Where to Invest in Africa RMB Global Markets Research 2014 | 2015 edition
Where to Invest in Africa Authors Nema Ramkhelawan-Bhana A guide to corporate investment and Celeste Fauconnier 2014 | 2015 edition Contributor John Cairns RMB Global Markets Research Data analyst Claudell van Aswegen
RMB009 RMB WTIA Cover FA V5.indd 1 2014/08/21 9:22 AM Authors Nema Ramkhelawan-Bhana and Celeste Fauconnier Contributor John Cairns Data analyst Claudell van Aswegen
RMB009 RMB WTIA Cover web.indd 2 2014/08/28 9:54 AM contents
Chapter 1: Overview and rankings 4
Chapter 2: Market size 20
Chapter 3: Growth 28
Chapter 4: Operating environment 40
Chapter 5: Cities – Overview 48
5.1: Cities – Finance 56
5.2: Cities – Infrastructure 64
5.3: Cities – Manufacturing 78
5.4: Cities – Resources 88
5.5: Cities – Retail 108
Chapter 6: Country snapshots 124
Chapter 7: Appendices 152
Chapter 8: Contact details and disclaimer 229
RMB Global Markets | 1 FOREWORD
2 | RMB Global Markets FOREWORD
RMB is proud to present the fourth edition of Where to Invest in Africa — A Guide to Corporate Investment. Once touted as the hopeless continent, Africa is now laden with opportunities. But, it is also fraught with challenges requiring meticulous planning by companies operating in, or seeking out, new and exciting markets. As a research team, we strive to provide easily digestible information relevant to our clients. We believe that this particular publication, which was initiated in 2011, provides a wealth of knowledge to corporates contemplating investment in Africa.
It should be stressed that this document is not an assessment of creditworthiness in the respective African countries, nor does it represent RMB’s willingness to extend credit for investment into these economies.
The rankings identify the most attractive investment destinations in Africa. These are updated on an annual basis to reflect changes in the macroeconomic and business environments of 54 distinctive economies. The methodology underpinning our scoring systems stems from academic evidence that suggests that GDP growth rates, economic size, and the general business landscape are fundamental investment considerations. We are mindful that sporadic shocks like geopolitical risks could impact short-term decisions, but remain confident in our scorings and believe that our findings hold over the long-run. Indeed, four of our top 10 most attractive investment destinations continue to receive the lion’s share of FDI into Africa.
Africa’s importance to the global economy is reflected in a number of noteworthy publications that have been distributed by respected organisations in recent years. We have incorporated the findings appropriate to our analysis and have listed the sources in a comprehensive directory in the Appendices.
We understand that no two businesses are alike and that they regard macroeconomic, political, social and operating variables differently. To account for this, we have included a series of alternative rankings at the end of each of our first four chapters.
Last year we addressed the issue of regional integration and highlighted major trends in the retail, manufacturing, resources, and infrastructure sectors across Africa. This year we turn our attention to cities and identify metropolises that are bursting with potential, often in unexpected places.
We trust that Where to Invest in Africa 2014/15 will provide a useful tool in navigating your journey through Africa.
Regards,
Nema Ramkhelawan-Bhana and Celeste Fauconnier Africa Analysts Rand Merchant Bank
RMB Global Markets | 3 OVERVIEW AND RANKINGS
CHAPTER 1: OVERVIEW AND RANKINGS
Our aggregate investment attractiveness score for Africa deteriorated over the past year for only the second time in the last decade (the previous fall was in 2009 on account of the financial crisis). The worsening in our aggregate investment score is partly a lagged result of the troubles in North Africa but, in all, 22 countries’ investment attractiveness scores decreased between 2013 and 2014.
LUANDA
4 | RMB Global Markets overview and rankings
Key highlights of this year’s report
• South Africa remains Africa’s foremost investment destination and has, in fact, extended its lead despite a GDP revision that transformed Nigeria into Africa’s largest economy.
• The remaining top 10 are, in order, Nigeria, Ghana, Morocco, Tunisia, Egypt, Ethiopia, Algeria, Rwanda, and Tanzania. Egypt has slipped three places while Libya has completely dropped out of the top 10. Algeria re- enters the top 10 after a three-year break, and Rwanda enters the fold for the first time.
• 2014 was a less favourable year for Africa’s investment attractiveness ratings. Not only did the continent’s overall investment attractiveness deteriorate, but 22 countries received lower scores. This comes after a decade of almost continuous improvement, which was only briefly interrupted by the global financial crisis. A small part of the deterioration seems temporary — due, for instance, to the political upheaval in North Africa. However, the outcome emphasises that the continent still has a long way to go in terms of reforms if the recent economic boom is to be sustained.
• The fall in Africa’s attractiveness score is attributed to a worsening in the business environments of several economies. Twenty-one countries’ operating environment indices declined between 2013 and 2014, with sharp falls observed in Libya, São Tomé and Príncipe, and Egypt.
• Notable improvements were seen in Niger, the DRC, Lesotho, Swaziland, Algeria, and Rwanda’s rankings, while the Congo, Mauritania, São Tomé and Príncipe, Egypt, and Libya fell several places lower.
• African economies are expected to continue to realise rapid growth rates. The IMF’s five-year real GDP growth forecast for the continent is 5.2%, marginally lower than the 5.3% that was projected last year, but still an exceptionally good number. Bursting with growth-laden economies, East and West Africa are forecast to grow at an average 6.3% and 6.4% between 2014 and 2018. But, East Africa could surpass this forecast if oil and gas activities come to fruition sooner than anticipated.
• While Africa has become a hot new destination for investment, many countries on the continent remain unreformed and unattractive: the bottom six countries in our world rankings are in Africa.
• As far as the global rankings are concerned, the US has regained the top spot from China, a position it surrendered after the financial crisis. This represents an improvement in the US economic outlook and an expected slowdown in Chinese growth rates.
RMB Global Markets | 5 overview and rankings
Table 1: RMB’s 2014/15 rankings of the most attractive countries for investment in Africa1 (the higher the score, the better)
2014 rank Country Score World rank 2013 rank 1 South Africa 5.72 35 1 2 Nigeria 5.62 43 2 3 Ghana 5.45 49 4 4 Morocco 5.45 50 5 5 Tunisia 5.28 58 6 6 Egypt 5.25 59 3 7 Ethiopia 5.24 60 8 8 Algeria 5.07 67 12 9 Rwanda 5.06 70 14 10 Tanzania 5.05 71 9 11 Kenya 5.04 72 10 12 Botswana 5.00 75 11 13 Uganda 4.91 79 15 14 Zambia 4.88 86 13 15 Mauritius 4.84 88 16 16 Côte d’Ivoire 4.69 96 17 17 Mozambique 4.68 97 18 18 Angola 4.63 100 20 19 Libya 4.59 103 7 20 Burkina Faso 4.55 107 21 21 Gabon 4.51 111 22 22 – Cameroon 4.48 114 19 23 – Namibia 4.44 116 23 24 Senegal 4.30 122 24 25 Niger 4.24 127 34 26 DRC 4.23 128 35 27 Madagascar 4.18 131 25 28 Malawi 4.12 132 27 29 Mali 4.09 135 26 30 Guinea 4.09 136 29 31 Sierra Leone 4.05 138 28 32 Benin 4.05 139 31 33 – Chad 3.95 140 33 34 Sudan 3.84 145 36 35 Congo 3.84 146 30 36 Mauritania 3.82 147 32 37 – Togo 3.58 152 37 38 Zimbabwe 3.48 154 40 39 Lesotho 3.46 155 42 40 Swaziland 3.44 156 44 41 – Burundi 3.41 157 41 42 Gambia 3.33 158 39 43 – Liberia 3.25 161 43 44 n/a South Sudan2 3.14 164 n/a 45 Seychelles 3.07 165 46 46 Cabo Verde 3.02 168 45 47 Djibouti 2.92 174 48 48 Comoros 2.67 178 50 49 São Tomé and Príncipe 2.65 179 38 50 Eritrea 2.64 180 51 51 CAR 2.56 181 47 52 Guinea-Bissau 2.51 182 49 53 Equatorial Guinea 2.09 183 52
Note: 1 Somalia had insufficient data to be rated. 2 South Sudan was not rated in 2013. Source: RMB Global Markets Data as at September 2014
6 | RMB Global Markets Investment attractiveness rankings — taking the good with the bad
We have constructed investment attractiveness scores for each country through a multiplicative combination of market size (GDP), economic growth (GDP growth forecasts over the next five years), and an operating environment index — arguably the three most important factors for most business investment decisions. These variables are discussed in subsequent chapters, while details on our methodology can be found in the Appendices.
Of the top 10 countries in Africa, four are in North Africa, two in West Africa, three in East Africa and one in Southern Africa.
Table 1 sets out the scores while Figure 1 illustrates how the countries fare based on each of the three pillars with the top 10 countries shaded in orange.
Figure 1: African country rankings in market size, market growth and operating environment
Operating index 8
Mauritius 7 Botswana Rwanda South Africa Tunisia 6 Ghana
Zambia Namibia Morocco
5 Egypt Kenya Swaziland Ethiopia Tanzania Senegal Uganda Mozambique 4 Algeria Cameroon Côte d’Ivoire Nigeria Niger Angola Guinea Congo 3 Chad Eritrea DRC Libya
Sudan 2 0% 2% 4% 6% 8% 10% 12% GDP growth
Note: 1 Forecast GDP growth is based on IMF figures for 2014 to 2019. The operating environment score is explained in Chapter 4. A higher number represents a better business environment. Square sizes represent the sizes of the economies in 2014 on a purchasing power parity basis. Source: RMB Global Markets Data as at September 2014
South Africa has held firm at number one, a position it has maintained since the 1990s. It has sustained its Africa ranking despite dropping in the world rankings from 33rd to 35th and a GDP revision that saw Nigeria become formally acknowledged as Africa’s largest economy. Its overall score declined in 2014, as it has done for the past four years, owing to a weaker operating environment and, more specifically, a benign growth outlook.
