investing in africa sir paul judge 20 th november 2012

Investing in AfricaSir Paul Judge

20th November 2012

AfricaAfrica is a Rich Continent

Sadly many of the people are still poor

3

2000 2011

5

Africa by Numbers

•54 sovereign states•1 billion people•US$2 trillion GDP•7 African countries among the 10 fastest growing economies•5.5% Africa’s share of global FDI projects•US$85 billion funding for African infrastructure in 2010

World Population (bn)

World Population (million) 2010 2030 2050 2010-50

% Change

Asia 4,167 4,917 5,231 26%

Africa 1,033 1,524 1,998 93%

Europe 733 690 729 -1%

Latin America/Caribbean 589 723 691 17%

Northern America 352 410 448 27%

Oceania 36 45 51 42%

World 6,909 8,309 9,150 32%

World Population (bn)

0.8, 13%

0.3, 6%

1.3, 21%3.6, 60%

Europe/ex-USSR

Western Offshoots

L. Am/Africa

Asia

0.7, 8%0.4, 5%

2.6, 29%5.2, 58%

Europe/ex-USSR

Western Offshoots

L. Am/Africa

Asia

2000

2050

Supporting Education

"Education is the most powerful

weapon you can use to change the

world“

Nelson Mandela(1918 - )

African Children Aged 5-14These countries represent about a third of Africa’s population

Population Percentage 5-14 Pop.

(m) Aged 5-14 (m)

Nigeria 131.5 27.3% 35.9

Tanzania 38.3 26.8% 10.3

South Africa 47.4 21.6% 10.2

Kenya 34.3 26.1% 9.0

Uganda 28.8 29.7% 8.6

Ghana 22.1 25.0% 5.5

Malawi 12.9 29.2% 3.8

Zambia 11.7 28.6% 3.3

Sierra Leone 5.5 25.5% 1.4

Gambia 1.5 24.9% 0.4

Total 334.0 26.5% 88.4

DIGITAL DIVIDE- THE REALITY

Africa has 250 million school pupils

95% of students in Africa graduate never having touched a PC

The cost of infrastructure, hardware and curriculum development is prohibitive for developing country governments

UK has 10 million school pupils

Computers per pupil:Primary schools: one for 7 pupils Secondary schools: one for 4 pupils

“The gap between Information ‘Haves’ and ‘Have-nots’ is widening, and there is a real danger that the world’s poor will be excluded from the emerging knowledge-based global economy”

Kofi Annan

Investment Climate

• 35 African countries ahead of China in the EIU’s Democracy Index

• 35 countries ahead of Russia on Transparency International’s Corruption Perception Index

• 17 African countries ahead of India on the World Bank’s Doing Business Index

14FDI inflows

Global and by group of economies, 1995 - 2011

Source: UNCTAD

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

200

400

600

800

1000

1200

1400

1600

1800

2000USD billions World

Developed economies

Developing economies

Transition economies

15

2005 2006 2007 2008 2009 2010 20110

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

% %

Africa - FDI inflows and outflows

As a % of world total

Source: UNCTAD

16Africa - FDI inflows

In USD billions

Source: UNCTAD

2005 2006 2007 2008 2009 2010 20110

10

20

30

40

50

60

FDI inflow into Africa

17FDI Projects in Africa

Source: Ernst & Young

2007 2008 2009 2010 20110

200

400

600

800

1000

421

901

747

675

857

18

Manufactur-ing; 24.6%

Infrastruc-ture-related;

13.0%Extraction;

9.9%

Services; 50.9%

Other; 1.5%

New projects (proportion, 2003 - 2011)

FDI flowing in a diverse range of sectors

Manufacturing and infrastructure-related activity account for a significant proportion of FDI

Source: Ernst & Young

Manu-facturing;

29.9%

Infra-structure-related; 38.3%

Extraction; 27.6%

Services; 4.0%

Other; 0.2%

Capital (proportion, 2003 - 2011)

19Africa - FDI inflows

2005 - 2011

Source: UNCTAD

2005 2006 2007 2008 2009 2010 20110

10

20

30

40

50

60

70

Eastern Africa Central Africa Northern Africa Southern Africa Western Africa

USD billions

20Top 15 African country destinations

Attract 82% of new FDI projects since 2003

Source: Ernst & Young

SA

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occo

Alge

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Tuni

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Nig

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ango

la

Keny

a

Gha

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Liby

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Uga

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Tanz

ania

Zam

bia

Moz

ambi

que

Bots

wan

a

Oth

er c

ount

ries

i...0

200

400

600

800

1000

1

4

7

10

13

16

19

827

563537

328 317 307 282

207178

141 134 128 119 96 80

924

New projects % share of total

•Deli Foods Limited is a biscuit manufacturing company. It produces over 10 varieties of biscuits including McVities biscuits, which it produces under a contract-manufacturing arrangement with United Biscuits (UB) of the U.K .

