Staying the course EY s attractiveness program Africa 2016
Africa attractiveness program 2011 2012 2013 2014 2015 It s time for Africa Building bridges Getting down to business Executing growth Making choices EY s Africa attractiveness surveys have been widely recognised by our clients, the media and major public stakeholders as a key source of insight on foreign direct investment (FDI). 2016 Navigating Africa s current uncertainties The 2016 program seeks to develop the reports from annually to ongoing updates and views. Staying the course Page 2
Economic outlook Page 3
Global economic factors weighing down many African economies Episodes of Largest 18-Month Decline in Real Crude Oil Prices, 1970 2015 Sub-Saharan Africa: Trade Balance with China, 2005 15 Page 4 July 2016
A generally sombre economic outlook Although performance is uneven & some bright spots remain Page 5
Slowdown or meltdown? Our view remains that Africa s rise over the past 15 years is real GDP growth (%) 6.8 7.6 4.9 5.7 4.0 5.0 5.2 4.0 4.5 SSA 4.2 3.3 3.4 3.1 3.5 3.8 World -0.1 2005 2007 2009 2011 2013 2015 2017 2019 Source: IMF World Economic Outlook, Apr 16 Page 6
FDI trends Page 7
FDI 2015: the global landscape FDI projects into Africa rise even as other major regions see decline Africa is amongst the only two global regions that saw growth in FDI projects in 2015 FDI projects by world region 4,643-7% 4,318 2014 2015 Change in FDI projects (2015 vs. 2014) -7% 4,000 3,710 +7% 722 771-3% 1,307 1,265-5% 643 608-8% 2,195 2,017 +4% 1,344 1,398 Africa Asia-Pacific Latin America & Caribbean Middle East North America Rest of Europe Western Europe Source: fdi Markets Page 8
FDI 2015: the headlines Despite economic headwinds, FDI flows to Africa remain robust FDI projects Value and jobs created from FDI projects +7% 238.6 Jobs created from FDI projects ('000) Capital investment (US$b) 874 754 694 923 826 882 722 771 104.6 140.0 136.9 132.1 167.6 121.4 130.6 160.5 148.7 386 58.5 83.6 70.4 67.6 47.2 66.3 88.5 71.3 Pre-crisis average (2003-07) 2008 2009 2010 2011 2012 2013 2014 2015 Pre-crisis average (2003-07) 2008 2009 2010 2011 2012 2013 2014 2015 Investors remain confident about Africa s FDI fundamentals 7% rise in FDI projects in Africa vs. 5% drop globally US$71.3b investment in 2015 vs. US$68b average in 2010-14 4.4% more jobs created in 2015 compared to 2010-14 average Source: fdi Markets Page 9
FDI destinations East Africa closes the FDI gap with Southern Africa East Africa recorded its highest ever share of FDI projects with 26.2% of total projects North Africa % share (2015) 21.5 % share (2015) 22.3 West Africa 28.5 29.8 % share (2015) 29.7 21.5 Central Africa East Africa 26.2 19.5 25.8 FDI projects FDI value Jobs created % share (2015) 2.3 2.0 3.6 Southern Africa % share (2015) 27.6 20.3 19.2 Source: fdi Markets Page 10
FDI destinations Bumper year for Kenya-destined FDI, other SSA countries recover ground Kenya becomes biggest gainer, with year-on-year FDI project numbers growing by over 50% Top 10 destination countries by FDI projects (2015) Source: fdi Markets Page 11
FDI sources Substantial reshuffle in source country rankings in 2015 Top 10 source countries by FDI projects (2015) Improvement in rank in FDI projects (2015 vs. 2014) Source: fdi Markets Page 12
The UK climbed a spot to become second largest investor in Africa UK, #2 investor in Africa FDI projects created by the UK US$4.9b invested in 2015, 93% higher than 2014 121 82 98 100 80 77 77 53 32 2007 2008 2009 2010 2011 2012 2013 2014 2015 12,813 jobs created in 2015, 101% higher than 2014 Top 5 destinations for the UK by projects Top 5 sectors for UK FDI projects FDI projects by destination (2015) Sectors FDI projects (2015) South Africa Kenya 16 22 Business services Financial services 24 20 Nigeria 7 CPR 7 Mozambique 5 Coal, oil and natural gas 4 Morocco 4 Mining and metals 4 Source: fdi Markets Page 13