Nigeria remains second with its overall investment score largely unchanged from 2013 — the upward revision to its GDP being offset by a weaker growth outlook.
Egypt and Libya both dropped substantially in the rankings. Egypt slipped from third to sixth as the growth outlook and operating environment weakened after the military coup and troubled elections. Libya fell from seventh to 19th, reflecting the political unrest and a slump in the operating environment.
RMB Global Markets | 7 overview and rankings
Figure 2: Africa’s top 10 investment destinations
Morocco Tunisia 4 5 Egypt 8 6 Algeria
Ethiopia 3 2 7 Ghana Nigeria 9 Rwanda
10 Tanzania
South Africa 1
Source: RMB Global Markets Data as at September 2014
Figure 3: Investment attractiveness scores of Africa’s “Big 3” (the higher the score, the better)
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0 1995 2000 2005 2010
South Africa Nigeria Egypt Source: RMB Global Markets Data as at September 2014
8 | RMB Global Markets Rwanda and Algeria re-enters the top 10, after a three-year hiatus, coming in at number eight (Figure 4). As the fourth largest economy in Africa, it had typically ranked in positions four Ethiopia are the to seven until 2012. The recovery in its rankings is mainly ascribed to an improvement in most unexpected the economic growth outlook. Rwanda is a newcomer to the top 10, continuing a trend that has seen it move all the countries in the way from 39th place in 1999. Its progression in the past year reflects the continued top 10, but both improvement in its operating environment as well as a pick up in expected growth. deserve their Rwanda and Ethiopia are the most unexpected countries in the top 10, but both deserve their elevated status. Rwanda’s rating reflects the excellent reforms of the past decade; and elevated status. Ethiopia’s reflects its sheer size and phenomenal growth rates. Aside from Algeria and Rwanda, notable advancements in the rankings include Niger (up nine spots to 25th), the DRC (nine spots to 26th), Lesotho (three spots to 39th), and Swaziland (four spots to 40th) — all underpinned by more favourable economic growth outlooks.
Figure 4: Algeria and Rwanda’s investment attractiveness (the lower the score, the better)
45
36
27
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0 1995 2000 2005 2010
Rwanda Algeria Source: RMB Global Markets Data as at September 2014
Notable downward movements were evident in the Congo (down five spots to 35th), Mauritania (four to 36th), and São Tomé and Príncipe (11 spots to 49th).
South Sudan makes its debut in our rankings as previously we had insufficient data to assess it. It placed 44th out of 53 African economies, and 164th out of 184 global economies. With South Sudan’s entry, Somalia is now the only African country that we do not rank.
RMB Global Markets | 9 overview and rankings
Africa’s aggregate performance — the whole is greater than the sum of its parts
Africa performed poorly in our global rankings in 2014. The deterioration in the aggregate investment attractiveness score is only the continent’s second in the last decade. The previous fall occurred in 2009 on account of the global financial crisis (Figure 5). While 31 African countries’ investment attractiveness scores rose, 22 declined — apart from during the financial crisis, the number of scores that improved or worsened was the lowest in a decade (Figure 6).
Figure 5: Africa’s investment attractiveness score (the higher the score, the better)
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6
5
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2 1990 1995 2000 2005 2010
Source: RMB Global Markets Data as at September 2014
Figure 6: Number of African countries with changes to their investment attractiveness score
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40
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-40
-60 1990 1995 2000 2005 2010
Score improved Score reduced Net Source: RMB Global Markets Data as at September 2014
10 | RMB Global Markets The deterioration in the aggregate score is partly the lagged result of the problems in North Africa, which have dampened the operating environment and the forecast growth rates of various countries in the region. More broadly, it is a result of the decline in the operating environment of many countries. Growth rates remain robust, although there has been a marginal deterioration in the outlook since last year (Figure 7).
Figure 7: Sub-components of Africa’s investment attractiveness score
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0 1990 1995 2000 2005 2010
Size (weighted) Growth Operating environment Source: RMB Global Markets Data as at September 2014 A quick take on FDI — show me the money
The value in our RMB attractiveness methodology can be seen when we compare actual FDI against our investment attractiveness score (Figure 8). The close link between the two series suggests that we are not only capturing what theory suggests, but also the reality on the ground.
Figure 8: Actual Africa FDI and the RMB investment attractiveness index (2007 – 2013)
Investment score 10
8
South Africa 6 Ghana Morocco Egypt Algeria Nigeria Mozambique 4 Zambia Guinea-Bissau
2 Comoros
0 0.0 0.1 1.0 10.0 FDI (US$bn)
Source: UNCTAD, RMB Global Markets Data as at September 2014
RMB Global Markets | 11 overview and rankings
Africa received US$57bn in FDI flows in 2013, almost 7% higher than the previous year (Figure 9). (FDI includes equity capital, reinvested earnings, and intra-company loans.) The largest recipients were South Africa (US$8.1bn), Mozambique (US$5.9bn), Nigeria (US$5.6bn), Ghana (US$3.3bn), and the DRC (US$2.0bn). Seventeen African countries received more than US$1bn in FDI.
Resource-driven sectors remain the largest recipients of FDI. However, the extractive sectors’ share of African FDI projects reached an all-time low in 2013. Instead, FDI is being channelled into consumer-oriented industries, including consumer products such as foods, information technology, tourism, finance, and retail (Figure 10).
Table 2 sets out which countries dominate the sectors in terms of the amount of FDI received. Investment activity is also growing in urban areas across the continent. Figure 11 illustrates how growth in market size will provide opportunities for FDI in selected Africa cities, while Figure 12 clarifies where South African companies have been investing.
Figure 9: FDI into Africa
US$bn 70
60
50
40
0
20
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0 1970 1975 1980 1985 1990 1995 2000 2005 2010
Source: UNCTAD Data as at September 2014
Figure 10: FDI into Africa by sector
Technology, media and 14% telecommunications
Retail and consumer products 12%
Financial services 12%
Business services 6%
Metals and mining 13%
Coal, oil and natural gas 11%
Source: fDi Intelligence Data as at September 2014
12 | RMB Global Markets Table 2: Top three recipient countries by sector as a share of overall FDI projects
Country Share Financial services Egypt 10.2% South Africa 9.4% Ghana 7.8% Technology, media and telecoms South Africa 24.1% Nigeria 11.9% Kenya 9.6% Nigeria 14.7% Retail and consumer products South Africa 13.0% Morocco 9.5% Business services South Africa 25.8% Kenya 9.7% Morocco 8.1% Real estate, hospitality Egypt 9.5% and construction Algeria 8.3% South Africa 7.1% Mining and metals South Africa 15.5% Ghana 12.1% Namibia 8.6% Coal, oil and natural gas Egypt 16.3% Mozambique 14.3% South Africa 12.2% Transport and logistics South Africa 17.2% Kenya 14.9% Morocco 9.2% South Africa 31.0% Diversified industrial products Kenya 10.7% Zambia 7.1% Automotive South Africa 31.1% Morocco 17.8% Kenya 13.3%
Source: fDi Intelligence Data as at September 2014
Africa received US$57bn in FDI flows in 2013, almost 7% higher than the previous year.
RMB Global Markets | 13 overview and rankings
Figure 11: African cities’ GDP growth rates and FDI project destinations
Tunis 18 >10 131 Casablanca 41 >20 Cairo 56 >20
43 Khartoum 28 93 5 24 Lagos 75 >20 Kumasi 8 Nairobi 36 >30 Accra 39 Dar es Salaam >10 Luanda >5 >5 156 45 Johannesburg 108 >50 38 Cape Town 22 Durban >20 89 53
CITY-LEVEL GDP FORECASTS (billion dollars)
7 2010 11 2025
TOP CITY DESTINATIONS FOR FDI IN 2012
>5 Number of projects
Source: Oxford Analytica, McKinsey Global Institute, fDi Intelligence, AfDB Data as at September 2014
14 | RMB Global Markets Figure 12: South Africa Inc’s footprint in Africa over the years1
2006 2009 2012
40+ SA companies 11 – 39 SA companies 1 – 10 SA companies Note: 1 Based on a survey of 800 of FirstRand Bank’s clients. FirstRand has a broad presence in Africa. First National Bank is well-established in Botswana, Mozambique, Namibia, Swaziland, Lesotho, Tanzania, and Zambia. RMB Corporate and Investment Bank operates in Botswana, Namibia, and Nigeria and has representative offices in Angola and Kenya. Source: RMB Global Markets Data as at September 2014
RMB Global Markets | 15 overview and rankings
How does Africa fare in the global scheme of things?
We have calculated investment attractiveness scores for 183 jurisdictions, allowing us to measure Africa’s relative performance. In contrast to Table 1, which looks at individual African countries, Table 3 provides a list of the top 40 countries in the world according to our methodology. As is evident from Figure 13, Africa is still at the lower end of the global spectrum despite positive developments in its investment climate in recent years.
