Unlocking Africa s Investment Potential. Gordon Smith Tel

Transcription

1 Unlocking Africa s Investment Potential Gordon Smith Tel GSmith@rencap.com

2 Part 1 Introduction Page 2

3 Africa: The basics Key facts about Africa (2007E) African population 925mn Real GDP growth 5.9 % p.a. Real GDP per capita growth 3.7% p.a. Inflation (average) 9.2% p.a. Key facts about Sub-Sahara Africa (2007E) Sub-Sahara African population 750mn Real GDP growth 6.7% p.a. Real GDP per capita growth 4.7% p.a. Inflation (average) 7.1% p.a. Key facts about Nigeria (2007E) Nigerian population 143mn Real GDP growth 8.2% p.a. Real GDP per capita growth 5.5% p.a. Inflation (average) 7.9% p.a. Atlantic Ocean Western Sahara (Morocco) Madeira Islands (Portugal) Canaty Islands (Spain) Mauritania Cape Verde Mali Eritrea Niger Chad Yemen Senegal Benin Sudan Gambia Burkina Gulf ofaden Faso Djibouti Guinea Cameroon Guinea-Bissau Nigeria Somalia Cote D Ivore Central Ethiopia Sierra Leone Ghana African Rep. Uganda Togo Liberia Democratic Sao Tome & Republic of Congo Principe Kenya Gabon Rwanda Lake Equatorial Congo Guinea Victoria Burundi Tanzania Zanzibar Cabinda (Angola) Malawi Seychelles Acension (UK) Equity Markets Members of the BRVM Portugal Spain Morocco St. Helena (UK) South Atlantic Ocean Algeria Tunisia Mediterranean Sea Libya Angola Namibia Zambia Botswana South Africa Cape of Good Hope Suez Canal Egypt Zimbabwe Lesotho Red Sea Mozambique Swaziland Saudi Arabia Comoros MIDDLE EAST Reunion (France) Madagascar Indian Ocean Mauritius Persian Gulf Sub-Sahara Africa today offers a rapidly improving growth opportunity in emerging markets Source: IMF, OECD, Renaissance Capital Page 3

4 Africa: Headline statistics Population GDP Principal export GDP/capita Life expectancy mn PPP $bn (in order of importance) PPP $bn Years Nigeria Crude Oil, Natural Gas 1, Cote d'ivoire Cocoa, Crude Oil 1, Ghana Gold, Cocoa 2, Kenya Tea, Coffee, Flowers 1, Malawi Tobacco, Tea, Sugar Mauritius Sugar, Textiles 14, Tanzania Gold, Fish, Copper Uganda Coffee, Fish, Tobacco 1, Zambia Copper, Cobalt 1, Zimbabwe Platinum, Tobacco, Nickel 2, Botswana Diamonds, Nickel 11, Mozambique Aluminium, Seafood 1, Namibia Diamonds, Uranium 8, Swaziland Sugar, Wood Pulp 5, vs South Africa Platinum, Gold, Base metals, Coal 12, Source: BBC, EIU, MF, OECD, Renaissance Capital Page 4

5 Cross-country comparisons highlight diversity Social and economic indicators, 2006 BOTSWANA GHANA KENYA NIGERIA SA ZAMBIA GDP ($bn) Population (mn) Population growth (%) GDP/capita ($) 6, Real GDP growth (%) Real GDP growth per capita (%) Inflation (%) Broad money growth (%) Fiscal balance, incl. grants (% GDP) Fiscal balance, excl. grants (% GDP) Current account, incl. grants (% GDP) Savings ratio (% GDP) Investment ratio (% GDP) Exports (% GDP) Broad money (% GDP) External official debt (% GDP) Foreign reserves (months, import cover) Source: IMF, EIU, OECD Renaissance Capital Page 5

6 Corruption metrics are varied but steadily improving 2007 Rank 2006 Rank Country TI 2007 Corruption Perception Index (CPI) 2007 CPI Score* Confidence Range** 2007 Rank 2006 Rank Country 2007 CPI Score* Confidence Range** Botswana Zambia Malaysia Indonesia South Africa Russia Ghana Nigeria Brazil Angola China Cote d'ivoire Tanzania Kenya Argentina Zimbabwe Uganda Sudan Malawi Somalia Source: Transparency International, Renaissance Capital Africa has a reputation as a corrupt, badly-governed continent, casting a long shadow that will take time to redress However, there is already quite a variation in the relative position of African countries in various governance surveys Nigeria consolidated its position, given that the number of countries in the 2007 CPI survery increased by 16 to 179 Page 6

7 Part 2 Why Africa?: The Economics Page 7

8 Continental economic record is improving Sub Sahara Africa: Select indicators ¹ E 2007P Annual growth (%) Real GDP of which: oil exporters oil importers Real non-oil GDP Consumer inflation² of which: oil exporters GDP per capita % of GDP Fiscal balance, incl. grants of which: grants Current account balance of which: oil exporters Reserves (months of imports)³ ) Arithmetic average of individual countries, weighted by GDP. 2) Excluding Zimbabwe. 3) Excluding South Africa & Nigeria Source: IMF Page 8

9 2007 economic forecasts: Select African countries Real GDP CPI inflation Current account Fiscal balance (%) (%) (% GDP) (% GDP) Botswana Cote d'ivoire Ethiopia Ghana Kenya Malawi Nigeria Tanzania Uganda Zambia Zimbabwe , Source: IMF, Renaissance Capital Page 9

10 Gleneagles has reinvigorated national balance sheets Total Debts Outstanding (% of GDP) Debt Services (% of Exports) 0 Source: IMF, Renaissance Capital Page 10

11 Except by design, currencies are largely stable or appreciating Real Effective Exchange Rate (REER) (2000=100) Angola(Kwanza) Zambia(Kwacha) Kenya(Shilling) Nigeria(Naira) CFA zone Ghana(Cedi) Botswana(Pula) Mauritius(Rupee) Malawi(Kwacha) Angola Zambia Kenya Nigeria CFA zone Ghana Botswana 80 Mauritius Malawi Source: IMF Page 11

