Sub-Saharan Africa s Potentials, Achievers and Champions. Thalma Corbett

Sub-Saharan Africa s Potentials, Achievers and Champions Thalma Corbett 18 February 2015

Agenda Relative Sizes of Economies and Recent Rebasings Key External and Domestic Risks Faced by Africa Potentials, Achievers and Champions..and those under Pressure 2

Economic Size - North Africa and SSA Sub-Saharan Africa 2014E Nominal GDP, $bn North Africa 2014 E Nominal GDP, $bn Libya, 67.57 Tunisia, 48.15 Sudan, 63.10 Morocco, 107.02 Algeria, 222.71 Egypt, 298.31 Gabon, 20.24 Chad, 15.84 Senegal, 15.89 Mozambique, 17.20 Zambia, 26.55 Cameroon, 32.16 DRC, 32.95 Mauritius, 12.26 Burkina Faso, 13.38 Namibia, 13.68 Republic of Congo, 14.11 Botsw ana, 15.29 Equatorial Guinea, 15.40 Zimbabw e, 15.77 Uganda, 22.12 Côte d'ivoire, 33.96 Ghana, 35.98 Tanzania, 36.36 Ethiopia, 47.24 Kenya, 60.57 Mali, 12.04 South Sudan, 11.89 Madagascar, 11.19 Benin, 9.24 Niger, 8.29 Rw anda, 7.61 Guinea, 6.77 Sierra Leone, 5.41 Nigeria, 546.44 South Africa, 347.08 Other, 38.18 Angola, 147.87 3

Recently Rebased Economies 4

Risks Faced by Africa External Factors Sharp fall of the oil price Less demand for Africa s oil from the US Softer precious and base metal commodity prices Weak euro zone growth Slower growth in China Impact of interest rate tightening in the US on Africa s portfolio flows Domestic Factors Fiscal mismanagement Rising external debt risks compounded when currencies under pressure Security risks and terrorism Competitiveness of largest economies declining, difficult general business environments Ebola virus 5

International Commodity Prices Have Dropped Significantly, with the Outlook Remaining Largely Subdued Global Commodity Prices Global Commodity Indices 7,500.00 120.00 320 150 7,000.00 100.00 300 140 6,500.00 80.00 280 130 260 120 6,000.00 60.00 240 110 5,500.00 Source: Bloomberg 40.00 220 Sources: Reuters, Bloomberg 100 5,000.00 20.00 200 90 Copper ($/tonne, lhs) ICE Brent Crude ($/bbl, rhs) Reuters Jefferies Commodities Index (lhs) Bloomberg Commodities Index (rhs)

Africa s Major Oil Exporters Algeria - 98% Libya - 98% Critical Dependence High Dependence Medium Dependence Ivory Coast - 26% > 90 89 51 < 50% Ghana - 20% Niger - 24% Chad - 96% Nigeria - 90% Equatorial Guinea - 93% Congo - 75% Gabon - 78% Cameroon - 40% Angola - 97% DRC - 31% Sudan & South Sudan - 80% Source: NKC Research 7

Trade in Africa Africa s Exports Hydrocarbons account for the vast majority of Africa s total exports Electrical equipment Primary African Exports (% of total, 4-year average) Copper 1.9% 1.9% Source: Trade Map More specifically, hydrocarbons represented more than 57% of Africa s total exports on average during the 2010-13period Mineral ores 3.6% Precious metals & stones 6.9% Oil, gas & fuels 57.3% 0% 20% 40% 60% 80% Precious metals and stones exports are a distant second Mineral ores accounted for an average of 3.6% of Africa s total exports over the last four years 8

Trade in Africa (2) Oil & Gas Exports Within the hydrocarbons category, the export of crude oil dominates. During the 2010-13 period, crude oil accounted for an average of 75% of total hydrocarbon exports The remainder is made up of petroleum gases (12.8%), non-crude petroleum oils (9.8%), coal (1.9%) and other hydrocarbons (1%) Source: Trade Map 350.00 300.00 250.00 African Oil & Gas Exports (% of total, 4-year av erage) Crude petroleum oils 74.7% Crude Petroleum Oil Exports ($'bn) Source: Trade Map Petroleum gases 12.8% Non-crude petroleum oils 9.8% Coal 1.9% Other 0.9% Despite crude oil s dominance, exports declined in 2013 and 2014, which is ascribed to significantly lower exports to the US 200.00 150.00 100.00 50.00 0.00 2010 2011 2012 2013 Crude petroleum oils 9

