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Africa – Opening the last frontier market January 2009 Africa – Opening the last frontier market Presentation to the Securities & Investment Institute – CPD Seminar 29 January 2009 Dr Ayo Salami 2 Disclaimer and Caveat This document does not constitute an offer, or the solicitation of an offer for the sale or purchase of any investment or security. This is a commercial 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 Duet Group, 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 Duet Group, 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. This document is not intended for the use of private customers. This document must not be acted on or relied on by persons who are private customers. Any investment or investment activity to which this document relates is only available to persons other than private customers and will be engaged in only with such persons. In European Union countries this document has been issued to persons who are investment professionals (or equivalent) in their home jurisdictions. 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 Duet Group Limited 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. This document has been sent to you for your information and may not be reproduced or redistributed to any other person. By accepting this document, you agree to be bound by the foregoing limitations. Unauthorised use or disclosure of this document is strictly prohibited. 3 Africa Moving from promises to results “Africa is indeed on the move. In contrast with the 1990s, conflicts in Africa have declined, economic performance has improved and some clear ‘high performers’ are beginning to emerge.” World Bank 2006 “Africa has learnt to trade more effectively with the rest of the world, to rely more on the private sector, and to avoid the very serious collapses in economic growth that characterized the 1970s, 1980s and even the early 1990s.” World Bank 2007 “Since 1995 there has been at least one African equity market among the top 10 best performing markets in the world. Last year (2007), it was Zambia, posting gains of 127% in US dollar terms. Joining Zambia among the best performing markets was Malawi (up 114%), Cote D’Ivoire (up 105%) and Nigeria (up 90%). In 2006, Malawi was the best performing stock market in the world posting gains of 129% in US dollar terms.” African Business Research Limited (2008) 4 Why invest in Africa? Africa A Lie by Omission 5 Misconceptions about Africa The view from abroad : Investing in Africa is risky The region is a basket case that is politically unstable Regulations are insurmountable There are no investment opportunities 6 Africa in Perspective Global Land Mass and Proportion of World’s Resources Square Miles: China 3,705,390 United States 3,618,770 India Europe Argentina Proportion of global resources in Africa: Land Mass 20% Diamonds 90% Gold 50% Phosphate 90% Platinum 40% Petroleum 8% Natural Gas 12% 1,266,595 1,905,000 1,065,189 New Zealand 103,736 Total 11,664,680 Africa 11,707,000 Source: Academic Centre for Education Development Source: Ayittey, George B.N. Africa Betrayed, 1993, Palgrave Macmillan , ISBN: 0312104006 7 Political Overview Wind of change blowing across Africa – declining political risk Circa.1980 Current Source: Duet, African Business Research 8 Macro Overview 12 consecutive years of growth in real per capita CDP Population and GDP Growth (Sub-Saharan Africa ex South Africa) Since 1995, Real GDP grow th has exceeded population grow th 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% Population (grow th) Grow th in real GDP 2008E 2007E 2006E 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 -4.0% Grow th in real per capita GDP Source: World Bank Data 9 Macro Overview African growth is now among the highest in the world GDP Growth across the world 12 % Change Real GDP 10 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 World G7 Countries Sub-Saharan Africa Developing Asia Middle East Newly Industrialised Asia Source: World Economic Outlook Database October 2008 Macro Overview Slower growth but NO recession GDP Growth forecast across the world (2009-2011) 10 % Change in Real GDP 9 8 7 6 5 4 3 2 1 0 Developing Asia Sub-Saharan Africa Middle East 2009 Source: World Economic Outlook Database October 2008 New ly Industrialised Asia 2010 2011 World G7 Countries Macro Overview