Table 3: RMB’s 2014/15 rankings of the most attractive countries for investment in the world (the higher the score, the better)
2014 rank Country Score 2013 rank 1 US 7.1 2 2 China 7.0 1 3 UK 6.5 9 4 – South Korea 6.5 4 5 – Taiwan 6.5 5 6 Australia 6.4 3 7 India 6.4 8 8 Hong Kong 6.4 6 9 Malaysia 6.4 11 10 Singapore 6.4 7 11 Canada 6.4 22 12 – Germany 6.4 12 13 Qatar 6.3 14 14 Japan 6.3 10 15 Saudi Arabia 6.3 13 16 Mexico 6.2 19 17 Chile 6.1 15 18 France 6.1 20 19 Sweden 6.1 23 20 Poland 6.1 29 21 United Arab Emirates 6.1 24 22 Thailand 6.1 16 23 Indonesia 6.0 21 24 Peru 6.0 17 25 Netherlands 6.0 26 26 Colombia 6.0 25 27 Turkey 6.0 18 28 – Switzerland 5.9 28 29 Philippines 5.9 45 30 Israel 5.8 32 31 Norway 5.8 30 32 Kazakhstan 5.8 31 33 New Zealand 5.8 35 34 Brazil 5.8 27 35 South Africa 5.7 33 36 Pakistan 5.7 63 37 Spain 5.7 36 38 Denmark 5.7 39 39 Ireland 5.6 37 40 Austria 5.6 42
Source: RMB Global Markets Data as at September 2014
16 | RMB Global Markets Figure 13: Global investment attractiveness scores (1 = poor; 10 = good)
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Other Africa Source: RMB Global Markets Data as at September 2014
In the global rankings, the US has regained the position it relinquished to China after the global financial crisis (Figure 14). This represents an improvement in the US economic outlook and an expected slowdown in Chinese growth rates. The top 10 most attractive investment destinations in the world are, in order, the US, China, the UK, South Korea, Taiwan, Australia, India, Hong Kong, Malaysia, and Singapore. The major changes are the UK’s leap from ninth to third place, and Malaysia’s inclusion at the expense of Canada. The continued presence of Singapore and Hong Kong in the top 10 shows that even countries with small populations can be well placed. Notable improvements on the world scale are Poland, the Philippines, and Pakistan as well as the UK. A decline is apparent in Thailand and Brazil’s scores while Russia left the top 40 by falling from 34 to 45.
Figure 14: Investment attractiveness scores of China and the US (the higher the score, the better)
7.5
7.0
6.5
6.0
5.5
5.0 1995 2000 2005 2010
US China Source: RMB Global Markets Data as at September 2014
RMB Global Markets | 17 overview and rankings
Regionalisation — calling on your neighbours
Though sound, our core methodology does not explicitly account for the potential benefits of economic integration.
To determine whether a regional affiliation improves an economy’s attractiveness, we calculated a geometrically weighted score using the inputs from our principal methodology. The market size and market growth rates of each economy are adjusted by values reflecting the relative success of the respective Regional Economic Community (RECs). To avoid duplication, we excluded the market size and growth rate of each country from its REC. A composite score is then derived by combining the macroeconomic pillars with the outcomes of the operating environment index laid out in Chapter 4. These results supplement our findings and should not be viewed as an alternative to the attractiveness scores in Table 1.
We discussed the issue of regional integration in great detail in the 2013/14 edition of Where to Invest in Africa and have simply updated the rankings used in that analysis (Table 4).
18 | RMB Global Markets Table 4: RMB’s 2014/15 rankings of the most attractive countries for investment in Africa when taking regionalisation into account (the higher the score, the better)
2014 rank Country Score Unadjusted score Gain/loss 1 Mauritius 6.3 4.8 1.5 2 South Africa 6.1 5.7 0.4 3 Rwanda 6.0 5.1 1.0 4 Botswana 5.9 5.0 1.0 5 Ghana 5.9 5.5 0.4 6 Seychelles 5.9 3.1 2.8 7 Zambia 5.8 4.9 0.9 8 Morocco 5.6 5.4 0.2 9 Nigeria 5.6 5.6 0.0 10 Swaziland 5.6 3.4 2.1 11 Tunisia 5.6 5.3 0.3 12 Namibia 5.5 4.4 1.1 13 Egypt 5.5 5.5 0.3 14 Ethiopia 5.4 5.2 0.2 15 Kenya 5.4 5.0 0.3 16 Madagascar 5.3 4.2 1.2 17 Burkina Faso 5.3 4.5 0.7 18 Liberia 5.3 3.2 2.0 19 Algeria 5.3 5.1 0.2 20 Gambia 5.3 3.3 1.9 21 Tanzania 5.3 5.0 0.2 22 Lesotho 5.2 3.5 1.8 23 Malawi 5.2 4.1 1.1 24 Senegal 5.2 4.3 0.9 25 Uganda 5.2 4.9 0.3 26 Cabo Verde 5.2 3.0 2.2 27 Côte d’Ivoire 5.2 4.7 0.5 28 Benin 5.2 4.0 1.1 29 Mali 5.2 4.1 1.1 30 Sierra Leone 5.2 4.1 1.1 31 Mozambique 5.1 4.7 0.5 32 Djibouti 5.1 2.9 2.2 33 Burundi 5.1 3.4 1.7 34 Togo 5.0 3.6 1.4 35 Niger 5.0 4.2 0.8 36 Comoros 4.9 2.7 2.3 37 Guinea 4.9 4.1 0.8 38 Zimbabwe 4.9 3.5 1.4 39 Gabon 4.9 4.5 0.4 40 Angola 4.9 4.6 0.3 41 Cameroon 4.8 4.5 0.3 42 Guinea-Bissau 4.7 2.5 2.2 43 DRC 4.7 4.2 0.4 44 Libya 4.6 4.6 0.0 45 Eritrea 4.4 2.6 1.8 46 Chad 4.4 3.9 0.4 47 São Tomé and Príncipe 4.3 2.7 1.7 48 Equatorial Guinea 4.3 2.1 2.2 49 Congo 4.3 3.8 0.4 50 CAR 4.2 2.6 1.7 51 Sudan 4.2 3.8 0.3 52 Mauritania 3.7 3.8 -0.1 53 South Sudan 3.0 3.1 -0.1
Source: RMB Global Markets Data as at September 2014
RMB Global Markets | 19 CHAPTER 2: MARKET SIZE
South Africa relinquished its status as the largest economy in Africa to Nigeria in 2014 but still remains a dominant force on the continent, maintaining an 8% gap over Egypt, its closest rival in PPP terms.
LAGOS
20 | RMB Global Markets Market size
Sizing up the market
Africa’s vast landscape, measuring 30 million km2, is shaped by tiny islets like São Tomé and Príncipe and sprawling territories like the DRC. It is tempting to draw parallels between a country’s geographical size and its total market value, but the two are often disparate with smaller unassuming countries like Uganda, boasting a larger nominal GDP than Chad.
Figure 15: Economic vs. geographic size1
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Note: 1 Size of the square represents the size of the economy. Source: RMB Global Markets Data as at September 2014
RMB Global Markets | 21 Market size
South Africa relinquished its status as the largest economy in Africa to Nigeria in 2014. At an estimated US$828bn1, the West African stalwart’s GDP is roughly 1.3 times bigger than its Southern African peer, accounting for 20% of Africa’s total purchasing power. However, South Africa still remains a dominant force on the continent, maintaining an 8% gap over Egypt, its closest rival in PPP terms.
There are 18 other noteworthy countries with market sizes greater than US$30bn — Algeria, Morocco, Tunisia, Sudan, and Libya in North Africa; Ethiopia, Kenya, Tanzania, and Uganda in East Africa; Ghana, Cameroon, Chad, Côte d’Ivoire, and Gabon in West Africa; the DRC in Central Africa; and Angola, Botswana, and Mozambique in Southern Africa. Independently, these countries comprise a fraction of Nigeria’s total market size but are considerable when taken as a whole, equating to US$714bn.
Of the remaining 32 countries, seven are larger than US$20bn, less than a third are between US$10bn and US$20bn while the remaining 15 make up a mere 1.7% of Africa’s total market share.
The sum of Africa’s parts
Nigeria and South Africa account for 35% of Africa’s overall value, outstripping North Africa’s combined worth of US$1.24 trillion, which is a tad less than one-third of the continent’s total economic size, making the two hard to ignore as part of any expansion strategy. West Africa, comprising 17 countries, trails North Africa by US$55bn but leads the Southern African collective by US$230bn. South Africa and Angola tower above their Southern African counterparts, accounting for 80% of the region’s wealth. At US$132bn, Ethiopia stands head and shoulders above its East African peers, yet the grouping’s growth potential outweighs most of its regional compatriots. Central Africa’s contribution to Africa’s total GDP is negligible.
Figure 16: Proportion of Africa’s total GDP
10% 20%
19%
3% 15%
3% 3% 5% 14% 8%
South Africa Algeria Ethiopia Other Nigeria Morocco Tunisia Egypt Angola Noteworthy Source: IMF, RMB Global Markets Data as at September 2014
1. Calculations are based on EIU estimates of revised GDP as the IMF’s figures were published prior to the revision. The numbers referred to by the Nigeria Bureau of Statistics were finalised following the publication of this report.