12 Fiscal policies are now much more sustainable 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Nigeria Cameroon Lesotho Namibia Rwanda Botswana South Africa Mali Mozambique Uganda Benin Seychelles Malawi Burkina Faso Kenya Ghana Madagascar Gambia Senegal Cap Verde Fiscal balance (2006, % of GDP) -2.00% -4.00% -6.00% -8.00% Source: OECD, Renaissance Capital Page 12

13 Relative inflation and inflation gaps have both narrowed Angola Kenya Mauritius Ghana Zambia Malawi Mozambique Botswana Nigeria Namibia Tanzania South Africa Uganda August 2007 inflation (12-month average) % Source: National sources, Global Insight Page 13

14 Inflation variation has also stabilized in the last three years % 45 Annual inflation variation Angola Kenya Nigeria Ghana Zambia Source: IMF, Renaissance Capital Page 14

15 The continent s cost of capital is no longer exorbitant % Current nominal yields in the most liquid part of the curve Tanzania (5-years) Malawi (273-days) Mozambique (1 year) Angola (1year) Zambia (5-years) Ghana (5-years) Uganda (5-years) Botswana (1-year) Kenya (5-years) Mauritius (5-years) Nigeria (5-years) Namibia (1-year) South Africa (8-years) Source: Bloomberg, Renaissance Capital Page 15

16 Botswana (1-year) Real rates have eased too, except where access is difficult Current real yields in traded part of the curve % Tanzania (5-years) Malawi (273-days) Uganda (5-years) Zambia (5-years) Namibia (1-year) Ghana (5-years) Angola (1year) South Africa (8-years) Mozambique (1 year) Nigeria (5-years) Kenya (5-years) Mauritius (5-years) Source: National sources, Global Insight, Bloomberg, Renaissance Capital Page 16

17 Nigeria s infrastructure deficit is particularly large 450 Africa: Total net per capita energy generation, 2004, kilowatt hours Nigeria Sub-Saharan Africa, excluding Nigeria and South Africa Sub-Saharan Africa, excluding Nigeria Total net electricity generation = net conventional thermal electricity generation + net hydroelectric power generation + net nuclear electricity power generation + net geothermal, solar, wind and wood and waste electric power generation. Source: IMF Page 17

18 But Nigeria has resources to pay for infrastructure upgrade Nigeria vs. South Africa: Export and Monetary intensity ratios Exports (%GDP) Broad Money (%GDP) Nigeria South Africa Page 18 Source: IMF

19 Nigeria s investment cycle is particularly geared to GDP Nigeria vs. SSA: Real Fixed Investment Growth (% year/year; 5-year moving average) SSA Nigeria Page 19 Source: EIU, Renaissance Capital

20 Part 3 Where in Africa?: Local rates and FX markets Page 20

21 Sovereign ratings imply more similarities than differences Botswana Mauritius Namibia Nigeria Lesotho Cape Verde Ghana Kenya Senegal Benin Burkina Faso Cameroon Madagascar Mozambique Mali Seychelles Uganda Malawi Rwanda A Baa1 BBB- BB- B+ B Source: Fitch, S&P and Moody s Page 21 B-

22 Yield curves have rapidly emerged but are still very immature 21.00% 19.00% Kenya Ghana Mauritius Nigeria Uganda Zambia 17.00% 15.00% 13.00% 11.00% 9.00% 7.00% 5.00% Maturity Source: Renaissance Capital, Bloomberg Page 22

23 Yield curves remain strongly positively-sloped Difference between short and long dated bonds 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Zambia Uganda Kenya Mauritius Ghana Nigeria Source: Renaissance Capital, Bloomberg Page 23

24 Currency trading is no longer a one way bet Local currency per dollar (Jan 2004 = 100) /2/2007 1/2/2004 3/2/2004 5/2/2004 7/2/2004 9/2/ /2/2004 1/2/2005 3/2/2005 5/2/2005 7/2/2005 9/2/ /2/2005 1/2/2006 3/2/2006 5/2/2006 7/2/2006 9/2/ /2/2006 1/2/2007 3/2/2007 5/2/2007 7/2/2007 Angola Kwanza Botswana Pula BRVM CFA Ghana Cedi Kenya Shilling Malawi Kwacha Mauritius Rupee Nigeria Naira Zambia Kwacha Source: Bloomberg Page 24

25 Zambia Botswana South Africa Mozambique Namibia Uganda Mauritius Kenya Angola Tanzania Ghana Malawi Nigeria FX risk is varied and largely reflects degree of convertibility Average 10-day FX volatility (prior six months to Sep 2007) Source: Bloomberg, Renaissance Capital Page 25

26 Steady foreign involvement in Africa s local bond markets US$ millions H1 Total SSA Ex-Nigeria Source: EMTA Page 26

27 Fundamental valuation screen is not especially revealing % 14 South Africa (8-years) Namibia (1-year) 12 Botswana(1-year) Zambia (5-years) FX Volatility Kenya(5-years) Mauritius(5-years) Mozambique (1-year) Angola(1-year) Uganda(5-years) Tanzania (5-years) 4 Ghana(5-years) Malawi (273-days) 2 Nigeria(5-years) Real interest rates % Source: National sources, Global Insight, Bloomberg, Renaissance Capital Page 27

28 So what sovereigns do we like? FX screen - 1 Ranking CAB Foreign debt AF REER FX vol Score Angola Botswana Ghana Kenya Malawi Mauritius Mozambique Namibia Nigeria Tanzania Uganda Zambia Source: Renaissance Capital Page 28

29 So what sovereigns do we like? FX screen Nigeria Mauritius Angola Botswana Ghana Kenya Tanzania Namibia Zambia Malawi Uganda Mozambique Source: Renaissance Capital Page 29

30 So what sovereigns do we like? FI screen - 1 Ranking CPI CPI variation Capacity Yield Real yield Score Angola Botswana Ghana Kenya Malawi Mauritius Mozambique Namibia Nigeria Tanzania Uganda Zambia Source: Renaissance Capital Page 30

