EY regular presentation - AMCHAM · Making choices EY’s attractiveness survey Africa 2015 . Page...
Transcript of EY regular presentation - AMCHAM · Making choices EY’s attractiveness survey Africa 2015 . Page...
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Making choices
EY’s attractiveness survey
Africa 2015
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Africa attractiveness surveys Background
EY’s 2015 Africa attractiveness survey
Using these qualitative
and quantitative inputs,
we continue to develop
insights and shape
viewpoints in support of
increased investment
into Africa.
Fifth annual Africa
attractiveness survey
Analysis of greenfield and
brownfield foreign direct
investment (FDI) project
flows into Africa for
various periods, going
back as far as 2003
Survey of over
500 business leaders
and investors from
30 countries to
ascertain the
perceived
attractiveness
of Africa as an
investment
destination
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Africa attractiveness surveys 2011 – 2015
EY’s 2015 Africa attractiveness survey
It’s time
for Africa
Building
bridges
Getting down
to business
Executing
growth
Making
choices
2011 2012 2013 2014 2015
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Africa’s FDI landscape
EY’s 2015 Africa attractiveness survey
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Actual FDI numbers FDI project numbers fall, but capital investment and jobs surge
Africa became the world’s second-largest
destination for FDI capital inflows in 2014.
EY’s 2015 Africa attractiveness survey
FDI projects by world region (% change, 2014 vs. 2013)
-21.3%
-17.7%
-17.5%
-14.8%
-8.4%
14.0%
17.3%
Rest of Europe
Middle East
Latin America…
Western Europe
Africa
North America
Asia-PacificCapital
investment
136% YOY growth in FDI
value in 2014
FDI job
creation
68% YOY growth in FDI
jobs in 2014
Source: fDi Markets, February 2015.
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SSA: more capital, more jobs, fewer projects Southern, East and West Africa see slower FDI projects
EY’s 2015 Africa attractiveness survey
Source: fDi Markets, February 2015.
FDI projects
down 11%
SSA
15% YOY drop in FDI projects
Southern Africa
West Africa FDI projects
down 23%
East Africa FDI projects
down 12%
► Some economies –South
Africa, Angola, Nigeria,
Ghana and Kenya –
received fewer FDI
projects.
► But Ethiopia and
Mozambique attracted
growing inflows of projects.
+42.7% +22.7% increase in FDI capital increase in job creation
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Diverse sources ensure ongoing resilience North America and Middle East expand presence
EY’s 2015 Africa attractiveness survey
In 2014, at the source country level, the US regained its title as the largest
investor
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Real estate, hospitality and construction An emerging key growth sector in Africa
EY’s 2015 Africa attractiveness survey
Top two sectors by % share Source: fDi Markets, February 2015.
Top 10 sectors by FDI projects (2014)
Top sectors FDI projects
(share in %)
Jobs created
(share in %)
FDI capital
(share in %)
Technology, media and telecommunications (TMT) 19.6% ||||||||||||||||||||||||||||| 6.4% ||||||||| 5.5% ||||||||
Financial services 18.1% ||||||||||||||||||||||||||| 2.0% ||| 1.2% |
Retail and consumer products (RCP) 14.1% ||||||||||||||||||||| 31.5% ||||||||||||||||||||||||||||||||||||||||||||||| 4.4% ||||||
Real estate, hospitality and construction (RHC) 8.0% |||||||||||| 33.6% |||||||||||||||||||||||||||||||||||||||||||||||||| 43.8% |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business services 7.5% ||||||||||| 1.6% || 0.5%
Transport and logistics 6.3% ||||||||| 3.1% |||| 2.2% |||
Diversified industrial products (DIP) 5.3% ||||||| 1.5% || 0.3%
Automotive 4.1% |||||| 5.7% |||||||| 0.9% |
Coal, oil and natural gas 3.5% ||||| 3.7% ||||| 25.4% ||||||||||||||||||||||||||||||||||||||
Chemicals 3.3% |||| 2.4% ||| 5.2% |||||||
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How foreign investors see Africa
EY’s 2015 Africa attractiveness survey
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Investor perceptions Africa’s attractiveness relative to other regions is down a notch
EY’s 2015 Africa attractiveness survey
Source: EY’s 2015 Africa attractiveness survey (total respondents: 501).