22 | RMB Global Markets Re-emphasizing the benefits of FDI
Economic size, alongside other non-policy issues such as factor endowments and political stability, is an important pull-factor influencing the flow of FDI. Academic research shows that investors seeking a locational advantage are encouraged by an economy’s size as it facilitates horizontal investment, which entails the replication of home-based activities by multinational firms in host countries. A larger market could provide economies of scale, a reduction in tariffs, greater prospects for penetration, and favourable incentives depending on the type of opportunity being pursued. While the size of the host market might persuade firms to localise activities, the decision to invest will depend on how conducive the business and regulatory environments are to a particular activity. Nigeria is an ideal example. Despite its newfound status as the biggest economy in Africa, it received 21.4% less FDI in 2013 compared to 2012 due to uncertainties over the long-awaited Petroleum Industry Bill and the state of security that led to a series of asset disposals.
Africa’s share of global FDI is fractional at 2.6% (US$686bn). Indeed, a large proportion of this value is absorbed by the mining industry, specifically projects focused on oil, gas, and minerals, though consumer-orientated sectors and their respective offshoots like ICT are gaining in popularity. A deepening of regional ties could enhance inward FDI led by cross-border investments. According to UNCTAD, intra-African investments have been rising since 2008, steered by sustained South African FDI into the continent and increasing flows from Kenya, Nigeria, and Northern African countries. Intraregional FDI also provides a means to integrate smaller African countries into global production processes.
The practice Rebasing debunked of rebasing GDP growth is usually presented at constant prices. Over time, the base year used to GDP has calculate the change in real economic activity can become less aligned to adjustments in a country’s economic structure, which can lead to exaggerations in growth rates. largely been To avoid discrepancies, countries periodically rebase their GDP. The reclassification overlooked in generally takes place every five years in line with the International System of National Accounts to ensure that aggregates of GDP reflect the evolution of prices in an economy. Africa. This practice has largely been overlooked in Africa, with 19 of the 35 countries surveyed by the African Journal of Statistics reporting that their base year is older than 10 years. Countries that have changed their base years without obtaining the necessary international verification are at an immediate disadvantage as old figures often present the country in a poorer light.
While upward revisions to GDP arising from changes to base years are common in developed countries, they have drawn widespread attention in sub-Saharan Africa due to the uneven application of methods and poor availability of data. Ghana is the most notable recent example, having attracted comment from scholars and the international community alike after its statistical agency (the GSA) announced in November 2010 that its annual estimate of GDP had virtually doubled. This implied an increase of 60% in per capita income, elevating Ghana to lower middle-income status, which precludes it from concessional development assistance.
Ghana’s transition to a low middle-income economy was met with scepticism from certain development scholars who argued that the sudden expansion was a politically motivated, statistical illusion. However, the adjustment was necessary as, prior to the revision, the GSA found evidence to suggest that growth had been severely underestimated. Taking surveys detailing various economic activities conducted in and around the reference year into account, the GSA was able to improve its coverage of the national accounts.
RMB Global Markets | 23 Market size
Ghana’s rebasing exercise is quite unique in that it was well documented and widely publicised. A similar revision occurred in Nigeria in April 2014, after several delays.
The long-awaited results of Nigeria’s rebasing assignment revealed that the West African giant’s 2013 gross economic output, measured in current prices, is roughly 90% greater than its estimated value — implying that it could be 1.3 times bigger than South Africa.
Figure 17: Forecasted GDP in PPP terms (pre- and post-rebasing)
US$bn 1.5
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EIU (post-rebasing) IMF (pre-rebasing) Source: EIU, IMF Data as at September 2014
The process, which commenced in 4Q11, comprised field studies, corroboration by sector experts and technical assistance from international development partners. During that time, the NBS was criticised over the lengthiness of the exercise but attributed the delay to a lack of technical skills, a high demand for disaggregated data, and funding that needed to be amassed to enable an efficient and trustworthy process. Nigeria is among 25 countries worldwide to have rebased its GDP in recent years and exhibits one of the largest gaps between base years within this grouping.
The baseline figures are impressive, with the most significant change seen in Nigeria’s sectorial composition. The reclassification of production from 33 to 46 activities reflects the emergence of new giants. By virtue of an adjustment to the base year from 1990 to 2010, mining and quarrying were in effect NGN6 trillion smaller at the start of the decade while the ICT sector was NGN5.6 trillion larger. What’s more, crop production and trade have continuously outstripped oil in terms of their individual contributions to GDP since 2010 — adding 18.5% and 17.1% to output in 2013 compared to oil’s 14.4%. The connotations for real GDP are significant as the average annual growth over the last three years is substantially lower at 5.0% compared to the pre-based value of 6.7%. The services sector is likely to have registered the quickest growth, increasing by an average of 14.4%, while agriculture stagnated at 4.2%.
24 | RMB Global Markets Sharing the same truth but living different realities: the impact of rebasing on social welfare
Though it enhances investment prospects, periodic reassessments of GDP tend to mask long-standing structural imperfections that can aggravate the cost of doing business. Nigeria’s restated figures, for example, do not imply greater human welfare or a lessening in income disparity. Poverty, which is multi-dimensional, and unemployment remain rife as the expansion in GDP is mainly driven by capital rather than labour-intensive activities.
This proves that income per capita is a poor reflection of human welfare as it does not reflect variances in the cost of living across countries. Equatorial Guinea, for example, is by far the most affluent country in Africa, boasting a GDP per capita of US$20,572.33 in 2013 but only 975 individuals (equal to 0.1% of the total population) participate in that wealth.
Another shortcoming is that even if income is static, poverty levels can change over time. Although Ethiopia is among the poorest countries in the world, the Oxford Poverty and Human Development Initiative notes that the proportion of destitute Ethiopians fell 30% between 2000 and 2011, with notable improvements in years of schooling, level of attendance, and sanitation.
A more commonly accepted indicator of wellbeing is the Human Development Index (HDI), which weights life expectancy, educational achievement, and income. It is discouraging to note that 48 of the 52 African countries surveyed rank in the lower 50th percentile of the index with CAR, Eritrea, Mali, Burkina Faso, Chad, Mozambique, Niger, and the DRC taking up the last eight spots. Using these statistics as a barometer, we find that even though the Seychelles and Gabon have similar levels of GDP per capita, the island economy boasts a much greater level of human development than its West African counterpart (0.8 versus 0.6) (Figure 18).
Figure 18: Contrasting HDI scores with GDP per capita of Africa’s 20 wealthiest economies
GD P/capita (US$) 24,000
Equatorial Guinea 20,000
16,000 Seychelles
Gabon 12,000 Libya South Africa Angola Mauritius
8,000 Namibia Algeria
Tunisia Nigeria Morocco 4,000 Sudan Egypt
0 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 Human Development Index (score 0 - 1 where 1 is best)
Source: UNDP, RMB Global Markets Data as at September 2014
RMB Global Markets | 25 Market size
Getting a bigger portion of the pie — alternative ranking
We have used logged GDP in our core methodology (to reduce wide-ranging sizes to smaller scopes) to represent market size. By raising the logged term to the power of 2 and weighting it against the market growth and operating environment of each economy, we are able to assess the importance of economic size to a country’s overall investment attractiveness. We present our findings in Table 5 and contrast the scores derived in our principal methodology to the alternative method. The most pronounced change within the top 10 is Egypt’s elevation to number three. Ghana and Ethiopia drop two spots respectively while Morocco, Nigeria, and South Africa remain unchanged.
While Nigeria’s overall attractiveness score in the alternative ranking improves on account of its mammoth economic size, it still falls a tad short of South Africa’s due to its poor operating environment. South Africa secures the number one spot whether our scorings are geometrically weighted or skewed in favour of market size, reiterating its appeal despite its wilting growth rates.
26 | RMB Global Markets Table 5: Alternate investment ranking prioritising GDP in PPP terms
Ranking Country Alternative Core Change South Africa 1 1 0 Nigeria 2 2 0 Egypt 3 6 3 Morocco 4 4 0 Algeria 7 8 1 Ghana 5 3 -2 Ethiopia 9 7 -2 Tunisia 6 5 -1 Tanzania 10 10 0 Kenya 11 11 0 Angola 13 18 5 Uganda 12 13 1 Botswana 14 12 -2 Libya 8 19 11 Côte d'Ivoire 16 16 0 Zambia 15 14 -1 Rwanda 19 9 -10 Cameroon 17 22 5 Mozambique 20 17 -3 Mauritius 18 15 -3 Gabon 22 21 -1 Burkina Faso 21 20 -1 DRC 28 26 -2 Senegal 23 24 1 Sudan 34 25 9 Namibia 24 23 -1 Madagascar 26 27 1 Chad 31 33 2 Niger 35 25 -10 Mali 27 29 2 Malawi 29 28 -1 Benin 33 32 -1 Guinea 32 30 -2 Congo 30 35 5 Sierra Leone 34 31 -3 Mauritania 36 36 0 Zimbabwe 38 38 0 Togo 37 37 0 South Sudan - 44 - Swaziland 40 40 0 Burundi 39 41 2 Lesotho 42 39 -3 Gambia 41 42 1 Liberia 46 43 -3 Seychelles 48 45 -3 Eritrea 49 50 1 Cabo Verde 47 46 -1 Equatorial Guinea 43 53 10 Djibouti 50 47 -3 Comoros 52 48 -4 São Tomé and Príncipe 44 49 5 CAR 45 51 6 Guinea-Bissau 51 52 1
Source: IMF, RMB Global Markets Data as at September 2014
RMB Global Markets | 27 MARKET GROWTH
CHAPTER 3: GROWTH
Six of the world’s fastest growing economies in 2014 will be from Africa, yet the continent still relies on primary commodities and capital-intensive extractive industries. Does Africa have the capacity to generate all-inclusive growth?