31 Tanzania Uganda Malawi Mauritius Zambia Namibia Kenya Ghana Nigeria Mozambique Botswana Angola So what sovereigns do we like? FI screen - 2 Source: Renaissance Capital Page 31

32 Tanzania Mauritius Nigeria Malawi Uganda Zambia Namibia Ghana Kenya Angola Botswana Mozambique So what sovereigns do we like? Combined Screens Source: Renaissance Capital Page 32

33 Part 4 Where in Africa?: Equities Page 33

34 Equity market capitalisation Africa (ex. South Africa) Market capitalisation as of M ozambique Uganda Swaziland Namibia M alawi Tanzania Zambia Ghana Zimbabwe BRVM M auritius Botswana Tunisia Kenya Nigeria M orocco Egypt Source: Stock Markets, Renaissance Capital At the end of 2006 these 17 African equity markets had a total market capitalisation of $201.6bn and a CAGR of 22.9% since 2000 ($58.6bn). Page 34

35 SSA (Ex SA, and North Africa): Market capitalisation & turnover 70.0 Sub Saharan market capitalisation (ex SA & NA) Sub Saharan market turnover (ex SA & NA) ,000 5,000 4,000 3,000 2,000 1, % 7.7% 7.5% 7.4% 6.5% 5.9% 4.9% 5,323 2,268 2,851 1, % 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Total % of M arket Capitalisation Source: Stock Markets, Renaissance Capital Excluding North Africa the combined market capitalisation of our Renaissance SSA equity universe (14 equity markets including the regional BRVM) as of the end of 2006 was $58.3bn, a CAGR of 28.6% since 2000 ($12.9bn). Market turnover has increased from $635mn in 2000 to $5.3bn in 2006, a CAGR of 42.5%. Source: Stock Markets, Renaissance Capital As a percentage of market capitalisation, turnover has increased from 4.9% in 2000 to 9.1% in This remains significantly below the global EM universe, for example South Africa (including duallisted stocks) and Egypt had turnover to market liquidity ratio s of 59% and 37% respectively in 2006 Page 35

36 SSA (Ex SA, and NA): Performance relative to MSCI EM & EMEA MSCI - EM M SCI - EM EA SSA Source: Stock Markets, Renaissance Capital We have created simple unweighted indices of the Sub-Sahara African equity market (excluding South Africa, Egypt, Tunisia and Morocco) shown above. It has almost consistently outperformed the MSCI EM index and MSCI EMEA index since The total dollar returns of this simple SSA has been 257% since Page 36

37 SSA (Ex SA): Sector splits Sub-Saharan market sector split as of 2000 (ex SA & NA) Sub-Saharan market sector split as of 2006 (ex SA & NA) TMT 4% Industrial and Manufacturing 11% Metals and Mining 4% Other 6% Oil and Gas 6% Financials 40% TMT 4% Industrial and Manufacturing 6% Construction and Real Estate 10% Other 9% Oil and Gas Metals and Mining 4% 1% Financials 48% Construction and Real Estate 8% Retail and Consumer 21% Retail and Consumer 18% Source: Stock Markets, Renaissance Capital Source: Stock Markets, Renaissance Capital The Financial sector (including Banks, Insurance and the Professional Services sectors) dominates, with 48% ($27.5bn) of our defined market as of the end of 2006, which is an increase of 8% since 2000 (40% - $5.4bn). Retail and Consumer (including Consumer Food and Beverages; Non-Food and Retail) is the second-largest sector at 18% ($10.4bn), but has contracted as a percentage of the total from 21% ($2.7bn) as of the end of The sector with the greatest relative growth (490%) has been the Construction and Real Estate sector (including Construction Materials, Real Estate and Hotel) rising from $1.0bn (8%) in 2000 to $5.9bn (10%) by the end of The relative insignificance of the commodities sectors is of the greatest surprise to most - Metals and Mining and Oil and Gas - which represented only 5% ($3.1bn) in 2006, contracting as a percentage of the total from 10% ($1.3bn) in Page 37

38 RC s Investable SSA Universe: Focus on >$100mn capped stocks No of listed equities in SSA (Ex SA & NA) No of listed equities in SSA (Ex SA & NA) >$100mn Source: Stock Markets, Renaissance Capital Source: Stock Markets, Renaissance Capital There were a total of 522 listed domestic equities (excluding foreign dual listed) as of the end of March 2007, an increase of 66 since 2000 (456). For simplicity, we have narrowed our coverage range to large cap stocks >$100mn. As of Mar 2007 there were 109 listed equities in our SSA universe, an increase of 75 since These 109 listed equities capture 87% of our total SSA market capitalisation (i.e. $50.9bn of the $58.3bn) and 90% of the total value traded ($4.8bn of $5.3bn). Page 38

39 RC s equity coverage market: Some basic statistics US$ Index 3 Yr US$ Dec Total US$m Total US$m Total Performance EPS 2006 Country Market Cap Turnover No. Of Stocks CAGR PER Botswana 4, % 17% 16.5x BRVM 2, % N/A N/A Ghana 1, % 22% 10.4x Kenya 11, , % 26% 19.2x Malawi % 16% 9.0x Mauritius 3, % 14% 11.9x Mozambique N/A N/A N/A Namibia % 18% 5.3x Nigeria 30, , % 28% 19.3x Swaziland N/A 5 N/A N/A N/A Tanzania N/A 10% 7.0x Uganda N/A N/A N/A Zambia 1, % 9% 12.4x Zimbabwe 1, % & 298%* 217% 107.5x SSA 58, , % 19% 17.6x *Zimbabwe Industrial and Mining Index Performance Source: African Stock Exchanges, Company Data, Renaissance Capital Estimates Page 39