Some out-performing economies 2009 – Forecast growth in Real GDP Angola 12.8 % Sudan 7.7% Nigeria 8.1% Uganda 8.1% Mozambique 6.7% Rwanda 5.6% Botswana 4.6% Equatorial – Guinea 4.6% Source: World Economic Outlook Database October 2008 Macro Overview Sound monetary policies …. Deficit as % of GDP 10.0 6.5% 8.0 6.0 4.5% 4.0 2.5% 2.0 0.5% 0.0 -2.0 -1.5% Budget deficit (US$bn) 12.0 8.5% -4.0 Budget Deficit (US$ billions) 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 -6.0 1989 -3.5% Deficit Including Grants as % of GDP Deficit Excluding Grants as % of GDP Source: World Bank data 13 Macro Overview … have controlled money supply and reduced inflation 25.0% 30.0% 25.0% 20.0% Inflation (%) 15.0% 15.0% 10.0% 5.0% 10.0% 0.0% Money supply (%) 20.0% -5.0% 5.0% -10.0% 0.0% -15.0% 2009E 2008E 2007E 2006E 2005 Growth in money supply 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 Year-On-Year % in price index Ratio of money supply to GDP Source: World Bank data 14 Macro Overview 30.0% 120.0% 25.0% 100.0% 20.0% 80.0% 15.0% 60.0% 10.0% 40.0% Debt service to exports ratio 2009E 2008E 2007E 2006E 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 0.0% 1991 0.0% 1990 5.0% 1989 20.0% External Debt as % of GDP 140.0% 1988 Debt Service to Exports Ratio (%) External debt is becoming sustainable External debt as % of GDP Source: World Bank data 15 Macro Overview With a little help from our friends in China 16000 As the Chinese economic resurgence has proceeded, Africa has become more important for China as a source of the raw materials needed by the Chinese manufacturing sector. 14000 US Dollar millions 12000 10000 8000 African economies, in particular oil and commodity producers have benefited substantially from China’s demand for raw materials 6000 4000 2000 0 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 China Imports from Africa The historical trade deficit with China’s has now become a surplus China Exports to Africa Source: WTO Direction of trade statistics 16 Correlation with other global markets Low correlation with other global markets offers diversification opportunities Correlation matrix between regional equity markets Africa (ex South Africa) Asia Emerging markets Far East G7 Countries Latin America South Africa World Index World Small Companies Africa Asia 100% -9% 100% -7% 88% -10% 99% 12% 18% -14% 6% 3% 42% 14% 21% 14% 22% Emerging markets 100% 86% 43% 44% 58% 46% 46% Far East G7 Countries 100% 17% 5% 40% 20% 21% 100% 57% 22% 99% 90% Latin America 100% 7% 57% 46% South Africa 100% 24% 28% World Index 100% 90% World Small Companies 100% Correlation coefficients based on daily equity returns between 1/1/2000 and 29/09/2006 Source: MSCI, African Business Research 17 African Equity Markets From Cape to Cairo There are 22 stock exchanges in Africa with a combined market value of US$480.1 billion and 2,072 listed equities Number of Market Value listed companies Sub-Saharan Africa (ex –SA) $79.7 bn 533 South Africa $228.3 bn 427 North Africa $172.1 bn 1,112 Data as at 31 December 2008 18 Trading and settlement Love thy neighbour – but don’t take counterparty risk Country Trading system Settlement cycle Central depository Algeria Botswana BRVM Cameroon Cape Verde Egypt Electronic Call over Electronic t+5 t+5 t+5 Yes yes Yes Electronic t+2 for active shares t+3 for dematerialised shares t+4 for physical shares Yes Ghana Kenya Malawi Mauritius Morocco Mozambique Namibia Nigeria South Africa Sudan Swaziland Tanzania Tunisia Uganda Zambia Zimbabwe Call over Electronic Call over Electronic Electronic t+3 t+5 t+7 t+3 t+3 yes Yes yes Yes yes Electronic Electronic Electronic t+3 t+3 t+3 Call over Electronic Electronic Electronic Call over Call over t+5 t+3 t+3 t+5 t+5 t+7 Yes yes 12 countries (94% of the stock markets – ex South Africa) have electronic and automated trading platforms. More countries are already planning a switch over. Also more markets are moving towards the international standard of t+3 settlement cycle yes yes yes 19 Natural Log of market size (US$ million) $3.1 bn 6 $1.9 bn $2.2 bn $0.6 bn $0.1 bn $0.12 bn $3.5 bn $3.5 bn $4.8 bn $2.3 bn 8 $0.5 bn 10 $0.8 bn $9.2 bn $46.7 bn $59 bn $108.3 bn 12 $5.3 bn 14 $228.2 bn Size matters ? Market values of stock exchanges in Africa Jumbo Large Medium 4 Small 2 0 Mozambique Swaziland Namibia Uganda Tanzania Malawi Zambia Ghana Zimbabwe Botswana Mauritius Tunisia Cote D'Ivoire Kenya Nigeria Morocco Egypt South Africa Data as at 31 December 2008 20 There is a good distribution of economic sectors Jointly, banks, telecoms, construction and consumer goods companies represent 70% of the total capitalisation of sub-Saharan African equity markets – ex South Africa. 