less than greater than $ 1 billion fund money for the rest of the emerging markets

• Relative to GDP, the activity of capital investment in SSA was comparable to that of BRIC in 2008 and 2009 (0.29% and 0.15% of GDP)


THE ECONOMIC CRISIS HAS SLOWED THE FLOW, WITHOUT STOPPING

31

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

En m

illio

ns

de

do

llars

EU

Fundraising and investment in private equity in Sub-Saharan Africa

Levée de fonds Investissements

1.3 billion of funds raised to $ 1 billion invested in private equity in 2011


THE SECTOR KNOWS GOOD PROSPECTS

• 67 % of limited partners interviewed believe attractive Africa in 2011

• 50% plan to make investments in sub-Saharan Africa by 2013

• A growing number of very large businesses include the African continent among their top strategic targets


2. THE DISTRIBUTION OF CAPITAL INVESTMENT GROWS ON THE CONTINENT

• The activity is concentrated in a handful of markets: South Africa, Kenya, Nigeria ...

• But diversification is at work: the three countries in 2010 had fallen to "only" 56% of the total number of investments (against 74% and 73% in 2008 and 2009)

• Among the new countries attraction: Benin, Congo, Ghana, Liberia, Madagascar, Tanzania ...


CHANGE TARGETS

The banking and the infrastructure sector hold a prominent place in the space of capital investment.

In 2010, however, more than half of the operations were carried out in areas such as health and food media and telecommunications 27%

18%

13%

10%

9%

9%

5%

9%

Sectoral distribution of investments in Sub-Saharan Africa (2009 - 2010)

Infrastructure

Banking & FinancialServices

Industrials &Manufacturing

Services

Energy & NaturalResources

Media & Telecom

Agribusiness

Other


3. SIGNIFICANT DEVELOPMENT FOREIGN DIRECT INVESTMENT

X 5 to sub-Saharan Africa since 2000 3 USD 000 billion is invested in the space of 10 years.

0

1

2

3

4

5

6

0

10

20

30

40

50

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Mill

iard

s

Source : UNCTAD 2011

Inward flow foreign direct investment in Sub-Saharan Africa

En dollars EU courants, taux de changecourants

% de PIB


EN TÉMOIGNE LE NIVEAU DES INVESTISSEMENTS PRIVÉS DANS LES TÉLÉCOMS

X 4 between 2000 to 2009, reaching $ 12 billion in 2009.

0

2

4

6

8

10

12

14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

En m

illia

rds

USD

co

ura

nts


Investment in telecoms with private participation in Sub-Saharan Africa


4 GROWTH WHICH PROMOTES THE DEVELOPMENT

OF AFRICAN BUSINESSES


SMES HOLD VITAL ROLE IN ECONOMIC DEVELOPMENT IN SUB-SAHARAN AFRICA

SMEs now have a flexible multiple barriers to their creation and growth, by improving the legal and administrative context:

1. Reducing the time of registration of property rights

2. Reducing the delays in obtaining operating licenses

3. Reducing the costs associated with starting a business in Sub-Saharan Africa

38

SMEs contribute to 30% of GDP and 17% of jobs created.


1. REDUCED REGISTRATION DEADLINES PROPERTY RIGHTS

39

40

50

60

70

80

90

100

110

120

2004 2005 2006 2007 2008 2009 2010

Nu

mb

er

of

day

s –

Sub

-Sah

aran

Afr

ica

Source : Doing Business 2011

- 60 days between 2004 to 2010


2. TIME LIMIT FOR OBTAINING A LICENSE

40

200

205

210

215

220

225

230

235

2005 2006 2007 2008 2009 2010

Nu

mb

er

of

day

s –

Sub

-Sah

aran

Afr

ica


- 44% between 2004 to 2010, 53 days or less


3. COST OF PROCEDURES FOR THE ESTABLISHMENT OF A COMPANY

41

0%

50%

100%

150%

200%

250%

300%

350%

2003 2004 2005 2006 2007 2008 2009 2010 2011

As

a %

of

GN

I - S

ub

-Sah

aran

Afr

ica


- 70% between 2003 to 2011


The phenomenon of the "missing middle" is partly explained by the lack of access to finance for small enterprises.

However we see in developing economies a significant lack of formal SMEs: THE MISSING MIDDLE

Source : http://www.hks.harvard.edu/centers/cid/programs/entrepreneurial-finance-lab-research-initiative/the-missing-middle

Nu

mb

er

of

firm

s

Micro

High-Income Countries

SMEs Large

Nu

mb

er

of

firm

s

Micro

Low-Income Countries

SMEs Large


http://www.hks.harvard.edu/centers/cid/programs/entrepreneurial-finance-lab-research-initiative/the-missing-middle













THE « MISSING MIDDLE »

Micro-Enterprises

(Invest.: 100€ to 50K€)

Mesofinance

Middle Size Companies

(Invest.: 150K€ to 1000K€)

LARGE COMPANIES

(Invest.: >1M€)

Local Banks,

international investors

MICROFINANCE

INSTITUTIONS

> Gap

funding

Today it is difficult to invest in these SMEs because: •The lack of reliable accounting •A lack of management culture •The high cost of monitoring and evaluation in comparison with the amounts invested


Investisseurs & Partenaires (I&P) intends to meet the

financing needs and support these businesses and thus

contribute to the growth and development of the African

continent.


Towards a new african economy - An analysis by I&P / Investisseurs & Partenaires

Economy & Finance

pays revenu

pays faible

foreign exchange

world bank

growth unevenly

raw materials

pays ptroliers

good prospects