INVESTMENT IN AFRICA OPPORTUNITIES AND CHALLENGES & CASE STUDY THE HONORABLE DOCTOR RAMA SITHANEN

OUTLINE OF PRESENTATION Facts and Figures on FDI/PI in Africa Opportunities going forward Challenges to overcome Some lessons from Mauritius Conclusion Facing the Challenges of Doing Business in Africa Page 2

FACTS AND FIGURES ON FDI IN AFRICA FDI peaked in 2008 at US$ 72 b. Down in Below 2008 in 2010 Rising but still low share of global FDI. 4.5 % in 2010 Impact of recession and events in North Africa on FDI Destination: unevenly distributed: few countries and few industries Origin: high but falling % of developed countries. BRIC/intra African FDI is 25 % of capital formation Important for growth and development Facing the Challenges of Doing Business in Africa Page 3

FACTS AND FIGURES ON PI IN AFRICA PI is still small, but of growing importance US$ 2b in 2000,US$ 8b or 23 % in Peaked in 2006 at US$ 24 billion US$ ‑ 22 billion in Recovery in 2010 at US$ 22 b and 30% of FDI Mainly equity (78 % equity and 22 % debt) Destination : significant % to South Africa (80%) Stock of US$ 150 b in 2009 Source : US (42 %),Luxembourg(10%),Mauritius & UK (5%) Facing the Challenges of Doing Business in Africa Page 4

OPPORTUNITIES GOING FORWARD Strong and sustained economic growth Improving investment policies and business environment Better macroeconomic management Structural & policy reforms and market friendly measures Political stability/democracy? Strong competition from emerging markets Improved perception of continent Page 5 Facing the Challenges of Doing Business in Africa

OPPORTUNITIES GOING FORWARD Natural resource/minerals abundant Young and growing population : labour Rising number of households with discretionary income 60 % of world uncultivated arable land: key for food security Opportunities in many sectors beyond resource/minerals FDI of US$ 150 b in 2015 Highest returns on investment Page 6 Facing the Challenges of Doing Business in Africa

CHALLENGES TO OVERCOME Political and social instability Governance and state capability Strong and predictable policies Consolidate and strengthen reforms Enabling business/regulatory environment Weak national infrastructure Scarcity of skills and human capital Page 7 Facing the Challenges of Doing Business in Africa

CHALLENGES TO OVERCOME Structurally balanced development: low quality growth/no diversification Absence of strong and vibrant private sector No one size fits all Low level of regional integration. Duplication Weak regional infrastructure Continue to improve perception Domestic resource mobilisation Page 8 Facing the Challenges of Doing Business in Africa

SOME LESSONS FROM MAURITIUS End of an economic cycle based on trade preferences Structural reforms to sharpen competitiveness Policy, fiscal, regulatory and institutional reforms Complete review of taxation : direct and indirect Open up the economy Ease of doing business Strong partnership with private sector Page 9 Facing the Challenges of Doing Business in Africa

SOME LESSONS FROM MAURITIUS Silent agreement Rules based v/s discretionary procedures Labour market reforms : flexi security Trade reforms : simplification Pension reforms 100 % foreign ownership Pragmatic and practical Page 10 Facing the Challenges of Doing Business in Africa

SOME LESSONS FROM MAURITIUS Building an international financial centre of repute Competitive tax regime No foreign exchange control Flexible and modern legal and regulatory framework Good network of DTAA and IPPA Open to talent, skills, knowledge and capital Investment in infrastructure : hard and soft Stable and predictable policies + governance Page 11 Facing the Challenges of Doing Business in Africa

SOME LESSONS FROM MAURITIUS Upper middle income country with high GDP/capita High on HDI : education, health and income Good rank in governance, ease of doing business and competitiveness Dynamic, diversified and resilient economy Tried, tested and trusted gateway for Investment into Africa & Asia Is model exportable? Challenges remain. To run the next development lap Page 12 Facing the Challenges of Doing Business in Africa

CONCLUSION Is Africa the next Investment frontier? A contingent Yes? Lions on the move : McKinsey It’s time for Africa : E & Y Africa may be the most exciting opportunity world wide : Barclays CEO Are African lions really roaring ? All Africa The global financial agencies’ desperation for an African success story should be taken with not a grain but a calabash full of salt’. All Africa Progress, stagnation and regression continue to coexist on the continent K. Annan Page 13 Facing the Challenges of Doing Business in Africa