30.0% 25.0% One of the least known open secrets of the investment world is that African banks are among the most profitable in the world with average ROE above 30%. 20.0% The high proportion of telecom companies reflects Africa’s status as the fastest growing telecoms market in the world. The average mobile phone user in Nigeria spends US$22 per month – nearly double that of a Chinese user. 15.0% 10.0% 5.0% 0.0% Aerospace Media Services Info Technology Autos Consumer Goods Mining Transportation Retail Manufacturing Health Agriculture Chemicals Finance Insurance Entertainment Conglomerates Oil and Gas Food Real Estate Construction Telecom Banks Africa (ex South Africa) Data as at 31 December 2008 21 African equity markets – Great returns Annual returns to Sub-Saharan Africa equity markets (ex – South Africa) over 1999 – 2008 70% 50% 30% 10% -10% -30% -50% Average 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Average annual returns of 9% (in US$) over the last 10 years from Jan. 1999 to December 2008, relative to 6.6% for emerging markets, -2.5% for G7 countries, 3.7 for global small companies and -2.2% for the All Global equity markets. Source: Local Stock Exchanges, African Business Research 22 Equity returns among the best in the world Average annual returns to various regions (1999 to 2008) 12% 10% 8% 6% 4% 2% 0% G7 Countries Far East Asia SubSaharan Africa South Africa Eastern Europe Latin America -4% Emerging Markets -2% Source: MSCI, African Business Research 23 2008 – One for the history books 65.00% 45.00% 25.00% 5.00% -15.00% -35.00% -55.00% -75.00% MSCI World Index MSCI G7 Index MSCI Asia MSCI Latin America MSCI Eastern Europe MSCI Frontier Markets MSCI Emerging Markets Sub-Saharan Africa Volatility Returns 2008 – Down but not out! 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% Average Nigeria Kenya Mauritius Zambia Botswana Uganda BRVM Namibia Swaziland Ghana Malawi 2008 – RIP A terrible year for everyone Africa was not spared the carnage in the international financial markets Larger markets like Nigeria, Kenya, Mauritius were hit by international emerging market funds struggling to cope with redemptions Smaller markets held up well, but at the expense of reduced liquidity Nigeria’s fall was compounded by the unresolved issue of margin-lending from the banking sector Performance of the financial markets did not reflect corporate earnings news flow. Average EPS growth for 2008 was 32% Lose on the currency swing Gain on the growth roundabout Sub-Saharan Africa equity returns in US$ since 1999 (excluding South Africa and Zimbabwe) 330% Cumulative $ returns (%) 15% Despite currency depreciation, cumulative $returns are positive averaging 9% per annum 280% 10% 5% 230% 0% 180% -5% 130% -10% 80% 30% -15% -20% -20% 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Annual % loss on currency Annual % loss on currency 380% Cumulative $ returns Source: Local Stock Exchanges, African Business Research 27 Trading Liquidity Spreading equity culture reflected in rising turnover 34.0% 29.0% 20.00 24.0% 15.00 19.0% 10.00 14.0% 5.00 Turnover Ratio (%) Annual Traded Volume (US$ billion) 25.00 Annual traded volume has increased by 25x since 2000 9.0% - 4.0% 2000 2001 2002 2003 2004 Annual Traded Volume 2005 2006 2007 2008 Turnover ratio Source: Local Stock Exchanges, African Business Research 28 What about volatility? “Give a dog a bad name” Standard deviation of annual returns (1999 – 2008) 60% 51% 50% 41% 40% 40% 38% 38% 37% 34% 33% 30% 27% 23% 20% 10% 0% The risk from investing in Africa is similar to that of other emerging markets. G7 Countries World Small Companies Sub-Saharan Africa South Africa Far East Emerging Markets Asia Eastern Europe Latin America North Africa The perception that Africa is inherently riskier is not supported by data Source: MSCI, African Business Research 29 Risk – Return Ratio How “Sharpe” is that? 35.0% 30% 29% 27% 27% 26% 30.0% 25.0% 17% 20.0% Sharpe ratio for Sub-Saharan Africa is 1.5x better than for emerging markets generally 14% 15.0% 12% 10% 10.0% 5.0% 0.0% -5.0% -10.0% -11% -15.0% G7 