DEG Deutsche Investitions- und Entwicklungsgesellschaft mbh International Conference on Local Pharmaceutical Production in Africa Cape Town April 4-6, 2011 Zubair Suliman Our business is developing.
DEG at a glance Mandate and working method German development finance institution for the private sector Long-term investment capital for private enterprises Financing of investments with a positive developmental impact Market-oriented conditions Agribusiness, finance sector, infrastructure, manufacturing industries, services Ecological and social acceptance according to international guidelines Contributions to sustainable economic growth and poverty reduction 2
DEG Promoter of entrepreneurial development cooperation Corporate data Founded: 1962 Employees: 436 Seat: Köln Shareholder: KfW, Frankfurt Equity 2010: Total assets 2010: EUR 1.5 billion EUR 3.9 billion New commitments in 2010: EUR 1.2 billion (supporting investments worth EUR 7.8 billion) Portfolio 2010: EUR 5.2 billion (supporting investments worth EUR 34.1 billion) 3
DEG member of KfW Bankengruppe National funding International finance Promotion of SMEs and start-ups, environmental and climate protection Promotion of housing, education, infrastructure and social sector Finance for municipal infrastructure projects and promotion in Europe International project and export finance Promotion of developing and transition countries 4
Tailor-made finance solutions Equity Capital Long-term loans Mezzanine finance Guarantees Solutions suited to individual project and risks Terms suited to the individual project Market-oriented conditions 5
Scope of DEG financings Loans with local security Loans Subordinated loans Loans with partial guarantees Hedged equity participation Partially hedged equity participation Equity participations Guaranteed loans Risk participation Risks assumed by DEG 6
Financial instruments Long-term loans Currency: EUR or USD, in selected cases also in local currencies Term: usually between four and ten years Period of grace: depending on cash-flow Interest rate: fixed or variable, market-oriented according to project and country risks Collateral security: usually security as fixed assets in the country of investment, project-specific arrangements Amount: up to EUR 25 million; larger volumes through cooperation with EDFI 7
Financial instruments Equity capital Equity participation in the project company Minority stake, usually over a limited period Variable arrangement of the risk components In certain cases, voting rights and seat on the board Clearly defined exit strategies 8
Financial instruments Mezzanine finance Financing combining elements of equity and debt: Project-specific arrangement Subordination Conversions options Risk-oriented yield 9
Financial instruments Guarantees Mobilisation of long-term loans and bonds in local currency Reduced exchange-rate risk via loan repayment in local currency Partial guarantee desirable (risk sharing with local bank and/or bond creditor) 10
New business development EUR million 1200 1.206 1.225 1.226 1000 930 1.015 800 702 600 464 558 601 400 200 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 New business development, as per 31 December 2010 11
New business 2010 Regions and Products Supraregional 2% Africa 19% Latin America 29% New commitments: EUR 1,226 million Of these risk capital: EUR 344 million (28%) Disbursements: EUR 868 million Europe 21% Products: Asia 29% Loans: EUR 1,045 million, of these mezzanine financings EUR 174 million Equity participations: EUR 170 million Guarantees: EUR 12 million New commitments by region; as per 31 December 2010 12
New Business 2010 Sectors Agribusiness and food industry 8% Services 4,5% Finance sector 33% Infrastructure 22% Manufacturing Industry 32,5% New commitments by sector; as per 31 December 2010 13
New business 2010: Top 10 countries 2010 Brazil China 112 106 India 86 Indonesia 71 Russia 69 Mexico 60 Turkey 59 Croatia 48 Southafrica 42 Costa Rica 36 EUR million 14
International cooperation EDFI Association 15 members, office in Brussels Total portfolio 2009: EUR 18.5 billion (3,971 projects) New commitments 2009: EUR 4.6 billion Goals: Joint financing (larger amount of finance, risk sharing, efficiency gains) Harmonisation: e.g. measuring developmental impacts, environmental and social standards Cooperation with the European Commission and its institutions Joint venture and marketing 15
Portfolio 2010 Total volume: EUR 5.2 billion Projects with 526 companies in 85 countries Europe: EUR 1.1 billion Asia: EUR 1.8 billion Africa: EUR 987 million Latin America and Caribbean: EUR 1.2 billion Supraregional: EUR 86 million Portfolio, as per: 31 December 2010 16
Portfolio Africa DEG commitments: EUR 987 million Investment countries 27 Companies 116 Top Three countries: South Africa, Kenya, Egypt 17
DEG offices abroad Moscow Accra Istanbul Nairobi New Delhi Beijing Bangkok Jakarta Mexico City Lima São Paulo Johannesburg Representative offices in 60 countries through KfW Bankengruppe 18
Financing criteria Qualified management Credit standing Proven track record Corporate Governance Environmental and social standards Developmental effects Sound business plan Investment plan Market analysis Due-diligence study Expected return Financing shares of owner and co-lenders 19
DEG Portfolio Healthcare Per February 28, 2011 Pharmaceutical Ingredients: 3 companies (in India and Russia) 26.7 mln committed by DEG Pharmaceutical Companies: 9 companies (Latin America, Asia and Cameroon) 54.9 mln committed by DEG Hospitals: 4 companies (in Asia, Latin America and Mozambique) 45.8 mln committed by DEG Health Funds (HCFA): 7.1 mln committed by DEG 20
DEG Healthcare Pharmaceutical Projects in Africa Issues encountered: Off-take levels not ensured Lacking supervisory infrastructure in country Lack of adequate local test laboratories Lacking pharmaceutical know-how and expertise in country Lack of experienced local management and local shop floor personnel Lacking expertise to dominate complex production process Planning not matching market demand: capacity too big and investment too expensive Strong fluctuation of market prices Lacking sufficient know-how for implementation 21
DEG Healthcare Pharmaceutical Projects in Africa Essential preconditions: GMP (Good Manufacturing Practice) standards Absolutely dedicated quality-conscious sponsor with good reputation Experienced entrepreneur with staying power (enough capital and good reputation with local banks) Networking capability (for negotiation with ministries, authorities e. g. customs, public and private wholesalers, pharmacies and hospitals) Dedicated upper management ready to adopt and implement foreign expert counsel Detailed market knowledge Marketing knowledge and strategy Upgrade of local pharmaceutical training facilities (management level) Setup of local pharmaceutical training facilities (shop floor) 22
Get in touch! Zubair Suliman DEG Deutsche Investitions- und Entwicklungsgesellschaft mbh Regent Place, 2nd Floor Cradock Avenue Rosebank Johannesburg Phone: +27 11 507 2500 Telefax: +27 11 507 2508 E-mail: zubair@deginvest.co.za Internet: www.deginvest.de 23