40 Market capitalisation by region: 2000 to 2006 In the following section we dissect the Renaissance SSA equity universe into three regions: West Africa, East Africa and Southern Africa West Africa has seen the strongest gains, rising from 46% to 59% (to $34.5bn market capitalisation; CAGR of 33.9%) of our total combined SSA equity universe. Regional split of market capitalisation 2000 South 31% East 23% West 46% Source: Stock Markets, Renaissance Capital East Africa has recorded a similar relative CAGR increase in market capitalisation (33.9%), rising from $2.9bn to $17.0bn. Regional split of market capitalisation 2006 South 12% West 59% Southern Africa delivered a more pedestrian market capitalisation CAGR of 9.4%, increasing from $4.0bn to $6.8bn and thus has seen its share of our combined SSA market capitalisation contract significantly from 31% to 12%. East 29% Source: Stock Markets, Renaissance Capital Page 40

41 Regional SSA market performance relative to MSCI-EM indices MSCI - EM West East South Source: Stock Markets, Renaissance Capital The figure above highlights the regional performances relative to the MSCI-EM indices. Page 41

42 Page 42 Nigeria equity market overview

43 NSE performance relative to SSA, MSCI-EM & EMEA MSCI - EM M SCI - EM EA NSE $ SSA Source:African Stock Markets, Renaissance Capital Estimates The Nigerian Stock Exchange (NSE) has been one of the best-performing emerging markets in the world. YtD it has risen 55%, and since 2000 it has delivered a 627% dollar return. At the end of 2006, the NSE was the fourth-largest stock market in Africa. Page 43

44 Nigeria: Market capitalisation & turnover growth Nigeria market capitalisation Nigeria market turnover % 11.4% 10.3% 9.1% 9.2% 7.7% 6.2% % 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Total % of M arket Capitalisation Source: Stock Markets, Renaissance Capital Source: Stock Markets, Renaissance Capital At the close of 2006 it had a total market capitalisation of $30.2bn, with a CAGR of 38.1% since 2000 ($4.3bn). Market turnover has increased from $268mn in 2000 to $3.5bn in 2006, with a CAGR of 53.1%. As a percentage of market capitalisation, turnover has increased from 6.2% to 11.4% over 2000 through Page 44

45 Nigeria: Sector splits Nigeria market sector split as of 2000 Nigeria market sector split as of 2006 TMT 0% Other 4% Oil and Gas 14% Financials 38% Industrial and Manufacturing 2% Other 8% Oil and Gas 6% Financials 54% Industrial and Manufacturing 7% Construction and Real Estate 9% Construction and Real Estate 6% Retail and Consumer 31% Retail and Consumer 21% Source: Stock Markets, Renaissance Capital Source: Stock Markets, Renaissance Capital The Financial sector dominates the market weighting in Nigeria and has risen from 38% in 2000 ($1.6bn) to 55% by 2006 ($16.2bn), an 880% relative increase. The Retail and Consumer sector has the second-largest weighting, but its weighting has contracted by 10% from 31% in 2000 ($1.3bn) to 21% in 2006 ($6.2bn). The strongest growth sector has been Construction and Real Estate, which has increased in relative terms by 975% from $262mn in 2000 (6%) to $2.8bn in 2006 (9%). Page 45

46 Nigeria: >$100mn stocks representation of the market Nigeria market capitalisation splits >$100mn vs <$100mn Nigeria turnover splits >$100mn vs <$100mn 100% 90% 80% 41% 33% 31% 18% 13% 9% 4% 100% 90% 80% 41% 30% 38% 20% 12% 9% 3% 70% 70% 60% 60% 50% 40% 30% 59% 67% 69% 82% 87% 91% 96% 50% 40% 30% 59% 70% 62% 80% 88% 91% 97% 20% 20% 10% 10% 0% % >100m <100m >100m <100m Source: Stock Markets, Renaissance Capital Source: Stock Markets, Renaissance Capital There were a total of 202 listed domestic equities (excluding foreign dual listed) as of the end of March 2007, an increase of 11 since 2000 (191). As of the end of 2006, there were 47 stocks in Nigeria with a market capitalisation in excess of $100mn, 23% of the total 202 listed equities. These 47 stocks represent 96% of the market capitalisation of the NSE ($28.9bn of the $30.2bn) and 97% of value traded. Page 46

47 Page 47 Kenya equity market overview

48 NSE-20 performance relative to SSA, MSCI-EM & EMEA MSCI - EM M SCI - EM EA NSE-20 $ SSA Source:African Stock Markets, Renaissance Capital Estimates The Nairobi Stock Exchange top 20 (NSE-20) in Kenya has provided a 139% dollar return since As the figure above highlights, Kenya s performance has a strong correlation to the MSCI indices, with outperformance only in 2003 and the latter half of At the end of 2006, the NSE was the fifth-largest stock market in Africa. Page 48

49 Kenya: Market capitalisation & turnover growth Kenya market capitalisation Kenya market turnover % 12.0% % Total 7.4% 6.8% 4.7% % 3.7% 2.3% % of Market Capitalisation 8.0% 6.0% 4.0% 2.0% 0.0% Source: Stock Markets, Renaissance Capital Source: Stock Markets, Renaissance Capital At the close of 2006, Kenya had a total market capitalisation of $11.2bn, with a CAGR of 43.4% since 2000 ($1.3bn). Market turnover has increased from $44mn in 2000 to $1.3bn in 2006, with a CAGR of 75.2%. As a percentage of market capitalisation, turnover has increased from 3.4% to 11.3% over 2000 through Page 49

50 Kenya: Sector splits Kenya market sector split as of 2000 Kenya market sector split as of 2006 Industrial and Manufacturing 16% TMT 3% Other 7% Oil and Gas 4% Financials 38% TMT 3% Other 18% Metals and Mining 1% Oil and Gas 2% Financials 39% Industrial and Manufacturing 10% Construction and Real Estate 14% Retail and Consumer 18% Construction and Real Estate 12% Retail and Consumer 15% Source: Stock Markets, Renaissance Capital Source: Stock Markets, Renaissance Capital The Kenyan equity market is more evenly diversified than Nigeria. The Financial sector remains the largest, rising from 38% in 2000 ($1.6bn) to 39% by 2006 ($1.2bn). The strongest growth sector has been the Other sub-sector (including Diversified Conglomerates, Transportation and Utilities), which has increased as a percentage of the total market capitalisation by 11% from $94mn in 2000 (7%) to $2.0bn in 2006 (18%). This is largely due to the successful IPO of Kengen, which had a market capitalisation of $900mn as of the end of Page 50

