africa: a new emerging markets frontier?

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Page 1: Africa: A New Emerging Markets Frontier?

27 June 200827 June 2008

Africa: A New EmergingAfrica: A New EmergingMarkets Frontier?

Javier Santiso

Director & Chief Development Economist, OECD Development Centre

1

UNECA UNECA

OECD Development Centre

Page 2: Africa: A New Emerging Markets Frontier?

GrowthGrowth Investment : a new driver?

40

DP

Public and Private Investment % of GDP

• The share of investment in GDP has increased in Africa, both public and pri ate both domestic and foreign

30

35

Percen

t of G

D private, both domestic and foreign.

• Saving rate increased by 30% since 2002, witnessing more prudent economic policies

20

25

economic policies.

28

t

African savings and investment ratesshare of GDP (%)

10

15

Ghana

Madagascar

22

24

26

Per cen

t

0

5

Madagascar

Tanzania

Zambia16

18

20

Investment

Gross national savings

2

UNECA

Source: OECD Development Centre / UNCTAD, 2008

Page 3: Africa: A New Emerging Markets Frontier?

GrowthGrowth Private capital flows more important than ODA?

70

n)

Development aid and private capital flows to Africa2000 ‐ 2007

Remittances

40

50

60

USD

 (billion

FDIPrivate portfolio flowsOther private flows

20

30

40

African ODA

0

10

‐20

‐10

2000 2001 2002 2003 2004 2005 2006 2007*

3

UNECA

Source: OECD Development Centre / UNCTAD, World Bank, IMF, 2008*: UNCTAD preliminary estimation

Page 4: Africa: A New Emerging Markets Frontier?

FDIFDI Record investment inflows for 2007

Africa FDI 2007 : $36 billion• +20% on 2006; +200% on 2004

African FDI: Sub‐regional breakdown2004‐2006

•FDI outflows ‐ $8 billion 2006

• Largely due to surging extractive industry investment: South Africa and oil producing 

h f

North Africa

p gcountries are still receiving the bulk of direct investment to Africa

• Previously off‐limit sectors opening to foreign West Africa

Southern Africa

investment:Banking:     Congo, Egypt, Nigeria

Telecoms:   Botswana, Burkina Faso, Cape Verde, Ghana, Namibia

Central Africa

2006

2005 Cape Verde, Ghana, Namibia

Land ownership: Morocco

FDI inflows likely to remain strong, but l di t ib t d b t d d ti ti

(5) ‐ 5  10  15  20  25 

East Africa

US$ billion

2005

2004

4

UNECA

Source: OECD Development Centre / UNCTAD, 2008 unevenly distributed by sector and destination.

Page 5: Africa: A New Emerging Markets Frontier?

FDIFDI Asian investments driving African growth

Distribution of cross‐border M&A purchases in Africa by home region, 2001‐2006 (US$ million)

2001 2002 2003 2004 2005 2006

World 15524 4684 6427 4595 10509 17569World 15524 4684 6427 4595 10509 17569

Developed economies 14964 3668 3156 4571 9564 7173

Developing economies 559 1016 3270 2024 476 9721

Africa 520 809 569 1849 360 746

Asia 39 141 2536 175 116 8850Source: OECD Development Centre based on UNCTAD cross‐border M&A database, 2008

5

UNECA

Page 6: Africa: A New Emerging Markets Frontier?

EquitiesEquities South Africa: dominating the investment landscape 

• Africa still lagging behind in investment 20

Equity flows to AfricaMonth‐end aggregate holdings

compared to other emerging regions (Asia especially).

• In turnover, the SA stock exchange is 14

16

18

20

USD

 Billion

Total Africa

South Africa

worth 100 times that of Africa’s second market: Nigeria. 

• Over 2001‐2006 period, South Africa 10

12

14

received as much portfolio equity investment as the entire rest of SSA, 46 times over…

4

6

8

• African allocations in global equity funds remains stable at 10% of total. 

0

2

6

UNECA

Source: OECD Development Centre / EPFR, 2008

Page 7: Africa: A New Emerging Markets Frontier?

Private EquityPrivate Equity Well adapted to African conditions?

Total  emerging world private equity  funds raised:

emerging markets private equity

CEE/RussiaLatam & Caribbean

8%

emerging markets private equityby region 2007 2003 2004 2005 2006 2007

$3.4 bln $6.4 bln $25 bln $33 bln $59 bln

• Sub‐Saharan Africa 2005 ‐ 2006:  $2.3 billionraised (+198% yoy)

27% 8%Sub‐Saharan 

Africa4%

Middl E & • Average deal size $1.2 million (2005), trending towards larger deals

• South Africa: 81% of investments, Nigeria 50% of remainder (2005)

Emerging Asia52%

Middle East & North Africa

9%

remainder (2005)

• Top sectors: Transport, consumer‐related investments, telecommunications/IT (2005)

f $ b ll f f d

Above: OECD Development Centre / African Venture Capital Association, EMPEA, 2008

7

UNECA

• 2006: first $1 billion pan‐African fund

Page 8: Africa: A New Emerging Markets Frontier?

BondsBonds Lowering spreads signal increased confidence

1800

)

Egypt 450

500

1400

1600

Spread

 (BP

Morocco

South Africa

EMBI Global

h300

350

400 Ghana

Gabon

EMBI 

800

1000

1200 Ghana

Gabon

200

250

Global

South Africa

Egypt

400

600 100

150

0

200

8

UNECA

Source: OECD Development Centre, based on Thomson Datastream, 2008

Page 9: Africa: A New Emerging Markets Frontier?

OpportunityOpportunity Sovereign Development Funds: future investors? 

0 500 1000 1500 2000 2500 3000 3500

USD billion

Sovereign Wealth FundsEmerging market investment potential

SWFs total assets

Potential 2018 SWF flows to EM

United Arab Emirates: ADIAUnited Arab Emirates: ADIA

Norway: Pension Fund Global

Potential current SWF flows to EM

Si GIC

If Sovereign Development Funds allocated 10% of their portfolios to emerging and developing countries, this will generate inflows of $100 billion/year over the next 

Singapore: GIC

Kuwait: KIA

China: CIC

10 years.

With such huge potential flows, it is critical to address SWF impact on developing world early on.

Russia: Stabilisation Fund

Singapore: Temasek

Development Aid DAC donors

SWFs will dwarf ODA flows to developing world.

9

UNECA

$1.4 trillion to the emerging world over coming decade?

Page 10: Africa: A New Emerging Markets Frontier?

DevDev CentreCentre A platform for global dialogue

Non‐OECD membersOECD members at 

Development Centre

IsraelChile

S h Brazil

Romania

South Africa

India

VietnamThailand

ColombiaEgypt

10

UNECA

Page 11: Africa: A New Emerging Markets Frontier?

AEOAEO African Economic Outlook impact

International Forum on African PerspectivesParis June 2008

Seminar on Capitol Hill Washington D.C,  June 2008

Paris, June 2008

EU Africa SummitEU‐Africa Summit Lisbon, December 2007 TICAD

Tokyo, May 2008

AfDB Annual MeetingMaputo, May 2008

• International launch at AfDB Annual Assembly: 11th May 2008• European launch: 13th May 2008• Over 40 presentations and events within 3 months of publication

Page 12: Africa: A New Emerging Markets Frontier?

27 June 200827 June 2008

Javier Santiso

Director & Chief Development EconomistDirector & Chief Development Economist, OECD Development Centre

12

UNECA UNECA