BRICS: The Africa and China Perspective

Transcription

1 BRICS: The Africa and Perspective Africa Business Forum 211 Johannesburg, 2 October 211 Kobus van der Wath Founder and Group Managing Director, The This document is issued by The. While all reasonable care has been taken in the preparation of this document, no responsibility or liability is accepted for errors or omissions of fact or for any opinions expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only, and solely for private circulation. The information contained here has been compiled from sources believed to be reliable. While every effort has been made to ensure that the information is correct and that the views are accurate, The cannot be held responsible for any loss, irrespective of how it may arise. In addition, this document does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or to adopt any investment strategy, nor does it constitute any prediction of likely future movements or events in any form. Some investments discussed here may not be suitable for all investors. Past performance is not necessarily indicative of future performance; the value, price or income from investments may fall as well as rise. The, and/or a connected company may have a position in any of the investments mentioned in this document. All concerned are advised to form their own independent judgement with respect to any matter contained in this document. 1 Commodities Commodity Marketing Commodity Procurement Capital Transaction Origination Corporate Finance Advisory Procurement Comprehensive Procurement Solutions Strategy Strategy Formulation Strategy Implementation The backdrop The rise of global labour market and supply shock as producer engine as consumer New competitive lines and forces, winners/losers the rise of Asia, BRICS, etc The Knowledge & Network Synergies A two-speed global economy over the long term? A lasting new GDP trajectory in Africa governance, growth, stability, infrastructure, confidence, etc Founded in 22; has successfully worked with many international and Chinese MNCs Operates in four synergistic cross-border businesses Provides services across various sectors, with a core focus on the MINING, RESOURCES, INDUSTRIAL and ENGINEERING sectors Provides solutions to international firms as they act in unfamiliar territory in /Asia Provides solutions to Chinese firms as they venture out and go global The issues now Risks in the developed world US debt, Europe and knock-on effect s landing soft or hard? Implications for growth and resource demand? Tapping into the story vs over-reliance on and need to diversify economic ties Making decisions in boardrooms around the world that will position businesses for this new era 2 3 and the World Regional GDP Comparison (USD bn, 21) GDP Growth Rate (%, 21) 1 Other Asia 3,291 Japan is an exception in APAC in that it did not grow faster than the world s average 17,783 Size of the bubble: Nominal GDP (USD bn, 21) Asia-Pacific is the largest economy in the region Africa 3,36 World average 1,73 South America GDP growth for 21: % 21 GDP CAGR BRICS (USD bn) (2-21) North America 17,28 Developed economies, % have been losing their 1, % 19,36 share of the world s 1, % GDP in the last few Europe 2, % years % % of World GDP 4 Source: IMF; The Analysis

2 Asia-Pacific GDP Comparison (USD bn, 21) GDP Growth Rate (%, 21) Singapore SE Asian economies are collectively ranked third-largest in the Asia Pacific region is the largest economy in the region Size of the bubble: Nominal GDP (USD bn, 21) Household Consumption as Percentage of GDP vs. GDP per Capita for Various Countries GDP per capita (USD, 21), Japan US 4, Size of bubble represents the total number of employed people in ,38 1,878 Thailand 319 Malaysia World average Hong Kong GDP growth for 22 Korea 21: % 77 1,7 28 Other SEA Indonesia Indonesia, the largest economy in SE Asia, is almost the same,49 Japan size as Turkey (73.6 bn) 1, Australia New Zealand % of Asia-Pacific GDP % % 1% 1% 2% 3% 3% 4% Source: IMF; The Analysis 6 3, 2, Low consumption, low GDP per capita Indonesia High consumption, high GDP per capita Malaysia 1, Vietnam Philippines Thailand % 1% 3% 4% % 6% 7% 8% 9% Household Consumption -1, Expenditure as Percentage of GDP (%, 21) Source: ILO; IMF; The Analysis 7 Top Economies GDP, excl. US (USD bn, F) Rank ? Rank ? GDP Comparison of BRICS with Top 3 Economies (USD bn, 21) GDP Per Capital (USD, 21) Size of the bubble: GDP (USD bn, 21) Rank 21 21F 2: 12, : Japan 3 3 Korea Italy Germany : 1, France 6 2: Q2 21: UK Surpassed 6 7 Canada France 7 8, Japan : 26: 11 8 Indonesia 6, UK : to surpass UK 4, 27: and France Germany 2, F 12F 13F 14F 1F Note: Forecast GDP growth based on IMF Economic Outlook Source: IMF; The Analysis 8 9, 8, 7, 6,, 4, 3, 2, 1, -1, US Japan 14,82 48, , , ,1 3,31 2,246 Germany UK 1,47 Italy Spain France 1,4 Mexico Norway Switzerland 92 Australia Korea 1, , , GDP CAGR BRICS (USD bn) (2-21), % 1, % 1, % 2, % % % 1% 3% 4% % 6% 7% 8% 9% 1% 11% Source: IMF; World Bank; The Analysis ranked 28 th across the globe in terms of GDP size 1,729 Several African Economies CAGR of GDP, 2-21 Indonesia,879 9 BRICS Trade and Share of Global Trade (USD bn, 21-21) 2, 2, 1, 11% 13% Export 1% 11% 1, 9% Import 1% 8% 9% 7% 8% 7% 1 1% 13% 1% Effect of global financial crisis 18% BRICS FDI Outward Flow and Share of Global FDI (USD bn, ) Share of World (rhs) 1 1% 8% 6% 4% % BRICS FDI Inward Flow and Share of Global FDI (USD bn, ) Share of World (rhs) 18% 1 1% 8% 6% 4% % Source: UN Comtrade; The Analysis 1 Source: UNCTAD; The Analysis 11