51 Kenya: >$100mn stocks representation of the market Kenya market capitalisation splits >$100mn versus <$100mn Kenya turnover splits >$100mn versus <$100mn 100% 90% 22% 24% 15% 8% 100% 90% 21% 15% 80% 70% 60% 54% 60% 43% 80% 70% 60% 71% 57% 53% 34% 42% 50% 40% 78% 76% 85% 92% 50% 40% 79% 85% 30% 20% 10% 46% 40% 57% 30% 20% 10% 29% 43% 47% 66% 58% 0% % >100m <100m >100m <100m Source: Stock Markets, Renaissance Capital Source: Stock Markets, Renaissance Capital There were a total of 51 listed domestic equities (excluding foreign dual listed) as of the end of March 2007, a decrease of two since 2000 (53). As of the end of 2006, there were 23 stocks in Kenya with a market capitalisation in excess of $100mn, 45% of the total 51 listed equities. These 23 stocks represent 92% of the market capitalisation of the Kenyan equity market ($1.1bn of the $1.3bn) and 85% of value traded. Page 51

52 Page 52 Zimbabwe equity market overview

53 Zimbabwe index performances relative to SSA, MSCI-EM & EMEA MSCI - EM MSCI - EMEA Zim-Ind $ SSA MSCI - EM MSCI - EMEA Zim-Min $ SSA Source:African Stock Markets, Renaissance Capital Estimates Source:African Stock Markets, Renaissance Capital Estimates Looking at each of the indices separately we can see that the Mining Index has delivered a dollar (based on the Old Mutual implied rate OMIR) return of 298% since 2000, whereas the Industrial Index has delivered a negative return of 38% over the same period. The noted performance was in 2003, when the Mining Index delivered a dollar return of 1166% and the Industrial Index an implied 151%. In 2000 the combined market capitalisation of the two indices ($2.5bn) would have ranked it second to Nigeria in Sub-Sahara Africa (excluding South Africa and North Africa), whereas by the close of 2006 the ZSE had fallen to the sixth-largest equity market within our SSA universe. Page 53

54 Zimbabwe: Sector splits Zimbabwe market sector split as of 2000 Zimbabwe market sector split as of 2006 Industrial and Manufacturing 14% TMT 6% Other 5% Metals and Mining 2% Other 14% Metals and Mining 10% Financials 13% Construction and Real Estate 6% Retail and Consumer 10% Financials 57% TMT 8% Industrial and Manufacturing 19% Construction and Real Estate 13% Retail and Co 23% Source: Stock Markets, Renaissance Capital Source: Stock Markets, Renaissance Capital The Zimbabwe equity market is one of the best diversified in Africa as of the end of The Financial sector has fallen from 57% in 2000 ($1.5bn) to 13% ($258mn), at the close of 2006, due to the increasing financial disintermediation caused by hyperinflation. Elsewhere, as to be expected, it has been the sectors (perceived to have a store of value or external FX reserves) that have shown the most growth, most notably Metals and Mining. Its weighting has increased 5x as a percentage of market capitalisation to 10% ($192mn) in 2006 from 2% ($48mn) in 2000, but still remains relatively insignificant. Page 54

55 Zimbabwe: >$100mn stocks representation of the market Zimbabwe market capitalisation splits >$100mn vs <$100mn Zimbabwe turnover splits >$100mn vs <$100mn 100% 100% 90% 80% 70% 60% 30% 82% 62% 61% 53% 49% 61% 90% 80% 70% 60% 35% 87% 85% 76% 76% 64% 73% 50% 50% 40% 30% 20% 10% 70% 18% 38% 39% 47% 51% 39% 40% 30% 20% 10% 65% 13% 15% 24% 24% 36% 27% 0% % >100m <100m >100m <100m Source: Stock Markets, Renaissance Capital Source: Stock Markets, Renaissance Capital There were a total of 79 listed domestic equities (excluding foreign dual listed) as of the end of Mar 2007, an increase of 16 since 2000 (63). As of the end of 2006, there were only four domestic equities in Zimbabwe with market capitalisations in excess of $100mn, less than 5% of the total 79 listed equities. (Note due to the high volatility of the exchange rate we have also included the Cotton Company of Zimbabwe). The five stocks listed on the next slide represent 39% of the market capitalisation of the Zimbabwe equity market ($0.8bn of the $2.0bn) and 27% of value traded. Page 55

56 Part 5 Concluding remarks Page 56

57 Four points to take away from this overview 1. Africa s outlook has been revitalised by rising commodity prices, improved balance sheets and slowly improving governance all of which have translated into lower FX volatility and a falling cost of capital. 2. These are ideal conditions to sustain GDP growth and investor confidence the real challenges now are to overcome two binding constraints: a chronic lack of infrastructure and ineffective financial intermediation. 3. Africa s excess return opportunities are in its renewed commodity-led pricing power and a much lower domestic cost of capital: from geared natural resource plays to down-stream long duration credit and equities. 4. Within African equities, we favour a two-pronged approach: in the traded sector, export-oriented companies with pricing power and operational gearing and in the nontraded sector, financials, real estate, cement, telecommunications etc. Page 57

58 An investor wish list 1. Political: Embed good governance criteria: Regular, transparent elections; tolerating an open society and implementing sustainable stabilisation policies. 2. Political/macroeconomic: Permit regulated private ownership of land and other productive assets by locals and foreigners alike to sustain long-term growth prospects. 3. Macroeconomic: Contain public sector activity to key functions, limiting external funding (donor grants and aid) to education, healthcare and core capital expenditure. 4. Macroeconomic: Liberalise trade and FX regimes that help to develop more competitive product markets, but seek to moderate appreciating or overvalued exchange rates. 5. Socio/regional-economic: Give priority to developing 1) energy, transport and water infrastructure and 2) regional integration in the allocation of public capital budgets. 6. Financial market: Harmonise regulatory standards consistent with global best practices to secure greater market access and liquidity for local and foreign investors alike. 7. Financial market: Deregulate savings industries by offering choices to pension fund investors to boost discretionary long-term savings and investment returns. 8. Credit market: Develop enabling legislation for effective mortgage, consumer finance and micro-lending, allowing normal bank intermediation to absorb financial surpluses. Page 58

