Download Investing and Doing Business in West Africa

Investing and Doing Business in West
Africa: Key Drivers and Perspectives
Rolake Akinkugbe
West Africa Specialist/Head of Energy, Ecobank Research
West Africa Global Banking and Investment Forum, 5 November 2012
Section 1
Investing & Doing Business in West Africa: Some
Strategic Perspectives
Presentation Outline
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Macroeconomic drivers
Key & Future Growth Sectors
Trade
Infrastructure (Transport & Power)
Institutional Reforms
Human Capital & Demographics
The Trade Solution?
The Ecobank Experience in West Africa
Macroeconomic drivers of investment in West Africa
Real GDP Growth
percent change
Real GDP Per Capita
US$, 2000 prices
11
1000
Oil
exporters
Oil
importers
9
900
7
5
• Sub-Saharan Africa continues to grow
strongly – both oil importers and oil
exporters. Growth remains strong in real
terms – compared to North America for
example.
• West Africa is ‘micro-Africa’: oil exporters,
oil importers, fragile countries, landlocked
and coastal countries
800
3
700
1
-1
600
-3
East Asia
Sub-Saharan Africa
North America
-5
05
06
07
08
09
500
10
05
11 12e
06
07
08
09
10
11 12e
Sub Sahara Africa Real GDP Growth
percent change
CFA Franc Zone
9.0
8.0
• While the predominant categories: oil
exporters, WAEMU zone, etc will enjoy
relatively buoyant growth……
• However in 2013, oil importers will see
increases in real GDP growth rates while oil
exporters will see decreases
WAEMU
7.0
6.0
Oil-exporting
countries
5.0
4.0
Oil-importing
countries
3.0
2.0
Landlocked
1.0
0.0
08
09
10
11
12e
13f
Coastal
• Primarily reflecting an expected moderation
in global oil prices in 2013
• Landlocked countries in the Sahel have fled
the impact of drought
Unbundling the groups presents a more dynamic picture
• Dips in growth over the last 4 years
attributable to financial crisis, instability in
Cote d’Ivoire
ECOWAS Real GDP Growth
percent change
7
6
6.12
5.8
5.4
5.2
4.6
5
4
• (Simple) average real GDP growth in the
ECOWAS will rise to around 6% in 2013
3.4
3
2
1
0
08
09
10
11
12e
13f
Select ECOWAS Real GDP
Growth
Percent change
Iron ore
production
boost
25.0
Oil and gas
production
boost
20.0
15.0
• Growth still largely resource-driven for
West Africa
10.0
5.0
0.0
08
09
10
11
12e
13f
-5.0
-10.0
Ghana
• Unbundling the groups presents a more
diverse picture. Examples:
• Sierra Leone’s resource driven
surge in 2012
• The impact of drought in the Sahel
• The implications of political
instability for growth – Mali
Sierra Leone
Mali
Côte d'Ivoire
Sector Components of GDP
Asia: Components of GDP
percent
Agriculture
West Africa: Components of GDP
percent
Agriculture
Industry
Industry
Services
Services
100%
100%
90%
90%
80%
80%
42%
70%
58%
70%
Key challenge is
to transform this
sector of the
economy:
60%
60%
50%
50%
40%
40%
47%
30%
30%
20%
20%
10%
10%
11%
0%
1970
1980
1990
2000
2010
31%
10%
0%
1970
1980
1990
2000
2010
It requires a
20 percentage
point increase to
match Asia
• Energy – West Africa’s energy exports have risen relatively steadily since the mid-1980s, and now account
for around 3.5% of daily global oil output. Clean technology
• Soft Commodities –
opportunities
A region that’s heavily dependent on food imports presents huge investment
• Mining & Metals - The number of active mines in West Africa came to 107, 69 in East Africa, 49 in Southern
Africa, and 39 in Central Africa. West Africa’s total is also well above the 21 companies actively mining the
DR Congo.