•Deli is a well run, profitable company operating in a growing industry that is driven by strong demand for affordable packaged foods which are locally manufactured.

•Company's own-brands account for circa 85% of the total annual turnover with strong brand in the mass-market segment.

Investments in Africa – Consumer

Vehicle Aureos Africa Fund Investment amount $10.1m

Country Nigeria Transaction type Strategic minority/ growth capital

Sector Packaged Food – Biscuit Manuf. Investment date November 2008

Deli Foods

2.1x MoC / 42% IRR

Brookside Dairy

•Brookside is the largest privately owned dairy in East Africa with operations in Kenya, Uganda and Tanzania. It also exports products to Rwanda, Burundi, Egypt and the Middle East, as well as to the Indian Ocean islands.

•Aureos invested in Brookside as a part of an acquisition of a complementary dairy business, which increased both the capacity and the number of brands managed by the Company.

Description/Investment Rationale

Investments in Africa – Consumer

Vehicle Aureos Africa Fund Investment amount $18.5m

Country Kenya Transaction type Strategic minority/ growth capital

Sector Consumer Staples - Diary products Investment date February 2009

21% revenue growth 2009-2011

27% EBITDA growth 2009-2011

Multi year data not available yet for comparison performance analysis

22

•CDS is the second largest cement producer in Senegal which operates a plant that has an annual capacity of 2.5 MT of cement.

•The Fund's investment was used to support the company's capacity expansion in order to take advantage of the huge market opportunities in the region.

•The company has strong fundamentals; high potential for attractive returns to investors and has cross border potential.

Investments in Africa – Materials (Cement)

Vehicle Aureos Africa Fund Investment amount $13.7m

Country Senegal Transaction type

Strategic minority/ Growth Capital

Sector Materials- Cement Investment date February 2009

28% revenue growth 2009-2011

29% EBITDA growth 2009-2011

Ciments Du Sahel (CDS)

23

•Southey was established in 1939 to offer industrial painting and contracting services to mines and heavy industry.

•The Group has grown into South Africa’s largest industrial painting, blast cleaning and contracting services company servicing major industrial, infrastructural installations and mining operations.

•The investment offers Aureos the opportunity to invest in a diversified portfolio of assets which are able to generate stable earnings and provides significant growth prospects.

Transaction Summary

Description/Investment Rationale

Investments in Africa – Industrials

Vehicle Aureos Africa Fund Investment amount $12.8mCountry South Africa Transaction type Change of Control

Sector Industrials - Industrial Congl. Investment date July 2009

27% revenue growth 2009-2011

19% EBITDA growth 2009-2011

Southey

24

Project Vision

Togo

13th July 2012

The Jewel of West Africa

Total Population (Millions)

Year Low Medium High

2010 6.0 6.0 6.0

2011 6.1 6.2 6.2

2013 6.4 6.4 6.4

2015 6.6 6.7 6.7

2020 7.2 7.3 7.5

2025 7.7 8.0 8.3

2030 8.2 8.7 9.2

Population By Age Group (000)Age: 0-4 5-19 20-64 65+ Total

2000 0.8 1.8 2.0 0.2 4.8

2005 0.8 2.0 2.4 0.2 5.4

2010 0.9 2.2 2.8 0.2 6.0

2015 0.9 2.3 3.2 0.2 6.7

2020 0.9 2.5 3.7 0.3 7.3

2025 1.0 2.6 4.2 0.3 8.0

2030 1.0 2.7 4.6 0.4 8.7

2030/10 112% 123% 168% 191% 144%

Annual Real GDP/Capita Growth Forecasts ($)5% 6% 7%

2010 535 535 5352011 550 550 5502012 578 583 5892013 606 618 6302014 637 655 6742015 669 694 7212016 702 736 7712017 737 780 8252018 774 827 8832019 813 877 9452020 853 929 1,0112021 896 985 1,0822022 941 1,044 1,1582023 988 1,107 1,2392024 1,037 1,173 1,3252025 1,089 1,243 1,4182026 1,143 1,318 1,5172027 1,201 1,397 1,6242028 1,261 1,481 1,7372029 1,324 1,570 1,8592030 1,390 1,664 1,989