MARRAKECH
28 | RMB Global Markets Market Growth
The last two decades have been fraught with global uncertainty, yet Africa has flourished, growing at an average rate of 4.7%, exemplifying its resilience to fluctuations in global growth. Admittedly, an abundance of natural resources have provided the incentive for expansion, but a youthful, energetic and driven middle class are gradually rousing domestic demand, cultivating innovation and driving entrepreneurship.
Fostering all-inclusive growth: all together now
Six of the world’s fastest-growing economies will be from Africa in 2014, yet the continent still relies on primary commodities and capital-intensive extractive industries. Moreover, there is growing unease over whether economies are generating adequate opportunities to absorb the youth bulge. These concerns have brewed uncertainty over whether Africa’s growth spurt is sustainable. More precisely, it begs the question: does the continent have the capacity to give rise to all-inclusive growth?
The African Centre for Economic Transformation concedes that better macroeconomic management, improved governance, and favourable incentives for the private sector have produced higher growth in many African countries, but there has been little success in altering the structures and technological levels of these nations.
The IMF regards growth in institutions, infrastructure, and individuals as the most likely solution to Africa’s long-run demographic, technological, and environmental challenges. This entails structural changes, specifically a diversification of economic activities, an improvement in technological capabilities, a broadening of international competitiveness, a step up in productivity, and an improvement in general well-being.
The latter is imperative to fostering all-inclusive growth. A rapidly-growing population demands wider access to quality education, healthcare, and infrastructure services. However, the UN’s latest Human Development Indicators reveal that, on average, children across Africa attend only five years of school (Figure 19), with Mozambique, Burkina Faso, and Niger reporting the worst turnout. More affluent economies like the Seychelles, Botswana, and South Africa average nine years of schooling, with approximately 71% of their populations possessing secondary qualifications. The quality of education is debatable with less than 70% of respondents to the Gallup World Poll, which is used by the UN in the compilation of the Human Development Report, expressing their satisfaction.
RMB Global Markets | 29 Market Growth
Figure 19: Mean years of schooling
Number of countries 12
10
8
6
4
2
0 1 - 2 2 - 3 3 - 4 4 - 5 5 - 6 6 - 7 7 - 8 8 - 9 9 - 10 10 - 12 Years of schooling
Source: UN Habitat Data as at September 2014
Social upliftment is also premised on rising productivity, stable wage growth, and reliable forms of employment. Regrettably, paid employment opportunities in SSA are scarce while the proportion of workers in vulnerable employment, such as subsistence farming or street hawking, remains extremely high at 77.4% according to the International Labour Organisation. While the vast majority of employment opportunities are generated by the private sector, they are largely informal in nature, restricting long-term productivity growth, which is still exceptionally low across the continent. In fact, Sierra Leone, Liberia, Côte d’Ivoire, and Ghana are the only countries to record productivity growth above 5% in 2013.
As a large percentage of labourers in the agricultural sector are employed casually, structural reallocation is vital to productivity growth in the absence of technical efficiency gains. A breakdown of individual output by sector illustrates that the transition from agricultural to manufacturing activities in SSA has recovered from the lows recorded between 2007 and 2011 but remains below pre-crisis levels (Figure 20).
Figure 20: Composition of output growth per person by sector in SSA
% 4.0
3.0
2.0
1.0
0.0
-1.0 1991 - 1999 1999 - 2007 2007 - 2011 2011 - 2017
Working-age population Labour force participation Structural reallocation Services labour productivity Industry labour productivity Agriculture labour productivity Source: ILO Data as at September 2014
30 | RMB Global Markets Reducing income inequality is part and parcel of all-inclusive growth, but the distribution of wealth is generally skewed across the continent. The Gini Index is a commonly used measure of income distribution, but current data on African economies is scarce as countries are surveyed infrequently. Of the 17 countries examined by the AfDB in the last five years, Swaziland, Zambia, and SouthA frica reflect the deepest inequalities in income distributions with Mali demonstrating the least. Development theory suggests that reducing incidences of poverty and inequality should bring about a more virtuous cycle of inclusive growth.
The quality of institutions that relate to the rule of law (that is the extent to which there is confidence in and adherence to the rules of society) is important in this regard. In a paper on the sustainability of Africa’s recent growth, the authors2 contend that the countries that grew at pace3 between 1996 and 2007 were characterised by solid institutions that increased in stature throughout the sample period and helped economies weather the effects of the global financial crisis. Rwanda is considered by the WEF to possess the best institutions, heightening its allure as an investment destination. Chad and Angola, on the other hand, are among the most poorly rated in the world (Figure 21).
Figure 21: Quality of institutions
1 = worst; 7 = best 7
6
5
4
3
2
1
0 Mali Libya Chad E gypt Benin unisia K enya Liberia Ghana T Gabon A lgeria Nigeria Guinea A ngola Malawi Zambia anzania Gambia Lesotho Senegal Burundi Uganda E thiopia R wanda Namibia T Morocco Mauritius Botswana Seychelles Swaziland Zimbabwe Cameroon Mauritania Cabo Verde Madagascar Sierra Leone South A frica Burkina Faso Côte d’Ivoire Mozambique
Source: WEF Data as at September 2014
While the vast majority of employment opportunities are generated by the private sector, they are largely informal in nature, restricting long-term productivity growth, which is still exceptionally low across the continent.
2. andersen, Thomas Barnebeck and Peter Sandholt Jenson, University of Southern Denmark, April 2013. 3. Above a median of 2.6% between 1996 and 2007.
RMB Global Markets | 31 Market Growth
Africa’s growth leaders and laggards
While Africa as a collective is expected to fare well over the next five years, individual performances are likely to differ. This is apparent when comparing regional growth rates (Figure 22). West Africa, renowned for its hydrocarbon wealth, is set to lead the pack while Southern Africa will bring up the rear as the growth prospects for its larger and more affluent economies wane. Bursting with growth-laden economies, East and West Africa are forecast to grow at an average of 6.3% and 6.4% between 2014 and 2018. But, East Africa could surpass this forecast expectation if oil and gas activities come to fruition sooner than anticipated. Equatorial Guinea’s feeble performance in 2013 is likely to extend into the next five years, weighing on Central Africa’s growth outlook. If we were to exclude Equatorial Guinea from the equation, the region’s prospects would be comparable to East and West Africa. North Africa will continue to be bolstered by the revival in Libya, but the region’s oil production is likely to remain volatile due to labour and operational constraints.
Figure 22: Regional economic growth rates
Southern Africa
East Africa
Central Africa
West Africa
North Africa
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
2013 2014 2014 - 2018 Source: IMF Data as at September 2014
We have identified economies that are expected to outdo their neighbours or vastly underperform in each region (Table 6).
32 | RMB Global Markets Table 6: Regional leaders and laggards
Forecast Frontrunner/ Region Affiliate growth (2014) straggler Strengths Challenges North Africa Libya 11.0% Frontrunner Gradual normalisation in Security-related spillovers (5.7%) political situation; rapid from neighbouring recovery in hydrocarbon countries; oil price output, strong non- volatility; ineffective bank hydrocarbon growth driven intermediation; lack of by private demand; easing private sector employment; in inflation; stable currency limited institutional peg capacity Egypt 3.7% Straggler Aid inflows from the Gulf; Ongoing political and expansionary budget; security concerns; medium-term recovery in inflationary pressures; dual tourism and activity in the deficits; divergent views Suez Canal; continued regarding terms of IMF growth in natural gas loan; policy inaction on sector structural issues West Africa Niger 9.4% Frontrunner Growth in extractive Fragile socio-political and (6.4%) industry; diversification security situation; climatic of budget financing; shocks; deterioration in deepening of regional current account; possible financial market; sizeable increase in debt stock concessional loans in the and debt service costs; works; reduction in tax commodity price volatility exemptions Cabo Verde 3.8% Straggler Sharp fall in inflation; Prolonged downturn in narrowing of current key trading partners; weak account deficit; increase domestic demand, falling in international reserve remittances and private position; banks remain well capital flows; decline capitalised; high levels of in banks’ profitability; long-dated concessional sluggish implementation of debt structural reforms to boost competitiveness; weak monetary transmission mechanism Central Africa DRC 7.4% Frontrunner Strong growth in mineral Security concerns; (4.4%) production and related widespread poverty; investments; agricultural limited fiscal space; sector gaining momentum; mounting social demands; elevated levels of mining weak governance and lack exports; de-dollarisation; of transparency low and stable inflation Equatorial -5.5% Straggler High levels of capital Expected decline in oil Guinea spending on infrastructure production; inconsistent and social-sector regulatory approach; weak projects; stable monetary and potentially volatile environment political environment; poor institutional framework; over-reliance on oil exports
RMB Global Markets | 33 Market Growth
Forecast Frontrunner/ Region Affiliate growth (2014) straggler Strengths Challenges East Africa South Sudan 9.0% Frontrunner Rising oil production; Domestic unrest; (6.3%) declining inflation; gradual disruptions to oil removal of fiscal austerity; production; reliance on possible IMF assistance; aid Sudanese pipelines and inflows; untapped arable shipping infrastructure; land widespread poverty Eritrea 2.5% Straggler Fledging mining industry; Unresolved border conflict growth in fishing exports; with Ethiopia; pervasive sustained diaspora poverty; lack of major remittances exports; shortage of US dollars; high cost of living; relatively closed economy; lack of investment in agricultural production Southern Africa Mozambique 7.9% Frontrunner Strong growth supported Burgeoning current (4.7%) by natural resource account deficit exploration; low and stable inflation Swaziland 2.1% Straggler Low risk of sovereign Heavily dependent on debt default; moderate financial support from levels of public debt; CMA development partners; membership; recovery in state revenues susceptible agricultural production; to changes in SACU increased vigour in mining revenue-sharing formula; and quarrying activities unsustainable wage bill; diminished manufacturing capacity due to lack of competitiveness; limited FDI
Source: IMF, IHS Global Insights, EIU, RMB Global Markets Data as at September 2014
34 | RMB Global Markets Forecasting is an inexact science
The IMF expects 14 countries to grow at more than 7% in 2014 — Libya, Niger, South Sudan, and Guinea are likely to be at the forefront of Africa’s expansion, averaging roughly 11% collectively over the next five years (Figure 23).
