Why Invest in Africa?

Africa has been the world’s fastest growing continent since the turn of the Millennium but despite Africa’s outstanding economic performance only a handful of investors have begun to realise its potential

01STANLIB Africa Overview 04

02The Four Pillars of Africa’s Growth 04

More stable and democratic 04

Opening itself up to free trade 05

Labour force 06

Fixed investment has surged 06

03Common Misconceptions About Africa 08

Africa is heavily indebted 08

Africa suffers fromendemically high inflation 08

Africa is inefficient, lacks transparancy and is corrupt 09

Africa is too small to bother with 09

Africa is too Risky 09

04The Time is Now 10

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Why Invest in Africa?Africa - The World’s Fastest Growing Continent

Africa has been the world’s fastest growing continent since the turn of the Millennium. Despite Africa’s outstanding economic performance, only a handful of investors have begun to realise its potential. However, that is not unusual! South East Asia’s economies had been growing rapidly for 20 years before they began to attract serious attention from global investors in the 1980s. In the investment world as in many others, perceptions can lag reality by a surprisingly long time.

Our Heritage

STANLIB is one of Africa’s leading asset managers with its headquarters in South Africa, managing assets in excess of R565 billion* for over 400 000 retail and institutional clients across the African continent. STANLIB was founded in 2002 when Liberty Asset Management and Standard Corporate and Merchant Bank (SCMB) Asset Management merged. Liberty Asset Management and SCMB Asset Management had managed investments for over 25 years prior to their merger.

STANLIB has adopted the Franchise Model which is designed to deal with the complexities of the investment world with agility. This operating model provides the advantages and commitment of a boutique house and the strength and efficacy of a large investment house.

Our Africa Footprint

Linked to the STANLIB footprint across Africa, the teams have an on-the-ground competitive advantage when originating potential investment opportunities and in converting these opportunities into successful investments.

In addition, the teams remain linked into the 18 African country Standard Bank/Stanbic Bank network , further enhancing their ability to incorporate vital local knowledge into their offering.

The graph below depicts STANLIB activity and presence on the continent, as at 31 December 2013.

STANLIB Africa Overview

• Current physical presence • Markets serviced from other jurisdictions • Potential presence

WESTERN AFRICA EASTERN AFRICA

SOUTHERN AFRICA

NigeriaStandard Bank made strategic acquisition of IBTC Chartered Bank

GhanaSTANLIB is the first South African managerto have a physical presence in Ghana

NamibaLaunched the first property unit trust in Namibia in 2007

BotswanaCurrently has the biggest unit trust platform in the countryand running the biggest money market fund in Botswana

South AfricaLargest management company in Africa

South SudanFirst asset manager to manage money in South Sudan

UgandaSTANLIB was the first asset manager to set up shop in 2002

KenyaRunning the largest unit trust in Kenya

TanzaniaStandard Bank current physical presence

SwazilandAUM of +E4.5 billion and biggest managerwith local presence

LesothoSTANLIB launched the first unit trust in Lesotho as part of the Government’sprivatisation initiative

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Africa is becoming more stable and more democraticUp to 75% of Africa’s population now lives under stable and increasingly democratic regimes. This represents a huge turnaround from 30-40 years ago, when the majority of Africa’s population lived under unstable and despotic regimes. This transformation has not occurred overnight and it is still evolving but it is real nonetheless. South Africa, Nigeria, Kenya and many smaller countries are now all democracies. There are 17 investable stock markets in Africa and only one of those - Zimbabwe - could still be called a dictatorship. The few countries in Africa that remain unstable - such as Somalia - do not have stock markets.

Number of democratic countries in SSA

20

18

16

14

12

10

8

6

4

2

0

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010Source: DB Research

The Four Pillars of Africa’s Growth

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Africa is opening itself up to free tradeSub-Saharan Africa has been leading the way in trade reforms. The World Bank’s 2013 ‘Doing Business’ Report shows that between 2006 and 2013 Sub-Saharan Africa introduced more reforms*. Since 1990 Sub-Sahara Africa’s exports to the world’s emerging markets have risen over 4000%.