• ICT - Currently, the West African region still lags behind Southern and East Africa in ICT infrastructure
The Consumer Sector
The size of the food and consumer goods market in West Africa could reach
US$60 billion by 2020
• The West African middle class has grown from
58 million in 2000 to 100 million in 2011, reflecting the
successful implementation of economic and structural
reforms over the last decade.
Country
Nigeria
Population
(2009)
151m
2010
Consumer
Spending
2020 Consumer
Spending*
$115bn
$167bn
• The size of the food and consumer goods market in West
Africa could reach US$60 billion by 2020.
Ghana
24m
$15bn
$29bn
Senegal
13m
$10bn
$16bn
• Retail giants are seizing the opportunity, including
Shoprite Holdings, Pick n Pay Stores, Massmart and
Woolworths Holdings Ltd.
• Local players are expanding to catch up in what is
becoming an increasingly competitive market.
• Consumer goods companies are growing but dirt roads,
and inefficient rail systems and harbors make West Africa
a logistical headache for consumer goods companies
Agro-processing in West Africa
Key commodity export/processing hubs
• Cocoa: West Africa produces 70% of the world’s
cocoa, but processes only 20-40% of beans.
Global demand is growing by 5% / year.
• Cotton: West Africa produces 15% of the world’s
cotton. An estimated 500 million to 1 billion
USD is required to expand ginning capacity &
textile production.
• Coffee: Growing production
• Sugar: Plantations are becoming multi-purpose
(raw or refined sugar, bio-ethanol and/or cogenerated electricity). Over 3 billion USD
planned investment from now to 2015.
Cotton
Grains
• Flour: Nigeria is emerging as Africa’s hub for
importing & processing cereals into flour, with a
1.25 billion USD projected investment.
Coffee
Sugar
Ports
Cocoa
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There are huge opportunities to finance West Africa’s
imports
Petroleum products make up most of the value, but food is surging
Imports by region, US$ m, 2011
3,000
Imports of petroleum products,
US$ m ,2011
2,500
Region
2,000
1,500
Total
ECOWAS
16,422
SADC
13,379
EAC
7,680
Total
37,481
1,000
500
Wheat
Rice
ECOWAS
Sugar
Fertiliser
SADC
Cement
Maize
EAC
Sources: Intracen, Ecobank Research.
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Intra-African Trade
ECOWAS fairs marginally better than the EAC
SSA’s trade with the world, 2010
Intra-regional trade, US$, 2010
Region
AMU
CEMAC
CFA Franc Zone
COMESA
EAC
ECCAS
ECOWAS
SADC
WAMZ
Africa
Total (US$ m)
7,187
631
5,552
12,770
3,915
925
15,262
28,419
3,949
86,184
% of total trade
3.2
1.6
7.1
6.2
8.3
0.9
8.9
12.1
9.9
10.9
EU
China
32%
35%
USA
India
2%
4%
Brazil
13%
14%
Others
Sources: Intracen, AfDB, Ecobank Research.
