Africa: A New Emerging Markets Frontier?

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  • 27 June 200827 June 2008

    Africa: A New EmergingAfrica: A New EmergingMarkets Frontier?

    Javier Santiso

    Director & Chief Development Economist, OECD Development Centre

    1

    UNECA UNECA

    OECD Development Centre

  • GrowthGrowth Investment:anewdriver?

    40

    D

    P

    PublicandPrivateInvestment%ofGDP

    TheshareofinvestmentinGDPhasincreasedinAfrica,bothpublicandpri ate both domestic and foreign

    30

    35

    P

    e

    r

    c

    e

    n

    t

    o

    f

    G

    D private,bothdomesticandforeign.

    Savingrateincreasedby30%since2002,witnessingmoreprudenteconomic policies

    20

    25

    economicpolicies.

    28

    t

    AfricansavingsandinvestmentratesshareofGDP(%)

    10

    15

    Ghana

    Madagascar

    22

    24

    26

    P

    e

    r

    c

    e

    n

    t

    0

    5

    Madagascar

    Tanzania

    Zambia16

    18

    20

    Investment

    Grossnationalsavings

    2

    UNECA

    Source:OECDDevelopmentCentre/UNCTAD,2008

  • GrowthGrowth PrivatecapitalflowsmoreimportantthanODA?

    70

    n

    )

    DevelopmentaidandprivatecapitalflowstoAfrica2000 2007

    Remittances

    40

    50

    60

    U

    S

    D

    (

    b

    i

    l

    l

    i

    o

    n

    FDIPrivateportfolioflowsOtherprivateflows

    20

    30

    40

    AfricanODA

    0

    10

    20

    10

    2000 2001 2002 2003 2004 2005 2006 2007*

    3

    UNECA

    Source:OECDDevelopmentCentre/UNCTAD,WorldBank,IMF,2008*:UNCTADpreliminaryestimation

  • FDIFDI Recordinvestmentinflowsfor2007

    AfricaFDI2007:$36billion +20%on2006;+200%on2004

    AfricanFDI:Subregionalbreakdown20042006

    FDIoutflows $8billion2006

    Largelyduetosurgingextractiveindustryinvestment:SouthAfricaandoilproducing

    h f

    NorthAfrica

    p gcountriesarestillreceivingthebulkofdirectinvestmenttoAfrica

    PreviouslyofflimitsectorsopeningtoforeignWestAfrica

    SouthernAfrica

    investment:Banking:Congo,Egypt,Nigeria

    Telecoms:Botswana,BurkinaFaso,Cape Verde, Ghana, Namibia

    CentralAfrica

    2006

    2005 CapeVerde,Ghana,Namibia

    Landownership:Morocco

    FDIinflowslikelytoremainstrong,butl di t ib t d b t d d ti ti

    (5) 5 10 15 20 25

    EastAfrica

    US$billion

    2005

    2004

    4

    UNECA

    Source:OECDDevelopmentCentre/UNCTAD,2008 unevenlydistributed bysectoranddestination.

  • FDIFDI AsianinvestmentsdrivingAfricangrowth

    DistributionofcrossborderM&ApurchasesinAfricabyhomeregion,20012006(US$million)

    2001 2002 2003 2004 2005 2006

    World 15524 4684 6427 4595 10509 17569World 15524 4684 6427 4595 10509 17569

    Developed economies 14964 3668 3156 4571 9564 7173

    Developing economies 559 1016 3270 2024 476 9721

    Africa 520 809 569 1849 360 746

    Asia 39 141 2536 175 116 8850Source:OECDDevelopmentCentrebasedonUNCTADcrossborderM&Adatabase,2008

    5

    UNECA

  • EquitiesEquities SouthAfrica:dominatingtheinvestmentlandscape

    Africastilllaggingbehindininvestment20

    EquityflowstoAfricaMonthendaggregateholdings

    comparedtootheremergingregions(Asiaespecially).

    Inturnover,theSAstockexchangeis14

    16

    18

    20

    U

    S

    D

    B

    i

    l

    l

    i

    o

    n

    TotalAfrica

    SouthAfrica

    worth100timesthatofAfricassecondmarket:Nigeria.