Number of Doing Business reforms making it easier to trade across borders by Doing Business report year.

Source: World Bank Doing Business 2013

Exports from Sub-Saharan Africa to Developed and Emerging Markets

0

1000

2000

3000

4000

5000

2013

2012

2011

2010

200

9

200

8

2007

200

6

200

5

200

4

200

3

200

2

200

1

200

0

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Inde

x, J

an 19

90 =

100,

Dol

lars

Emerging Markets Developed Market

Source:

0 10 20 30 50 60 7040

Sub-Saharan Africa(46 economies)

5 5 6 11 14 9 7 6

Latin America & Caribbean (33 economies)

5 3 6 8 7 4 2 6

Middle East & North Africa (19 economies)

4 2 4 4 6 6 2 1

Eastern Europe & Central Asia(24 economies)

1 3 3 4 6 6 2 2

East Asia & Pacific (24 economies)

4 3 2 4 2 5 1 1

OECD high income(31 economies)

4 1 1 2 2 2 4 5

South Asia(8 economies)

1 2 2 1 1 1 1

2006

2007

2008

2009

2010

2011

2012

2013

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Africa’s Labour Force - and its Middle Class - Is the Fastest Growing in the WorldThe McKinsey Global Institute in 2012 forecast Africa’s labour force will grow by 122 million between 2010 and 2020. China’s will grow by just 12 million and North America’s by 8 million. Europe and Japan’s will decline. By 2030-40 Africa will be home to the largest workforce in the world. Of course, a rapidly rising population is of little value if most of it is destined to live below the poverty line. That is far from being the case in Africa. The African Development Bank’s 2011 Africa Report stated that ‘Africa’s Middle Class is the fastest growing in the world.’ In 2010 McKinsey reported that ‘regardless of the fact that India has a larger population than Africa, Africa now has more Middle Class consumers.’ Since 1990, GDP per capita growth in Africa has risen in line with China and India. Poverty levels have fallen commensurately.

Africa’s labour force to grow by 122 million by 2020 and largest in the world by 2035

Africa 122

India 78

Latin America 45

Southeast Asia 40

China 12

North America 8

Europe -4

Africa1,200

1,000

800

600

400

200

01970 1980 1990

20402000 2010 2020

2030

India

Latin AmericaSoutheast Asia

China

North America

Japan

Europe

Labour Force2020

504

534

316

331

792

178

354

Size of the working-age population (15-64 yearsGrowth of the labour force, 2010-20

Source: Source:

Africa’s fixed investment has surged In order for economic growth to be balanced and sustainable, fixed investment spending must be treated as equally important as consumer spending. Africa’s fixed investment spending has surged by over 350% since 2000. As a percentage of GDP, fixed investment spending in key African economies such as Nigeria and Kenya is at least equal to that in China, India and South East Asia.

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Africa’s Fixed Investment has been Growing Exponentially

fixed

inve

stm

ent a

s % G

DP

0

25

50

75

100

125

150

175

200

225

250

2011201020092008200720062005200420032002200120001999

Up 343%

Source:

The Result?

Africa has been the world’s fastest growing continent since 2000. The IMF predicts that between 2015 and 2020, seven out of the world’s 10 fastest growing economies will be found in Africa. It predicts GDP growth for the region as a whole will be between 6% and 7% for the foreseeable future.

And Do Not Forget Africa’s Game Changers...

Љ Oil and gas - Africa’s growth since 2000 has been achieved without the help of the immense oil and gas discoveries made since then. In the last five years, commercially viable oil and gas discoveries have been made in Ghana, Niger, Ethiopia, Uganda, Kenya, Tanzania and Mozambique. Only a fraction of Africa’s potential energy resources have so far been commercially explored.