3 BRICS % of World Population (21) mn mn 1.21 bn 1.34 bn.9 mn 42.11% and the World GDP (USD, 21) 2,87.9 bn 1,479.8 bn 1,729 bn,876.6 bn bn 18.3% Total Imports (USD, 21) 18. bn bn bn 1,396. bn 8.1 bn 1.9% Total Exports (USD, 21) bn 4.1 bn 22.4 bn 1,77.8 bn 71. bn 17.9% Source: Various; The Analysis Africa GDP Comparison in Selected Countries (USD bn, 21) GDP Growth Rate (%, 2-21) 3% 2% 1% 1% % % Sudan Zambia 6 16 Nigeria 32 Ghana 3 23 Ethiopia Morocco Kenya Zimbabwe Egypt Angola 82 Algeria Tunisia Oil rich countries have grown at a high rate owing to increasing oil demand globally 364 SA s GDP growth was down by during 8-9, but rebounded to its pre-crisis level in 21 accounts for almost 3% of the entire GDP of Africa Size of the bubble: GDP (USD bn, 21) 2, 4, 6, 8, 1, 12, 14, Libya 71 World average GDP growth for 21: % s Imports by Partner Country (USD bn, 21-21) Effect of global 1 financial crisis Africa BRIC exclude Others Breakdown of s Imports by Commodity (21) Mineral fuels, oils, distillation products, etc 3% 3% 3% 7% 18% 1% 1 2 Total: USD 8.1 bn Demand for capital goods has remained strong on the back of government infrastructure spending, driving demand for machinery Nuclear reactors, boilers, machinery, etc Electrical, electronic equipment Vehicles other than railway, tramway Works of art, collectors pieces and antiques Optical, photo, technical, medical, etc apparatus Plastics and articles thereof Pharmaceutical products Organic chemicals Miscellaneous chemical products Rubber and articles thereof Others GDP per Capita (USD, 21) Source: UNCTAD; The Analysis 14 Source: UN Comtrade; The Analysis 1 s Exports by Partner Country (USD bn, 21-21) Africa The EU accounts for the greatest share of s exports (24.%), although the share has been decreasing due to increased trade shares with other countries such as and the US BRIC exclude Effect of global financial crisis 71. Breakdown of s Exports by Commodity (21) 13% 1% 4% 23% Pearls, precious stones, metals, coin Ores, slag and ash Iron and steel 6 4 Others Mineral fuels, oils, distillation products Vehicles other than railway, tramway Precious stones and metals is s largest export category Nuclear reactors, boilers, machinery, etc Edible fruit, nuts, peel of citrus fruit, melons Total: USD 71. bn Source: UN Comtrade; The Analysis 16 Note: The red dots represent Chinese mining investment locations Source: UN Comtrade database; The Analysis 17

4 Note: The red dots represent Chinese mining investment locations Source: UN Comtrade database; The Analysis 18 Note: The red dots represent Chinese mining investment locations Source: UN Comtrade database; The Analysis 19 and the World 2 21 GDP Growth Rate for and Selected African Countries (%, 21-29) 1 Ghana Kenya Nigeria Tanzania Zambia Uganda Source of capital: strategic equity partner or divest non-core asset User of capital: ECM and DCM Infrastructure investment Capital Market Voracious consumer of metals leads to off-take and financing opportunities Long term driver of demand but no one-way bets 1 Comprehensive package across project development cycle Need to strategically manage the engagement as a continent Sourcing s need for international investment, technology, and knowhow a large importer of various products / services as a low-cost manufacturer Significant cost savings can be achieved by sourcing from - Must be considered as a capital project / MRO supply chain partner Source: World Bank; Customs Data; The Analysis 22 23

