africa: process industries can unlock resources ... - syngas · imf: >5% gdp growth/yr 2016-2020...

Melissa T. Cook, CFA

Founder & Managing Director

African Sunrise Partners LLC

+1 845 363-4622

[email protected]

www.AfrSun.comOctober 2015

Gasification Technologies Conference

Colorado Springs, CO

October 12, 2015

Africa: Process Industries Can Unlock Resources and Build Economies

mailto:[email protected]

Starting with the Basics:

Africa 101

October 2015 www.AfrSun.com 2

Reality Check: Scale of the Continent


ASP HeatMap: 54 Separate Stories


Source: African Sunrise Partners LLC

What is Changing?

1. Improving governance

2. Urbanization, rise of a middle class

3. Infrastructure upgrades

4. Industrialization and domestic manufacturing

5. Agriculture as a business

6. Technology leapfrog

7. Financial inclusion

8. Globalization: end of Africa’s isolation from world markets


Why Are Things Changing Now?

Status quo is not an option:

Fear of another Arab Spring

Young people pushing for change

Governments focused on:

Putting people to work

Investment framework for private sector

China’s impact is a net positive:

Financing for infrastructure

Affordable consumer & capital goods


Not Politics, Not Charity, Just Business

Political stability in a rising number of countries

Rule of law and anti-corruption measures increasingly effective

Privatization of key sectors

Talent: MBA grads and seasoned managers returning home to Africa

International Financial Agencies offer financing, knowledge, risk mitigation

Commercial counselors at embassies are very plugged in

Department of Commerce: White House policy-- pushing for more US corporate engagement in Africa

President’s Advisory Council on Doing Business in Africa: we’re the channel for private-sector input on policy and action

Power Africa, OPIC, IFC, Ex-Im, African Development Bank, USTDA, USDA, USAID


Macro Tailwinds

IMF: >5% GDP growth/yr 2016-2020

Sound macro and fiscal policies

Improving infrastructure: China’s role

Agriculture and manufacturing productivity

Rising disposable household income

Technology-driven sector transformation

Innovative and profitable local companies

The biggest risk is in not being there!


Africa Will Drive Global Growth for Decades

Young Population: Over 1 billion people and growing rapidly

40% under age 15

Rising education levels, tech savvy, leapfrog into a new century

Booming Economies: Sound macro and fiscal policies

Expanding infrastructure: China playing a huge role

Consumers have money to spend and they want brands

Information and communications technology-based transformation

Skilled and innovative local corporate sector

Mineral Wealth Can Fund Africa’s Future: Large-scale stores of diamonds, gold, cobalt, bauxite, copper, iron ore

China snapping up contracts: oil-for-infrastructure

Oil & gas: new discoveries continuing in East Africa


Business Activity in Many Sectors Energy: oil & gas E&P, pipelines, services, refining & marketing, petrochem

Power: generation, transmission, distribution, meters, standby power

Machinery: power, construction, mining, electrical, agriculture

Process & Materials: cement, housing-related, chemicals, fertilizer

Transportation: Aircraft, shipping, rail, public transport

Consumer: private education, household goods, electronics, autos, transportation, hotels, leisure, food, soft drinks, beer

Communications: broadband, satellite, entertainment, data

Healthcare: hospital services, insurance, NCDs, generics, OTC, diagnostics

Financial services: mobile money, insurance, pensions, banking

Agribusiness: machinery, fertilizer, localized hybrid seeds, processing, storage, trade finance

Manufacturing: assembly, labor-intensive fabrication for domestic consumption or export

Property: hotels, commercial, retail, housing and related financing


Rising Demand for End Products

Chemicals

Food & beverage

Personal care, cosmetics, household products, cleaners

Textiles, clothing & leather manufacturing

Plastics: consumer, industrial, commercial

Fertilizer: enormous push to boost yields and productivity

Food processing: packaged foods for urban consumers

Commercial: Autos, construction, housing, manufacturing

Healthcare and pharmaceuticals manufacturing

Refined petroleum products: from kerosene through jet fuel


Africans Want You to Come

Why African countries want US firms and investors:

Known as ethical business operators

Willing to invest in long-term human capital development

Quality goods and services

So what’s holding US companies back?

Skewed perception of risk/reward

Lack of understanding of scale & immediacy of local opportunities

Management or balance sheet constraints

Too far outside their comfort zone

Misperception that Africa is a place for charity, not viable business

Too much emphasis on published statistics, poor knowledge of real

scope of local market opportunities


Chinese Companies Already Everywhere

China is just getting started but they are already very dominant

China started by seeking resources– now developing new end markets

Strategic and coordinated push across sectors: power, transportation,

rail, electrical, machinery

OE sales: dealers are all there for XCMG, Sany, Liugong, Shanghai

Electric, Dongfang, China South Rail, solar providers

Ex-Im financing from China: different rules, very aggressive

Boots on the ground even in the most challenging of circumstances

Decision-making process quick and without strings attached

Reputation for lack of follow-through on service: starting to change

Most government procurement focuses only on price– this benefits

the low-priced competitor


Ideas and Opportunities:

For the GTC Audience


Plenty of Activity Already In the Works

Oil, gas, coal discoveries: update your maps

Governments want to add value to raw materials:

Refineries: import substitution, new industries

Processing: minerals, agricultural commodities

South Africa: clean coal IPPs

Botswana: Carbon capture & storage, coalbed methane

Nigeria: major refinery/fertilizer complex under way

Consumer products: vertical integration

Major consumption growth potential

Financing is increasingly available–locally and globally


Why Import PET Preforms?