Љ Electricity - Nigeria’s compound 7%+ GDP growth has been achieved with the same electricity output that powers Japan’s Narita airport. The IMF argues that if Nigeria can reform its electricity production and distribution, annual compound GDP growth could rise to over 10%. And the picture is changing, with many of Nigeria’s state owned electricity generators and distributors recently sold to world class international companies.

Љ Agriculture - Africa has 60% of the world’s uncultivated arable land. East Africa alone has a larger acreage of uncultivated arable land than all the cultivated land of India. Again, the picture is changing, with China, India, Brazil and the Gulf States competing to lease millions of acres of Africa’s farmland to secure their future food supplies.

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Africa is Heavily IndebtedWrong - Africa’s Sovereign debt as a percentage of GDP has been falling steadily. According to IMF statistics, Africa is now the least indebted region in the world.

African Debt levels as a % of GDP Have Fallen Dramatically

% o

f GD

P

0.00

6.25

12.50

18.75

25.00

31.25

37.50

43.75

50.00

56.25

62.50

68.75

75.00

2012

2011

2010

200

9

200

8

2007

200

6

200

5

200

4

200

3

200

2

200

1

200

0

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Source: Africa Suffers From Endemically High InflationWhile it is true that inflation in Africa is projected at around 8% for 2015 compared to around 6% for Latin America and 4% for Asia, it is no longer out of line with other global regions and should fall further as the weighting represented by food in Africa’s inflation basket continues to decline.

African Inflation is No Longer Significantly out of Line with Other Global Regions

Africa – Latin America –Europe – Asia – North America –

-2

0

2

4

6

8

10

12

14

20152014201320122011201020092008

Common Misconceptions About Africa

Africa is In-Efficient, Lacks Transparency and Is CorruptAs the table below produced by the World Bank shows, Africa scores no worse on these measures than India and South East Asia. The real problem in Africa is not its culture but its lack of infrastructure.

In a recent World Bank Report, Sub-Saharan Africa was in line with South East Asia with respect to efficiency, transparency and corruption. Africa’s problems relate to its physical infrastructure, not its culture.

CRG Corruption(0=High Risk, 6= Low Risk)

Transparency Accountability, and Integrity of the Public Sector (1=Low, 6=High)

Logistics Performance Index, Efficiency of Customs Clearance (1=low,5=high)

Road Density (Kilometers of road per 100 square Kilometers land area, 2007)

Cost to Export (U.S dollar per container)

Value to Electrical Outages (Percent of Sales)

Bangladesh 3.0 3.0 2.3 N/A 970 N/A

Cambodia 2.0 2.0 2.3 N/A 732 N/A

India 2.0 3.5 2.7 N/A 945 N/A

Indonesia 3.0 N/A 2.4 22.0 704 2.4

Philippines 2.0 N/A 2.7 N/A 816 3.4

Vietnam 3.5 3.0 2.7 48.0 555 3.7

South East Asia (median)

2.5 3.0 2.6 35.0 774 3.4

Sub-Saharan Africa

2.3 2.8 2.2 14.5 1.927 6.1

Sources: World Bank, World Development Indicators, International Country Risk Guide and IDA Resources Allocation Index. Road density refers to 2004, and electrical In the same way that many potential investors have been slow to perceive the positive developments taking place in Africa, so they have been slow to lose some of the more common negative misconceptions about Africa. Let’s deal with some of these.

Africa Is Too Small to Bother WithIn terms of stock market capitalisation this criticism is fair...But the same was said about South East Asia before investors began to appreciate the region’s superior economic fundamentals and began to invest in its stock markets in the 1980’s. Africa’s stock markets may still be small as global investors still have to discover them but its economy is not small. By 2020 HS Global Insight predicts Africa’s GDP will be of the order of $5 trillion - larger than the individual economies of Germany, the UK and France - and 60% of the size of these economies combined.

