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UBD - Africa
Africa: Transitioning from Aid to Financial Markets?
March 31, 2014
Fernando Costa Lima
UBD - África 2
1. Grants and GDP
2. Private Equity
3. Debt Markets
4. Banking System
5. Some Remarks for Thought
UBD - África
Avg. Max Min
2.3% 9.6% 0.1%
Avg. Max Min
4.7% 13.5% 0.3%
Avg. Max Min
11.3% 28.1% 3.7%
Avg. Max Min
13.2% 32.9% 4.3%
0%
5%
10%
15%
20%
25%
30%
35%Lib
eria
Buru
ndi
São T
om
é a
nd…
Dem
. Rep.
of
Congo
Com
oro
s
Côte
d'Ivoire
Centr
al Afr
ican R
ep.
Zim
babw
e
Guin
ea-B
issau
Togo
Guin
ea
Eritr
ea
Mala
wi
The G
am
bia
Mozam
biq
ue
Nig
er
Rw
anda
Sie
rra L
eone
Burk
ina F
aso
Tanzania
Mali
Uganda
Eth
iopia
Benin
Kenya
Madagascar
Cape V
erd
e
Lesoth
o
Senegal
Zam
bia
Ghana
Seychelles
Sw
aziland
Nam
ibia
Mauri
tius
Bots
wana
South
Afr
ica
South
Sudan
Chad
Cam
ero
on
Republic o
f Congo
Nig
eria
Gabon
Angola
Equato
rial G
uin
ea
3
2012 Sub-Saharan Africa, Grants % of GDP
1.1. What’s the history today in Sub-Saharan Africa
GRANTS AND GDP
Fragile countries Low-income Middle-income
countries
Oil-exporting countries
Source: IMF - World Economic Outlook, OECD – International Development Statistics
UBD - África
0%
2%
4%
6%
8%
10%
12%
14%
19
80
19
85
19
90
19
95
20
00
20
05
20
10
4
Sub-Saharan Africa (ex-South Africa), Grants % of GDP
1.2. And what about the past…
How do grants relate to economic development?
Source: IMF - World Economic Outlook, OECD – International Development Statistics
0
200
400
600
800
1,000
19
80
19
85
19
90
19
95
20
00
20
05
20
10
Sub-Saharan Africa (ex-South Africa), GDP current prices
US
$ B
illi
on
s
Source: IMF - World Economic Outlook
GRANTS AND GDP
UBD - África
0
100
200
300
400
500
600
19
80
19
85
19
90
19
95
20
00
20
05
20
10
5
Oil-exporting countries, Grants % of GDP
1.2. And what about the past…
Is it all about Oil?
Source: IMF - World Economic Outlook, OECD – International Development Statistics
US
$ B
illi
on
s
Oil-exporting countries, GDP current prices
Source: IMF - World Economic Outlook
0%
1%
2%
3%
4%
5%
6%
7%
8%
19
80
19
85
19
90
19
95
20
00
20
05
20
10
GRANTS AND GDP
UBD - África
0
20
40
60
80
100
120
140
19
80
19
85
19
90
19
95
20
00
20
05
20
10
6
Middle-income countries, Grants % of GDP
1.2. And what about the past…
And again…
Source: IMF - World Economic Outlook, OECD – International Development Statistics
US
$ B
illi
on
s
Middle-income countries, GDP current prices
Source: IMF - World Economic Outlook
0%
2%
4%
6%
8%
10%
12%
14%
19
80
19
85
19
90
19
95
20
00
20
05
20
10
GRANTS AND GDP
UBD - África
0
50
100
150
200
250
19
80
19
85
19
90
19
95
20
00
20
05
20
10
7
Low-income countries, Grants % of GDP
1.2. And what about the past…
And again…
Source: IMF - World Economic Outlook, OECD – International Development Statistics
US
$ B
illi
on
s
Low-income countries, GDP current prices
Source: IMF - World Economic Outlook
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
19
80
19
85
19
90
19
95
20
00
20
05
20
10
GRANTS AND GDP
UBD - África
0
10
20
30
40
50
60
70
80
19
80
19
85
19
90
19
95
20
00
20
05
20
10
8
Fragile countries, Grants % of GDP
1.2. And what about the past…
This time is different…
Source: IMF - World Economic Outlook, OECD – International Development Statistics
US
$ B
illi
on
s
Fragile countries, GDP current prices
Source: IMF - World Economic Outlook
0%
5%
10%
15%
20%
25%
19
80
19
85
19
90
19
95
20
00
20
05
20
10
GRANTS AND GDP
UBD - África
0
100
200
300
400
500
600
19
80
19
85
19
90
19
95
20
00
20
05
20
10
9
1.2. And what about the past…
0%
5%
10%
15%
20%
25%
19
80
19
85
19
90
19
95
20
00
20
05
20
10
Oil-exporting countries Middle-income countriesLow-income Fragile countries
Grants % of GDP by Country Group
0%
5%
10%
15%
20%
25%
19
80
19
85
19
90
19
95
20
00
20
05
20
10
The decreasing dependency on grants is consistent for all the groups except for the fragile
countries
Source: IMF - World Economic Outlook, OECD – International Development Statistics
GDP by Country Group
US
$ B
illi
on
s
Source: IMF - World Economic Outlook
0%
5%
10%
15%
20%
25%
19
80
19
85
19
90
19
95
20
00
20
05
20
10
Oil-exporting countries Middle-income countriesLow-income Fragile countries
GRANTS AND GDP
UBD - África
0%
20%
40%
60%
80%
100%
120%Lib
eria
Buru
ndi
São T
om
é a
nd P
ríncip
e
Dem
. Rep.