Figure 23: Average economic growth (2014 – 2019)
< 0% - 2% growth 2% - 4% growth 4% - 7% growth 7% - 10% growth > 10% growth Source: IMF Data as at September 2014
The Fund’s optimism, however, is not shared by other institutions such as IHS Global Insights and Business Monitor International. A comparison of the three agency’s average economic forecasts between 2014 and 2019 reflects a standard deviation of more than 1 for 23 countries, indicating divergent views (Table A5, Appendices). Stark differences are evident for Equatorial Guinea, Libya, Mozambique, Liberia, South Sudan, and Guinea mainly due to opposing outlooks on production growth. The agencies are more aligned in their views on Egypt and South Africa, anticipating sluggish growth rates over the next five years on account of persistent structural rigidities. Despite its formidable market size, South Africa’s growth prospects are uninspiring. The tertiary sector is a clear outperformer, but it is heavily reliant on an increasingly pressurised South African consumer.
RMB Global Markets | 35 Market Growth
Rising debt could knock the wind out of Africa’s sails
The World Bank warns that overborrowing could endanger the continent’s debt sustainability and erode the economic gains recorded since the overwhelming debt-relief initiative in the 1990s.
To ascertain whether Africa is at risk of medium-term fiscal deterioration, we compared an average of forecasted public debt-to-GDP ratios for individual economies to the actual debt paths of the US and UK between 2001 and 2010. Our results are presented in Figure 24, where each trend line is indexed to 100 to represent the cumulative percentage change in the selected economies’ debt ratios. An important distinction between the time series data is the starting point as T+1 is set at 2001 for the developed nations and 2012 for our sample of SSA economies. Admittedly, the state of public finances cannot be summarised by a single indicator. However, the ratio is a useful gauge of debt sustainability.
Figure 24: Debt-to-GDP comparison
% of GDP 265
230
195
160
125
90 T+0 T+1 T+2 T+3 T+4 T+5 T+6 T+7 T+8 T+9 T+10
US Rising debt UK could knock Africa Source: IMF, RMB Global Markets the wind out Data as at September 2014 of Africa’s sails. Africa’s debt-to-GDP ratio displays a flat trend in debt levels over the next six years (Figure 24). This is in sharp contrast to the experience of the US or the UK where debt levels crept up from the early 2000s.
We find that the main factor that will mitigate an increase in public debt levels in our core economies is the robustness of forecasted economic growth — on average 5.4% over the next six years. Inflation is also expected to remain relatively high, keeping nominal GDP growth elevated.
36 | RMB Global Markets Figure 25: Average inflation and GDP forecasts
% 8
6
4
2
0 UK US Africa
2000 - 2010 2012 - 2019
Growth Inflation Source: IMF Data as at September 2014
While our focus economies have made great strides in reducing public indebtedness over the last decade, the preservation of debt sustainability will require strong nominal GDP growth. However, there are certain factors that could impede economic expansion, thereby exacerbating our countries’ debt burdens.
Cyclical downturn in commodities prices: A number of African countries have a comparative advantage in the export of primary commodities. This means that a slump in resource prices, particularly in oil-exporting nations, has the potential to exacerbate a country’s debt burden if its export-to-debt ratio falls below 150%. That is, if a country is unable to accrue the necessary export earnings to service annual debt.
Exchange rate volatility: Rapid currency depreciation, especially in countries with strictly managed exchange rate regimes, would result in a negative terms of trade shock, raising the burden of external debt repayments. The effect of real exchange rate depreciation would be more pronounced in countries bearing large stocks of external debt like Angola and Tanzania.
Budgetary assistance: While not directly related to growth, multilateral assistance has always provided a crutch to embattled African economies. However, the financial requirements of developed nations could begin to take preference over the needs of countries that are not as integrated into the global economy. This provides further justification for countries like Mozambique andT anzania to lessen their reliance on budgetary assistance, especially as donors increasingly apply fiscal austerity.
Untenable increase in absolute debt levels: Our findings reveal that high and rising levels of nominal economic growth are vital to debt sustainability across our core economies. However, this is only viable if absolute debt levels are contained. Academic evidence suggests that economic growth could slow by as much as 2% if public debt exceeds 60% of GDP. While debt-to-GDP ratios of African countries are well below this level, debt stock rose on average by 26% between 2010 and 2011. This is particularly concerning in East Africa where economies like Kenya have struggled in the past to contend with debt overhang.
RMB Global Markets | 37 Market Growth
Giving precedence to growth — alternative ranking
The face of our top 10 most attractive investment destinations changes drastically if we prioritise GDP growth within our rankings (Table 7). Nigeria vaults into first place despite a marginal decline in its trend growth rate following the rebasing of its nominal GDP. The revised GDP data reflects Nigeria’s transition from a factor-based to services-orientated economy underpinned by trade, ICT, and real estate. Although oil’s contribution to overall GDP has waned, it is crucial to export earnings and fiscal revenues. The enduring struggle for resource control in the Niger Delta and persistent disruptions to midstream activities continues to dampen investor sentiment.
Libya and Zambia make their way into the top 10, rising 17 and four places respectively. The IMF describes Libya as being at a crossroads. While the restoration of hydrocarbon output will hasten Libya’s economic expansion, its intense reliance on oil and gas renders it vulnerable to fluctuations in commodities prices. Managing the political transition and addressing security challenges while maintaining budget discipline and macroeconomic stability is vital to sustainable growth. Zambia’s outperformance is attributed to robust mining output and a strong recovery in agricultural production. However, the risk of rising fiscal imbalances and lower reserve coverage could erode these gains.
Comparatively slower growth rates mean that four of our top 10 economies, including South Africa, slip down the rankings. Interestingly, Ghana retains its number three spot regardless of the weighting to growth, illustrating its strength in more than one pillar.
38 | RMB Global Markets Table 7: Alternate investment ranking prioritising GDP growth
Country Alternative Core Change Nigeria 1 2 1 Libya 2 19 17 Ghana 3 3 0 Egypt 4 6 2 South Africa 5 1 -4 Morocco 6 4 -2 Tanzania 7 10 3 Tunisia 8 5 -3 Ethiopia 9 7 -2 Zambia 10 14 4 Rwanda 11 9 -2 Kenya 12 11 -1 Uganda 13 13 0 Mozambique 14 17 3 Côte d'Ivoire 15 16 1 Botswana 16 12 -4 Mauritius 17 15 -2 Burkina Faso 18 20 2 Algeria 19 8 -11 Angola 20 18 -2 Cameroon 21 22 1 Guinea 22 30 8 Sierra Leone 23 31 8 Gabon 24 21 -3 Congo 25 35 10 Namibia 26 23 -3 Malawi 27 28 1 Mauritania 28 36 8 Senegal 29 24 -5 Mali 30 29 -1 São Tomé and Príncipe 31 49 18 Madagascar 32 27 -5 DRC 33 26 -7 Niger 34 25 -9 Chad 35 33 -2 Benin 36 32 -4 Gambia 37 42 5 Sudan 38 34 -4 Togo 39 37 -2 Zimbabwe 40 38 -2 Burundi 41 41 0 Liberia 42 43 1 Cabo Verde 43 46 3 Lesotho 44 39 -5 CAR 45 51 6 Seychelles 46 45 -1 Djibouti 47 47 0 Guinea-Bissau 48 52 4 Swaziland 49 40 -9 Comoros 50 48 -2 Eritrea 51 50 -1 Equatorial Guinea 52 53 1 South Sudan - 44 -
Source: IMF, RMB Global Markets Data as at September 2014
RMB Global Markets | 39 CHAPTER 4: OPERATING ENVIRONMENT
While operating in Africa is not without risk, the right approach and planning can significantly improve the likelihood of achieving a successful outcome and enable investors to realise the significant growth opportunities that SSA is anticipated to deliver. ACCRA
40 | RMB Global Markets OPERATING ENVIRONMENT
Probably one of the most important indicators of a country’s attractiveness, the operating environment, can be the deciding factor for the investment process. Africa is well known for its tricky business environment, with potential stumbling blocks ranging from political and regulatory to operational risks.
Encompassing all risk aspects
To get a holistic view on how easy it is to do business in Africa, we have constructed a composite operating environment index by combining the four main independent global assessments on operational issues: The World Bank’s Doing Business Report 2013; Transparency International’s Corruption Perceptions Index 2012; the Heritage Foundation’s Index of Economic Freedom 2013; and the WEF’s Global Competitiveness Report 2012/13. Our selection is based on their prominence, wide coverage, and lengthy time series. These four reports combine both objective and subjective assessments of the operating environment across a wide variety of areas.
