The Untold Story of the African Growth Miracle Lars Christensen Chief Analyst, Head of Emerging Markets Research +45 45 12 85 30 (direct) + 45 40 74 49 51 (mobile) larch@danskebank.dk March 2012
Africa in context GDP Share ($Bn) (% of Total) Pan Africa Middle East Africa Middle East ("AME") Other Frontier Markets Total Frontier Markets MSCI Emerging Markets (excluding AME) Developed Markets World 1,432 2,155 3,587 2,680 6,267 12,943 37,976 57,186 3% 4% 6% 5% 11% 23% 66% 100% Source: GDP and Population: Global Insight, September 2009; Area: World Bank 2008 Area Share Population Share (mkm 2 ) (% of Total) (Bn) (% of Total) Pan Africa Middle East Africa Middle East ("AME") Other Frontier Markets Total Frontier Markets MSCI Emerging Markets (excluding AME) Developed Markets World 42 6 48 18 66 47 32 145 29% 4% 33% 12% 46% 32% 22% 100% 1.0 0.3 1.3 1.0 2.3 3.6 0.9 6.8 14% 4% 18% 15% 33% 53% 13% 100% Population: Global Insight, Source: September GDP and 2009; Population: Area: World Global Bank Insight, 2008September 2009; Area: World Bank 2008 Source: GDP and Population: Global Insight, September 2009, Area: World Bank 2008
Africa is now a growth destination... Source: IMF, WEO, April 2011
GDP since 1995 GDP level in selected African countries + benchmark countries (Index, 1995=100) 450 400 Brazil China Poland Turkey Angola Botswana Ethiopia Mozambique Nigeria South Africa Tanzania Uganda 350 300 250 200 150 100 50 0 4 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: IMF
...growing faster than most other regions of the World Heat map of expected GDP growth for 2011 as per IMF Forecasts 10% or more 6% - 10% 3% - 6% 0% - 3% less than 0% no data Source: IMF, WEO, April 2011
Bild 5 R1 Will ask Adriaan whether we have updated heatmap RHorne; 2011-04-08
BUT income levels still low GDP per capita 2010 (PPP, current international dollar) 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 China Br azil Tur key Poland Mozambique Ethiopia Uganda Tanzania Niger ia Angola South Afr ica Botswana Source: IMF 6
...with improving macro s which remain broadly favourable Structurally lower inflation Debt - starting from a clean slate?????? Sustained high GDP growth Source: IMF WEO, April 2011??? Sub-Saharan Africa have had significant macro tailwinds in term of debt relief and a commodities boom, however, Current global conditions and populist politics will place pressure on the African macro environment We see countries with strong fiscal and monetary policies will be better positioned in the current environment
Five reasons for African success 1) Peace 2) Political and economic reforms 3) Debt reduction 4) Commodity export 5) Trade with other Emerging Markets primarily China 8
Background for the African success The end of the Cold War started a process of reform and peace. 1989 9
What caused the change in African fortunes? Peace.. 1970s 1980s 1990s 2011 Armed Conflict Peace Source: African Analyst and Investec Asset Management, September 2011
... sustained political and economic reforms The spread of democracy in Africa is improving sovereign governance Over 75% of African countries now in functioning democracies; up from c. 12% in late 1980s Governments are improving infrastructure and creating an enabling business environment Sub-Saharan Africa: Regimes by type, 1946-2008 Source: Monty G. Marshall, Benjamin R. Cole. 2009. Global Report 2009, Conflict, Governance, and State Fragility. Center for Systemic Peace, Severn, Maryland. Countries that made at least one positive reform in 2008/9 (%) Growth of democracy: % of African countries Eastern Europe & Central Asia 93 Middle East & North Africa East Asia & Pacifc Sub-Saharan Africa South Asia OECD high income 50 50 63 63 61 * IAM assessment Multi-party Competitive 72% Flawed 21% Latin America & Caribbean 50 0 10 20 30 40 50 60 70 80 90 100 Source: African Elections Database, Freedom House, The World Fact book, Polity IV Country Reports 2006, Investec Asset Management analysis, May 2008 Source: Doing Business database, May 2009
75.0 70.0 65.0 60.0 55.0 50.0 45.0 40.0... taking governance more seriously Ibrahim Index of African Governance South Africa Ghana Egypt Morocco Kenya Nigeria Source: Mo Ibrahim Foundation, June 2011, http://www.huffingtonpost.com/huffwires/20090422/af-south-africa-election/images/c359edad-c014-41cc-9bbcc56abcece6c8.jpg The African Governance discount is being reconsidered Increased focus on monitoring and reporting governance quality across the continent Company Governance on an improving trend
...with resources igniting economic potential Africa s share of world commodities China s imports from Africa, oil dominant African resource wealth is significant Over 80% of world s platinum resources 85% of world s phosphate 9.5% of world s oil reserves 60% of the world s unexploited cropland in Sub-Saharan Africa World share of unexploited cropland Source: USGS, WTO, IMF, FAO, McKinsey Global Institute, Standard Bank Research, 2011, Investec Asst Management
... increasing trade with the Emerging World Source: *McKinsey Global Institute, June 2010
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