59 Part 6 Key African country profiles Page 59

60 Angola: Key country facts 1. Capital: Luanda (population: 4.5mn) 2. Population (2006): 16.4mn 3. Currency: Angolan New Kwanza (Code: AOA); USDAOA: AOA REER (2000=100) (2006): (vs SSA 111.9) 5. Consensus 12-month USDAOA forecast (Sep 2007): n/a 6. Three-month Treasury Bill rate & Long Bond yield:15% & 14.98% (1-year) 7. Sovereign rating: Not rated 8. Size of GDP (2006): $44bn 9. GDP per capita, in USD & PPP terms: $2,668 (2006) & $3,438 (2006) 10. Five-year trailing real GDP growth ( ): 13% 11. Real GDP growth (2006): 15.3 % 12. Five-year trailing CPI inflation ( ): 57.4% 13. CPI inflation (2006): 13.3% 14. Current account balance/gdp, incl. & excl. grants (2006): +10.5% & +10.5% 15. Fiscal balance/gdp incl. & excl. grants (2006): +9.4% & +9.3% 16. Reserves import cover (2006): 3.9 months 17. External debt to official creditors (2006): 15.5%/GDP (52.7% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 60

61 Botswana: Key country facts 1. Capital: Gaborone (population: 0.2mn) 2. Population (2006): 1.7mn 3. Currency: Botswana Pula (Code: BWP); USDBWP: BWP REER (2000=100) (2006): 104 (vs SSA 111.9) 5. Consensus 12-month USDBWP forecast (Sep 2007): Three-month Treasury Bill rate & Long Bond yield: 12% & 11.36% (1-year) 7. Sovereign rating: S&P A/Stable 8. Size of GDP (2006): $11bn 9. GDP per capita, in USD & PPP terms: $6,353 (2006) & $11,611 (2006) 10. Five-year trailing real GDP growth ( ): 5.7% 11. Real GDP growth (2006): 4.2% 12. Five-year trailing CPI inflation ( ): 8.8% 13. CPI inflation (2006): 11.3% 14. Current account balance/gdp, incl. & excl. grants (2006): +14.9% & +8.5% 15. Fiscal balance/gdp, incl. & excl. grants (2006): +3.1% & +2.5% 16. Reserves import cover (2006): 21 months 17. External debt to official creditors (2006): 3.7%/GDP (7.5% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 61

62 Cote d Ivoire: Key country facts 1. Capital: Abidjan (population: approximately 4.5mn) 2. Population (2006): 18.5mn 3. Currency: CFA Franc (code XAF); USDXAF: XAF REER (2000=100) (2006): (vs SSA 111.9) 5. Consensus 12-month USDXAF forecast (Sep 2007): pegged to euro 6. Three-month Treasury Bill rate & Long Bond yield: n/a 7. Sovereign ratings: Not rated 8. Size of GDP (2006): $17bn 9. GDP per capita, in USD & PPP terms: $937 (2006) & $1,393 (2006) 10. Five-year trailing real GDP growth ( ): 0.2% p.a. 11. Real GDP growth (2006): 1.4% 12. Five-year trailing CPI inflation ( ): 2.7% p.a. 13. CPI inflation (2006): 1.6% 14. Current account balance/gdp, incl. & excl. grants (2006): +1.2% & +0.3% 15. Fiscal balance/gdp, incl. & excl. grants (2006): -2.1% & -3.1% 16. Reserves import cover (2006): 2.3 months 17. External debt to official creditors (2006): 62.4%/GDP (69.4% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 62

63 Ghana: Key country facts 1. Capital: Accra (population: approximately 1mn) 2. Population (2006): 22.6mn 3. Currency: New Ghana Cedi (code GHC); USDGHC: GHC REER (2000=100) (2006): (vs SSA 111.9) 5. Consensus 12-month USDGHC forecast (Sep 2007): Three-month Treasury Bill rate & Long Bond yield: 9.8% & 13% (3-year) 7. Sovereign rating: S&P B+/Stable; Fitch B+/Positive 8. Size of GDP (2006): $13bn 9. GDP per capita, in USD & PPP terms: $572 (2006) & $2,146 (2006) 10. Five-year trailing real GDP growth ( ): 5.5% p.a. 11. Real GDP growth (2006): 6.2% 12. Five-year trailing CPI inflation ( ): 16% p.a. 13. CPI inflation (2006): 10.9% 14. Current account balance/gdp, incl. & excl. grants (2006): -8.2% & -11.2% 15. Fiscal balance/gdp, incl. & excl. grants (2006): -6.2% & -11.3% 16. Reserves import cover (2006): 3.2 months 17. External debt to official creditors (2006): 7.7%/GDP (117.7% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 63

64 Kenya: Key country facts 1. Capital: Nairobi (population: 2.9mn) 2. Population (2006): 35.1mn 3. Currency: Kenya shilling (code KES); USDKES: KES REER (2000=100) (2006): (vs SSA 111.9) 5. Consensus 12-month USDKES forecast (Sep 2007): Three-month Treasury Bill rate & Long Bond yield: 7.35% & 12.97% (15-year) 7. Sovereign rating: S&P B+/ Stable 8. Size of GDP (2006): $23bn 9. GDP per capita, in USD & PPP terms: $661 (2006) & $1,835 (2006) 10. Five-year trailing real GDP growth ( ): 3.9% p.a. 11. Real GDP growth (2006): 6.0% 12. Five-year trailing CPI inflation ( ): 9.6% p.a. 13. CPI inflation (2006): 14.1% 14. Current account balance, incl. & excl. grants (2006): -3.3% & -3.6% 15. Fiscal balance, incl. & excl. grants (2006): -3.2% & -4.4% 16. Reserves import cover (2006): 3.6 months 17. External debt to official creditors (2006): 20.6%/GDP (35.1% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 64