Africa Is Too RiskyAfrica is perceived by many to be high risk but this statement needs to be qualified. It is true that political risk is greater in Africa but this can to a considerable degree be reduced by a prudential spread of investments across Africa’s 17 investable markets. On the other hand, we believe many perceived risks are considerably exaggerated. For instance, the financial statements of most listed African companies are audited by the major international audit firms and the information contained in them can be relied on. Nonetheless, it is true that the statements tend to contain less information than would be found in the reports produced by companies in the developed world, which is why it is essential to have local research teams in Africa visiting companies on the ground. As for African stock markets, in the global financial crisis of 2008-9 no African stock market suspended trading and closed its doors for business, in contrast to a number of markets in the Far East. Nor was there any difficulty in repatriating assets.

From STANLIB’s point of view the greatest risk is the relative illiquidity of the markets. African markets trade daily but volumes can be exceptionally low by developed or even emerging market standards, which means any investment in African equities.

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Africa – Largely Ignored by Global Investors but Already Outperforming for 10 Years

Africa accounts for 1% of the world’s stock market capitalisation. STANLIB research indicates only one in two of Europe’s 200 largest pension funds has any direct investment in Africa. However, Africa accounts for 6% of the world’s GDP. Clearly, the world’s largest investors are not going to remain as under-invested in Africa as they are now. It is anyone’s guess as to when the world’s investment community will wake up to the opportunity Africa represents. There are sound reasons to believe early investors will reap the greater rewards. Indeed, Africa’s Frontier Markets have been outperforming the rest of the world for over 10 years already, even though the world’s investment community has largely ignored this. But for how much longer?

MSCI FM AfricaMSCI FMMSCI EMMSCI World

4.83%

8.52%

4.15%

8.89%

10 Years Annualised USD Returns

Source: MSCI; Silk Invest

STANLIB Pan-Africa Capabilities

STANLIB offers its clients Pan-African solutions for their Africa investment needs. An advantage of the franchise model is that it is an enabler for investment diversification for clients through asset class, portfolio manager and investment styles in order to provide a complimentary solution for its clients’ investment risk and return needs.

Below is a depiction of STANLIB’s Pan-Africa Capabilities:

EQUITY FIXED INTEREST LISTED PROPERTY ALTERNATIVE

Ƭ Pan-Africa Equity Proposition Ƭ Pan-Africa Fixed Interest Proposition

Ƭ Listed Property Proposition Ƭ Africa Direct Property Proposition

Ƭ Infrastructure Investments Proposition

SEGREGATED MANDATES

STANLIB is able to construct portfolios leveraging our core capabilities in equities, fixed income, property (listed), property (direct), balanced and country/region specific.

* Jones Lang La Selle

The Time is Now

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The Pan-Africa Franchise manages a range of listed equity, fixed income and balanced portfolios. Investors are able to choose a pooled solution or can structure a segregated mandate with specific regional exclusions or inclusions. The primary investment objective of the franchise is to achieve medium to long-term capital growth and in the process, outperform the relevant benchmark.

The Listed Property Franchise has an outstanding track record as a leading listed property manager with a unique offering across all property markets in the world. The size of our Property Book and our strong ties to STANLIB Direct Property Investments is a clear competitive advantage, while our affiliation with Standard Bank Properties further strengthens our influence when it comes to voting, private placements and liquidity. In addition to doing our own analysis and research, the property team leverages off the greater STANLIB Asset Management team, including the Fixed Income Team, the in-house economists, and the Equity Research Team, for trends in the retail, construction and financial sectors.

The STANLIB Direct Property Investment Franchise (SDPI) is committed to delivering long-term inflation beating returns to investors through a quality real estate portfolio. Our investment purpose is making real estate accessible sustainably. These are our three main focus areas:

Ensure that we stay in touch with the market to create exposure for investors to key opportunities and economically growing nodes.