Trade in Africa (3) Export Markets While the US has received the bulk of Africa s exports between 2009 and 2013 an average of 12.4% total exports to the US were overtaken by China in both 2012 and 2013 While Africa s exports to the US fell from a peak of $103bn in 2008 to only $48bn in 2013, exports to China increased strongly in recent years Similarly, Africa s exports to India grew by an astounding 120% from 2009 to 2013 10

Trade in Africa (4) Exports to BRIC Countries Africa s exports to China and India have dominated the BRIC landscape in recent years, with China receiving 59% of Africa s exports to BRIC countries during 2009-13, and India receiving 27% over the same period Exports to Brazil amounted to 13% of Africa s exports to BRIC countries over the 2009-13period Exports to Russia amounted to 1% of Africa s exports to BRIC countries over the period 11

The Economic Outlook Has Deteriorated in Most Salient Markets, Except for the US 8.00 7.00 6.00 China Real GDP Growth (%) Oct'14 vs. Jan'05 forecasts Green: Upward Revision Red: Downward Revision 5.00 4.00 3.00 2.00 India SSA US 1.00 0.00-1.00 EZ 2012 2013 2014 2015 2016 Source: IMF

Africa s Dependence on Euro Area for Trade Cape Verde Libya Sao Tome and Principe Tunisia Seychelles Central African Republic Botswana Mauritius Morocco Cameroon Algeria Madagascar Mozambique Guinea Niger Sierra Leone Comoros Equatorial Guinea Ivory Coast Namibia Malawi Nigeria Ethiopia Mauritania Egypt Liberia Kenya Congo Ghana South Africa Uganda Exports to euro zone (% of total exports, avg 2009-13) 0% 20% 40% 60% 80% 100% 93.0% 75.2% 72.1% 71.0% 64.2% 63.0% 62.7% 61.3% 58.4% 57.4% 53.8% 51.0% 47.8% 44.0% 40.3% 39.1% 36.4% 35.7% 34.8% 29.8% 29.7% 29.0% 28.8% 27.9% 26.7% 25.8% Source: Trade Map 25.7% 24.7% 21.2% 19.7% 19.6% Cape Verde Sao Tome and Principe Saint Helena Tunisia Gabon Algeria Morocco Guinea Seychelles Central African Republic Mauritania Guinea-Bissau Senegal Angola Chad Cameroon Benin Togo Libya Ghana Burkina Faso Equatorial Guinea Comoros South Africa Egypt Sierra Leone Burundi Congo Niger Gambia Ivory Coast Eritrea DRC Nigeria Mali Mauritius Western Sahara Mozambique Imports from euro zone (% of total imports, avg 2009-13) 0% 10% 20% 30% 40% 50% 60% 70% 80% 75.8% 63.4% 58.8% 54.5% 52.5% 48.1% 46.8% 45.1% 43.1% 42.8% 41.5% 41.4% 40.1% 38.3% 37.9% 36.5% 35.7% 35.0% 33.7% 32.5% 31.3% 29.1% 28.3% 27.8% 27.7% 26.9% 26.8% 25.6% Source: Trade Map 25.5% 25.3% 25.2% 25.1% 24.8% 24.4% 23.8% 22.8% 22.6% 22.6%

Trade in Africa Africa s Imports Africa s imports are considerably more diverse than the continent s exports, but oil & gas still made the largest average contribution over the 2010-13 period (15.6%) as the continent s refining capacity remains limited Cereals Electrical equipment Vehicles Machinery Primary African Imports (% of total, 4-year average) 4.2% 7.6% 8.7% 11.9% Source: Trade Map Countries such as Kenya, Ethiopia, Tanzania and Senegal spend more than 20% of their import bill on oil Oil, gas & fuels 15.6% 0% 5% 10% 15% 20% Machinery placed second (11.9%) in terms of imports, and vehicles came in third (8.7%) 14

