Malcolm Pautz, KPMG - Africa Commodity Outlook
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Transcript of Malcolm Pautz, KPMG - Africa Commodity Outlook
World population
YEAR PEOPLE (bln)
1950 2.5 2010 6.8 2050 9
2
$16T $1T $7T
Budget $40 000 000 000 000
Global needs/challenges
2
3
YEAR PEOPLE (bln)
`
`
1950 0.2 2010 0.95 2050 2.00
Africa population
5 Budget $1 000 000 000 000
Africa needs
The African context…
In 2013, Africa was the world’s fastest-growing continent at 5.6% a year
GDP is expected to rise by an average of over 6% a year between 2014 and 2024
Africa’s dependence on primary commodity exports leaves it vulnerable to global market fluctuations
Africa’s institutional, regulatory, and administrative reform processes is only halfway along
Commodity-based industrialization is still largely undeveloped
Africa’s Share of Global Reserves and Production, Selected Minerals (%)
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Commodity Price Trends
Commodity Price Index, January 1980 – January 2011
Commodity Price Forecast
Source: World Bank, nominal USD, January 2014
Drivers of African commodity demand
■ Global population growth
■ Economic growth
■ Urbanization and labour force expansion
■ Availability of comparatively cheap resources
■ Increasing / increased political stability (less sanctions)
■ Global Economic ties
KPMG outlook for commodity demand
■ Mild acceleration in global growth due to demand in advanced economies during 2014 with some acceleration in 2015 and 2016
■ Cyclical swing in advanced economies boosting trade and exports in emerging markets
■ However, Emerging markets will remain under pressure – US tapering effect and Chinese growth and domestic troubles
■ Global inflationary pressures are anticipated towards end of 2014 ■ Result in increase in certain commodity prices – although US tapering effect
could have a negative on commodity pricing
■ Expectation of inflationary pressures could lead to increased interest rates in 2015 and 2016, tampering global growth and increased inflation over 2017 to 2018.
KPMG outlook for commodity demand (cont…)
■ Further tapering of Quantitative Easing (QE) in the US could potentially negatively affect base metals prices (such as copper) in the future
■ Base metals prices are expected to remain static, but could decline due to weaker-than-expected demand over the medium term
■ Reversal could occur when production of goods increase because of global growth
■ Generally – it is expected global growth will push up overall demand for commodities in the short term – resulting in higher prices
■ Over the medium and long term, prices are expected to slow with supply imbalances catching up with demand as well as further QE tapering
Africa’s Resource Spread
Mineral Resource Deposits
Source: The Economist
Sources of Demand
Africa’s Main Export Destinations and Origin of Imports 2001, 2008 and 2011 (% share)
Top 10 African Exporters
Key Commodity Interest Areas: America
Share of Top Five Exporting Countries and Top Five Export Products to the US under AGOA, 2011 (%)
Key Commodity Interest Areas: China
Special Economic Zones setup by PRC as of 2011
1. Chambishi, Zambia - copper and copper related industries.
2. Lusaka, Zambia - garments, food, appliances, tobacco and electronics. (classified as a subzone of the Chambishi zone)
3. Jinfei, Mauritius - manufacturing (textiles, garments, machinery, high-tech), trade, tourism and finance.
4. Oriental, Ethiopia - electrical machinery, construction materials, steel and metallurgy.
5. Ogun, Nigeria, - construction materials, ceramics, ironware, furniture, wood processing, medicine, and computers.
6. Lekki, Nigeria - transportation equipment, textiles, home appliances, telecommunications, and light industry.
7. Suez, Egypt - petroleum equipment, electrical appliance, textile and automobile manufacturers.
The African Opportunity
increase diversification in export products
diversification of trade partners
promotion of regional / intra-African trade
commodity-based industrialization
implementation of strategic trade and infrastructure policies
Development of value-add capabilities within the continent
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Algeria
Morocco
Tunisia
Mali
Cameroon
DRC Gabon Congo
Nigeria
Niger Chad
Libya Egypt
Central African
Republic
Angola
Madagascar
Mauritius
Seychelles
Comoros
Sudan North
Benin
Mauritania
Burkina Faso
Ghana
Senegal
Guinea
Sierra Leone Liberia
Equatorial Guinea
Namibia
Botswana
Zambia
South Africa
Lesotho Swaziland
Mozambique Zimbabwe
Malawi
Tanzania
Kenya
Somalia Uganda
Rwanda
Burundi
Ethiopia
Djibouti
Sudan South
São Tomé and Principe
Cape Verde
Guinea-Bissau
Togo Côte d’Ivoire
The Gambia
Eritrea
Copper
Coal
Iron Ore
Manganese
Africa’s Mineral Deposits
Precious metals
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Potential African Mining Destinations
Does Country Attractiveness attract FDI?
