FUTURE OPPORTUNITIES IN BUSINESS AND THE DIGITAL ECONOMY Clifford D. Mpare, CFA Chairman and CEO Frontline Capital Advisors, Ltd.
2022 Vision: Whose GDP will grow most in the world by 2022? RANK EXPECTED GDP GROWTH REGIONAL RANK EXPECTED GDP GROWTH COUNTRY NAME ISO CODE EXPECTED GDP GROWTH IN 2022 (%) GDP GROWTH IN 2010 (%) POPULATION GROWTH 2016 (%) 1 1/16 Mozambique M0Z 13.99 6.69 2.90 Sub-Saharan Africa 2 2/16 Mongolia MNG 8.25 7.31 1.70 East Asia 3 3/16 India IND 8.16 10.26 1.10 South Asia 4 4/16 Myanmar MMR 7.55 5.35 0.90 South-East Asia 5 5/16 Rwanda RWA 7.48 7.32 2.40 Sub-Saharan Africa 6 6/16 Ethiopia ETH 7.47 10.57 2.50 Sub-Saharan Africa 7 7/16 Sierra Leone SLE 7.37 5.35 2.20 Sub-Saharan Africa 8 8/16 Uganda UGA 7.35 7.67 3.30 Sub-Saharan Africa 9 9/16 Bangladesh BGD 7.00 6.03 1.10 South Asia 10 10/16 Lao P.D.R. LAO 7.00 8.02 1.40 South-East Asia 11 11/16 Liberia LIB 6.84 6.09 2.50 Sub-Saharan Africa 13 13/16 Tanzania SEN 6.55 6.36 3.10 Sub-Saharan Africa 14 14/16 Kenya KEN 6.48 8.40 2.60 Sub-Saharan Africa 15 15/16 Côte d'ivoire ETH 6.48 2.02 2.50 Sub-Saharan Africa 16 16/16 Senegal SEN 6.37 4.27 2.90 Sub-Saharan Africa w2 w2 w2 w2 Africa s Top 10 are in the Global First 16; Eastern Africa is the best represented region Source : International Monetary Fund, World Economic Outlook Database, October 2017 2 REGION
Population size in 2010 compared to other countries With 15 % of the World s population Africa controls less than 3% of the Global GDP 156mn Nigeria = Russia (140) = Bangladesh (165) 85mn Ethiopia = Vietnam (88) = Germany (82) = Egypt (78) 70mn Dem Rep Congo = Iran (75) = Turkey (71) 50mn SA = Korea (49) = Spain (46) 40mn Kenya= Algeria (36) = Poland (38) = Canada (34) = Uganda (34) 24mn Ghana = Saudi Arabia (26) = Australia (23) 14mn Zimbabwe = Zambia (13) = Cambodia (14) = Greece (12) 10mn Rwanda = Hungary (10) = Czech Republic (11) Source: IMF, Renaissance Capital estimates
Fastest Growing Cities in Africa FASTEST GROWING SUB- SAHARAN AFRICAN CITIES Annual city growth rate 1995- Share of city in national population (%) Share of city in national pop.in 2025 city density (pop./km2) City,Country 1 Abuja,Nigeria 8.93 1.2 1.4 9,100 2 Ouagadougou,Burkina Faso 7.02 11.3 17 5,600 3 Luanda, Angola 5.87 24.4 29.08 9,990 4 Yaoundé, Cameroon 5.45 8.9 10.07 9,100 5 Kumasi,Ghana 5.04 7.5 8.2 5,200 6 Dar es Salaam, Tanzania 4.77 7.4 8.7 6,600 7 Lilongwe, Malawi 4.75 5.4 7.3 1,479 8 Douala, Cameroon 4.56 42.9 11.8 11,000 9 Mbuji-Mayi, Dem. Rep. Congo 4.47 2.2 2.7 29,689 10 Lusaka, Zambia 4.3 10.9 10.8 8,200 11 Brazzaville, congo 4.19 35.1 33.7 10,540 12 Kinshasa, Dem. Rep. Congo 4.18 12.7 15.7 15,300 13 Nairobi, Kenya 4.08 8.5 10.5 7,700 14 Lubumbashi, Dem. Rep. Congo 4.06 2.3 2.8 9,300 15 Lagos, Nigeria 3.93 6.6 6.8 10,700 16 Kampala, Uganda 3.72 4.7 6.09 3,300 17 Accra, Ghana 3.7 9.5 10.4 3,900 18 Dakar, Senegal 3.66 22.2 24.1 14,000 19 Conakry, Guinea 3.3 15.9 20.3 10,500 20 Abidjan, Cote d'ivoire 3.29 19 23.3 12,900 21 Cotonou, Benin 2.82 21.8 21.2 4,400 22 Khartoum, Sudan 2.53 11.9 13.07 6,400 23 Cape Town, South Africa 2.52 6.7 7.1 5,000 24 Ibadan, Nigeria 2.39 1.7 1.6 7,900 25 Johannesburg, South Africa 2.38 7.3 7.6 2,900 26 Durban, South Africa 2.33 5.7 6 3,500 27 Kano, Nigeria 2.23 2.1 2.2 15,600 28 Addis Ababa, Ethiopia 2.06 3.5 4.3 13,100 29 Maputo, Mozambique 1.37 6.9 9.8 7,000 30 Harare, Zimbabwe 1.3 12.8 14.8 2,800
5 Africa's Boastful Burgeoning Middle Class Source: Ernst and Young The number of middle-class consumers in Africa has expanded more than 60 percent
