AFRICA MUST TRY HARDER NOVEMBER 2014

INVESTMENT DESTINATIONS1 DEVELOPED MARKETS AFRICAN GROWTH INVESTMENT EVERGREENS EMERGING MARKET LESSONS AFRICA MUST TRY HARDER

The Developed World: scoring own goals INVESTMENT SOLUTIONS2 Investor Objectives Macroeconomic Management Debt Trap Financial Repression Emulate? Haven?

Markets and Economies: Continued disconnect.. INVESTMENT SOLUTIONS3 Unsustainable… Problematic…

DM Economies EM Economies DM & EM GDP per Capita INVESTMENT SOLUTIONS4 DM vs EM GDP per capita Source: INET- Bridge, Investment Solutions

INVESTMENT DESTINATIONS5 DEVELOPED MARKETS AFRICAN GROWTH INVESTMENT EVERGREENS EMERGING MARKET LESSONS AFRICA MUST TRY HARDER

Global growth 2007 INVESTMENT SOLUTIONS 6 Rest of World Africa (5/25) BRICS

Global growth 2015: Africa & Asia INVESTMENT SOLUTIONS7 Rest of World Africa (14/25) BRICS

Projected economic growth rates Sub-Saharan Africa to grow at more than 4% Source: IMF World Economic Outlook April 2014 INVESTMENT SOLUTIONS

African growth INVESTMENT SOLUTIONS9 Investment TimelinesCellular Telephony 2008: Debt Crisis Zimbabwe!! Improving Governance Necessary, but not the whole picture Technology Critical Growth Unlock Factors Lower Debt Levels

Economic risk-reward INVESTMENT SOLUTIONS10 Inflation and Growth: G7 and SSA last 20 years Source:IMF, Investment Solutions, 2014 G7 GDP G7 CPI SSA GDP SSA CPI

SSA GDP / Capita INVESTMENT SOLUTIONS11 Middle Income Counties Low Income Countries 2000 `

SSA GDP / Capita INVESTMENT SOLUTIONS ` Middle Income Counties Low Income Countries High Income Country

EM GDP now eclipsing DM: Africa still small INVESTMENT SOLUTIONS13 Source: IMF, Investment Solutions, 2014

INVESTMENT DESTINATIONS14 DEVELOPED MARKETS AFRICAN GROWTH INVESTMENT EVERGREENS EMERGING MARKET LESSONS AFRICA MUST TRY HARDER

Investor perceptions on Africa Foreign direct investment on the rise Source: EY’s Attractiveness Survey Africa 2014, Executing Growth Markets More attractive than Africa Markets less attractive than Africa Improvement in Africa’s relative attractiveness Africa INVESTMENT SOLUTIONS Latest Fashion Or Evergreen?

Investment evergreens: Jurisdiction INVESTMENT SOLUTIONS16 Investment Evergreens Freedom from Financial Repression Capital Controls Valuation Liquidity Diversification Financial Market Stability Regulatory Certainty

Investment evergreens: Investor requirements INVESTMENT SOLUTIONS17 Investor Requirements YieldGrowth Quality/ Solvency Developed Market own goals!!

INVESTMENT DESTINATIONS18 DEVELOPED MARKETS AFRICAN GROWTH INVESTMENT EVERGREENS EMERGING MARKET LESSONS AFRICA MUST TRY HARDER

Investment and growth INVESTMENT SOLUTIONS19 Source: IMF, Investment Solutions, 2014 Advanced CountriesEM and AfricaBRICS

Government spending and growth INVESTMENT SOLUTIONS20 Source:INet

Global shifts: Savings critical for growth INVESTMENT SOLUTIONS21 Global Savings Source:Thomas Reuters Datastream / Fathom Consulting

G7 and BRICS investment INVESTMENT SOLUTIONS22 G7 & BRICS Investment 1992G7 & BRICS Investment 2015 Source: INET- Bridge, Investment Solutions

Tale of two elections: SA and India INVESTMENT SOLUTIONS23 … currency has also outperformed Rand SA vs India Source: INET- Bridge, Investment Solutions

INVESTMENT DESTINATIONS24 DEVELOPED MARKETS AFRICAN GROWTH INVESTMENT EVERGREENS EMERGING MARKET LESSONS AFRICA MUST TRY HARDER

WEF Global Competitiveness Report Financial Market Development Mauritius Kenya South Africa Morocco Botswana Algeria Namibia Zambia Egypt Zimbabwe Nigeria Angola Source: World Economic Forum Global Competitiveness Repot (2014/2015 and 2006/2007) 2014/2015 out of 144 countries 2006/2007 out of 125 countries

Risk of Overheating INVESTMENT SOLUTIONS

SA: Slow puncture… Global comparisons2008 RankLatest Rank WEF Competitiveness Index45/13156/144 Corruption Perception Index54/18072/177 Freedom of the Press28/19533/194 Economic Freedom83/14188/152 Ease of Doing Business35/18141/189 S&P Credit RatingBBB+BBB- Overvalued markets and deteriorating long term growth outlook INVESTMENT SOLUTIONS27 Stagflation Triple Deficit Growth Drivers Self Inflicted

National Scars National Transitions Economic Value Chains Capital Allocation Political Economy Dynamics within BRICS… INVESTMENT SOLUTIONS28 BRICS ANALYTICAL LENSES

SA BRICS membership Punching above its weight INVESTMENT SOLUTIONS29 SA Global Aspirations Big in Africa Small in BRICS Globally Insignificant Emulate China? Emulate Mauritius?

SA’s role model: or Chile? INVESTMENT SOLUTIONS30 GDP / Capita since 1980 Source: IMF, Investment Solutions, 2014 Chile South Africa

SA’s role model: China or Mauritius.? INVESTMENT SOLUTIONS31 GDP / Capita since 1980 Overtaken by both China SA Mauritius Source: IMF, Investment Solutions, 2014

SSA: Tax differentials between jurisdictions CountryIncome Tax Rate (%)Corporate Tax Rate (%)Tax Burden % of GDP Hong Kong Nigeria Ghana Mauritius Zambia Kenya South Africa Namibia Lower tax burdens more competitive… Source: Heritage foundation

Top Insights from ‘Half Way There’ INVESTMENT SOLUTIONS33 Business is the source of all wealth Corruption is an economic cancer Effective institutions essential for democratic credibility SEE HALF WAY THERE FOR MORE..!

Global economic freedom… INVESTMENT SOLUTIONS34

Thank You INVESTMENT SOLUTIONS35 CHRIS HART Chief Strategist Investment Solutions