of
Congo
Com
oro
s
Côte
d'Ivoire
Centr
al Afr
ican R
ep.
Zim
babw
e
Guin
ea-B
issau
Togo
Guin
ea
Eritr
ea
Mala
wi
The G
am
bia
Mozam
biq
ue
Nig
er
Rw
anda
Sie
rra L
eone
Burk
ina F
aso
Tanzania
Mali
Uganda
Eth
iopia
Benin
Kenya
Madagascar
Cape V
erd
e
Lesoth
o
Senegal
Zam
bia
Ghana
Seychelles
Sw
aziland
Nam
ibia
Mauri
tius
Bots
wana
South
Afr
ica
South
Sudan
Chad
Cam
ero
on
Republic o
f Congo
Nig
eria
Gabon
Angola
Equato
rial G
uin
ea
2012 Observation
10
1.3. There’s a lot of histories to tell…
Fragile countries Low-income Middle-income countries
Oil-exporting countries
Box Plot by Country, Grants % of GDP
Source: IMF - World Economic Outlook, OECD – International Development Statistics
GRANTS AND GDP
UBD - África 11
2.1. Private Equity Investment in Emerging Markets
EM as % of global PE Fundraising EM as % of global PE Investment
0%
5%
10%
15%
20%
25%
$0
$100
$200
$300
$400
$500
2006 2007 2008 2009 2010 2011 2012 2013
EM
as %
of G
lob
al T
ota
l
US
$ B
illion
s
Developed Asia (JANZ) United States Western Europe Emerging Markets
0%
4%
8%
12%
16%
$0
$100
$200
$300
$400
$500
2008 2009 2010 2011 2012 2013
EM
as %
of G
lob
al T
ota
l
US
$ b
illio
ns
Developed Asia (JANZ) United States Western Europe Emerging Markets
Sources: Developed Asia - Asia Private Equity Review, U.S. – PitchBook, Western Europe – European Venture Capital Association, EM – EMPEA
PRIVATE EQUITY
UBD - África
1.62
1.02
0.89
0.280.20
0.13 0.12 0.110.07 0.06 0.04 0.03 0.01 0.01
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Israel United
States
United
Kingdom
South
Korea
India Brazil SSA* Poland China South
Africa
Japan Turkey Russia MENA**
12
2.1. Global Private Equity Penetration
PE Investment/GDP (%)
Sources: Emerging Markets – FundLink, EMPEA’s; United Kingdom – Centre for Management Buy-Out Research; Israel – Israel Venture Capital Research Center; Japan – Asia Private Equity; International Monetary Fund
*Sub-Saharan Africa
**Middle East & North Africa
PRIVATE EQUITY
UBD - África 13
2.2. Private Equity Investment in Sub-Saharan Africa
0.9
1.7 1.7 1.7
0.9 1.0
0.8
1.4
1.1
1.6
$0
$1
$2
2009 2010 2011 2012 2013
US
$ B
illio
ns
Funds Raised Capital Invested
Sub-Saharan Africa Fundraising & Investment
Source: Emerging Markets Private Equity Association
Sub-Saharan Africa attracted $1.6 billion of private equity investment in 2013, the most in five years, with the East Africa region experiencing the biggest increase in deal activity
This contrasts with emerging markets as a whole, which saw a 7 percent year-on-year decline in capital flow to $24 billion.
