African Development Bank Group

Africa’s growth prospects Investing in Africa Benchmarking Nigeria Outline of the presentation The Bank Group Africa’s growth prospects Investing in Africa Benchmarking Nigeria African Development Bank Group

1 The Bank Group African Development Bank Group

Term referring collectively to: Bank Group Term referring collectively to: African Development Bank African Development Fund Nigeria Trust Fund May also include other funds managed by the Bank African Development Bank Group

Membership Composition: MANDATE – African Development Bank Established in 1964 by Agreement between member states Mandate: Contribute to the sustainable economic development and social progress of its regional (African) member countries Fulfills mandate through financing of projects, mobilization of resources, technical assistance, cooperation Membership: Currently 77 countries with 3 finalizing membership Membership Composition: 53 African Countries and 24 Non- African Countries Provides financing through Loans, Guarantees & Equity Investments for sovereign and non- sovereign transactions African Development Bank Group

Bank Group Membership Europe 14 member countries Shareholding: 21% Asia 4 member countries Shareholding: 7% North & South America 4 member countries Shareholding: 11% Middle East 2 member countries Shareholding: 1% Africa 53 member countries Shareholding: 60% African Development Bank Group

Bank Group loan and grant approvals and disbursements, 2001-2010 (UA millions) In 2009, the Bank Group’s lending was about US$10bn (owing to the financial crisis). It returned to pre-crisis levels of US$5bn in 2010. End 2011 projections are for US$9bn. This excludes trust funds. African Development Bank Group

2 Africa’s growth prospects African Development Bank Group

Annual average real GDP growth rates by regions (in %) 2000-2010 ● Africa is the fastest growing region other than Asia ● Africa’s growth rate is a good indicator for economic development and poverty reduction African Development Bank Group

Evolution of annual average real GDP growth rates by regions Africa was more resilient to the global financial and economic crisis than most other developing regions. The high growth rates in Nigeria were due to high world price of oil  and the efficiency gains resulting from economic reforms in Nigeria. Non-oil sector was also growing at higher rates that than oil sector – telecoms, general commerce, agriculture, and services. The decline could be explained by the disruptions in oil production in the Niger Delta and later the impact of global economic and financial crisis of 2008-09. As a result of political events in Tunisia, Lybia and Egypt, growth performances in North Africa and Sub-Saharan Africa have diverged: SSA GDP growth should reach 5.5% NA is expected to grow by 0.7% Africa growth will reach 3.7% African Development Bank Group

Projected real GDP per Capita growth rates in 2011 African Development Bank Group

Africa’s GDP per Capita growth prospects In recent years African growth rates have exceeded those of the world as a whole – Some of the fastest growing economies are in Africa (Ghana, Ethiopia, Botswana). Even adjusting for the political events, North Africa will continue to post the highest income per capita. East Africa is likely to show the strongest growth performance, reaching 9.3% in 2030. By 2060, the sub-region will have a per capita income ten times higher than in 2010. Global developments, particularly the escalating price of commodities like food and oil, could yet pose serious threats to governance, peace and security. African Development Bank Group

Sector contributions to growth in Africa, 2000-2009 The Service sector is the largest contributor to growth in Africa. African Development Bank Group

Share of Traditional Partners (TPs) and Emerging Partners (EPs) in Africa’s total trade Impact of the Instability in Financial Markets on Investment Opportunities/Risk Perception Trade Risk OECD countries: more than 60% of Africa’s total trade Share of emerging partners’ trade has increased from 20% to close to 40% in 2009 Opportunities for African emerging markets through portfolio relocations. African Development Bank Group

Investment, aid and remittances inflows to Africa (1990-2010) African Development Bank Group