65 Malawi: Key country facts 1. Capital: Lilongwe (population: 0.5mn) 2. Population (2006): 13mn 3. Currency: Malawi Kwacha (Code: MWK); USDMWK: MWK REER (2000=100) (2006): 73.2 (vs SSA 111.9) 5. Consensus 12-month USDMWK forecast (Sep 2007): n/a 6. Three-month Treasury Bill rate & Long Bond yield:11.38% & n/a 7. Sovereign rating: Fitch B-/Stable 8. Size of GDP (2006): $2.3bn 9. GDP per capita, in USD & PPP terms: $172 (2006) & $653 (2006) 10. Five-year trailing real GDP growth ( ): 4.3% 11. Real GDP growth (2006): 8.5% 12. Five-year trailing CPI inflation ( ): 11.5% 13. CPI inflation (2006): 9% 14. Current account balance/gdp, incl. & excl. grants (2006): -7.1% & -21.8% 15. Fiscal balance/gdp, incl. & excl. grants (2006): -3.0% & -18.9% 16. Reserves import cover (2006): 2.1 months 17. External debt to official creditors (2006): 202.4%/GDP (590.6% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 65

66 Mauritius: Key country facts 1. Capital: Port Louis (population: 0.15mn) 2. Population (2006): 1.3mn 3. Currency: Mauritian rupee (Code: MUR); USDMUR: MUR REER (2000=100) (2006): 81.6 (vs SSA 111.9) 5. Consensus 12-month USDMUR forecast (Sep 2007): n/a 6. Three-month Treasury Bill rate & Long Bond yield: 9% & 13% (20-year) 7. Sovereign rating: Moody s: Baa1/Stable 8. Size of GDP (2006): $6.4bn 9. GDP per capita, in USD & PPP terms: $4,925 (2006) & $12,519 (2006) 10. Five-year trailing real GDP growth ( ): 3.3% 11. Real GDP growth (2006): 3.7% 12. Five-year trailing CPI inflation ( ): 4.8% 13. CPI inflation (2006): 5.1% 14. Current account balance/gdp, incl. & excl. grants (2006): -5.3% & -5.5% 15. Fiscal balance/gdp, incl. & excl. grants (2006): -5.3% & -5.6% 16. Reserves import cover (2006): 3.5 months 17. External debt to official creditors (2006): 12.3%/GDP (20.9% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 66

67 Mozambique: Key country facts 1. Capital: Maputo (population: 1.7mn) 2. Population (2006): 20.2mn 3. Currency: Mozambique Metical (Code: MZN); USMZN: 25, MZN REER (2000=100) (2006): 85.6 (vs SSA 111.9) 5. Consensus 12-month USDMZM forecast (Sep 2007): n/a 6. Three-month Treasury Bill rate & Long Bond yield: 14.62% (3 month) & 15% (1-year) 7. Sovereign rating: S&P: B/Positive; Fitch: B/Stable 8. Size of GDP (2006): $7.3bn 9. GDP per capita, in USD & PPP terms: $361 (2006) & $1,957 (2006) 10. Five-year trailing real GDP growth ( ): 8% 11. Real GDP growth (2006): 8.5% 12. Five-year trailing CPI inflation ( ): 12.5% 13. CPI inflation (2006): 13.2% 14. Current account balance/gdp, incl. & excl. grants (2006): -2% & -12.7% 15. Fiscal balance/gdp, incl. & excl. grants (2006): -5.3% & -5.6% 16. Reserves import cover (2006): 4.5 months 17. External debt to official creditors (2006): 40.5%/GDP (88.1% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 67

68 Namibia: Key country facts 1. Capital: Windhoek (population: 0.25mn) 2. Population (2006): 2.1mn 3. Currency: Namibian Dollar (Code: NAD); USDNAD: 7.15 (SA Rand in Namibia) 4. NAD REER (2000=100) (2006): (vs SSA 111.9) 5. Consensus 12-month USDNAD forecast (Sep 2007): n/a 6. Three-month Treasury Bill rate & Long Bond yield: 8.49% (3 month) & 10.11% (1-year) 7. Sovereign rating: Fitch: BBB-/Stable 8. Size of GDP (2006): $6.3bn 9. GDP per capita, in USD & PPP terms: $3,081 (2006) & $8,467 (2006) 10. Five-year trailing real GDP growth ( ): 5.1% 11. Real GDP growth (2006): 4.6% 12. Five-year trailing CPI inflation ( ): 6% 13. CPI inflation (2006): 5.1% 14. Current account balance/gdp, incl. & excl. grants (2006): 16.3% & 2.5% 15. Fiscal balance/gdp, incl. & excl. grants (2006): -0.1% & -0.2% 16. Reserves import cover (2006): 1.9 months 17. External debt to official creditors (2006): 6%/GDP (4.5% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 68

69 Nigeria: Key country facts 1. Capital: Abuja (population: 2.5mn) 2. Population (2006): 143mn 3. Currency: Naira (code NGN); USDNGN: NGN REER (2000=100) (2006): (vs SSA 111.9) 5. Consensus 12-month USDNGN forecast (Sep 2007): Three-month Treasury Bill rate & Long Bond yield: 6.19% & 9.37% (10-year) 7. Sovereign ratings: Moody s Baa3/ Stable; S&P BB-/ Stable; Fitch BB-/ Stable 8. Size of GDP (2006): $142bn 9. GDP per capita, in USD & PPP terms: $993 (2006) & $1,070 (2006) 10. Five-year trailing real GDP growth ( ): 6.1% p.a. 11. Real GDP growth (2006): 5.3% 12. Five-year trailing CPI inflation ( ): 13.8% p.a. 13. CPI inflation (2006): 8.3% 14. Current account balance/gdp, incl. & excl. grants (2006): +15.7% & +11.8% 15. Fiscal balance/gdp, incl. & excl. grants (2006): +8.8% & +8.8% 16. Reserves import cover (2006): 11.8 months 17. External debt to official creditors (2006): 3.4%/GDP (60.5% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 69