Better to Make Them At Home



Africa is Industrializing Rapidly

Infrastructure being built right now:

Power, rail, roads, ports, airports

Communications

Water, urban infrastructure

Manufacturing and industry:

Refineries: Replace imported refined products

Process: chemicals, plastics, pharmaceuticals

Start with assembly, move to manufacturing

Well-established local companies want to partner with you


Infrastructure Is Getting Built


Kenya’s Thika Highway… …Is Now Open and Easy


Massive Power Shortfalls:

As Much Power as Spain


Source: Kenya Ministry of Power

Diesel as Primary Power in Lagos:

Generators Take all the Parking Spots!



Power: Major Investment Programs

Opportunity cost: The economic cost of inaction is severe: high cost of

diesel and generators, lost productivity

Privatization: Nigeria privatized its power sector: investment coming in

Regional coordination:

Kenya has a roadmap including geothermal, imports from Ethiopia.

Southern Africa Power Pool: South Africa, Malawi, DRC,

Mozambique

Not just grid-based: Off-grid or distributed power will play a major role

Renewables: Lower cost of solar and wind– now viable options

PAC-DBIA has new recommendations on how to boost US involvement

in this sector– stay tuned!


Green is the Name of the Game

Leapfrog to newest technology:

Power, manufacturing, process

Carbon emissions

Waste management

Renewable energy

Smart grid, IT-enabled processes

Imperative to create jobs:

Surging number of young workers

Labor intensity is a good model

Africa didn’t create climate change, but the continent is very much affected by it


Charcoal? There Has to Be a Better Way



50MW of Waste-to-Power in Ethiopia…



…Built By a Chinese EPC…



…Drew Lots of Interest During a Tour



Coal Conversion Opportunities in Africa

Source: Andrew Minchener, IEACCC 2014

www.AfrSun.com 27October 2015

Commercial Scale Operations in S. Africa



South African IPP Africary: Going

Underground for 50MW of Power


Source: Africa Carbon Eenrgy

Challenges & Opportunities:

Mozambique



Where In The World?



African Sunrise Partners:

Our Business Is To Make Your Job Easier

What we do:

Business intelligence for smarter decision-making

We visit the continent 5-6x per year– well over 35 trips since 2007

We know the trends, opportunities risks, and local players in key countries--14 so far, and adding new countries each year

Our reports and advisory services make your life much easier

Melissa Cook

Founder & Managing Director, African Sunrise Partners LLC

Member, President Obama’s Advisory Council on Doing Business in Africa

25+ years Wall Street research experience

Global traveler– connecting the dots to help your business


33

ANALYST CERTIFICATIONThe author certifies that this market commentary accurately states her personal views about the securities mentioned, which are reflected in

the substance of this publication. The author further certifies that no part of her compensation was, is, or will be directly or indirectly related

to the views contained in this publication.

IMPORTANT DISCLAIMER AND DISCLOSURESAfrican Sunrise Partners LLC (ASP) is an independent investment strategy company and is not a registered investment advisor and is not

acting as a broker dealer under any federal or state securities laws. ASP is a member of IRC Securities’ Research Prime Securities platform.

IRC Securities is a FINRA registered broker-dealer that is focused on supporting the independent research industry. Certain personnel of ASP

(i.e. Research Analysts) are registered representatives of IRC Securities, a FINRA member firm registered as a broker-dealer with the

Securities and Exchange Commission and certain state securities regulators. As registered representatives and independent contractors of

IRC Securities, such personnel may receive commissions paid to or shared with IRC Securities for transactions placed by ASP clients directly

with IRC Securities or with securities firms that may share commissions with IRC Securities in accordance with applicable SEC and FINRA

requirements.

As registered representatives of IRC Securities, our analysts must follow IRC Securities’ Written Supervisory Procedures. Notable compliance

policies include (1) prohibition of insider trading or the facilitation thereof, (2) maintaining client confidentiality, (3) archival of electronic

communications, and (4) appropriate use of electronic communications, among other compliance related policies.

Information and opinions in ASP market commentary are submitted solely for advisory and information purposes and intended for

institutional clients to enhance their understanding of Africa and its impact on global markets. ASP market commentary does not offer

specific investment ratings or recommendations on the subject companies. Furthermore, ASP market commentary is not intended to be used

as the basis for any investment decision or to recommend any security. ASP market commentary is designed to enhance clients'

understanding of those factors at issue and to augment investors' fundamental investment research, whether in-house, sell-side, or third-

party.

The information and analysis upon which ASP market commentary is based was obtained from sources believed to be reliable. Any opinion

represents market conditions at the date of writing, and is subject to change without notice. ASP may or may not continue to comment on a

specific security/sector subsequent to issuing market commentary. ASP does and seeks to do business with companies mentioned in its

publications. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this market

commentary. Investors should consider the material in this publication appropriate for use as only a single source among many consulted in

making their investment decisions.

Neither the publication/communication nor any portion hereof may be reprinted, sold, or redistributed without the written consent of African

Sunrise Partners LLC. Copyright 2015 by African Sunrise Partners LLC.

www.AfrSun.comOctober 2015

africa: process industries can unlock resources ... - syngas · imf: >5% gdp growth/yr 2016-2020...

Documents