• Intra-regional trade totaled US$86.2bn in 2010, just 10.9% of SSA’s trade with world
• Most developed intra-regional trade occurs in SADC, ECOWAS & EAC
• In contrast ECCAS and CEMAC intra-regional trade is negligible
• Huge potential for boosting trade flows between major trade blocks, notably ECOWASCFA Franc Zone
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Infrastructure in West Africa (Transport & Logistics)
West Africa 2012 Logistics Performance Index (LPI) – (5 = highest 1 = lowest)
Country
Senegal
Ghana
Benin
Nigeria
Cote d'Ivoire
Niger
Gambia
Guinea
Liberia
Mali
Burkina Faso
Togo
Sierra Leone
Guinea Bissau
4
Infrastructure
2.64
2.52
2.48
2.43
2.37
2.28
2.17
2.1
2
2
1.89
1.82
1.61
1.56
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The LPI measures the logistics friendliness of
155 countries, regards to trade facilitation
The LPI highlights infrastructure shortcomings
in West Africa, though picture is mixed
SA is 3.42, but Senegal performs better than
Tanzania (2.00), Gabon (2.09), and even
Botswana (2.09)
Long-standing trade routes exist along the
West African coast (Dakar-Lagos) and from
coastal countries to the interior (Côte d’Ivoire to
Burkina Faso/Mali)
2012 Logistics Performance Index (LPI) for West Africa’s biggest economies vs. EAC & SA
3.5
Senegal
3
Ghana
2.5
Cote d'Ivoire
Nigeria
2
Kenya
1.5
Tanzania
1
Uganda
0.5
South Africa
0
Overall LPI
Customs
Infrastructure
International
Shipments
Logistics
Competence
Tracking & Tracing
Timeliness
Infrastructure in West Africa (Power)
Commercial Energy Consumption Mix (%) - 2010
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100
•
90
•
80
70
Renewables
60
•
Nuclear
50
•
Coal
40
Hydro
30
20
Natural Gas
10
Oil
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0
Benin
Cote
d'Ivoire
Ghana
Nigeria
Togo
SSA
Own Generation as a Share of Total Installed Capacity
by SSA sub-region, 2010
% of installed capacity Southern
Africa
6%
ECOWAS region – power supply & demand imbalances
On average across each individual West African country, two
inputs account for 9% of total generation capacity
The issue is one of attracting investment into energy
infrastructure.
The West Africa Power Pool (WAPP) has been successful in
attracting some investments in transmission
West Africa’s overall capital productivity lower than South
America’s primarily due to the low quality of power supply
Own generation constitutes a significant proportion of total
installed power capacity in the region—as much as 51% in
West Africa
Significant opportunities exist in boosting the regional trade in
electricity
Expansion of transmission and generation facilities over the
next 10 years will cost around US$30 billion, and at least half
of that is expected to come from the private sector.
Infrastructure contribution by sector in West African
economies (2011)
Power
Mali
Central
Africa
20%
Customs
clearance
Senegal
Transportation
West
Africa
51%
Burkina
Faso
East
Africa
23%
ICT
Benin
0
20
40
60
80
% contribution to total factor productivity (tfp)
Water
100
Institutional & Business Reforms in West Africa
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The challenges in West Africa are no longer ‘hard’ historical challenges but ‘soft risks’.
In the survey chart below, the following are ranked from a business cost and likelihood perspective and
likely impact on business
Power supply, regional trade barriers, bureaucracy, were deemed more likely
Generic chart; much will depend on operating sector
In addition to the opportunity, the West Africa region presents investors with a wide a variety of business
challenges
EXPROPRIATION
WARFARE AND TERRORISM
IMPACT
CORRUPTION
POLITICAL
UPHEAVAL
CLASHES WITH
LOCAL
COMMUNITIES
CRIME
POWER SUPPLY SHORTAGES
HIDDEN POLITICAL
INTERESTS
REGIONAL TRADE BARRIERS
LABOUR
DISPUTES
UNFAIR CONTRACTS /
TAXATION
FACILITATION
PAYMENT
DEMANDS
LIKELIHOOD
BUREAUCRATIC
BLOCKAGES
West Africa: Business climate
Senegal
200
Mali
150
200
100
150
50
100
0
50
Guinea
Burkina Faso
200
150
100
0
Nigeria
50
200
0
150
200
Côte d’Ivoire
150
200
100
150
50
100
0
50
100
50
Ghana
200
0
150
100
0
50
0
Ease of doing business
Starting a business
Getting electricity
Getting credit
Protecting investors
Source: IFC / World Bank
2012
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Doing Business in West Africa: The Facts and Figures
Doing Business Rankings, 2012 (1= easiest, 185 = hardest)
Singapore
Ghana
Cape Verde
Nigeria
Sierra Leone
Gambia, The
Liberia
Regional Average
Mali
Burkina Faso
Togo
Senegal
Benin
Niger
Cote d'Ivoire
Guinea
Guinea-Bissau
-15
1
64
122
131
140
147
149
151
151
153
156
166
175
176
177
178
179
35
85
135
185
In 2012, Sierra Leone was the only West African
country, recognised in the top 10 economies with
the most improved business environment (WB,
Doing Business 2012)
Gap between top performers such as Ghana and
rest of the pack is still wide, and regional average
still low at 151
However OHADA* saw business start up costs
have decreased by 67% of the average per
capita income, while property registration times
decreased by 28%
In certain categories some West African
economies are comparable to the world’s best
performers; starting a business in Senegal takes
only 5 days, same as in Canada and faster than
in France. Construction permits in Burkina Faso
take only 98 days, 3 month faster than the
European Union average.