70 Tanzania: Key country facts 1. Capital: Dar-es-Salaam (population: 2.4mn) 2. Population (2006): 39mn 3. Currency: Tanzanian Shilling (Code: TZS); USDTZS: 1, TZS REER (2000=100) (2006): 62.6 (vs SSA 111.9) 5. Consensus 12-month USDTZS forecast (Sep 2007): 1, Three-month Treasury Bill rate & Long Bond yield: 14.57% & 19.63% (10-year) 7. Sovereign rating: Not rated 8. Size of GDP (2006): $13bn 9. GDP per capita, in USD & PPP terms: $328 (2006) & $594 (2006) 10. Five-year trailing real GDP growth ( ): 6.5% 11. Real GDP growth (2006): 5.9% 12. Five-year trailing CPI inflation ( ): 4.7% 13. CPI inflation (2006): 5.8% 14. Current account balance/gdp, incl. & excl. grants (2006): -9.3% & -13.2% 15. Fiscal balance/gdp, incl. & excl. grants (2006): -5.2% & -10.9% 16. Reserves import cover (2006): 5.3 months 17. External debt to official creditors (2006): 48.4%/GDP (54.2% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 70

71 Uganda: Key country facts 1. Capital: Kampala (population: 1.2mn) 2. Population (2006): 29.9mn 3. Currency: Ugandan Schilling (Code UGX); USDUGX: 1, UGX REER (2000=100) (2006): 87.9 (vs SSA 111.9) 5. Consensus 12-month USDUGX forecast (Sep 2007): 1, Three-month Treasury Bill rate & Long Bond yield: 7.8% & 13.5% (10-year) 7. Sovereign rating: Fitch B/Stable 8. Size of GDP (2006): $9.4bn 9. GDP per capita, in USD & PPP terms: $316 & $1,562 (2006) 10. Five-year trailing real GDP growth ( ): 5.8% p.a. 11. Real GDP growth (2006): 5.4% 12. Five-year trailing CPI inflation ( ): 4.7% p.a. 13. CPI inflation (2006): 6.6% 14. Current account balance/gdp, incl. & excl. grants (2006): -4.1% & -9.9% 15. Fiscal balance/gdp, incl. & excl. grants (2006): -0.9% & -7.5% 16. Reserves import cover (2006): 6.1 months 17. External debt to official creditors (2006): 41.4%/GDP (62.1% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 71

72 Zambia: Key country facts 1. Capital: Lusaka (population: 1.5mn) 2. Population (2006): 11.9mn 3. Currency: Zambian Kwacha (Code ZMK); USDZMK: 3, ZMK REER (2000=100) (2006): (vs SSA 111.9) 5. Consensus 12-month USDZMK forecast (Sep 2007): 4, Three-month Treasury Bill rate & Long Bond yield: 12% & 19.08% (10-year) 7. Sovereign rating: Not rated 8. Size of GDP (2006): $11bn 9. GDP per capita, in USD & PPP terms: $922 & $1,167 (2006) 10. Five-year trailing real GDP growth ( ): 5% p.a. 11. Real GDP growth (2006): 6% 12. Five-year trailing CPI inflation ( ): 17.8% p.a. 13. CPI inflation (2006): 9.1% 14. Current account balance/gdp, incl. & excl. grants (2006): -0.4% & -1.6% 15. Fiscal balance/gdp, incl. & excl. grants (2006):+20% (due to HIPC-relief) & -6% 16. Reserves import cover (2006): 3 months 17. External debt to official creditors (2006): 4.9%/GDP (182.4% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 72

73 Zimbabwe: Key country facts 1. Capital: Harare (population: 1.4mn) 2. Population (2006): 13.1mn 3. Currency: Zimbabwe dollar (code ZWD); USDZWD: 30,000 (Official); 580,000 (OMIR) 4. ZWD REER (2000=100) (2006): 81.2 (vs SSA 111.9) 5. Consensus 12-month USDZWD forecast (Sep 2007): 114, Overnight rate & Long Bond yield: 600% & 340% (1-year) 7. Sovereign rating: Not rated 8. Size of GDP (2006): $5.5bn 9. GDP per capita, in USD & PPP terms: $423 (2006) & $2,272 (2006) 10. Five-year trailing real GDP growth ( ): -5.8% p.a. 11. Real GDP growth (2006): -4.8% 12. Five-year trailing CPI inflation ( ): 420.5% p.a. 13. CPI inflation (2006): 1017%; (current estimate): c.15,000% 14. Current account balance/gdp, incl. & excl. grants (2006): -3.9% & -5.0% 15. Fiscal balance/gdp, incl. & excl. grants (2006): -10% & -10.1% 16. Reserves import cover (2006): 0.8 months 17. External debt to official creditors (2006): 35.6%/GDP (38.1% in 2002) Source: IMF, OECD, S&P, Moodys, Fitch, Consensus Economics, Official sources, Renaissance Capital Page 73

74 Part 7 Disclaimers Page 74

75 For Renaissance Securities (Cyprus) Limited Research, see Bloomberg page Rena, or contact the relevant Renaissance Capital office Renaissance Securities (Cyprus) Limited. All rights reserved. This document and/or information has been prepared by and, except as otherwise specified herein, is communicated by Renaissance Securities (Cyprus) Limited, an indirect subsidiary of Renaissance Capital Holdings Limited ("Renaissance Capital"). This document and/or information is for distribution only under such circumstances as may be permitted by applicable law. This document and/or information is not and should not be construed as an offer, or a solicitation of an offer, or an invitation to subscribe for, to buy or sell, any securities or other financial instruments, and cannot be relied upon as a representation that any particular transaction necessarily could have been or can be effected at the stated price. The information contained herein is solely for information purposes only. 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