Why Invest in Africa Senzo Hlangu 7 June 2011
6 Reasons to Invest in Africa INTERNAL FACTORS Best demographics Large, young & growing population EXTERNAL FACTORS Low penetration rates Reduced debt levels Improving policies Rising FDI Abundance of Resources Connecting Africa to fast growing emerging economies All leading to strong/better/higher economic growth + wealth creation 2
Reason 1: Best Demographics in the world 3.500 3.000 2.500 2.000 Population growth rates WORLD AFRICA ASIA EUROPE LATIN AMERICA AND THE CARIBBEAN NORTHERN AMERICA OCEANIA 1.500 1.000 0.500 0-0.500 3 Africa is the fastest growing region Source: United Nations Population Division
Reason 1: Best Demographics in the world 2 500 AFRICA China 2 000 India EUROPE LATIN AMERICA AND THE CARIBBEAN NORTHERN AMERICA 1 500 OCEANIA 1 000 500 0 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 Only region that has population doubling over the next 40 years 4 Source: United Nations Population Division
Reason 1: Best Demographics in the world 50.0 45.0 Median Age 40.0 WORLD 35.0 AFRICA 30.0 ASIA 25.0 20.0 15.0 10.0 EUROPE LATIN AMERICA AND THE CARIBBEAN NORTHERN AMERICA OCEANIA 5.0 0 Source: United Nations Population Division 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Africa has the youngest population 5 Source: United Nations Population Division
6 Africa is almost as urbanized as China and has as many cities of 1 million people as Europe
7 By 2020, more than half of African households will have discretionary spending power
8 Africa s labour productivity grew for the first time in decades
Reason 2: Low Penetration for most goods and services Zambia Cote d'ivoire Ghana Botswana Mexico Nigeria Zimbabwe Kenya Turkey Russian Federation Brazil Namibia Egypt, Arab Rep. Tunisia Morocco Mauritius Greece Estonia Korea, Rep. Italy China Canada South Africa Portugal Japan United Kingdom Ireland United States Domestic Credit to Private Sector (% GDP) 0 50 100 150 200 250 Source: Insead Global Innovation Index 9
10 Reason 2: Low Penetration for most goods and services
Reason 3: Reduced Debt Levels 70.00 Debt % GDP 60.00 50.00 40.00 30.00 20.00 10.00 - Asia North America Europe Africa South America Oceania Source: CIA World Fact Book
Reason 3: Reduced Debt Levels
Reason 3: Reduced Debt Levels 1. Initiative for Heavily Indebted Poor Countries (HIPC Initiative). The HIPC Initiative entailed coordinated action by multilateral organizations and governments to reduce to sustainable levels the external debt burdens of the most heavily indebted poor countries. 2. In 2006, The Multilateral Debt Relief Initiative (MDRI) Cancel all debt from the IMF, the International Development Association (IDA) of the World Bank, and the African Development Fund (AfDF). 3. Better Policies and Economic Management
Reason 3: Reduced Debt Levels
Reason 4: Improvements in Policies Sub-Saharan Africa: % of countries regarded as Stable
16 Reason 4: Improvements in Policies
Reason 5: Abundance of natural resources % of world shares of reserves
Reason 5: Abundance of natural resources
Reason 6: Improving FDI from low base 80 6.0% 70 FDI Inflows (USD Bn) Africa % of Global FDI 5.0% 60 50 4.0% USD Billions 40 3.0% % of Glo obal FDI 30 2.0% 20 1.0% 10 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Africa s share of FDI remains disproportionately low, considering its resources base and market size 0.0%
Reason 6: Improving FDI from low base Some large South African companies have already made significant investments and more are now looking North of our borders
Leading to Higher Economic Growth 10.00 8.00 6.00 4.00 2.00 - -2.00 World Developed Economies Emerging Economies SSA SA -4.00 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 21 Source: UNCTAD, IMF
Leading to Higher Economic Growth 22
23 Growth rates were robust across sectors Compound annual growth of real GDP by sector¹, 2002-08
6 Reasons to Invest in Africa INTERNAL FACTORS Best demographics Large, young & growing population EXTERNAL FACTORS Low penetration rates Reduced debt levels Improving policies Rising FDI Abundance of Resources Connecting Africa to fast growing emerging economies All leading to strong/better/higher economic growth + wealth creation 24
Test Yourself 1. Asia has the fastest growing population in the world. TRUE/FALSE? 2. FDI into Africa continues to decline, thus leading to deterioration in productivity. TRUE/FALSE? 3. Governance & Economic Policies continue to improve in Africa, thus creating an enabling environment for citizens, businesses and foreigners to take advantage of vast opportunities present in the continent. TRUE/FALSE? 4. Economic growth in Africa has sorely been driven by external demand of her resources. TRUE/FALSE? 5. Africa has one of the highest debt levels in the world, both in absolute terms as well as relative to Gross Domestic Product. TRUE/FALSE? 6. Africa is the least developed region in the world, thus presenting vast and unique opportunities for economic growth from a very low base and significant wealth creation for all stakeholders, particularly global investors. TRUE/FALSE? 25
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