As one of the world's fastest growing regions, sub-Saharan Africa has caught the attention of private equity investors who have been encouraged by rising consumer spending and natural resource discoveries
Given the limited number of listed companies and low liquidity in stock markets outside Johannesburg, Lagos and Nairobi, the asset class also offers investors greater exposure to fast-growing sectors
PRIVATE EQUITY
UBD - África 14
2.2. Characterizing Private Equity Investment in Sub-Saharan Africa
61%
85%
69%64%
74%
18%
6%
12%15%
13%8%7%
7%6%
8% 15% 6%
0%
20%
40%
60%
80%
100%
2009 2010 2011 2012 2013
% o
f T
ota
l N
um
ber o
f D
eals
300+
100-299
75-99
50-74
25-49
<25
US$m
Investment by Size
79%
64%
88%
39%
93%
12%21%
34%
55%
6%
0%
20%
40%
60%
80%
100%
2009 2010 2011 2012 Thru Q3 2013
% o
f T
ota
l C
ap
ital
Rais
ed
Sub-Saharan Africa Central and Eastern Africa West Africa
Southern Africa Country-dedicated Funds
79%
64%
88%
39%
93%
12%21%
34%
55%
6%
0%
20%
40%
60%
80%
100%
2009 2010 2011 2012 2013
% o
f T
ota
l C
ap
ital
Rais
ed
Fund Raising by Region
The market is characterized by
small size deals
Source: Emerging Markets Private Equity Association
Source: Emerging Markets Private Equity Association
PRIVATE EQUITY
UBD - África 15
Bond Market Capitalization (% of GDP)
3.1. Bond Market Comparison, 2010
Source: IMF
DEBT MARKETS
UBD - África 16
3.2. Sub-Saharan African Bond Market Capitalization, 2006-2010
Source: IMF
Bond Market Capitalization (% of GDP)
Go
vern
men
t B
on
d M
arket
Co
rp
orate
Bo
nd
Market
DEBT MARKETS
UBD - África 17
3.3. Sub-Saharan African Corporate Bond Market
Source: IMF, BIS
Number of Active Markets
DEBT MARKETS
UBD - África 18
3.4. Sovereign Debt Ratings Comparison (Foreign Currency Long Term )
Source: Bloomberg
MOODYS S&P FITCH
Angola Ba3 BB- BB-
Botswana A2 A- NR
Burkina Faso NR B NR
Cameroon NR B NR
Cape Verde NR B B+
Gabon NR BB- BB-
Ghana B1 B B
Kenya B1 B+ B+
Lesotho NR NR BB-
Mauritius Baa1 NR NR
Mozambique B1 B B+
Namibia Baa3 NR BBB-
Nigeria Ba3 BB- BB-
Republic of Congo Ba3 B+ B+
Republic of Zambia B1 B+ B
Rwanda NR B B
Senegal B1 B+ NR
Seychelles NR NR B
South Africa Baa1 BBB BBB
Uganda B1 B B
Sub-Saharan African
MOODYS S&P FITCH
Argentina B3 CCC+u CC
Brazil Baa2 BBB BBB
Colombia Baa3 BBB BBB
Uruguay Baa3 BBB- BBB-
South America
MOODYS S&P FITCH
Austria Aaa AA+ AAA
Belgium Aa3 AAu AA
Finland Aaa AAA AAA
France Aa1 AAu AA+
Germany Aaa AAAu AAA
Greece Caa3 B- B-
Ireland Baa3 BBB+ BBB+
Italy Baa2 BBB u BBB+
Netherlands Aaa AA+u AAA
Portugal Ba3 BB BB+
Spain Baa2 BBB- BBB
United Kingdom Aa1 AAAu AA+
Europe
MOODYS S&P FITCH
Canada Aaa AAA AAA
USA Aaa AA+u AAA-
Mexico A3 BBB+ BBB+
North and Central America
MOODYS S&P FITCH
Australia Aaa AAAu AAA
China Aa3 AA- A+
India Baa3 BBB-u BBB-
Japan Aa3 AA-u A+
Singapore Aaa AAAu AAA
Asia
DEBT MARKETS
UBD - África 19
In Financial Times, Africa: set for a sovereign debt rush? by Rob Minto, Oct 15, 2012
DEBT MARKETS
UBD - África 20
In IIF REGIONAL OVERVIEW, Sub-Saharan Africa: Growing Strong, Challenges Ahead November 6, 2012
DEBT MARKETS
UBD - África 21
DEBT MARKETS
In Standard & Poor´s, The Growing Allure Of Eurobonds For African Sovereigns, 06-May-2013
UBD - África 22
In Thorsten Beck Robert Cull, Banking in Africa, The World Bank, Development Research Group, Finance and Private Sector Development Team, October 2013
BANKING SYSTEM
UBD - África 23
In Thorsten Beck Robert Cull, Banking in Africa, The World Bank, Development Research Group, Finance and Private Sector Development Team, October 2013
BANKING SYSTEM
UBD - África 24
In Dirk Willem te Velde and Stephany Griffith-Jones (eds), Sustaining growth and structural transformation in Africa: how can a stable and efficient financial sectorhelp?, Current policy and research debates, DEGRP Policy Essays: December 2013
BANKING SYSTEM
UBD - África 25
Source: Bloomberg
Do we need Smarter Aid? Infrastructure financing *
Professionalisation of project management * Streamline the system for slicing risk unrelated to a project’s commercial
viability, through a bigger and more standardised menu of credit enhancements and guarantees *
The first African sovereign debt management centre was created in 2011 The centre will encourage co-operation among African debt managers and support the development of sound practices in public debt and cash
management, in order to create stronger securities markets. It will also encourage the implementation of a stronger infrastructure for
government securities markets.
Is there room for Aid to Domestic Financial Markets? The case of Angola Investe
SOME REMARKS FOR THOUGHT
* See The Economist March 22nd 2014, Investing in infrastructure, The trillion-dollar gap
How to get more of the world’s savings to pay for new roads, airports and electricity
Thank you
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