5 African countries look to for an alternative to the multi-tiered conditions that accompany aid and loans from the World Bank and the IMF Most African countries lack linkages between Chinese and local enterprises and efforts to promote regional integration have been limited so far A definite gain is infrastructure improvements that increases the ability of African countries to participate in a competitive global economy Chinese economic activity in Africa extends into public infrastructure, such as the building of hospitals, schools and affordable housing, which greatly benefit the general populace Chinese construction activities in Africa create a source of employment for the local population Chinese construction projects in Africa still import about half of their workforce from. This inflow of Chinese labour into Africa has led to tensions with local communities, especially since the Chinese personnel generally do not attempt to assimilate Although cheaper Chinese manufactured goods benefit the African consumer, it threatens local business; the fear is that in the long-run this will harm local manufacturing capabilities and competitiveness Cheaper Chinese manufactured goods and services are more readily affordable to impoverished African consumers and provide them with access to new products Academic and athletic exchanges are also on the rise. In recent years, has sent about 12 coaches to 4 African countries to help them develop capabilities in certain sports such as table tennis There is great potential to reduce procurement costs when sourcing from, although this needs careful management Chinese labour practices in Africa are controversial. Chinese enterprises in Africa regularly pay relatively lower wages, offer poor working conditions and are against unionisation. This has led to protests and work stoppages at Chinese construction sites in Africa 's booming resource demand could decrease the incentive for African countries to diversify their economies and lessen their dependency on commodities, contributing to African countries susceptibility to swings in global prices 24 2 Strategic Levers Tap into / Asia opportunity / BRICS / Africa Hedge against global (developing country) risks Aware EXPORT DEVELOPMENT STRATEGIC COMPREHENSIVE SOURCING ENGAGEMENT Strategy and Implementation Sphere SHARING MARKETS (i.e. Africa) Supply raw materials, manufactures/services Understand variability, volatility & exceptions Strategic marketing Own end-user relationships Attract strategic capital Equity, debt, off-take, infrastructure Equity level / disposals Project level Procurement and supply chain a MUST Products & services CAPEX / projects MRO Action Develop strategic intelligence Be completely comfortable in the new world: BRICS/Asia/New Winners informed, strategic, systematic n n Generic Strategy Imperatives Advantages to Leverage Disadvantages to Counter Sectoral Advantages Cultural Astuteness Historical / Political legacy Managerial Skills Focused Niche Technologies Operational Tenacity Research - Based Flexible Implementable Learning Systems Right Partnerships Right People Low Start - Out Knowledge Limited Budgets Limited Scale and Scope No Patience / Commitment to i.e. No Integrated Approach Get Get the the Basics Right during Initial Engagement and and Entry Market Intelligence Relationships Due Diligence Structuring Appreciate and Leverage Appreciate the BRIC/Asia/New and Leverage the Winner - Africa Strategic Plane Understand Understand the BRIC/Asia/New the Chinese Winner System Systems History Culture Politics & Power Economic System A fragile global context in developed world and the World Asia is the foremost developing region in the world, led by,, Indonesia and Indo-. BRIC and other new winners on the rise a long term phenomenon, with many side-effects Asia/BRIC and other new winners require large inflows of natural resources, manufactures, technology, best practice and services from abroad for its drive toward modernisation - sustainable demand, as well as some volatility Understand the drivers of 1) broad trends and 2) the exceptions get close, be informed and strategic As global producers exposures to Asia rise, strategic marketing becomes more necessary cast truly close relationships with top-tier end-users in Asia Appreciate the outward-looking stance of, and other Asian players new global leaders are emerging in Asia and they will act in Africa presenting both an opportunity and threat Adapt view: /Asia/BRIC/New winners > Africa matters more and more. This has wide-ranging influence: significant off-take potential in resources industry; a viable source of capital; strong in equipment/plant supply; has strong EPC capacity; advanced technology; African infrastructure, etc 28 29

6 THANK YOU Kobus van der Wath Founder and Group Managing Director, The Beijing, Shanghai, Hong Kong Singapore Perth, Australia Cheryl Tang, GM, Julia Wang TBA Secretary Corporate Office Kobus van der Wath, Founder Doug Horak Procurement Specialist 386 Central Plaza, 18 Harbour Penthouse & LV 42, Business Development juliawang@thebeijingaxis.com Rd, Wanchai, HK Suntec Tower 3, 8 Temasek Manager ext Blvd, Singapore doughorak@thebeijingaxis.com Johannesburg, London, UK/Europe Dirk Kotze Matt Pieterse Director; GM, Africa MD, Capital dirk@thebeijingaxis.com matt@thebeijingaxis.com +27 () Desk Lilian Luca (Beijing) MD, Procurement luca@thebeijingaxis.com Latin America Desk Javier Cuñat (in Beijing) GM, Strategy javiercunat@thebeijingaxis.com 3