Types of Project Investment
Source: IJonline
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Africa & Middle East Americas Asia & Pacific Europe
Global Equity Investments by Region/Sector - Primary and Secondary Markets 2013 to Sept
Primary market Secondary market Refinancing
USDm
Copper
Coal
Iron Ore
Manganese
Freight
Southern African Corridors
SADC RIDMP Projects by Sector
Botswana
A heavy haul railway line and a port at Ponta Techobanine ((Mozambique, Botswana, Zimbabwe)
TransKalahari/Mamuno OSBP (Namibia, Botswana)
Botswana 8 projects
Botswana has 2 cross border projects with Mozambique/ Namibia
Techobanine Heavy Haul Railway (Techobanine) (Mozambique, South Africa, B o t s w a n a , Z i m b a b w e , Swaziland)
Botswana has 1 cross border projects with DRC/Swaziland/
Tanzania/Zambia
Botswana has 3 cross-border projects with South Africa
Kinshasa-llebo railway link (DRC, Tanzania, Zambia, Zimbabwe, South Africa)
Trans Kalahari Railway (Namibia, Botswana)
Botswana has 4 cross-border projects with Zimbabwe
New Transport Projects
Namibia
TransKalahari/Mamuno OSBP (Botswana, Namibia)
Luanda‐Windhoek Corridor roads (Angola, Namibia)
Trans‐Caprivi‐western Zambia Railways from Kolwezi (DRC), through Solwezi (Zambia) to Mongu, Sesheke (Zambia) and Katima Mulilo (Namibia) (DRC, Zambia, Namibia)
Katima Mulilo/Wenela OSBP (Zambia , Namibia)
Oshikango‐Santa Clara OSBP – Border Post (Angola, Namibia)
Trans Kalahari Railway (Botswana, Namibia)
Ariamsvlei OSBP Border Post (Namibia, South Africa)
New Transport Projects
Tanzania
Transport Nakonde/ Tunduma OSBP (Tanzania, Zambia)
Restructuring of Zambia’s railway systems (Dar‐es‐Salaam Corr idor. From the Zambian Copper Belt to south‐western Tanzania. (Tanzania, Zambia)
Construction of Mtwara – Songea – Mbambabay railway line with Spurs to Mchuchuma/ Liganga (Tanzania, Malawi, Mozambique and Zambia)
Establishment of Cargo Freight Station (CFS) – Kisarawe
Upgrading of Dar Es Salaam (DSM)- Isaka (ISK) railway line to standard gauge and construction of Isaka – Keza Kigali (Rwanda)/ Musongati (Burundi) railway Line
Tanzania Railways Limited Revival
Mtwara Port and EDZ development (Tanzania (bene f i t i ng coun t r ies inc lude Ma law i , Mozambique and Zambia) Kinshasa- llebo railway link: construction
(Tanzania, DRC, Zambia, Zimbabwe, South Africa)
New Transport Projects
Zambia Transport Nakonde/ Tunduma OSBP Border Post Tanzania, Zambia)
Restructuring of Zambia’s railway systems (Dar‐es‐Salaam Corr idor. From the Zambian Copper Belt to south‐western Tanzania. (Tanzania, Zambia)
Construction of Mtwara – Songea – Mbambbay railway line with Spurs to Mchuchuma/ Liganga (Tanzania, Malawi, Mozambique, Zambia)
Mtwara Port and EDZ development
Katima Mulilo/Wenela OSBP Transport boarder post (Between the towns of Sesheke and Katima Mulilo) (Zambia, Namibia)
Mwami‐Mchinji OSBP Transport Border post (Malawi, Zambia)
Trans‐Caprivi‐western Zambia Railways from Kolwezi (DRC), through Solwezi (Zambia) to Mongu, Sesheke (Zambia) and Katima Mulilo (Namibia) (Zambia, Namibia)
Kasumbalesa OSBP Transport Border post (DRC, Zambia)
Chingola‐Solwezi Railway Extension (Zambia, Angola)
Kolwezi- Dilolo Road Rehabilitation (DRC, Zambia, Angola)
Kinshasa- llebo railway link: construction (Tanzania, DRC, Zambia, Zimbabwe, South Africa)
New Transport Projects
West Africa
Nigeria High Speed Rail Nigeria to build a 2,000 mile (3,218 km) nationwide high speed rail (HSR) system.
New Rail Projects
Ghana Eastern Railway Line Project Tema and Tokaradi Port Upgrade
Conducive Environment
Provision of commercial security Management capacity and operational agreement Collaboration between public and private sector addressing liquidity challenge
prevalent in the supply-chain Governance trends:
– preserve existing jobs and aim to create new and local participation – have environmental protection plan – be social conscious
– maintain proper commerciality and – potential stake in projects
Emerging market Political Risk
Developing economies have had a rough ride since US Federal Reserve mooted a wind-down of its money printing
This has had detrimental effect on market bonds and equities
Political risks to FDI go beyond tax hikes or payment risks and extend to expropriation of assets, threats to staff or plant and inventory damage
Traditionally these risks to FDI have been judged by deep local know-how or by government insurance bodies or bespoke political agencies
Recent study shows that a 1% rise in political risk spread leads to a drop in FDI of 12%, or some USD305million on average
Lets not forget CHINA
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Considerations
Healthy banking sector, GDP growth and political will are catalysts for local capital investments
View going forward – make infrastructure, energy and project finance more attractive to larger pools of investment capital
A new market has emerged which is more conservative, more collaborative and willing to innovate to draw in new sources
Institutional investors seeking to scale up their investment flows, need to invest in internal competency (esp construction risk), get their heads around illiquidity of assets and political framework and find the right investment structure.
Governments need to create the right environment, ensure transparency, address market failures, monitor performance and collect data.
Establishment of great collaboration between African countries for the promotion and enhance great accessibility to markets through rail infrastructure