AFRICAAFRICA

DARK HOLEDARK HOLEORORROUGH ROUGH DIAMOND ?DIAMOND ?

Hiroshima 1945Hiroshima 1945

In 1945 Detroit was In 1945 Detroit was experiencing prosperityexperiencing prosperity

If you were investing in If you were investing in 1945: 1945: Would you have chosen Would you have chosen Detroit ahead of HiroshimaDetroit ahead of Hiroshima

Detroit Detroit 20102010

Hiroshima 2010Hiroshima 2010

Are we expecting Africa Are we expecting Africa to overtake the world ?to overtake the world ?

GDP in $ Billions (PPP)GDP in $ Billions (PPP)2007 2010 2020 ?2007 2010 2020 ?

• SA 467 505SA 467 505• Algeria 227 253Algeria 227 253• Angola 96 115Angola 96 115• Morocco 125 146Morocco 125 146• Liberia (excl BHP) 1.5 2.5Liberia (excl BHP) 1.5 2.5

• USA 14 256USA 14 256• China 8 765China 8 765

It is difficult to grow a It is difficult to grow a business in the USA or business in the USA or ChinaChina• Tight marginsTight margins

• Fierce competitionFierce competition

• Strict regulationStrict regulation

• High labour costHigh labour cost

• Lengthy paperworkLengthy paperwork

• Lots of lawyersLots of lawyers

What caused Africa’s problemsWhat caused Africa’s problems

•FEAR, GREEDFEAR, GREED

What is driving the GROWTHWhat is driving the GROWTH

•GREEDGREED

FEAR FOR AFRICA CONSIST FEAR FOR AFRICA CONSIST OF:OF:• Violence, law enforcementViolence, law enforcement

• Uncertainty of numbersUncertainty of numbers

• Political, legislation Political, legislation

• Financial viability Financial viability

• Malaria, climateMalaria, climate

• Staff willingness to venture to go thereStaff willingness to venture to go there

• Infrastructure ?: Transport, health, shopsInfrastructure ?: Transport, health, shops

Did the last 10 years reduced these fears ?Did the last 10 years reduced these fears ?

Fact or Fiction:Fact or Fiction:

• Continent with biggest % of new tarred Continent with biggest % of new tarred roads over last 10 yearsroads over last 10 years

• Continent with biggest % of new rail Continent with biggest % of new rail tracks in last 10 yearstracks in last 10 years

• Greatest potential for expansion in next Greatest potential for expansion in next 10 years10 years

• Massmart, Woolies, Foschini, Edgars (< 10%)Massmart, Woolies, Foschini, Edgars (< 10%)

• Shoprite 15% of sales, 20% of profit.Shoprite 15% of sales, 20% of profit.

• African Bank, CapitecAfrican Bank, Capitec

• Sanlam, MetropolitanSanlam, Metropolitan

• The big 4 banksThe big 4 banks

• Illovo, Tongaat operates on land 3 times the Illovo, Tongaat operates on land 3 times the size of Belgiumsize of Belgium

• Omnia, Afgri, AstralOmnia, Afgri, Astral

• Big construction contracts, materialsBig construction contracts, materials

• Transport, logistics, Car dealers, TourismTransport, logistics, Car dealers, Tourism

• Mining, mining, miningMining, mining, mining

Small DevelopmentsSmall Developments

• Transnet privatising more railsTransnet privatising more rails

• China offering to build railways China offering to build railways rather than pay for mining rightsrather than pay for mining rights

• Current CHEAP cost of capitalCurrent CHEAP cost of capital

Rank City/Urban area Country

Average annual growth

2006 to 2020, in %

1 Beihai China 10.58

2 Ghaziabad India 5.2

3 Sana'a Yemen 5

4 Surat India 4.99

5 Kabul Afghanistan 4.74

6 Bamako Mali 4.45

7 Lagos Nigeria 4.44

8 Faridabad India 4.44

9 Dar es Salaam Tanzania 4.39

10 Chittagong Bangladesh 4.29

11 Toluca Mexico 4.25

12 Lubumbashi Congo 4.1

13 Kampala Uganda 4.03

14 Santa Cruz Bolivia 3.98

15 Luanda Angola 3.96

16 Nashik India 3.9

17 Kinshasa Congo 3.89

18 Nairobi Kenya 3.87

19 Dhaka Bangladesh 3.79

20 Antananarivo Madagascar 3.73

21 Patna India 3.72

22 Rajkot India 3.63

23 Conakry Guinea 3.61

24 Jaipur India 3.6

25 Maputo Mozambique 3.54

26 Mogadishu Somalia 3.52

Things to look for:Things to look for:

• Income level of top 5% of populationIncome level of top 5% of population

• TechnologyTechnology

• Big investments: Eg. BHP into DRC, LiberiaBig investments: Eg. BHP into DRC, Liberia

• Population categorisation:Population categorisation:

- Regional identity. Manage small chunks- Regional identity. Manage small chunks

- ID numbers, other individual detail- ID numbers, other individual detail

- Credit history- Credit history

- Better econ stats measurement- Better econ stats measurement

Conclusion:Conclusion:

Whatever rating we give Africa at Whatever rating we give Africa at the moment, we are likely to the moment, we are likely to give it a better rating in 10 years give it a better rating in 10 years time.time.

Question: Question:

Is it time to invest in Africa?Is it time to invest in Africa?