Africa: A New Frontier or False Dawn for
Sustainable Private Equity?
Presented by Herta von Stiegel
November 11, 2010
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Ariya Sustainability ModelA holistic approach to sustainable investment
* Bottom-of-the-Pyramid Consumer; typically earning ~<US$2 per day
Accountability • Measurement of social and
environmental impact • External monitoring
Investment analysis• ESG evaluation• Qualitative and quantitative
assessment
Sector• Poverty alleviation• Service enabler• Environmental sustainability
Geography • Defined by need and demand• Leapfrogging technology gaps• Preserve environmental capital
Economic impact
• Profitable, competitive and efficient business operations
• Demand-driven businesses for growing middle class and BOP* consumers
• SME development
• Increase tax revenue to governments
• Reduce gap in value of imports versus value of exports
Environmental impact
• Sustainable use of natural resources
• Promotion of environmentally sound products and services
• Resource stewardship
• Pollution prevention
• Investment in companies addressing climate change
• Carbon credits
Governance
• Management and structures
• Business ethics
• Management structures and ESG
• Compliance with local law and international standards
• Responsible corporate citizenship
• Certified environmental management systems
• Transparency
• Support of PRI, Equator Principles
Social impact
• Stakeholder engagement
• Community collaboration
• Job creation
• Skills development
• Human health and safety
• Economic inclusion and wealth creation at the BOP
• Introduction of new technologies
• Local ownership schemes
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1,658
1,169
India
1,409
1,329China
2,199
1,532
Asia
Europe
731
664
North America
445
339
SouthAmerica
769
572
Global Population Growth 1950-2050Africa’s population is expected to double by 2050
Source: UN (Figures in millions)
1,998
965
Africa
Population 2007
Population 2050
Population 1950
• Forecast population of 2bn by 2050• 33% of global mineral resources• 20% of the world’s land mass• 3% of global FDI• Labour force expected to grow at 4%
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Africa and Climate ChangeThe continent with the lowest emissions stands to lose the most
Source: The Lancet Vol 373 May 16, 2009
Comparison of undepleted cumulative CO2 emissions by country for 1950–2000
Regional distribution of four climate-sensitive health consequences (malaria, malnutrition, diarrhoea, and inland flood-related fatalities)
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Renewable energy & clean technology• Essential for sustainable economic growth• Unreliable energy supply can stunt growth by 4% in SSA• Consumption of energy shows strong links to income per capita
Key Sectors for Growth and ImpactEnabling sectors that are key to poverty alleviation and economic growth
Source: How Exciting is Africa’s Potential, Goldman Sachs Strategy Series, Oct 2010; The Economics of Renewable Energy Expansion in Rural Sub-Saharan Africa, The World Bank, Jan 2010
Microfinance• Key to tackling poverty and fostering entrepreneurship• SME sector contributes more than 50% to gross GDP
Telecommunications• Driver of knowledge based activities • The mobile market has seen a cumulative 50% annual growth rate
over the last 5 years- Mobile phone usage increased by almost 20x between 2000 and 2008 in
the 11 largest African countries (‘African 11’)
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Opportunities for InvestmentRecognizing Africa’s potential and contributing to its positive growth
Source: IMF Data Mapper 2009; How Exciting is Africa’s Potential, Goldman Sachs Strategy Series, Oct 2010
Macro stability
Macro conditions
Human capital
Political conditions
Technology
0 1 2 3 4 5 6 7
2009 Average for 'African 11' Countries
1997 Average for 'African 11' Countries
Growth Environment Score(GES)
Current International Presence Africa’s Growth Conditions
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Africa 1994/95Africa 2009
Rule of Law and Good Corporate GovernancePrerequisites to attracting foreign investment
Source: Freedom House Countries are scored on a scale of 1-7. Combined average rating for civil liberties and political freedom are 3-5 for ‘partly free’ and 5-5-7 ‘not free’
.
• Cote D’Ivoire held its first round of presidential elections, which had been postponed 6 times since 2005, last month
• Elections are scheduled for 2011 in the DRC
• Zimbabwe and the Rep. of the Congo are the only two countries to have regressed since 1995
• In 2009 successful elections have been held in Malawi, South Africa and Zambia
Partly Free
Free
Not Free
African Private Equity MarketAfrica is a growth area with historic IRRs* of 43.5% for private equity investments
* Ariya Capital research: sample of 40 mid-to-large sized deals in Africa between 2000 - 2007
African Private Equity Investments – 2000-2007 mid to large sized deals*
There is a significant opportunity to achieve superior financial returns AND positive social and environmental impact by investing in Africa
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