FDI sectors Investors diversify focus across sectors Proportion of investment in extractive sectors* steadily declined 60% FDI projects, 2005 2015 (% share) 50% 40% 30% 20% 33.4% 26.9% 44.7% 10% 0% 5.8% 2005 2007 2009 2011 2013 2015 Extractive Consumer-facing Technology, media and telecom (TMT), financial services (FS) and consumer products and retail (CPR) are the primary beneficiaries of FDI projects in Africa. These three industries have led investment into Africa almost every year since 2009. Source: fdi Markets; *Extractive sectors include coal, oil and natural gas as well as mining and metals; Consumer-facing sectors include TMT, CPR and FS Page 14
FDI sectors TMT, FS and CPR together hold 44.7% of FDI projects Diversification continues beyond consumer interest Source: fdi Markets Page 15
FDI sectors Investors line up to service Africa s next-generation sectors Next wave of sectors in Africa draw investor interest Business services Automotive Fourth most preferred sector for FDI projects in 2015 123.9% rise in capital investment in 2015 Cleantech Life sciences Second most attractive sector by capital investment Capital investment in 2015 was 13x that of 2014 Source: fdi Markets Page 16
Ghana climbs a spot to become sixth largest destination for FDI projects in Africa Ghana, #6 destination in Africa FDI projects in Ghana US$1.4b invested in 2015 60 50 43 33 39 41 22 28 6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2,160 jobs created in 2015 Top 5 sources for FDI projects in Ghana Top 5 sectors for FDI projects in Ghana FDI projects by sources (2015) Sectors FDI projects (2015) Nigeria 8 Financial services 16 France South Africa 4 7 Coal, oil and natural gas Business services 5 5 UK 3 TMT 4 Luxembourg 3 CPR 4 Source: fdi Markets Page 17
Kenya reports bumper year in 2015 with FDI project number growing by over 50% vs. 2014 Kenya, #2 destination in Africa FDI projects in Kenya 95 77 64 56 62 23 28 35 9 2007 2008 2009 2010 2011 2012 2013 2014 2015 US$2.6b invested in 2015, 11% higher than 2014 11,896 jobs created in 2015, 163% higher than 2014 Top 5 sources for FDI projects in Kenya UK US 15 16 Top 5 sectors for FDI projects in Kenya FDI projects by sources (2015) Sectors FDI projects (2015) TMT Financial services 24 19 India 10 Business services 11 South Africa 7 CPR 10 China 6 RHC 9 Source: fdi Markets Page 18
Uganda reports a slight increase in FDI project numbers in 2015 Uganda, #10 destination in Africa FDI projects in Uganda 42 24 28 17 15 18 23 24 7 2007 2008 2009 2010 2011 2012 2013 2014 2015 US$4.7b invested in 2015, a strong increase from 2014 2,036 jobs created in 2015, 9.7% higher than 2014 Top 5 sources for FDI projects in Uganda Kenya UAE Norway 1 2 14 Top 5 sectors for FDI projects in Uganda FDI projects by sources (2015) Sectors FDI projects (2015) Business services Financial services TMT 7 5 3 India 1 DIP 2 Russia 1 RHC 2 Source: fdi Markets Page 19
Conclusion Page 20
Looking forward Staying the course: Investors focused on longer term potential Nothing fundamentally new or surprising in our analysis good news! We are seeing a process of evolution - ongoing diversification of destination markets and sectors, as well as sources of investment. This evolving process will continue in coming years, notwithstanding economic headwinds. Risk & opportunities likely to be more uneven, and we anticipate a shift in emphasis from rapid expansion to consolidation and striking a greater balance between growth, profitability and risk management. EY s 7-P s strategic framework provides a tool to support investors to focus on the right questions to stay the course in Africa Page 21
Focusing on effective execution in Africa EY s 7-P model for effective strategy in Africa Page 22
Our core message Do not get distracted by shorter term noise. Maintain the longer term view, keep your focus and stay the course. Page 23
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