Figure 26: RMB’s composite index of Africa’s operating environment
Good Moderately good Average Good Poor Moderately good Very poor Average Poor Very poor Sources: World Bank, WEF, Heritage Foundation, Transparency International, RMB Global Markets Data as at September 2014
RMB Global Markets | 41 Operating environment
Highlights of our latest operating environment scoring
• The top performer for a number of years, Mauritius, retained its number one spot. Its business environment benefits from strong and transparent public institutions, solid judicial independence, clear property rights, favourable taxes, and an efficient government.
• The island economy is followed by Botswana, Rwanda, and South Africa. On an almost equal footing in fifth place are Tunisia, Ghana, and the Seychelles.
• Countries that have shown robust improvement over the past year are Burundi and Angola. Rwanda once again increased its business environment scoring. In fact, since the inception of our RMB investment attractiveness index four years ago, Rwanda has consistently improved its standing. Other states like Djibouti, Lesotho, and Zimbabwe moved up the ranks this year, but ever so slightly.
• South Sudan, Somalia, Sudan, Eritrea, and Libya have the five most difficult business environments on the continent. The political risk associated with these countries has a large and negative impact on investor perception and risk appetite.
• Twenty-one out of the 54 countries fell down the ratings ladder, although most were negligible drops.
• The largest declines were seen in Libya and Egypt due to political issues affecting sentiment. In fact, their scores have declined the most over the past four years.
• One of our star performers in the overall attractiveness ranking, Nigeria, was one of the biggest fallers over the past year. It still battles with weak institutions, high corruption levels, and a large infrastructure deficit. The WEF also believes that there is still insufficient protection of property rights, and that Nigeria is slow in harnessing technologies for productivity enhancements. Most of all, the security situation remains an issue. Attacks by Islamist insurgents have increased and will be evident in next year’s operating environment index due to the recent escalation.
• Although it is worrying that a large number of countries’ rankings dropped, 19 countries showed in improvement, while 14 countries stayed the same.
• Overall, only three countries were rated “good”, but 11 countries are now above “average” from seven countries last year. Thirteen countries have very poor business environments.
Table 8: Top and bottom three performers between 2013 and 2014
Top 3 Bottom 3 Burundi Libya Angola Egypt Rwanda Nigeria
Source: RMB Global Markets Data as at September 2014
42 | RMB Global Markets What we should look out for
Access to financing remains the most difficult factor for doing business in Africa (Figure 27). Although growing, financial intermediation in Africa is still slow. Several aspects such as stable macroeconomic fundamentals, strong capital flows, developed financial sectors, and political stability are all key for inclusive growth in access to financing. Micro aspects like financial institutions, the regulatory and legal environments, and innovative technology are also important. Please refer to the Appendix (A17 to A19) to see each country’s score when looking at different financial aspects.
Figure 27: Most problematic factors for doing business in Africa
Respondents 20%
16%
12%
8%
4%
0% ax rates I nflation T Corruption ax regulation T FX regulations P olicy instability P oor work ethic Crime and theft P oor public health A ccess to financing G overnment instability Uneducated workforce
Most I nadequate infrastructure Least nefficient govt bureaucracy I nefficient
R estrictive labour regulations
Source: WEF, World Bank Data as at September 2014
Unfortunately, the lack of strong financial intermediation affects the poor the most (Figure 28).
Figure 28: A summary of financial intermediation levels
Lower State and commercial banks middle income
Credit unions, cooperatives, Economically consumer finance active poor Poor Financial NGOs Very poor
Destitute Subsidised poverty programmes
Source: Cornell University Data as at September 2014
RMB Global Markets | 43 OPERATING ENVIRONMENT
For businesses (local and foreign), access to financing can take on different forms, for example, complexities of transacting in foreign currency or obtaining/extending/increasing credit lines to invest in certain jurisdictions.
African currencies are characterised by risks that may stem from frequent changes in domestic liquidity conditions, inflation differentials with primary trading partners, or perhaps foreign exchange controls. Though varied, these risks are largely determined by the prevailing exchange rate regime (Figure 29).
Figure 29: Exchange rate regimes in Africa
Ghanaian cedi: Managed float Nigerian naira: Managed float Kenyan shilling: Managed float Congo franc: Pegged to the euro Ugandan shilling: Managed float Angolan kwanza: Tanzanian shilling: Adjustable US dollar peg Managed float Zambian kwacha: Malawian kwacha: Free float Managed float
Botswana pula: Crawling basket peg Mauritian rupee: Managed float
Mozambican metical: Managed float West African franc: euro peg Independent currencies Central African franc: euro peg Common Monetary Area: essentially rand (free float) Source: RMB Global Markets Data as at September 2014
Other key factors hindering access to finance are the credit and political risk factors associated with each country. Although our rankings point to attractive investment environments filled with opportunity, some risks will most certainly discourage funding opportunities for businesses wanting to enter. We have therefore illustrated the respective country’s attractiveness according to our RMB composite index and compared it to a country’s sovereign risk rating (Figure 30). Countries in the upper right-hand quadrant (Nigeria, Ghana, and Egypt) have attractive investment scores but have below investment grade sovereign ratings, which could translate into difficulty when attempting to access financing.
44 | RMB Global Markets Figure 30: Credit lines more open to higher ranked countries
Investment score (1 = poor, 10 = good) 10.0
7.5 US China India UK Nigeria Brazil Ghana SA Egypt Russia 5.0 Botswana Angola Kenya Rwanda Namibia
Seychelles 2.5 Cabo Verde
0.0 AA+ AA- A BBB+ BBB- BB B+ B- CCC CC Sovereign credit rating
Source: RMB Global Markets, S&P Data as at September 2014
Mitigating risks: run for cover
Unfortunately, the risk of investing is still high in certain countries. Yes, most companies would admit that the rewards outweigh these hazards, but they will make sure they have ways and means of mitigating the risks involved. Firms need cover for a whole array of issues such as exchange controls, political insecurity, foreign exchange transfer risk, the breach of contracts, and the expropriation of assets, to name a few. Investors have a number of options for mitigating these types of risks. Two key considerations include:
1. Public support: Bilateral investment treaties (BITs) offer legal benefits for companies operating in different jurisdictions. These treaties can guarantee, for instance, that a South African investor will be subject to the same standards and treatment as a domestic investor. At the same time, BITs can help regulate issues of due process and compensation in cases of expropriation; safeguard the free transfer of capital back to South Africa; and provide for dispute settlement mechanisms, allowing the investor to claim directly against the country concerned in an international arbitral forum. However, Bowman Gilfillan notes that SouthA frica has signed BITs with 17 countries (Table 9), but has only ratified the treaties with Mauritius and Mozambique. Although beneficial, the slow ratification rate makes BITs unreliable.
RMB Global Markets | 45 Operating environment
Table 9: Bilateral investment treaties for South Africa
Country Signed Came into effect Mozambique 6 May 1997 28 July 1998 Mauritius 17 February 1998 7 October 1998 Senegal 5 June 1998 Ghana 9 July 1998 Egypt 28 October 1998 Uganda 8 May 2000 Algeria 24 September 2000 Rwanda 19 October 2000 Tunisia 28 February 2002 Libya 14 June 2002 Equatorial Guinea 17 February 2004 DRC 31 August 2004 Tanzania 1 December 2006 Congo 1 January 2009 Madagascar 13 December 2006 Ethiopia 1 January 2008 Zimbabwe 27 November 2009
Source: UNCTAD, Bowman Gilfillan Data as at September 2014
2. Private support: Political risk insurance has become a necessity, especially as investment flows between emerging economies have increased over the past decade. Investors can negotiate cover with private sector insurers as well as parastatals where relevant. South Africa, for example, has the Export Credit Insurance Corporation Ltd, which is wholly owned by the South African government and the Department of Trade and Industry. Private sector insurance comes at a high premium, but does not restrict one to government policy and ownership requirements. Importantly, Bowman Gilfillan notes that the biggest benefit of government cover is that it has the political clout and diplomatic leverage to recover claims from the host government, where the private sector offers limited potential for advocacy on behalf of the investor.
When the business environment becomes top priority for investors — alternative rankings
While operating in Africa is not without risk, the right approach and planning can significantly improve the likelihood of investors achieving a successful outcome and enable them to realise the significant growth opportunities that SSA is anticipated to deliver. In many cases, we find that our clients are more concerned about the challenges of doing business than growth and market size, and therefore they place greater emphasis on the risks associated with the different operating environments Africa offers. We have therefore tweaked our RMB attractiveness ranking index methodology to give a larger weighting to the operating environment scoring (Table 10) (see the Methodology in the Appendices).
