@chrishartza @investmentsolza africa must try harder november 2014
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INVESTMENT DESTINATIONS 2
DEVELOPED MARKETS
AFRICANGROWTH
INVESTMENTEVERGREENS
EMERGING MARKET
LESSONS
AFRICA MUST TRY HARDER
INVESTMENT SOLUTIONS 3
The Developed World: scoring own goals
InvestorObjectives
MacroeconomicManagement
Debt Trap
FinancialRepression
Emulate?Haven?
INVESTMENT SOLUTIONS 5
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
Est
im...
0
5
10
15
20
25
30
35
40
45
50
GD
P p
er
ca
pit
a /
10
00
US
$ DM Economies
EM Economies
DM & EM GDP per Capita
DM vs EM GDP per capita
Source: INET- Bridge , Investment Solutions
INVESTMENT DESTINATIONS 6
DEVELOPED MARKETS
AFRICAN GROWTH
INVESTMENT EVERGREENS
EMERGING MARKET
LESSONS
AFRICA MUST TRY HARDER
Projected economic growth ratesSub-Saharan Africa to grow at more than 4%
Source: IMF World Economic Outlook April 2014
Wor
ld
South
Afri
ca
sub-
Sahar
an A
frica
Kenya
Tanza
nia
Zambi
a
Moz
ambi
que
Botsw
ana
Namib
ia
Angol
a
Niger
ia
Ghana
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2014 2015
INVESTMENT SOLUTIONS
INVESTMENT SOLUTIONS
African growth
10
Investment Timelines Cellular Telephony
2008: Debt Crisis
Zimbabwe!!
ImprovingGovernance
Necessary, but not the whole picture
Technology
Critical GrowthUnlock Factors
Lower DebtLevels
INVESTMENT SOLUTIONS 11
Economic risk-reward
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
-5
0
5
10
15
20
Pe
rce
nta
ge
ch
an
ge
Inflation and Growth: G7 and SSA last 20 years
Source: IMF, Investment Solutions, 2014
G7 GDPG7 CPI
SSA GDPSSA CPI
INVESTMENT SOLUTIONS 13
SSA GDP / Capita
2015
`
Middle Income Counties
Low Income Countries
High Income Country
INVESTMENT SOLUTIONS 14
EM GDP now eclipsing DM: Africa still small
Advanced Economies Emerging Markets Sub-Saharan Africa0
5
10
15
20
25
30
35
40
45
50
GD
P –
Tri
llio
n U
SD
Source: IMF, Investment Solutions, 2014
INVESTMENT DESTINATIONS 15
DEVELOPED MARKETS
AFRICAN GROWTH
INVESTMENT EVERGREENS
EMERGING MARKET
LESSONS
AFRICA MUST TRY HARDER
Investor perceptions on AfricaForeign direct investment on the rise
Source: EY’s Attractiveness Survey Africa 2014, Executing Growth
2011 2012 2013 2014
MarketsMore attractive
than Africa
Markets less attractive than
Africa
1
2
3
4
5
6
7
8
9
10
1
2
3
4
5
6
7
8
9
10
1
2
3
4
5
6
7
8
9
10
1
2
3
4
5
6
7
8
9
10
Improvement in Africa’s relative attractiveness
Africa
INVESTMENT SOLUTIONS
Latest FashionOr
Evergreen?
INVESTMENT SOLUTIONS 17
Investment evergreens: Jurisdiction
InvestmentEvergreens
Freedom fromFinancial Repression
CapitalControls
Valuation LiquidityDiversification
Financial MarketStability
RegulatoryCertainty
INVESTMENT SOLUTIONS 18
Investment evergreens: Investor requirements
InvestorRequirements
Yield Growth
Quality/Solvency
Developed Marketown goals!!
