building africa from the outside-in

BUILDING AFRICAHow local banks, governments, and African

emigrants can help bridge Africa infrastructure funding gap

April 2015By Khadar Ahmed and Serge Ouedraogo

© Rollo Consulting 2015 1

The TeamKhadar Ahmed Serge Ouedraogo

MBA from UC Berkeley Haas School Business

• Born in Somalia, he spent – due to the Civil War – five years in refugee camps without access to education, health care, and decent food

• He has deep appreciation for the difficulties faced many Africans and eager to contribute solutions that increase economic activities and help lift many out of poverty

CFAMBA from UC Berkeley Haas School Business

• Originally from Burkina Faso, he has over 10 years of international experience in North America, Europe, Africa and the Middle East

• He is an experienced consultant and financial analyst who enjoys helping entrepreneurs solve strategic questions with double bottom line opportunities


Agenda

African Infrastructure: A collaborative approach to solve a fundamental funding problemHow African emigrants can potentially bridge the gapHow local Banks can win new business and help solve the funding problemHow government can facilitate the collaboration

ABCD


How you can contribute todayE

Over the next 10 years, Africa faces an infrastructure funding gap of ~$50B annually – Low funding from private

• Over $93B annually over the next 10 years

• Financing gap of about $50 billion/year

• Poor state of infrastructure cuts economic growth by 2%

• Productivity down by to 40%

African infrastructure funding, $B/year

$48B

$45B

$93B

$30B $11B

Total required funding

Infrastructure funding

gapTotal

current funding

African Govern-ments

Donor Agencies

$4B

Private


This gap can be addressed by collaboration between 3 parties: African emigrants, local banks, and governments

INFRASTRUCTUREFUNDING GAP

AFRICAN EMIGRANTS1

32LOCAL BANKS GOVERNMENTS


African emigrants can potentially bridge the gap through productive remittances and savings

Private Foreign Capital

African EmigrantSavings & Remittance

Institutional Collaboration

Saving Incentives

Fundlocation

External

InternalSize/Cost/

SustainabilityLow High

1 AFRICAN EMIGRANTS


African emigrants can help close the infrastructure gap by investing 20% of remittance and 50% of savings

$48B$45B

$93B

Total current funding

Total required funding

Infrastructure funding

gap

$11.7B

$5.3B

Remittance

Savings

$17B/year

Annual infrastructure gap

• Sub-Sahara Africa’s diaspora saved $37B in 2012 in western banks

• 8% annual growth rate (2009 – 2012)• Africans’ surveyed indicate a willingness

to allocate 20% of saving to home country• Saving allocation to home country could

grow to 50% with reduced political risks

• $32billion remittance flows to sub-Sahara Africa in 2013

• 9% annual growth rate (2013 – 2017)• Highest remittance cost at 12%• In Kenya 25% of remittance is

saved/invested

1 AFRICAN EMIGRANTS


Offering African emigrants an opportunity to “build their home country” is a win-win for emigrants and banks

2 LOCAL BANKS

Why Local Banks Win-Win PropositionAfrican Emigrants offer• New source of capital • Reliable and sizable long term fundingLocal banks offers• Affordable remittance services• Easy saving options not offered by host

country• Reliable means of investing money

back home• Investment advisory

Asset Allocation

Debt Financing Political

Risk Currency

Risk

Local banks have limited to no assets allocated to infrastructure projects

Debt financing market is dominated by DFIs, the requirements of which are so stringent and stifle investmentsReduce political risk, which is one of top 3 risks limiting the participation of private capital Reduce currency risk, which is one of top 5 risks limiting the participation of foreign private capital


Local banks do not yet cater to the needs of African emigrants – Opportunities for new solutions

2 LOCAL BANKS

The Voice of African Emigrants Opportunities For Banks• Saving plans to return home • Partner in business ventures

and help dissipate the perception of risk

• Business and investment advisory

• Real estate investment advisory and mortgages

“I’m not successful here. I don’t have money. I’ll be ashamed to return just with my suitcase.”