Eastern Europe (0)
201 1
Africa
Asia (+31)
North America (+16)
Western Europe (+15)
Middle East (+8)
Oceania (+6)
Latin America (+2)
Central America (-4)
CIS (-19)
201 2 201 3 201 4
10
9
7
8
6
5
4
3
2
1
201 5
Markets more attractive than Africa Markets less attractive than Africa
Numbers in brackets indicate total attractive responses minus total not attractive responses.
Latin America (-1)
Eastern Europe (-3)
Asia (+26)
North America (+13)
Oceania (+5)
Western Europe (+5)
Middle East (-0.3)
Central America (-5)
CIS (-17) 10
9
7
8
6
5
4
3
2
1
Africa
Western Europe (-4)
Middle East (-10)
Asia (+16)
Oceania (+11)
Latin America (+8)
North America (+5)
Central America (-1)
Eastern Europe (-12)
CIS (-14) 10
9
7
8
6
5
4
3
2
1
Africa
Middle East (-15)
CIS (-17)
North America (+4)
Asia
Oceania (-2)
Latin America (-14)
Eastern Europe (-17)
Central America (-19) 10
9
7
8
6
5
4
2
2
1
Africa
Western Europe (-3)
CIS (-16)
Oceania (+3)
Asia (+1)
Latin America (-2)
10
9
7
8
6
5
4
2
2
1
Africa
North America (+1)
Western Europe (-1)
Central America (-8)
Eastern Europe (-10)
Middle East (-15)
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Investor perceptions But respondents from North America have a more positive view
Source: EY’s 2015 Africa attractiveness survey (total respondents from North America: 100
EY’s 2015 Africa attractiveness survey
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Perception gap persists Those with an established presence remain overwhelmingly positive
EY’s 2015 Africa attractiveness survey
Source: EY’s 2015 Africa attractiveness survey (total respondents: 501).
believe attractiveness
will improve over the next
three years
Africa is the second least
attractive investment
destination in the world
30% believe attractiveness has
improved over the past year
50%
Respondents who are not
established in Africa
believe attractiveness will improve
over the next three years
Africa is the most attractive
investment destination in the
world
believe attractiveness has
improved over the past year 66%
81%
#1
Respondents who are already
established in Africa
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Roadblocks to investment The top five perceived barriers to investing in Africa remain consistent
EY’s 2015 Africa attractiveness survey
► Despite the “Africa rising” narrative and steady
growth in FDI inflows, there has been no quantum
leap in FDI into Africa.
► Respondents have highlighted political risk factors,
such as instability and corruption, as the top
barriers that discourage investment on the
continent. Source: EY’s 2015 Africa attractiveness survey (total respondents: 501).
Unstable
political
environment 55%
Poor basic
infrastructure 14%
Corruption 26%
22% Weak
security
Lack of highly
skilled labor 13%
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The headlines Perspective remains important
EY’s 2015 Africa attractiveness survey
► Africa received the second most FDI capital in
the world, registering year-on-year (YOY) growth
of 136%.
► Sub-Saharan Africa (SSA) will be the second
fastest-growing region in the world this year,
with 22 economies growing at 5%+.
► Successful Nigerian elections are an
important symbol of the ongoing process
of democratization in Africa.
► Established investors remain
overwhelmingly positive about the continent’s
prospects.
Glass half full: “Africa rising”
narrative remains resilient
Glass half empty: economic and
political headwinds
► The World Bank and International Monetary
Fund (IMF) revised their 2015 GDP growth
forecasts down to their lowest since 2009.
► Ebola and terrorist insurgencies have had a
negative impact on perceptions.
► In this year’s survey we are seeing
deteriorating perceptions of Africa’s
investment attractiveness.