INVESTMENT DESTINATIONS 19
DEVELOPED MARKETS
AFRICAN GROWTH
INVESTMENT EVERGREENS
EMERGING MARKET
LESSONS
AFRICA MUST TRY HARDER
INVESTMENT SOLUTIONS 20
Investment and growth
0 2 4 6 8 1015
20
25
30
35
40
45
50
18.4
46.0
35.5
22.3
SAUSA
GDP Growth y/y %
Tota
l Inv
estm
ent %
GD
P
Best Fit
Source: IMF, Investment Solutions, 2014
Advanced Countries EM and Africa BRICS
INVESTMENT SOLUTIONS 22
Global shifts: Savings critical for growth
Global Savings
Source: Thomas Reuters Datastream / Fathom Consulting
INVESTMENT SOLUTIONS 23
G7 and BRICS investment
G7 & BRICS Investment 1992
9%
91%
BRICSG7 48%
52%
BRICSG7
G7 & BRICS Investment 2015
Source: INET- Bridge , Investment Solutions
INVESTMENT SOLUTIONS 24
2014/05 2014/06 2014/07 2014/08 2014/09 2014/100.950000000000002
1
1.05
1.1
1.15
1.2
1.25
Sto
ck M
arke
t Per
fro
man
ce
bas
ed to
1
+17%
-4%
India
South Africa
Tale of two elections: SA and India
… currency has also outperformed Rand
SA vs India
Source: INET- Bridge , Investment Solutions
INVESTMENT DESTINATIONS 25
DEVELOPED MARKETS
AFRICAN GROWTH
INVESTMENT EVERGREENS
EMERGING MARKET
LESSONS
AFRICA MUST TRY HARDER
WEF Global Competitiveness ReportFinancial Market Development
Mauritius
2014 2006
26 67
Kenya
2014 2006
24 72
South Africa
2014 2006
7 33
Morocco
2014 2006
69 74
Botswana
2014 2006
57 59
Algeria
2014 2006
137 96
Namibia
2014 2006
46 79
Zambia
2014 2006
50 85
Egypt
2014 2006
125 65
Zimbabwe
2014 2006
112 113
Nigeria
2014 2006
67 70Angola
2014 2006
140 120
Source: World Economic Forum Global Competitiveness Repot (2014/2015 and 2006/2007)2014/2015 out of 144 countries2006/2007 out of 125 countries
Risk of Overheating
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.00.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Botswana Cameroon
Côte d'Ivoire
Ethiopia
Ghana
Kenya Mauritius
Mozambique
Namibia
Nigeria
South Africa
Tanzania
Zambia
United States
Inflation and Growth
Inflation, average consumer prices % change
Gro
ss
do
me
sti
c p
rod
uc
t, c
on
sta
nt
pri
ce
s %
ch
an
ge
INVESTMENT SOLUTIONS
INVESTMENT SOLUTIONS 28
SA: Slow puncture…
Global comparisons 2008 Rank Latest Rank
WEF Competitiveness Index 45/131 56/144
Corruption Perception Index 54/180 72/177
Freedom of the Press 28/195 33/194
Economic Freedom 83/141 88/152
Ease of Doing Business 35/181 41/189
S&P Credit Rating BBB+ BBB-
Overvalued markets and deteriorating long term growth outlookStagflation
Triple Deficit
Growth Drivers
Self Inflicted
INVESTMENT SOLUTIONS 29
National Scars
National Transitions
EconomicValue Chains
Capital Allocation
Political Economy
Dynamics within BRICS…
BRICS ANALYTICAL LENSES
INVESTMENT SOLUTIONS 30
SA BRICS membershipPunching above its weight
SA GlobalAspirations
Big in Africa
Small in BRICSGlobally Insignificant
Emulate China?
Emulate Mauritius?
INVESTMENT SOLUTIONS 31
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
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1991
1992
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1995
1996
1997
1998
1999
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2008
2009
2010
2011
2012
2013
2014
2015
0
2
4
6
8
10
12
14
16
18
GD
P /
Capi
ta U
S$ '0
00
SA’s role model: or Chile?
GDP / Capita since 1980
Source: IMF, Investment Solutions, 2014
Chile
South Africa
INVESTMENT SOLUTIONS 32
SA’s role model: China or Mauritius.?
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
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2008
2009
2010
2011
2012
2013
2014
2015
2016
0
2
4
6
8
10
12
GD
P /
Capi
ta U
S$ ‘0
00
GDP / Capita since 1980
Overtaken by both
China
SA
Mauritius
Source: IMF, Investment Solutions, 2014
SSA: Tax differentials between jurisdictions
Country Income Tax Rate (%) Corporate Tax Rate (%) Tax Burden % of GDP
Hong Kong 15.0 16.5 14.2
Nigeria 24.0 30.0 4.7
Ghana 25.0 25.0 14.6
Mauritius 15.0 15.0 18.3
Zambia 35.0 35.0 19.3
Kenya 30.0 30.0 20.1
South Africa 40.0 28.0 27.3
Namibia 37.0 34.0 28.0
Lower tax burdens more competitive…
Source: Heritage foundation
INVESTMENT SOLUTIONS 34
Top Insights from ‘Half Way There’
3. Business is the source of all wealth
5. Corruption is an economic cancer
8. Effective institutions essential for democratic credibility
... SEE HALF WAY THERE FOR MORE..!
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