Countries Far East Asia World Small Companies Emerging Markets Eastern Europe Sub-Saharan Africa Latin America North Africa South Africa Source: MSCI, African Business Research 30 Risk of Loss You think I am a loser, wait till you meet my siblings Number of losing months (Jan 2000 to December2008, 108 Months ) 60 52 51 60% 50 50 48 44 41 50% 40 40 40% 30 30% 20 20% 10 10% 0 0% Latin America Emerging Markets Number of losing months Eastern Europe SSA (exSouth Africa) Far East Far East G7 Countries Asia Source: MSCI, African Business Research Risk of loss Number of losing months 50 Risk of loss Risk of Loss for Africa is similar to other regions of the world 31 Historic Value At Risk Always look on the bright side of life 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% Eastern Europe Latin America South Africa Emerging Markets Far East Asia Africa (ex South Africa) G7 Countries World Index Low est Monthly Return Highest Monthly Return Outside the developed world, Africa has the lowest Historic VAR Source: MSCI, African Business Research 32 Risk and Performance The linear relationship predicted by the CAPM does not appear to hold in Africa - similar result has been found in other markets. Annual returns to risk segments (2000 - 2007) 200% 150% 100% 50% 0% -50% 2000 2001 2002 2003 High Beta 2004 Medium Beta 2005 2006 2007 Average Low Beta Source: Local Stock Exchanges, African Business Research 33 Risk and Performance Although the linear relationship between risk and return is violated, risk is still a statistically significant determinant of returns. Results from Annual regression of returns against Beta (2000 – 2007) Year 2007 2006 2005 2004 2003 2002 2001 2000 1999 Combined Source: Duet Asset Management Intercept Beta T-Stat R-Squared Num of Obs 1.601 -1.637 -4.74 6.75% 313 1.972 -1.293 -3.80 4.67% 275 0.435 0.003 0.03 -0.36% 279 0.168 0.066 0.75 -0.17% 256 0.345 -0.069 -0.79 -0.12% 329 0.471 0.330 2.31 1.34% 322 -0.035 0.154 2.80 2.10% 319 0.070 -0.043 -0.59 -0.22% 297 -0.049 0.174 2.25 1.49% 271 0.508 -0.203 -2.98 0.30% 2636 Red indicates statistically significant relationships 34 Size and Performance Small firm effect found in other markets is also present in Africa Annual returns to size segments (2000 - 2007) 150% 130% 110% 90% 70% 50% 30% 10% -10% -30% 2000 2001 2002 2003 2004 Large Medium 2005 2006 2007 Average Small Source: Local Stock Exchanges, African Business Research 35 Risk and Size Paradoxically – smaller companies have consistently lower betas relative to large companies Beta for size segments (2000 - 2007) Annual returns to risk segments (2000 - 2007) 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2000 2001 2002 2004 2003 Large Medium 2005 2006 2007 Average Small Source: Local Stock Exchanges, African Business Research 36 Investment strategies Key sectors for equity investors • Banks • Telecoms • Breweries • Construction and cement • Consumer goods Increasing number of investment vehicles are becoming available. In the last 3 years about 10 new Africa focused funds have been launched Research can be challenging but fun Dynamics of economic reform We believe Africa is positioned here on the growth curve Africa is just beginning to realise the benefits of the economic restructuring of the 1990’s. Expected Output Total output X Private sector output Public sector output Cost of input Source: Olivier Blanchard; The Economics of Post-Communist Transition Africa has had the pain, the gains are about to become evident 15 years ago, Africa would not have been able to cope with a doubling of energy prices. Despite recent doubling of oil prices few African countries have required balance of payments support from the IMF. The continent is less vulnerable to external shocks. 38 Would you invest in these countries? A country recently endured a long and bloody civil war, the assassination of its president, a financial panic and an influx of poor immigrants United States of America A country formed from the ruins of a vanquished army forced from its historic homeland to a small barren island Taiwan A country divided after a long and destructive civil war and still technically at a state of war Korea A country that started a regional war, suffered a humiliating defeat, heavy bombing that destroyed its infrastructure and without a history of civil liberties or democratic government Japan 39 Duet: Who are we? We are farmers not hunters DUET GROUP Overview • Duet Group is a client-focused financial group specialising in Alternative Asset Management that is dedicated not only to generating superior investment returns, but also to delivering risk management, transparency and client service required by sophisticated investors. • Duet Group was founded by Henry Gabay & Alain Schibl in June 2002 in London. • Osman Semerci joined Duet Group in April 2008 as Chief Executive Officer and Managing Partner. • As of 1st July 2008 Duet Group has USD 1.8 billion of equity under management. 