Making choices. EY s attractiveness survey Africa 2015

Transcription

1 Making choices EY s attractiveness survey Africa 2015

2 Africa attractiveness surveys Background Fifth annual Africa attractiveness survey Analysis of greenfield and brownfield foreign direct investment (FDI) project flows into Africa for various periods, going back as far as 2003 Survey of over 500 business leaders and investors from 30 countries to ascertain the perceived attractiveness of Africa as an investment destination Using these qualitative and quantitative inputs, we continue to develop insights and shape viewpoints in support of increased investment into Africa Page 2

3 Africa attractiveness surveys It s time for Africa Building bridges Getting down to business Executing growth Making choices Page 3

4 2014: The headlines Perspective remains important Glass half full: Africa rising narrative remains resilient Glass half empty: economic and political headwinds Africa received the second most FDI capital in the world, registering year-onyear growth of 136% SSA will be the second-fastest-growing region in the world this year, with 22 economies growing at 5%+ Successful Nigerian elections an important symbol of the ongoing process of democratization in Africa Established investors remain overwhelmingly positive about the continent s prospects The World Bank and International Monetary Fund revised revised their 2015 GDP growth forecasts down to its lowest since 2009 Ebola and terrorist insurgencies have had a negative impact on perceptions Deteriorating perceptions of Africa s investment attractiveness 8.4% year-on-year (YOY) decline in FDI projects in 2014 Page 4

5 Africa s FDI landscape Page 5

6 Actual FDI numbers FDI project numbers fall, but capital investment and jobs surge FDI projects by world region (% change, 2014 vs. 2013) Asia-Pacific North America Africa -8.4% 17.3% 14.0% Capital investment 136% YOY growth in FDI value in 2014 Western Europe Latin America and the Caribbean Middle East Rest of Europe -14.8% -17.5% -17.7% -21.3% FDI job creation 68% YOY growth in FDI jobs in 2014 Source: fdi Markets, February Africa became the world s second-largest destination for FDI capital inflows in Page 6

7 Re-emergence of North Africa Value of FDI projects into North Africa grows dramatically North Africa sees FDI value grow, while share in job creation also increases FDI projects ( , %) FDI amount ( , %) 76.9% 83.1% 77.5% 83.5% 76.4% 70.5% 80.9% 61.2% 59.6% 59.9% 67.9% Sub-Saharan Africa (SSA) 57.3% 65.7% SSA 51.1% 38.8% 40.4% 40.1% 32.1% North Africa 23.1% 16.9% 22.5% 16.5% 42.7% 34.3% North Africa 23.6% 29.5% 19.1% 48.9% Source: fdi Markets, February Page 7

8 SSA: more capital, more jobs, fewer projects Southern, East and West Africa see slower FDI projects +42.7% increase in FDI capital +22.7% increase in job creation West Africa FDI projects down 23% Sub-Saharan Africa (SSA) East Africa FDI projects down 12% Some economies South Africa, Angola, Nigeria, Ghana and Kenya received fewer FDI projects. 15% y-o-y drop in FDI projects Southern Africa FDI projects 11% down But Ethiopia and Mozambique attracted growing inflows of projects. Source: fdi Markets, February Page 8

9 South Africa remains top destination country Top 10 countries by share of FDI projects in 2014 South Africa Egypt Morocco 9.7% 9.1% 16.5% Over the past five years, SA has attracted twice as many FDI projects as any other African country. Kenya Mozambique Nigeria 8.5% 6.8% 6.7% SA is also ranked by far the most attractive investment destination in Africa due to: Ghana Ethiopia Uganda 5.3% 4.4% 3.1% 1. Diverse economy 2. Solid infrastructure 3. Stable political environment Tanzania 2.7% Source: fdi Markets, February Page 9

10 Diverse sources ensure ongoing resilience North America and Middle East expand presence Western Europe maintains leading position, investments from North America and the Middle East on the rise FDI projects by source regions (in %) 39.0% 36.8% Western Europe 24.6% 17.5% 14.7% 8.8% 9.1% 7.9% Source: fdi Markets, February % 15.7% Africa Asia-Pacific North America Middle East Rest of Europe Latin America and the Caribbean In 2014, at the source country level, the US regained its title as the largest investor. France, the United Arab Emirates and China also were particularly active during the year. Page 10

11 RHC emerges as key growth sector Now fourth-most-attractive sector in Africa Top 10 sectors by FDI projects (2014) Top sectors FDI projects (share in %) Jobs created (share in %) Technology, media and telecommunications (TMT) 19.6% 6.4% 5.5% Financial services 18.1% 2.0% 1.2% Retail and consumer products (RCP) 14.1% 31.5% 4.4% FDI capital (share in %) Real estate, hospitality and construction (RHC) 8.0% 33.6% 43.8% Business services 7.5% 1.6% 0.5% Transport and logistics 6.3% 3.1% 2.2% Diversified industrial products (DIP) 5.3% 1.5% 0.3% Automotive 4.1% 5.7% 0.9% Coal, oil and natural gas 3.5% 3.7% 25.4% Chemicals 3.3% 2.4% 5.2% Top two sectors by % share Source: fdi Markets, February Page 11