“I want to start a business back home, but everything is political in Africa. If you don’t have connections, your business could be

crushed and closed at any time by officials.”“ “I don’t have a place where to live. I don’t want to return to my parents house. Where will I live and host my family when I don’t

have that much money?”“As an African in the diaspora I haven’t really seen any targeted information that would compel me to… invest in [Africa]. There has to be a lot more focused marketing and encouragement to

invest.”


Local banks can take action by building suited banking infrastructure and reaching out to African emigrants

2 LOCAL BANKS

Engage Enable Empower• Engage with the

emigrants that are about to leave the country

• Create and implement referral programs

• Simple products with attractive interest rates and low fees

• Low cost remittance solutions such as free account transfers

• Market investment products that meet the diaspora needs

• Emigrant-specific platforms, products and advisors

• Development of online and mobile banking demonstrated infrastructure barriers can be overcome

• Telecommuni-cation investments contributed 1% per capita growth from 1995 - 2005


Government is an important partner to implement policies paving the way for African emigrants and others investors

3 GOVERNMENTS

• Rehabilitate existing infrastructure, target better subsidies, and improve budget execution

• Governments need to be more active in engaging the diaspora and reducing the perception of risk

• More tangible actions such as FDIC deposit insurances and regulation allowing foreign denominated deposits need to be considered

Challenges Solutions

PoliciesNo targeted policies to incentivize emigrants

Engagement

Platforms

Lack of EngagementNo dedicated platforms for mobilization

Increase engagement with diaspora through Embassies, World Bank, Media

Develop online and offline platforms that can help mobilize & engage emigrantsCreate policies incentivizing emigrants to invest back home: allow dual nationalities, tax incentivesOffer deposit insurance protection (DIP) comparable to those provided in Asia –Only 20% of African banks provide DIP Increase bank regulation & supervision, implement insolvency resolution procedures


Government has an opportunity to engage, enable, & empower African emigrant communities around the worldEngage Enable Empower

• Events Promoting saving and investments in Africa

• Dedicated diaspora engagement cabinet

• Tax incentives: Remittance and diaspora saving and investments

• Transparency and deposit insurance

• Develop the infrastructure that allows diasporas to vote

• Develop online platforms dedicated to the Diaspora

3 GOVERNMENTS


Use a compelling integrated marketing strategy to attract emigrants capital

EXAMPLE OF OUTREACH FROM LOCAL BANKS

Solutions

Channels

• Emigrant saving and checking • Then more sophisticated products:

Securitize infrastructure assets funded• Emigrant bonds, Sukuk• Partnership with external investors to

make projects economically viable

• Referral programs • Ads on online diaspora communities • Partnership with the African Diaspora

Networks

Communication“To all African Emigrants, South African Citi is a local partner and financial advisor for an affordable remittance solution to support your family and invest back home. Citi does this by providing a no charge money transfer solution across all Citi bank accounts and a dedicated financial advisor to support all your money management and investment needs.”


What can you do today to bridge the infrastructure gap in Africa?

EXAMPLE OF WHAT EMIGRANTS CAN DO TODAY

Mentor African Startups

Study Engineering

• Help entrepreneurs build revolutionary technologies and scalable businesses• It only takes a few hours a month • Contribute remotely through platforms

like VC4Africa

• A recent study by the Royal Academy of Engineering shows that: • Africa is not graduating enough

engineers • Graduates do not have the necessary

skills and experience

Invest• Invest in Infrastructure funds

• Participate in the many funds across the continent

• New crowdfunding platforms such as Homestrings make it easier than ever (e.g.)

• Invest in current African startups that are helping Africa leapfrog traditional infrastructure • Drones, distributed resources (e.g.

solar), mobiles technologies…• Join the growing number of African

angel networks like ABAN© Rollo Consulting 2015 14

THANK YOUContacts:Khadar Ahmed : [email protected] Ouedraogo: [email protected]


building africa from the outside-in

Economy & Finance