FDI inflows to Africa (US $ mn) FDI to Africa fell to USD 55 bn. in 2010 after a peak at USD 73.4 bn. in 2008. China and India FDI inflows are acting as a game changer. In June 2010, Bharti Airtel (India’s biggest mobile phone operator) bought the African assets of Zain for USD 10.7 bn. In 2007, Industrial and Commercial Bank of China purchased a 20% of Standard Bank, South Africa’s largest bank by assets and earning for USD 5.5 bn. African Development Bank Group

Africa’s governance progress Political stability is on the increase and the control of corruption is also increasing as more taylor-made and higher quality of regulations come into play. African Development Bank Group

Demographic growth evolution West Africa has tended to have the highest growth in Africa over time African Development Bank Group

A growing economically active population Continued rapid growth in the size of the economically active population (men and women 15-64 years of age), at an average of around 3.5% per annum, will lead to an absolute increase in Africa’s working age population of around 1.87 billion. Around 74% of Africans will be of working age in 2060. Human resources strongly impact on overall factor productivity. African Development Bank Group

Africa’s age distribution African Development Bank Group

Poverty headcount ratio at $1 Poverty headcount ratio at $1.25 a day (PPP) (% of population), most recent year Nigeria is one of the Countries in Africa in which more than 55% of the population earn less than $1.25 a day African Development Bank Group

Under five mortality rates total per 1000, 2010 Mortality rates will decline in most places over the coming decades as the strong focus on reducing the impact of communicable diseases continues. Good progress is expected in reducing child and infant mortality. Child mortality is projected to decline from 127 per 1,000 live deaths in 2010 to 45 per 1,000 live deaths in 2060. This will result largely from improvements in incomes, access to improved water supply and sanitation and better health services. North and East Africa will benefit the most from the reduced burdens of child mortality, in large part due to the declining impact of HIV/AIDS.   It is, however, to note that malaria is still endemic in most African countries and continues to represent a major cause of morbidity and mortality in the continent. The impact of climate change on the geographical spread of malaria is still unknown. A lot remains to be done to reduce the impact of malaria. HIV/AIDS and deepening poverty are the most important challenges facing Africa, particularly sub-Sahara Africa. HIV prevalence rates are expected to decline from 2.1% in 2010 to 1.4% in 2060. The number of deaths due to HIV/AIDS is also projected to drop substantially as a result of HIV prevention programs and improved access to antiretroviral treatment. African Development Bank Group

Growing middle class & urban sectors The growth of urban sectors will act as a driver for strengthening the continent’s economic advancement. Strong economic growth has resulted in a significant increase in the size of the African middle class (defined as earnings of between US$4 and US$20 per day). The proportion of urban dwellers in 2010 was nearly 40 percent, it will rise to 50% by 2030, and will reach 65% by 2060. The movement of working age people from rural areas to urban centers will lead to more diversified economies. African Development Bank Group

Distribution of African population by selected classes There is a lot of GOOD NEWS for the future of Africa The middle class will continue to grow, from 355 million (34% of Africa’s population) in 2010 to 1.1 billion (42%) in 2060. Poverty levels are expected to fall, with the proportion of the population living on less than US$1.25 a day declining from 44% in 2010 to 33.3% in 2060. African Development Bank Group

Real estate The Egypt Annual Current GDP Real Estate Index has shown a dramatic increase since 2003. This is mainly due to: The robust economic and demographic growth. The strong demand from the local market. The small size of the Egyptian mortgage market has protected the country from the contagion of the global financial crisis.   The Nigeria Quarterly Real GDP Industry Real Estate Index rose by 19.8% in Q1 2011 compared to the same period of 2009. This performance was mainly driven by the high economic growth in Nigeria. The initiatives undertaken by the Federal Government (restructuration of the Stock Exchange and stabilization of the financial system) should boost the financing of the real estate sector. African Development Bank Group

