1. Investing in Africa: Myth vs. Reality
Ritesh Anand
Invictus Investment Management

2. Disclaimer Title here in Trebuchet Bold 20pt
"Investment in the fund is suitable only for sophisticated investors: (1)  that do not require immediate liquidity for their investment, (2) for which an investment in the fund does not constitute a complete investment programme, and (3) that fully understand and are willing to assume the risks involved in the fund's investment programme.  The Fund involves a substantial degree of risk.   There will be no public offering of securities in the Fund and any investment in the Fund can only be made on the basis of a Private Placement Memorandum yet to be finalised. It is not intended that the Fund will be registered as an investment company under the United States Investment Company Act 1940, nor is it intended that the manager or any advisor be registered as an investment advisor under the United States Investment Advisor's Act of 1940."
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3. Perceptions about Africa
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“Isn’t Africa too small to matter to the rest of the world?”
“Hasn’t Africa always been an under-achiever?”
“All Africans are poor”
“Africa has been dealt a poor hand by nature”
“Africa is a pure play on raw material prices”
“Africa has a shortage of capital and too little investment”
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4. Some interesting facts about Africa
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As an economy, Africa’s GDP is larger than that of India, Brazil or Russia.
9 African countries are richer than China on the basis of per capita income (PPP basis).
The fastest growing global economy over the past 3 decades in the world is in Africa.
15 of the 35 fastest growing economies in the world in 2009 are in Africa.
Half of Africa’s population is aged under 24 with the median age only 19
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5. So what’s changing in Africa
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Greater political and economic stability
Improving Macroeconomic Outlook
Favourable Demographics
Technology driving rapid change
Transition from Aid dependence to Investment and Trade
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6. From promises to results
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“Africa is indeed on the move. In contrast with the 1990s, conflicts in Africa have declined, economic performance has improved and some clear ‘high performers’ are beginning to emerge.”
World Bank 2006
“Africa has learnt to trade more effectively with the rest of the world, to rely more on the private sector, and to avoid the very serious collapses in economic growth that characterized the 1970s, 1980s and even the early 1990s.”
World Bank 2007
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7. Africa in perspective Title here in Trebuchet Bold 20pt Square Miles:
China 3,705,390
United States 3,618,770
India 1,266,595
Europe 1,905,000
Argentina 1,065,189
New Zealand 103,736
Total 11,664,680
Africa 11,707,000
Proportion of global resources in Africa:
Land Mass 20%
Diamonds 90%
Gold 50%
Phosphate 90%
Platinum 80%
Petroleum 8%
Natural Gas 12%
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Source: Academic Centre for Education Development
Source: Ayittey, George B.N. Africa Betrayed, 1993, Palgrave Macmillan , ISBN:

8. Wind of change blowing across Africa – declining political risk
Political Environment
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Wind of change blowing across Africa – declining political risk
Circa.1980
Current
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Source: Duet, African Business Research

9. Demographic Dividend Title here in Trebuchet Bold 20pt
Population ages (2008)
High Income:
OECD Countries
Sub-Saharan Africa
0 – 14 (% of total) 17 43
15 – 64 (% of total) 67 54
65 and over (% of total) 16 3
Total population
970mn
820mn
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Source: World Development Indicators

10. Macro Overview Title here in Trebuchet Bold 20pt
Population and GDP Growth (Sub-Saharan Africa ex South Africa)
12 consecutive years of growth in real per capita GDP
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Source: World Bank Data

11. African growth is now among the highest GDP growth rates in the world
Macro Overview
African growth is now among the highest GDP growth rates in the world
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Source: World Economic Outlook Database April 2010

12. Distribution of Growth in Africa in 2009
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Source: World Bank data

13. Sound monetary policies ….
Macro Overview
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Sound monetary policies ….
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14. External debt is becoming sustainable
Macro Overview
External debt is becoming sustainable
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Source: World Bank data

15. Foreign Direct Investment Africa
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Africa: FDI flows 2002 – 2007 (US$ mn)
Despite the increase in FDI flows to Africa FDI flows to Africa still less than 8% of global FDI flows
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Sources: UNCTAD, FDI Online Database (March 2009) and World investment Report 2008.

16. Is this like Asia in the 1980’s ?
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ASEAN in 1980 compared to SSA today
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17. African Equity Markets in Perspective
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There are 22 stock exchanges in Africa with a combined market value of US$1,107.5 billion and 2,084 listed equities

18. African Equity Returns amongst the best in the world
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Average annual returns to various regions (2000 to 2009)
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Source: MSCI, African Business Research
Africa has outperformed emerging markets in particular Asia over the last 10 years

19. Volatility Title here in Trebuchet Bold 20pt
Standard deviation of annual returns (1999 – 2008)
The risk from investing in Africa is similar to that of other emerging markets.
The perception that Africa is inherently riskier is not supported by data
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Source: Local Stock Exchanges, African Business Research

20. Economy and equity markets moved in opposite directions
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The recent share price performance has not reflected the true profit performance of companies
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Source: Local Stock Exchanges, African Business Research

21. Correlation with other global markets
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Africa
Asia
Emerging markets
Far East
G7 Countries
Latin America
South Africa
World Index
World Small Companies
(ex South Africa)
100%
-9%
-7%
88%
-10%
99%
86%
12%
18%
43%
17%
-14% 6%
44% 5%
57% 3%
42%
58%
40%
22% 7%
14%
21%
46%
20%
24%
90%
28%
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22. Conclusion Title here in Trebuchet Bold 20pt
Contrary to perception, Africa offers tremendous long term investment opportunities across a number of sectors.
Africa could benefit from the “demographic dividend”, provided it gets its act together.
Political uncertainty continues to improve with few “big men” left in Africa. Younger generation of African leaders recognise the importance of good governance.
Improved macro-economic fundamentals continues to drive growth and investment.
Africa is still under the radar of most investors and hence offers great opportunities to the early adopters
A credible and peaceful future of the world in the 21st century must include a positive future for Africa
Development of efficient financial markets is integral to the alleviation of poverty. Recognition that investment and not aid will drive growth
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23. Appendix Title here in Trebuchet Bold 20pt
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24. Africa, Emerging Markets, World GDP
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25. Trade balance and FX Reserves
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Reforms, improved economic management, strong commodities prices and China import deflation have transformed Africa’s terms of trade…
….leading to a surge in Africa’s forex reserves
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26. Marco Overview Title here in Trebuchet Bold 20pt
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27. Macro Overview Title here in Trebuchet Bold 20pt
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28. Macro Overview Title here in Trebuchet Bold 20pt
Slower growth but NO recession
GDP Growth forecast across the world ( )
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Source: World Economic Outlook Database April 2009

29. Africa Equity Returns Title here in Trebuchet Bold 20pt
Annual returns to Sub-Saharan Africa equity markets (ex – South Africa) over 1999 – 2008
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Average annual returns of 9% (in US$) over the last 10 years from Jan to December 2008, relative to 6.6% for emerging markets, -2.5% for G7 countries, 3.7 for global small companies and -2.2% for the All Global equity markets.
Source: Local Stock Exchanges, African Business Research

30. Trading Liquidity Title here in Trebuchet Bold 20pt
Liquidity has declined sharply in Although the recovery is likely to be very rapid.
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Source: Local Stock Exchanges, African Business Research

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