    Over20012006period,SouthAfrica10

    12

    14

    receivedasmuchportfolioequityinvestmentastheentirerestofSSA,46timesover

    4

    6

    8

    Africanallocationsinglobalequityfundsremainsstableat10%oftotal.

    0

    2

    6

    UNECA

    Source:OECDDevelopmentCentre/EPFR,2008

  • PrivateEquityPrivateEquity WelladaptedtoAfricanconditions?

    Totalemergingworldprivateequityfundsraised:

    emerging markets private equity

    CEE/RussiaLatam&Caribbean

    8%

    emergingmarketsprivateequitybyregion2007 2003 2004 2005 2006 2007

    $3.4 bln $6.4 bln $25 bln $33 bln $59 bln

    SubSaharanAfrica2005 2006:$2.3billionraised(+198%yoy)

    27% 8%SubSaharan

    Africa4%

    Middl E & Averagedealsize$1.2million(2005),trendingtowardslargerdeals

    SouthAfrica:81%ofinvestments,Nigeria50%ofremainder (2005)

    EmergingAsia52%

    MiddleEast&NorthAfrica

    9%

    remainder(2005)

    Topsectors:Transport,consumerrelatedinvestments,telecommunications/IT(2005)

    f $ b ll f f d

    Above:OECDDevelopmentCentre/AfricanVentureCapitalAssociation,EMPEA,2008

    7

    UNECA

    2006:first$1billionpanAfricanfund

  • BondsBonds Loweringspreadssignalincreasedconfidence

    1800

    )

    Egypt 450

    500

    1400

    1600

    S

    p

    r

    e

    a

    d

    (

    B

    P

    Morocco

    SouthAfrica

    EMBIGlobal

    h300

    350

    400 Ghana

    Gabon

    EMBI

    800

    1000

    1200 Ghana

    Gabon

    200

    250

    Global

    SouthAfrica

    Egypt

    400

    600 100

    150

    0

    200

    8

    UNECA

    Source:OECDDevelopmentCentre,basedonThomsonDatastream,2008

  • OpportunityOpportunity SovereignDevelopmentFunds:futureinvestors?

    0 500 1000 1500 2000 2500 3000 3500

    USDbillion

    SovereignWealthFundsEmergingmarketinvestmentpotential

    SWFstotalassets

    Potential2018SWFflowstoEM

    United Arab Emirates: ADIAUnitedArabEmirates:ADIA

    Norway:PensionFundGlobal

    PotentialcurrentSWFflowstoEM

    Si GIC

    IfSovereignDevelopmentFundsallocated10%oftheirportfoliostoemerginganddevelopingcountries,thiswillgenerateinflowsof$100billion/year overthenext

    Singapore:GIC

    Kuwait:KIA

    China:CIC

    10years.

    Withsuchhugepotentialflows,itiscriticaltoaddressSWFimpactondevelopingworldearlyon.

    Russia:StabilisationFund

    Singapore:Temasek

    DevelopmentAidDACdonors

    SWFswilldwarfODAflowstodevelopingworld.

    9

    UNECA

    $1.4trilliontotheemergingworldovercomingdecade?

  • DevDev CentreCentre Aplatformforglobaldialogue

    NonOECDmembersOECDmembersat

    DevelopmentCentre

    IsraelChile

    S h Brazil

    Romania

    SouthAfrica

    India

    VietnamThailand

    ColombiaEgypt

    10

    UNECA

  • AEOAEO AfricanEconomicOutlookimpact

    InternationalForumonAfricanPerspectivesParis June 2008

    SeminaronCapitolHillWashingtonD.C,June2008

    Paris,June2008

    EU Africa SummitEUAfricaSummitLisbon,December2007 TICAD

    Tokyo,May2008

    AfDBAnnualMeetingMaputo,May2008

    InternationallaunchatAfDBAnnualAssembly:11th May2008 Europeanlaunch:13th May2008 Over40presentationsandeventswithin3monthsofpublication

  • 27 June 200827 June 2008

    Javier Santiso

    Director & Chief Development EconomistDirector & Chief Development Economist, OECD Development Centre

    12

    UNECA UNECA

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