Focus dedicated efforts on building Africa investment opportunities through creating quality stock in high growth areas.

Remains a key focus area with a dedicated investment team to drive investment returns for policy holders and match exposure needs.

Liberty Property Portfolio Third Party MandatesPan-Africa Portfolio

The Infrastructure Investments Franchise is focussed on creating a platform that will enable a wide range of investors to gain access to investment opportunities in African Infrastructure. A market traditionally limited to a group of specialist investors and financial institutions. This initiative has evolved through collaboration between us and Standard Bank. Standard Bank has long recognised the infrastructure investment opportunity, one of its core African strategies. It established and developed a highly successful Infrastructure Equity offering and team. The natural progression of this business opportunity, given the limitations of banking regulations and capital constraints, was to evolve into a standalone asset management business. We have acquired the Standard Bank Infrastructure Equity Team, its assets and deal pipeline and are now in a position to offer institutional clients investment opportunities in this exciting new asset class

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Disclaimer

Information and ContentThe information and content of this document are intended to be for information purposes only and STANLIB does not guarantee the suitability or potential value of any information contained herein. STANLIB Asset Management Limited does not expressly or by implication propose that the products or services offered in this document are appropriate to the particular investment objectives or needs of any existing or prospective client. Potential investors are advised to seek independent advice from an authorized financial adviser in this regard. STANLIB Wealth Management Limited is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 37 of 2002 (Licence No. 26/10/590)

This document does not constitute investment advice, an offer, or the solicitation of an offer for the sale or purchase of any investment or security. This is a factual communication. If you are in any doubt about the contents of this document or the investment to which this document relates you should consult a person who specialises in advising on the acquisition of such securities. Whilst every care has been taken in preparing this document, no representation, warranty or undertaking (express or implied) is given and no responsibility or liability is accepted by the STANLIB Group of Companies, its subsidiaries, holding companies or affiliates as to the accuracy or completeness of the information contained herein. All opinions and estimates contained in this report may be changed after publication at any time without notice. Members of the STANLIB Group of Companies, their directors, officers and employees may have a long or short position in currencies or securities mentioned in this report or related investments, and may add to, dispose of or effect transactions in such currencies, securities or investments for their own account and may perform or seek to perform advisory or banking services in relation thereto.

No liability is accepted whatsoever for any direct or consequential loss arising from the use of this document. Past performance is no indication of future results. The value of investments may fluctuate and investors may not get back their original investment. Changes in currency exchange rates may have an adverse effect on the value of your investment.

Neither this document nor any copy of it nor any statement herein may be taken or transmitted into the United States or distributed, directly or indirectly, in the United States or to any U.S. person except where those U.S. persons are, or are believed to be, qualified institutions acting in their capacity as holders of fiduciary accounts for the benefit or account of non U.S. persons. The distribution of this document and the offering, sale and delivery of securities in certain jurisdictions may be restricted by law. Persons into whose possession this document comes are required by the STANLIB Group of Companies to inform themselves about and to observe any such restrictions. You are to rely on your own independent appraisal of and investigations into (a) the condition, creditworthiness, affairs, status and nature of any issuer or obligor referred to and (b) all other matters and things contemplated by this document.

Neither this document nor any copy of it nor any statement herein may be taken or transmitted into the United States or distributed, directly or indirectly, in the United States or to any U.S. person except where those U.S. persons are, or are believed to be, qualified institutions acting in their capacity as holders of fiduciary accounts for the benefit or account of non U.S. persons. The distribution of this document and the offering, sale and delivery of securities in certain jurisdictions may be restricted by law. Persons into whose possession this document comes are required by the STANLIB Group of Companies to inform themselves about and to observe any such restrictions. You are to rely on your own independent appraisal of and investigations into (a) the condition, creditworthiness, affairs, status and nature of any issuer or obligor referred to and (b) all other matters and things contemplated by this document

Compliance number: D8R476

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