Total Real GDP ($bn)Population (000) 5% 6% 7%

2010 6,028 3.22 3.22 3.22

2011 6,155 3.39 3.39 3.39

2012 6,283 3.63 3.66 3.70

2013 6,413 3.89 3.96 4.04

2014 6,543 4.17 4.29 4.41

2015 6,674 4.46 4.63 4.81

2016 6,807 4.78 5.01 5.25

2017 6,940 5.12 5.41 5.73

2018 7,074 5.47 5.85 6.25

2019 7,208 5.86 6.32 6.81

2020 7,343 6.26 6.82 7.42

2021 7,477 6.70 7.36 8.09

2022 7,612 7.16 7.95 8.81

2023 7,747 7.65 8.57 9.60

2024 7,881 8.17 9.25 10.45

2025 8,016 8.73 9.97 11.37

2026 8,150 9.32 10.74 12.37

2027 8,284 9.95 11.57 13.45

2028 8,418 10.61 12.47 14.63

2029 8,551 11.32 13.42 15.90

2030 8,684 12.07 14.45 17.27

Project Sectors

GovernanceBusiness Development

AgricultureMiningTourism

TransportEnergy

TelecommsEducation

Health

Governance Vision

• By 2020 the most respected country in coastal West Africa– Constitutional stability– Rule of law– Government management– Government effectiveness

• People are content with the government• Overseas investors see Togo as a country

which provides predictable returns

Political Stability

• Ensure Election Commission is seen to be independent

• Ensure free and fair Parliamentary elections in the autumn with external African Union, European Union and United Nations observers certifying them

• Free and fair Presidential election in 2015

Rule of Law

• Set up Independent Commission Against Corruption (ICAC) with international board

• Ensure Supreme Court for all criminal and civil cases is seen to be independent using Togolese lawyers returning from overseas as necessary

• Increase number of local courts with trained magistrates

• Improve police training and conditions

Attracting Foreign Direct Investment

41

“Q: What is your strategy to attract foreign investors?

A: Togo has an image problem today. It is the result of the long years of

crisis in this country. It is imperative that we rid ourselves of the bad image of the past, in order to win the confidence of foreign

investors, to make them look at Togo with fresh eyes and to understand the extent of the positive changes that have happened

in this country in recent years…”

Faure Essozimna Gnassingbe

Source: Quote from New Togo, new governance, new business climate. African Business. May 2011, Issue 375, p35-35; FDI Data from E&Y Africa Attractiveness Report 2012 and World Bank Group FDI

No1: South Africa $827bn (16% of total, $ per capita) No6: Nigeria $307bn (5.9% of total) No9: Ghana $178bn (3.4% of total) No49: Togo $5bn (0.1% of total)

FDI flows into Africa from 2003-2011

Attracting Foreign Direct Investment

42

Summary Action Plan

1. Finalise the New Investment Code

2. Set-up an Investment Promotion Agency (IPA): A One-Stop Window Portals for the various priority sectors / market

opportunities Use current Centre for Business Formalities

3. Define a strategy for resource mobilisation

4. Ensure adequate local skillset

5. Do not overlook Intra-Africa FDI Targets for FDI : have a % of GDP and % job creation as targets

Approach: brand and market Togo: market opportunities, priority sectors, business environment, websites, marketing, public relations…

Key issues to address: ensuring FDI benefits the country and its people

Timing: 2012-2030 Potential source of funding: UNCTAD

Olivier du Lac

AGRICULTUREThe Roots of Togo

• 75 % of working population, around 40 % of GDP

• Average farm < 2 ha, 90 % of the poor are subsistence farmers

• Only 10 % of farmers use animal assisted ploughs

• Very low mechanisation: 1 Tractor for every 30 K Ha

• 84 % of cultivated land receives no fertiliser

• Insufficient national integration and coordination

• 1 million Ha of free arable land

• Blessed with diverse landscapes and fertile soils

National Priority

A smallholder revolution will take root in Togo, and ‘trickle-up’ through the economy.

Project Vision:(2012-2030)

1. Staple foods, ensuring food security

2. Efficient decentralisation

3. Livestock, reduction of imports and nascent exports

4. Tree crops, capitalising on quality

Phosphates– Unconsolidated phosphate: 70m t, P2O5  36 % content;

– Carbonate phosphate: > 2,000m t, P2O5 20 % content;

Marble– Important reserves, good quality: some deposits > 800m t

Limestone– Substantial good-quality limestone reserves (> 200m t)

Iron ore– 500m t grading 30-40 %

Manganese– 6.3m t grading 14.1 %

Identified sites for Chromite, Bauxite, Nickel…

Important Known Mineral Potential

46

Fair Revenues for the Country and for Companies

47

Auctioning or bidding for tender with supervision by

the International Advisory Board

Appropriate fiscal framework – State equity participation (20%) + buy additional shares at

market price– Corporate tax on profits,– Progressive Royalties

e.g. 3% on business planned commodity market price, progressively up to 15% if price rises

Royalties to be used– By the Government – Local Communities Development Fund– Mineral Development and Liability Fund