12 How foreign investors see Africa Page 12

13 Investor perceptions Africa s perceived attractiveness has deteriorated over the past year Africa s past attractiveness at lowest level since % 60% 60% 56% 53% 7% 11% 14% 17% 19% Deteriorated Improved When asked about Africa s future attractiveness, a strong majority (69%) of respondents remain positive about the continent s investment appeal over the next three years. However, the proportion of optimists has fallen four percentage points since our 2014 survey. Source: (total respondents: 501). Page 13

14 Investor perceptions Even Africa s attractiveness relative to other regions is down a notch Asia (+31) North America (+16) Western Europe (+15) Middle East (+8) Oceania (+6) Asia (+26) North America (+13) Oceania (+5) Western Europe (+5) Africa Asia (+16) Oceania (+11) Latin America (+8) North America (+5) Africa 1 North America (+4) 1 Oceania (+3) 2 Africa 3 Asia 4 Oceania (-2) 5 Western Europe (-3) 2 North America (+1) 3 Asia (+1) 4 5 Africa Western Europe (-1) 6 Latin America (+2) 6 Middle East (-0.3) 6 Central America (-1) 6 Latin America (-14) 6 Latin America (-2) 7 Eastern Europe (0) 7 Latin America (-1) 7 Western Europe (-4) 7 Middle East (-15) 7 Central America (-8) 8 Africa 8 Eastern Europe (-3) 8 Middle East (-10) 8 CIS (-17) 8 Eastern Europe (-10) 9 Central America (-4) 9 Central America (-5) 9 Eastern Europe (-12) 9 Eastern Europe (-17) 9 Middle East (-15) 10 CIS (-19) 10 CIS (-17) 10 CIS (-14) 10 Central America (-19) 10 CIS (-16) Markets more attractive than Africa Markets less attractive than Africa Numbers in brackets indicate total attractive responses minus total not attractive responses. Source: (total respondents: 501). Page 14

15 Perception gap persists Those with an established presence remain overwhelmingly positive #1 Africa is the most attractive investment destination in the world Respondents who are not established in Africa 66% believe attractiveness has improved over past year Africa is the second least attractive investment destination in the world 81% believe attractiveness will improve over next three years 30% believe attractiveness has improved over the past year Respondents who are already established in Africa 50% believe attractiveness will improve over the next three years Source: (total respondents: 501). Page 15

16 Roadblocks to investment The top five perceived barriers to investing in Africa remain consistent Unstable political environment 55% Poor basic infrastructure 14% Corruption 26% Lack of highly skilled labor 13% Weak security 22% Source: (total respondents: 501). Despite the Africa rising narrative and steady growth in FDI inflows, there has been no quantum leap in FDI into Africa. Respondents have highlighted political risk factors, such as instability and corruption, as the top barriers that discourage investment on the continent. Page 16

17 Making choices: Inclusive, sustainable growth Page 17

18 Strong fundamentals remain intact We believe that the African growth story is real and sustainable The African growth story is real Gross Domestic Product (GDP) and Compound Annual Growth Rate (CAGR) Above 5% Between 0% and 5% Less than 0% (negative) Number of economies growing faster than 5% a year Asia Pacific CIS Central and Southeast Europe 6 4 Middle East 8 21 SSA 24 As a region, SSA has by far the most economies growing at sustained rates of 5% over the past 15 years and the next 15 years Sources: Oxford Economics database estimates; EY analysis, accessed in August Page 18

19 Economic resilience Many African countries have shown resilience during global downturns GDP growth rate (%) GDP growth in SSA during global downturns Structural reforms in the 1990s, strong macroeconomic policies and early adoption of counter-cyclical monetary and fiscal policies enabled SSA to weather the most recent crisis relatively well in comparison to previous global downturns. 5 4 V shaped recovery Average: 1975,1982 and 1991 L shaped recovery 0 t-4 t-3 t-2 t-1 t t+1 t+2 t+3 t+4 Sources: World Bank, EY analysis Recession cycles Current cycle (t= 2009) Average three cycles 1975,1982 and 1991 Page 19

20 Addressing structural transformation African countries still underperform on key competitiveness measures Africa s competitiveness performance relative to other regions Institutions Innovation Infrastructure Business sophistication Macroeconomic environment Market size Health and primary education Technological readiness Financial market development Labor market efficiency Goods market efficiency Higher education and training Africa Southeast Asia Latin America and the Caribbean Source: Africa Competitiveness Report 2013, World Economic Forum, Page 20

21 Toward inclusive, sustainable growth EY s point of view: five priorities for action Realizing the possibilities: 5 priorities for action Shared value Entrepreneurship Regional integration Infrastructure development Partnerships Africa Page 21

22 EY Strategic Growth Forum Africa November 2015, Johannesburg, South Africa EY in Africa Fourth Forum hosted in Africa Visit ey.com/sgfafrica 2015 Focus on the strategic growth opportunities that Africa offers and the challenges that need to be addressed to realize these opportunities Unparalleled opportunity to network, share ideas and learn from those doing business in and implementing government policies across Africa EY World Entrepreneur Award Southern Africa during gala dinner on 3 November 2015 EY hosts the Strategic Growth Forum in several locations around the world. Page 22

23 Making choices Download the full report at: emergingmarkets.ey.com Follow us Page 23

24 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com EYGM Limited. All Rights Reserved. EYG no. xxxxxxx BMC Agency GA 0321_01482 ED None BSC WR# This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com