Great potential in natural and biological resources 9.5% of the world oil reserves and close to 8% of gas reserves. Highest reserve of agricultural land: 807 million ha. Well positioned to embark on a low carbon growth and development path. Unique fauna and flora. Investment opportunities in the tourism given the unique fauna and flora Renewable Energy Solar Power  Many African countries receive on average 325 days per year of bright sunlight. This gives solar power the potential to bring energy to virtually any location in Africa without the need for expensive large scale grid level infrastructural developments.  The distribution of solar resources across Africa is fairly uniform, with more than 80% of their landscape receiving almost 2000 kWh per square meter per year. Wind Power and Wave Power:  Africa has a large coastline, where wind power and wave power resources are abundant and underutilized in the north and south.  The western coast of Africa has a substantial availability of wind power, exceeding 3,750 kWh, and will accommodate the future prospect for energy demands. Geothermal Power : Kenya has been estimated to contain 2000 MW of potential geothermal energy and is the only country to-date that has exploited the potential of the Great Rift Valley. It has 20 potential drilling sites marked for survey in addition to 3 operational geothermal plants. It was the first country in Africa to adopt geothermal energy, in 1956, and houses the largest geothermal power plant on the continent, Olkaria II. African Development Bank Group

Investments in ICT The 2010 ICT broadband penetration estimated at 7 per cent of the population is projected to rise to 99 per cent of the population in 2060. Win-win area of collaboration between Africa and foreign investors. Catalytic role for market integration and competitiveness. African Development Bank Group

The Need for substantial investments Massive injections of capital will be needed to bridge the huge infrastructure gap. Investments needed to build a business-enabling environment that will attract domestic and foreign investment, promote cross-border trade and regional integration, and bolster private sector-driven growth. African Development Bank Group

Africa’s Infrastructure Stock African Development Bank Group

3 Investing in Africa African Development Bank Group

Investing in Africa Access to finance needs to be addressed in order to unlock Africa’s potential for a sustained and inclusive growth. 55 to 67 million SMEs on the continent, of which 70% are financially underserved. Their funding needs are estimated between USD 385 and 455 billion. African Development Bank Group

Africa’s Billionaires Africa’s total billionaires numbered 7 in 2006 and 11 in 2010. This year there are 14 on the 2011 Forbes Rich list made up of two Nigerians, 4 South Africans and 8 Egyptians. Their main sectors of activity are: sugar, flour and cement, precious stones, construction, luxury goods, telecommunications, mining, cotton trading and banking. African Development Bank Group

Credit to the private sector in selected regions (% of GDP) African Development Bank Group

Deposit accounts per 1,000 adults in selected African countries, 2009 African Development Bank Group

Private equity funds raised in Africa by region, 2006-2010  Private Equity Funds (PEF) in Africa mainly seek to invest in SMEs with significant growth potential. Private equity funds can provide the capital and management expertise desperately needed for small African firms to thrive. Even though the private equity market is nascent in Africa, evidence suggests that current transactions have a positive impact on employment, sales growth, innovation, and profitability. PEF-backed companies have been growing, exporting, and creating jobs at a higher pace than other firms. Sales of firms funded by PEF grew by an average of 20%, compared to 18% in companies listed on the Johannesburg Stock Exchange (JSE).   PEF also fosters innovation. Over two thirds of PEFs-backed companies introduced new products and/or services. Their research and development expenses also grew by 7% a year over the period 2005-2009, compared to 1% in JSE listed companies. In addition, PEFs have been helping out underprivileged groups set-up viable and sustainable enterprises. The number of black-owned enterprises tripled post investment to reach 52%. Besides, 69% of total funds under management had at least 5% of black ownership in 2007. African Development Bank Group

Sampling of Africa private equity investments 2008-2010 Developing the private-equity industry requires regulatory reforms, fiscal incentives, and capacity building for regulators. For ex., regulation 28 of South Africa’s Pension Fund Act increased the share of assets that South African institutional and retail investors could invest in private equity from 2.5% to 10%. African Development Bank Group

Market capitalization in major African stock exchanges (2003-2011) African Development Bank Group