Burkina Faso closed the most gap to the frontier
of best regulatory practices for local
entrepreneurs out of any West African country
*OHADA: Organisation for the Harmonisation of Business Law; Benin, Burkina Faso, Cameroon, Central African Republic, Chad,
Comoros, Republic of Congo, Côte d'Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal, and Togo
Demographics & Human Capital
West African’s are amongst the most mobile people in SSA
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West Africa: 320 million (2012) – 400 million (2025) – 500million
(2030)
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West Africa’s working age population/labour forces could be 125
million by 2025
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Key challenging will be transforming ‘youth bulge’ to the
‘economically active’ to boost tax and consumer bases
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There needs to be a corresponding boost to the manufacturing base
Around 320 million, could exceed 400 million by 2025
West Africans who were at least 20yrs old in 1960 now represent only 3% of the population
By 2050 West Africa will host more people than North America, and as many as Latin America
or Europe
Intra-regional migration is seven times higher than migration towards Europe
Infact, outside of Nigeria, 15% of the region’s population do not live in their country of birth
West Africa offers a potential demographic dividend; wide market area, and a big consumer
population to investors, but this dividend is not a given
East Asia’s ‘demographic dividend’ accounted for up to a third of East Asia’s economic miracle
Regional Trade: Key to improving investment conditions in West Africa?
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Intra-regional trade have been on the whole found to have a higher job
creation impact than extra-regional exports; Benin, Ghana, Senegal, and
Togo, who export manufacturing products to the region, have
substantially higher productivity on their regional exports than their
global exports.
For many countries, in particular those with a high manufacturing share
in regional exports, these effects can be expected to be stronger for
regional than for global trade.
STABILITY
The strongest impact were found to be in manufactured goods and
agricultural commodities that were exported regionally
Help to tackle the growth without development problem.
However, regional exporters do continue to face substantial trading
costs in the region (vs. global exporters)
Average productivity values (PV) of exports by destination region, 2010 (US$)
TRADE
JOBS
GROWTH
With the exception of Burkina
Faso, all countries in the
region had a rather high PV
for regional exports above
$7,500. Also, the PV on
regional exports to ECOWAS
achieved the highest or
second highest PV across all
regions, often along with
exports to the rest of SSA, for
all countries but Niger.
The Ecobank Experience in West Africa
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Present in 37 countries (35 in Middle Africa, operating in 32)
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Leading pan-African full service banking group
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International offices established in Paris (2009), Dubai (2010) and
London (2011)
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Listed on 3 stock exchanges: NSE, GSE and BRVM
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We took the long-term view, and set up shop
during one of the most difficult times in the West
Africa’s history – the 1980s (first mover
advantage?)
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We embarked on a growth strategy that cut
across Anglophone, Lusophone and Francophone
Africa
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Admittedly, we had a large risk appetite, but also
took the view that we would never leave any
country, except forced out
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We found the opportunities in the gap between
risk perception and reality
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Diversification was key to spreading and
managing risk
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Now operate in 32 countries in West, Central,
East and Southern Africa.
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Financing and promoting regional trade is a
strategic focus on the business
Thank you