Trade in Africa (2) Africa s Imports Africa s imports from China have risen sharply over the past decade, increasing by an average of 25% p.a. from 2004 to 2013 As a result, imports from the Asian giant accounted for 14.2% of total African imports in 2013, amounting to some $84bn On the other hand, imports from the US (the combined second largest source of Africa s imports during 2009-13) declined from a peak of $41bn in 2011 to $35.6bn in 2013 15

Chinese Investment in SSA Chinese Investment Trends Chinese investments in sub- Saharan Africa (SSA) have increased significantly in recent years, from $8.3bn in 2006 to $40.1bn in 2013 From a country-level perspective, Chinese investment is often volatile from one year to the next This is ascribed to the fact that China often invests in what it deems the most lucrative largescale projects across the continent 16

Chinese Investment in SSA (2) Chinese Investment by Country Regardless of the annual volatility exhibited by Chinese investments into a specific country, over the course of the last five years, Nigeria has been the preferred investment destination During the 2009-13 period, China invested roughly $14.6bn in Nigeria Ethiopia follows close on Nigeria s heels, having received around $12.5bn in Chinese investments during 2009-13 17

Chinese Investment in SSA (3) Chinese Investment by Sector Chinese investment in energy projects has increased significantly in recent years, from a mere $3bn in 2006 to $14.5bn in 2013 Investments in metals and transport have also realised significant growth 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Chinese Investment in SSA ($'bn) Sources: The American Enterprise Institute and The Heritage Foundation Energy Metals Transport Real estate Finance Unsurprisingly then, investment in energy projects represented the largest share (37.5%) of total Chinese investments over the 2009-13 period Investment in metals (24.7%) and transport (21.5%) also represent fairly large shares 18

Chinese Investment in SSA (4) Chinese Investment in Energy Sector by Country In relation to China s investments specifically in energy-related projects, Uganda (13.8%), Nigeria (10.9%), Ethiopia (10.7%) and Tanzania (10.6%) were the main recipients 19

Chinese Investment in SSA (5) Chinese Investment in Transport Sector by Country 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 Chinese Investment in SSA Transport Sector ($'bn) Sources: The American Enterprise Institute and The Heritage Foundation Transport Other 15.4% Ethiopia 16.7% Nigeria 13.8% Chinese Investment in SSA Transport Sector (% of total, 2009-13) Chad 18.5% Kenya 12.3% Sources: The American Enterprise Institute and The Heritage Foundation Congo 4.7% Mozambique 4.0% Cameroon 6.4% Angola 3.2% Ivory Coast 2.6% Sierra Leone 2.5% China s investment in SSA s transport sector has shown strong growth in recent years In relation to China s investments specifically in transport-related projects, Chad (18.5%), Ethiopia (16.7%), Nigeria (13.8%), and Kenya (12.3%) were the main recipients 20

South Africa Outward FDI World vs. Africa South Africa Outward FDI Stock (Rbn) South Africa Outward FDI Stock (%) 1,200.00 50% 1,000.00 Source: SARB 40% 800.00 600.00 400.00 30% 20% 200.00 10% 0.00 1997 1999 2001 2003 2005 2007 2009 2011 2013 0% 1997 1999 2001 2003 2005 2007 2009 2011 2013 Outside Africa Africa Outside Africa Africa Source: SARB South African FDI stock in Africa increased from around 5% of the country s global FDI stock in 1996-99 to more than 20% during 2008-13 FDI stock in Africa increased by a CAGR of more than 30% over the past decade double the rate seen in non-african stock growth 21