► Africa recorded 8.4% YOY decline in FDI
projects in 2014.
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Africa’s long-term growth
EY’s 2015 Africa attractiveness survey
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Strong fundamentals remain intact We believe that the African growth story is real and sustainable
EY’s 2015 Africa attractiveness survey
The African growth story is real 1988–2000 2001–12 2013–30
Above 5%
Between 0% and 5%
Less than 0% (negative)
GDP and Compound
Annual Growth Rate
(CAGR)
Number of economies growing faster than 5% a year
Sources: Oxford Economics database estimates; EY analysis, accessed in August 2014.
11
1 2 3 8
11 6
1 6
21
7 3 1
4
24
Asia-Pacific CIS Central and SoutheastEurope
Middle East SSA
1988-2000 2001–12 2013–30
As a region, SSA
had by far the most
economies growing
at sustained rates
of 5% over the past
15 years, and this
is forecast to
continue for the
next 15 years.
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Addressing structural transformation African countries still underperform on key competitiveness measures
EY’s 2015 Africa attractiveness survey
Institutions
Infrastructure
Macroeconomic
environment
Health and
primary
education
Higher
education
and training Goods
market
efficiency Labor market
efficiency
Financial market
development
Technological
readiness
Market size
Business
sophistication
Innovation
Africa Southeast Asia Latin America and the Caribbean
Africa’s competitiveness performance relative to other regions
Source: Africa Competitiveness Report 2013, World Economic Forum, 2013.
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Toward inclusive, sustainable growth EY’s point of view
EY’s 2015 Africa attractiveness survey
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More risk
Less risk
BEPS initiative momentum Substantial progress in OECD BEPS initiative:
► All workstreams have now reported back.
► Country-by-country reporting (CBCR) is expected to be introduced in relation to 2016 data.
► There has been a proliferation of domestic law changes.
► Progress fuels and informs continued press and NGO interest in tax planning.
What is the impact?
► Transparency workstreams (especially CBCR) change the risk and controversy environment.
► Substance workstreams may require a refresh of transfer pricing policies and documentation.
► Coherence workstreams change the overall approach to tax planning and tax risk management.
Trends and themes
► Increased focus on tax planning and risk management being:
► Aligned to tax policy
► Transparent
► Aligned to business and commercial substance
► General increase in source taxation.
What are companies doing?
Understanding the risk:
► Overall BEPS risk assessment
► CBCR template evaluation
► Peer benchmarking
Addressing substance workstreams:
► Transfer pricing and permanent establishment training
► Transfer pricing policy and documentation review and refresh
► Permanent establishment risk management policy review and refresh
► Greater use of unilateral and bilateral Advance Pricing Agreements (APAs)
Addressing coherence workstreams:
► Rebalance capital structure vs. supply chain
► Restructure finance structures impacted by BEPS measures
► Revisit Hub Cos.
► Business alignment
► Substance
► Transparency
► Sustainability
► Rulings renewal
Questions that boards are asking
► Is the effective tax rate predictable and sustainable?
► Are there unprovided exposures?
► What communications with the market may be necessary?
► Can the tax department manage the diversity of risk and increased breadth of stakeholder interest?
► What is the impact on me and my peers?
► Diverging responses may see “winners” and “losers” by reference to HQ, strategy adopted and geographic footprint.
► Changes may be needed to planning approaches.
► Do I understand the impact of BEPS changes on:
► Relationships with governments?
► Customers?
► Operating model?
Sample risk assessment by key territory
Intragroup financing is impacted by BEPS measures
Hub Co rulings and APAs must be based on full value chain transparency
HQs: global and regional
Hub Co
Main Op Cos
Base erosion and profit shifting (BEPS)
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Making choices EY’s 2015 Africa attractiveness survey
EY’s 2015 Africa attractiveness survey
Download the full report at:
emergingmarkets.ey.com
Follow us on Twitter:
@EY_EmergingMkts
@EY_Africa
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