41 DUET GROUP Values and Principles • Duet’s primary focus is its client’s needs. It strives to understand their individual investment objectives. • Values such as integrity, fairness and transparency ensure its reputation. Through these qualities it looks to build solid, long-lasting relationships with its clients. • Through commitment and respect to its people Duet aims to create a close, collegial working environment. This is essential to produce optimum results from its individual team members and thus determines its overall success. • Duet’s commitment to excellence ensures that they approach each task in hand with professionalism and dedication. 42 DUET GROUP Group Structure Duet Asset Management Duet Private Equity & Real Estate Duet Financial Products Hedge Funds BR.I.T Platform Structured Products Duet Multi Strategy SLCDO 1 Duet Global Opportunities Brazil: ITACARE Real Estate Fund Duet Convertibles Duet Special Situations India: SARE South Asia Real Estate Fund Astor Duet Managed Futures India: Duet India Hotels Fund Duet Global Macro Turkey: Duet Golden Horn Real Estate Fund Fund of Funds GSAH Optimum Long Only Funds Duet Victoire Africa Index Fund Duet Real Estate Duet Luxury Hotel Fund I Duet Private Equity Capital Markets Placement Agent Corporate Finance DPEL 1 43 DUET GROUP Operating Model Alain Schibl Henry Gabay Osman Semerci Founding Partner & Co-Chairman Founding Partner & Co-Chairman Managing Partner & CEO Trading Private Equity Financial Products Hedge Funds Real Estate Investor Relations New Business Development Marketing CFO Risk Management 44 Compliance Operations Technology 44 DUET GROUP Funds Duet Asset Management is authorised and regulated by the FSA and is registered as an Investment Advisor with the SEC. Duet’s mission is to become the leading provider of absolute return investment strategies to sophisticated investors. Each strategy aims to deliver risk-adjusted absolute returns uncorrelated to broad market indices. Duet integrates its Investment Managers through a common infrastructure and economic alignment based on shared equity ownership. The alignment of incentives is critical to achieving sustainability, team collaboration, developing and retaining quality people and building a long-term franchise value. Duet Asset Management Ltd is the Investment Manager of: Hedge Funds Duet Multi Strategy Long Only Funds Duet Victoire Africa Index Fund Fund of Funds GSAH Optimum Duet Global Opportunities Duet Convertibles Duet Special Situations Astor Duet Managed Futures Duet Global Macro 45 Duet Victoire Africa Index Fund The fund seeks to replicate the performance of a proprietary benchmark index that measures the investment returns of large capitalisation stocks listed on stock exchanges in sub-Saharan Africa excluding the Johannesburg Stock Exchange. The benchmark index is the “Sub-Saharan Africa Large Companies Index”. This is a customised market-cap weighted index developed by Dr Ayo Salami and his research team. Sub-Saharan Africa Large Companies Index – US$ Returns 46 Investment Strategy The Duet Victoire Africa Index is composed of all companies listed on stock exchanges in Sub-Saharan African countries (ex South Africa) with a market capitalisation above $250 million that meet minimum trading liquidity requirements. The index will replicate the benchmark index by investing all, or substantially all, of its assets in the stocks that make up the “Sub-Saharan Africa Large Companies” Index, holding each stock in approximately the same proportion as its weighting in the index. The index manager will ensure that the index rules are closely adhered to at all times, however, the investment guidelines allow the index manager to temporarily remove stock from the portfolio if he becomes aware of a company suffering from financial distress or illiquidity. 