Africa's boastful burgeoning middle class Source: McKinsey Global Institute, 2010 By 2020 more than half of African households will have discretionary spending power
With Consumer facing industries in Africa expected to grow to $400 Billion by 2020 Africa consumers resemble their Urban counterparts in the rest of the world Notable categories of consumption, apparel, financial services, groceries, the internet and telecommunications Cities offer the best opportunities Local relevance of quality products = preference, lifestyle and daily needs Fast moving goods and importance of brands Hit the right price point Source: The rise of the African consumer Mckinssey
Economic growth is driven by knowing how to make and export things Making things remains a quintessential human endeavour without which there can be no prosperous large economies and no socially stable populous societies Vaclav Smil, (Bill Gates s favourite author)
The Core of the Observatory Thesis: Productive Knowledge Most complex The evolution of productive knowledge Least complex Source: Atlas of Economic Prosperity Hausmann Hildago From mining to electronics
From growing cotton from mining copper Africa is becoming more graduating from being to making T-shirts to assembling cars economically complex a commodity play to MANUFACTURING 10
Labour productivity is good in textiles, excellent in agrobusiness Labour productivity in light manufacturing PRODUCTIVITY TEXTILES Same as Vietnam 50% of China DAIRY FARMING 9x VIETNAM BETTER THAN CHINA Ethiopia s productivity, adjusting for lower wages, is some 3x that of China 11
Mobile Money Report - Africa Leads! Europe & Central Asia: 10.4 million registered accounts 1.4 million active accounts South Asia: 164.2 million registered accounts 40.4 million active accounts Middle East & North Africa: 44.1 million registered accounts East Asia & Pacific 36.6 million registered accounts 7.1 million active accounts Latin America & the Caribbean 23.0 million registered accounts 10.8 million active accounts Sub- Saharan Africa: 277.4 million registered accounts 100.1 million active account Source: GSMA, State of the industry report on Mobile Money 2016 12
Financial Services Trends Millennials Phenomena How is digitalization changing our culture (Facebook, twitter, WhatsApp and LinkedIn) Gen X and Millennials don t start with the same level of loyalty and trust. They are looking for how they will benefit first. Gen X and Millennials will inherit $30 trillion from Baby boomers in 30 to 40 years in US (How will that change their investment decisions and habits about investing in Africa?) P2P, Crowd funding
Fintech Financial Services Trends Fintech start-ups aim to disrupt current practices and do it fast. In 2015, Global Fintech investment grew by 75% $9.6 B to $22.3 Billion Areas of focus: Credit analysis, Big Data, Fraud Detection, A Artificial Intelligence B Block Chain C Cloud Computing D Big Data Fintech increases scale and decrease overheard: solutions may include consumer finance, wealth management, mobile technology, risk management, Health care solutions, life and property insurance and pensions delivery.
Africa offers exciting rates of Return FDI Flows top 5 Countries 2016 $59.6 billion Ethiopia $3.2bn +46.8% Nigeria $4.4bn +46.2% Egypt $8.1bn +17.1% Ghana $3.6bn +9,2% Angola $14.4Bn -11.2% Source: World Investment Report 2013, FCA Research In developing and transition economies, FDI rates are higher than those in developed economies