Market capitalization in major African stock exchanges (2003-2011) African Development Bank Group

Prices of African indexes (in USD) African Development Bank Group

Prices for selected African indexes (in USD) African Development Bank Group

Improving SMEs access to finance through stock markets Egypt’s Nile Stock Exchange (Nilex) Lower requirements in terms of minimum capital and number of shares to be offered to the public. An advisor is nominated to help eligible SMEs prepare their financial statement, comply with the listing rules and complete the initial public offering of their shares. Platform within the Cairo and Alexandria Stock Exchanges (CASE) to facilitate SMEs access to stock markets. Launched in 2007, yet trading only started in 2010. Nilex is too recent for its full impact to be assessed, and it has been affected by the recent political events in Egypt. African Development Bank Group

Improving SMEs access to finance through stock markets (contd.) South Africa’s AltX A registered advisor is designated to assist SMEs through the listing process, the initial public offering and to help them maintain their status once listed. The Directors Induction Programme is a compulsory education program offered to managers on corporate finance, management and governance. Set up in 2003 as a window within the JSE dedicated to SMEs with high growth potential. , AltX has been quite successful and allowed several SMEs access funding through the stock market. Both experiences show that establishing stock markets with relaxed listing rules needs to be accompanied with capacity building programs for companies to understand the benefits and procedures of listing, and potentially with some financial support to help SMEs bear the cost of listing. African Development Bank Group

Private credit bureaus in selected African countries South Africa -Transunion -Experian -Compuscan -XDS Botswana -TransUnion ITC -CRB Africa -Compuscan Botswana Namibia -Transunion ITC Namibia -Credit Information Bureau Namibia Swaziland -ITC Swaziland Mozambique Zambia Tanzania Uganda -Compuscan Uganda Rwanda Kenya -Credit reference bureau africa limited -Metropol East Africa Ltd -Transunion Kenya Egypt -I-score Morocco Nigeria -Credit registry corporation CR services LTD nigeria -Credit reference company Ghana -XDS Ghana Malawi Public credit registries and private credit bureaus facilitate the cost-effective exchange of accurate and timely credit information, which allows financial institutions to assess borrowers’ creditworthiness. They translate into lower barriers to access finance, especially for SMEs which suffer from high information asymmetry. They help potential borrowers use their reputation, rather than tangible assets, as collateral. African Development Bank Group

High average real GDP growth rate in the 2000s of 8 High average real GDP growth rate in the 2000s of 8.7%, higher than the average growth rate of 2.6% in the 1990s and the very low rate of 1.8% in the 1980s. Over the period 2007-2009, GDP growth was 6.6%, higher than the average for SSA. The country is expected to grow at 7.3% in 2010, 7.4% in 2011, and about 6% in 2015. 4 Benchmarking Nigeria African Development Bank Group

Ease of doing business African Development Bank Group

Corruption Corruption in Nigeria has leveled since 2006. Expectations are that it will begin to fall as Taylor-made high quality regulations come into force African Development Bank Group

Human development index in Nigeria vs selected comparators African Development Bank Group

School enrolment (Secondary and Tertiary, % Gross) and adult literacy, 2001-2009 Higher education In order to develop manufacturing industries and innovation, highly-skilled labor is needed Opportunities for private tertiary education given the lack of capacities of public universities African Development Bank Group

Potential for Diaspora Bonds, 2007 African Development Bank Group

THE FUTURE IS PROMISING… But there is much to be done! Prospects… THE FUTURE IS PROMISING… But there is much to be done! African Development Bank Group

Eye on the future Access to credit Job creation Technical skills building Infrastructure, infrastructure, infrastructure (Energy, transportation-air, rail, land, waterways) Regional integration Gender Governance African Development Bank Group

Acknowledgments Laureline Pla Nadim Guelbi Athanasius Coker Simon Mizrahi Desire Vencatachellum African Development Bank Group

Thank you African Development Bank Group