Why Tourism• Consumed at the point of production• Promoting Cross-cultural

Awareness• Developing communities poor in

resource but rich in culture • Upgrading the economy to a higher

value chain with a service orientation

Local

Global

Special

Add Value

Build New Hotels (2012-2030) 2011 2015 2020 2025 20305 Star Hotel 0 1 2 4 64 Star Hotel 0 2 4 8 15

COST (100 rooms/hotel) 2011 2015 2020 2025 20305 Star Hotel 42 45 52 60 704 Star Hotel 22 25 29 34 39

Total Cost 2011 2015 2020 2025 20305 Star Hotel 45 52 121 140 4 Star Hotel 50 58 134 273

Country Brand Star Cost ($m) Time Room Developer FundUganda Hilton 5 150 Feb-12 300 Aya Foundation Aya InvsetmentRwanda Hilton 4 30 Feb-11 160 Opulent Hilton

Rural & Urban AvailabilityTargeted Growth Rates – Electricity Penetration

% o

f Pop

ulati

on

with

Acc

ess

to

Elec

tric

ity

• Target = 100% of the population to have access to electricity

• Rural

• Mainly decentralised energy systems• Urban

• Mainly centralised energy systems

•

Sources: Niama’s report

• Low level of light• Solar lamp is 10x – 20x

stronger• Air pollution• High oil costs• Dangerous for children

• Strains their eyes studying by weak light at night

• Cause major burn accidents every day

Kerosene Lamps

Sources, CNN, Rural Energy Foundation3

Micro Solar Kits

• “Whole villages can become self-sufficient once someone has a home solar system."

• Allow children to study in the evening• Access to information through radio and television• Charge mobile phones, laptops, possibly small refrigerators

Vision for Telecoms

3 Year 8 Year 18 Year

Inclusive Society Growing Economy Jewel Of The Crown

Telecom as a social tool

Affordability of services

Telecom as a business tool

Reliable business

grade services

Platform for new

business

Full suite of services available

universally

Telecom’s Role

Implied Priorities

Business Development: M-Pesa

Coastal Cables

Developing Togo’s Transport

RoadAir

MarineRail

“Insufficient infrastructure is one of Togo’s biggest obstacles to stronger

growth”

US Treasury Official Neal Wolin, 9th May 2012.

Air Transport And Tourism Promote Lome airport together with tourist business

(Thomas Cook & Monarch in The Gambia) + VISA on arrival

Develop the Niamtougou, Kara airport with the local tourist trade as a destination, plus serve local communities including Benin.

Progressively pave other runways with tourism trends

Private financed Development of nature reserves Tour operators

Note: Indicative route shown on the map – detailed route planning would be required, considering relief, ground conditions, centres of population, mineral reserves etc.

Commission detailed investigation into rail viability, route & gauge

Phase 1: Lome – Blitta (340km) (rehabilitation), linking mines

Phase 1.2 Lome – Kpalime (120km) optional for mine access

Phase 2: Blitta – Niamtougou (190km), linking major towns

Phase 3: Niamtougou – Dapaong (190km) (North Togo border)

Phase 4.1 Burkina Faso, Ouagadougou (300km)

Phase 4.2 Niger, Niamey (400km)

Total Togo rail: 720km + 120km Burkina Faso & Niger: 700km

(1)

(2)

(3)

(4.1)

(4.2)

Rail Transport - Delivery

Education Overview• Enrolment rates

–Primary (net) 91.8%–Secondary (net) 24.7%–Technical and Vocational training 7.8%

• Low completion rates and high repetition rates–Primary completion 73.7%–Progression to secondary school 70.5%–Primary repeaters 22.1%–Secondary repeaters 22.9%

School Investment

By 2030:• Primary education:

– 16,000 teachers to be trained– 2487 new schools, $60,000 per school, total cost

$144 million, average $8.3 million per year (138 schools)

• Secondary education: – 14,400 teachers to be trained– 2400 new schools, $103,000 per school, total cost

$247 million, average $13.8 million per year (133 schools)

53.78%39.16%

5.76%1.30%

All Causes of Death

Communicable DiseasesNon-communicable DiseasesViolence & InjuryOther

14.69

11.36

11.31

7.727.52

47.4

Leading Communicable Causes of Death

HIV/AIDS

Influenza & Pneumonia

Tuberculosis

Diarrhoeal diseases

Malaria

Other

Overview and Key Metrics

• Need 4,300 doctors by 2030• It costs $80,000 to train each

doctor• Total of $344 million or $17

million per year• 9.7% of health budget

Physicians

Other alternatives Import doctors Export specialization

Project Vision

Togo

13th July 2012

The Jewel of West Africa