47 Africa – The Indexing Approach Significant challenges are faced for investors seeking alpha. Active managers in Africa are compelled to use a bottom-up approach to stock selection with liquidity and market size as two of the key screening criteria. By the time a stock will meet the minimum liquidity constraints that most active fund managers are using, the stock is not likely to be under-valued. Higher transaction costs in emerging markets combined with high turnover can represent a significant performance hurdle for active managers in emerging markets. Index funds deliver a highly transparent investment processes, that consistently comply with fund guidelines and regulations. Index funds provide investors with low cost access to the performance of different financial markets. For the large relatively liquid stocks in Africa, a passive investment strategy will prove to be effective. Even in Africa it is difficult to consistently beat the market. In the search for alpha, you are more likely to find beta and sigma. 48 Index Membership Rules The primary factors that determine index membership are liquidity and market value. To be eligible for inclusion in the index, each individual security must achieve a traded turnover of at least 0.1% of its market capitalisation in the quarter preceding the index review date and in at least 2 of the 4 quarters prior to the quarterly index review date. At each quarterly review date all securities that satisfy the liquidity constraint and have a market value above $250 million are selected. Inclusion and deletion of index constituents is managed according to the following buffer rules: An index constituent is not deleted from the index until its market capitalisation has been below $250 million for at least 2 consecutive quarters. A non constituent is not added to the index until its market capitalisation has been above $250 million for at least two consecutive quarters. Constituent companies in the index are reviewed on the last day of March, June, September and December and the rules governing index membership is implemented by a computer algorithm. The index is capped and no single constituent has a weighting of more than 10%. The aggregate weighting for all securities from a single country is capped at 40%. 49 Historic Simulation Benchmark Index – Price Returns The historic performance of the Index was simulated back to 31 March 1999 to create a time series of daily returns for the index, with quality revision of the securities in the index. The index has generated positive returns in 27 out of the last 35 quarters. 50 Historic Simulation Summary Statistics – Sub-Saharan Africa Large Companies Index 2008 Return (to Aug 08) -24.9% 2007 Return 64.7% 14.1% (over last 5 years monthly returns) 2006 Return 38.4% 2005 Return 10.2% 2004 Return 14.7% 2003 Return 43.2% 2002 Return Annualised Standard Deviation 21.5% Best Quarterly Return 23.3% Worst Quarterly Return -16.7% Best Monthly Return 12.4% Worst Monthly Return -10.2% Percentage of positive months 73.3% In last 5 years Index since inception 599.2% (31 March 1999 to 31 Jan 2008) 51 Let’s start running “Every morning in Africa, a Gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a Lion wakes up. It knows it must outrun the slowest Gazelle or it will starve to death. It doesn't matter whether you are a Lion or a Gazelle... when the sun comes up, you'd better be running.” 52 Sustaining growth in Africa No magic bullet, however growth has to be private sector-led Improving property protection rights Enhancing the international networks of African companies Closing the infrastructure gap – particularly transportation and housing Creating vibrant financial markets – regional cooperation Conclusion ‘If you see a bandwagon, you have missed it” • Contrary to perception Africa offers significant growth and profit opportunities • Africa is still under the radar of most investors and hence offers great opportunities to the early adopters • Future equity returns from developed markets are projected to be significantly lower than historic levels • Spreading equity culture and rising trading volumes • Returns outweigh currency depreciation • A credible and peaceful future of the world in the 21st century must include a positive future for Africa • Development of efficient financial markets is integral to the alleviation of poverty 54