South Africa Outward FDI (2) Investment into Africa SA Outward FDI Stock in Africa (Rbn) SA Outward FDI Stock in Africa (%) 210.00 Source: SARB 100% 180.00 80% 150.00 120.00 90.00 60.00 30.00 0.00 2007 2008 2009 2010 2011 2012 2013 Mauritius Mozambique Nigeria Ghana Namibia Other 60% 40% 20% Source: SARB 0% 2007 2008 2009 2010 2011 2012 2013 Mauritius Mozambique Nigeria Ghana Namibia Other Mauritius accounts for 45% of South African FDI stock on the continent Mauritius, Mozambique, Nigeria, Ghana and Namibia account for 75% The remainder of the top 10 are Botswana, Zimbabwe, Zambia, Swaziland and DRC Mauritius & Nigeria declined from 76.8% of FDI stock in 2007 to 51% in 2013 22

The Top and Bottom Performers - 2014

The Top and Bottom Performers - 2015

Africa s Economic Growth 25

Foreign Direct Investment 26

Enough Reserves for a Rainy Day? 27

External Vulnerability Senegal -22.13 2.2 57.30 Zambia -17.70 3 28.00 Nigeria -18.60 2.60 38.9 Ghana -38.72 5.5 47.50 Kenya -6.22 8.3 28.50 Source: NKC Research -60.0-40.0-20.0 0.0 20.0 40.0 60.0 80.0 100.0 FX reserves ($'bn) LCU/$ (% depreciation since January 2014) External Debt/GDP (%)

% Exchange Rate Trajectories Exchange Rates (LCU/$, rebased) Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 10.0 0.0-10.0-20.0-30.0-40.0-50.0-60.0-70.0 Angola Ghana Kenya Nigeria Tanzania Uganda Zambia Source: Reuters

% Bouts of Frontier and Emerging Market Risk Aversion bps above UST 11.5 10-year Sovereign Bond Yields Sovereign Bond Spreads (10-year) Source: Reuters 1,000.0 Source: Reuters 10.0 800.0 8.5 7.0 5.5 600.0 400.0 4.0 200.0 2.5 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Ghana 8.5% 2017 Nigeria 6.38% 2023 Senegal 8.75% 2021 Zambia 5.375% 2022 Gabon 8.2% 2017 Kenya 6.875% 2032 0.0 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Kenya Senegal Zambia Gabon Nigeria Ghana

Competitiveness 31

Business Environment Most Improved Countries in the Previous Eight Doing Business Indices Ranking 2008 2009 2010 2011 2012 2013 2014 2015 1 Egypt - Rwanda - Morocco - - - 2 - - - Rwanda - - Rwanda Togo 3 Ghana - - - - - - Benin Sao Tome Ivory Coast 4 - - - - - - and Principe 5 - Senegal - Cape Verde Cape Verde Burundi - Senegal Burkina Sierra Rep. of 6 - - - - Djibouti Faso Leone Congo 7 - Botswana - Zambia Burundi - Ivory Coast - 8 Kenya - - - - - Burundi - 9 - - Egypt - - - - - 10 - Egypt Liberia - - - - - Number of African Countries in Top 3 4 3 3 5 1 4 5 10 Source: World Bank Non-African countries are noted with a - 32

Potentials, Achievers and Champions. and those under Pressure Dependence on US, vs. euro area, or China for trade and investment North African countries (Libya, Tunisia, Morocco, Algeria), Cape Verde, Mauritius Dependence on Gulf Cooperation Council (GCC) for aid and investment Egypt, Morocco Dependence on hydrocarbons for GDP output, fiscal revenue, export receipts & investment Nigeria, Angola, Algeria, Libya, Gabon, Sudan, South Sudan, Cameroon, Ghana, Equatorial Guinea, Chad, Republic of Congo Frontier markets for commodity exploration Uganda, Kenya, Tanzania, Mozambique 33

Potentials, Achievers and Champions. and those under Pressure (2) Dependence on copper, gold, iron ore DRC, Zambia, RSA, Ghana, Tanzania, Mali, Burkina Faso, Ivory Coast, Sierra Leone, Mauritania Dependence on foreign investors in local bond markets RSA, Nigeria, Kenya, Ghana, Zambia Large share of foreign currency denominated bonds Ghana, Zambia, Kenya, Ethiopia, Gabon Dependence on weather East Africa, Malawi, Mozambique, Morocco Countries relatively better positioned in 2015 Kenya, Senegal, Ethiopia, Botswana, Namibia 34

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