46 | RMB Global Markets
Table 10: RMB’s attractiveness ranking with a higher operating environment weighting
Country Alternative Core Change 1 South Africa 1 1 0 2 Ghana 2 3 1 3 Morocco 3 5 2 4 Tunisia 4 15 11 5 Rwanda 5 4 -1 6 Botswana 6 6 0 7 Mauritius 7 12 5 8 Nigeria 8 2 -6 9 Egypt 9 9 0 10 Ethiopia 10 14 4 11 Zambia 11 10 -1 12 Kenya 12 7 -5 13 Tanzania 13 11 -2 14 Algeria 14 19 5 15 Uganda 15 13 -2 16 Namibia 16 8 -8 17 Mozambique 17 23 6 18 Côte d'Ivoire 18 20 2 19 Burkina Faso 19 17 -2 20 Gabon 20 16 -4 21 Cameroon 21 21 0 22 Angola 22 22 0 23 Senegal 23 27 4 24 Madagascar 24 24 0 25 Malawi 25 29 4 26 Niger 26 28 2 27 Mali 27 18 -9 28 Benin 28 31 3 29 Sierra Leone 29 32 3 30 Libya 30 30 0 31 Guinea 31 36 5 32 Mauritania 32 25 -7 33 DRC 33 33 0 34 Swaziland 34 35 1 35 Lesotho 35 42 7 36 Chad 36 45 9 37 Togo 37 46 9 38 Seychelles 38 26 -12 39 Congo 39 49 10 40 Gambia 40 37 -3 Interestingly, in this specific ranking, 41 Burundi 41 39 -2 Ethiopia still trumps a country like 42 Liberia 42 40 -2 Namibia, which has a very stable and 43 Cabo Verde 43 43 0 favourable business environment. It is 44 Zimbabwe 44 34 -10 therefore important to highlight that 45 Sudan 45 41 -4 46 Djibouti 46 38 -8 the growth and market size of Ethiopia 47 Comoros 47 47 0 heavily outweighs the smaller and slower 48 São Tomé and Príncipe 48 51 3 growth market of Namibia when it comes 49 CAR 49 48 -1 to business opportunities, regardless of a 50 Eritrea 50 52 2 higher operating environment weighting. 51 Guinea-Bissau 51 53 2 If you refer to the beginning of this 52 South Sudan 52 50 -2 chapter where Figure 26 only considers 53 Equatorial Guinea - 44 44 the business environment ranking, 54 Somalia - - - Namibia outshines Ethiopia.
Source: RMB Global Markets Data as at September 2014
RMB Global Markets | 47 CHAPTER 5: CITIES OVERVIEW 2014
Africa has the fastest urbanisation rate in the world and there are now more than 1,000 cities in SSA that play a large role in driving the economic growth of their respective countries. Lagos and Cairo, for instance, are in the ranks of the world’s megacities, while Kinshasa is also rapidly approaching megacity status.
ABIDJAN
48 | RMB Global Markets Cities overview
Africa’s growing city limits
Our clients have become increasingly interested in cities and urban areas as part of their investment strategies, especially the consumer-driven firms. Investment activity is also growing in urban areas across the continent. Due to a lack of information, most companies focus on national level data. The problem with this is that it doesn’t always reflect the true opportunities within urban areas. To uncover some of this potential, we have looked at various indicators to get a better understanding of what is happening within city limits using various surveys that assess the viability of cities across Africa. Where possible, we endeavour to identify sectoral opportunities in major city centres in the chapters that follow.
SpecifiCITY
Africa’s goliaths are supported by urban giants. Oxford Economics holds that Africa’s most significant cities contribute about US$700bn to the continent’s GDP, a figure that is expected to increase 2.4 times in the next 16 years. Eleven of Africa’s top 15 cities identified by the British firm have roots in seven of the continent’s largest economies: Nigeria (Lagos), South Africa (Johannesburg), Egypt (Cairo), Algeria (Algiers), Morocco (Casablanca), Angola (Luanda); and Tunisia (Tunis).
From an average growth perspective, the top three fastest growing cities in Africa between 2011 and 2013, according to IHS Global Insight, were Accra (Ghana), Addis Ababa (Ethiopia), and Kigali (Uganda).
Figure 31: Africa economic growth hotspots
Accra
Addis Ababa
Kigali
Luanda
Maputo
Lusaka
Lagos
Abuja
Kinshasa
Dar es Salaam
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
Source: IHS Global Insight, Jones Lang LaSalle Data as at September 2014
RMB Global Markets | 49 Cities overview
Where will the lights shine brightest?
It is, of course, important to look at the size, growth and population of each city. But whether they will have inclusive and sustainable growth is a different story (discussed in Chapter 3). The potential for inclusive growth, says MasterCard, is mainly the result of the implementation of political, economic and social policies.
The firm looks at lagging and leading indicators to analyse the inclusive growth potential of 74 African cities. The lagging indicators include GDP per capita growth; household consumption expenditure growth; urbanisation; governance; ease of doing business; population growth; and middle-class household growth. GDP per capita is classified as both a leading and lagging indicator. It can be construed as a short-term predictor of the economy as it is directly correlated to human capital and informs consumer behaviour but is also impacted by economic change, rising and falling in line with national output. When positive, these indicators are both causes and consequences of inclusive urbanisation.
The leading indicators include infrastructure; GDP per capita growth; FDI; mobile subscriptions; air travel; health and education; and household consumption expenditure growth.
Once consolidated by combining the lagging and leading indicators, the results, which offer a perspective on potential profitable investment into fast growing cities, are illustrated in Figure 32.
Figure 32: MasterCard African Cities Growth Index 2014
Accra Casablanca Tunis Freetown Libreville Nouakchott Kumasi Tripoli Victoria São Tomé Matola Lagos Port Louis Pretoria Maputo Abuja Dar es Salaam Pointe-Noire Brazzaville Abidjan Johannesburg Lusaka Rabat Port Harcourt Gaborone Fes Yamoussoukro Nairobi Windhoek Kampala Monrovia Kigali Banjul Cairo Algiers Durban Ibadan Maseru Kaduna Cape Town Djibouti Addis Ababa Kinshasa Dakar Kano Port Elizabeth Douala Khartoum Lubumbashi Oran Lomé Conakry Cotonou Praia Kisangani Bamako Mombasa Ouagadougou Alexandria Niamey Yaoundé Luanda Harare Huambo Antananarivo Lilongwe Moroni N’Djamena Bissau Bujumbura Bangui Malabo Mbabane Asmara 0 10 20 30 40 50 60
Source: MasterCard Data as at September 2014 50 | RMB Global Markets Accra, Casablanca, and Tunis (the capitals of Ghana, Morocco, and Tunisia) are the African cities with the highest potential for growth over the next five years. Although the leader of the pack is battling with aspects such as the country’s fiscal and current account deficits, electricity and water supply, high wages, and large slum areas, it has the most potential for inclusive growth for the population than any other city in Africa.
Figure 33: MasterCard African Cities Growth Index 2014
Tunis Medium city with Casablanca highest potential for inclusive growth Second-ranked large city
Nouakchott Accra Third-ranked African city (top medium city large city) with highest potential for inclusive growth
Freetown Third-ranked large city São Tomé Libreville Small city with Second-ranked highest potential medium city Victoria for inclusive growth Second-ranked small city
Port Louis Third-ranked small city
Source: MasterCard Data as at September 2014
RMB Global Markets | 51 Cities overview
Pretty penny metropolis
African cities are becoming more and more expensive as investors flood the market while most goods are still being imported. Luanda was recently revealed as one of the most expensive cities in the world, especially when looking at expatriate living due to inadequate secure housing, high prices of income goods, and the demand for business in the city.
Figure 34: Most expensive and populous cities in Africa in 2014 and 2025
Casablanca cairo 11.7 million (2014) 14.7 million (2025)
abidjan 4.7 million (2014) khartoum 6.9 million (2025) abuja 5 million (2014) 7 million (2025)
kinshasa 9.9 million (2014) accra 14.5 million (2025) nairobi 3.7 million (2014) 6.1 million (2025) Lagos 12.6 million (2014) dar es salaam 18.8 million (2025) 4.1 million (2014) 7.2 million (2025)
lusaka luanda 5.9 million (2014) maputo 7.5 million (2025)
Johannesburg 4 million (2014) Cape 4.7 million (2025) town
Source: EIU, Canback Dangel, UNDESA Data as at September 2014
By 2050, the absolute number of people living in cities will increase to one billion — equivalent to the continent’s total population in 2010.
52 | RMB Global Markets Most populous
The AfDB holds that 50% of Africa’s population will live in cities by 2040. By 2050, the absolute number of people living in cities will increase to one billion — equivalent to the continent’s total population in 2010. Over the last 50 years, the percentage of Africans living in urban areas has doubled from 19% to 39% representing over 360 million new city dwellers. Currently, 52 cities are inhabited by one million or more residents with Bamako (Mali) and Lagos (Nigeria) among the fastest growing in the world. However, the high percentage of urban slums is a cause for concern, requiring sustainable urban development strategies focused on relieving the pressures on congested metropolises. Satellite cities are rapidly emerging across the continent. Tatu City and Konza Techno City in Kenya, the City of Light and King City in Ghana, and the greater Port Harcourt and Eko Atlantic in Nigeria are just a few examples of smaller municipalities sprouting near to major city centres.
Figure 35: City population and slum population in Africa
Morocco Algeria Tunisia
Libya Egypt Mauritania
Mali Chad Senegal Niger Eritrea The Gambia Benin Sudan Guinea Bissau Djibouti Burkina Faso Guinea Nigeria Sierra Leone Togo Liberia Central African South Côte Ghana Republic Sudan Cameroon Ethiopia d’Ivoire Somalia Equatorial Guinea Uganda
Gabon Kenya Congo Rwanda DRC Burundi Tanzania Comoros Zambia Angola Malawi
Mozambique Zimbabwe Madagascar Namibia Botswana Swaziland Lesotho
South Africa
65 30 15 Million inhabitants 7 1 0.5 Share of population living in slums No data Source: AfDB Data as at September 2014
RMB Global Markets | 53 Cities overview
Centres of buying power
The growth in purchasing power (represented by GDP per capita) is likely to be exponential in certain cities due to robust levels of growth (Figure 36). Oxford Economics contends that by 2030 cities like Cairo (Egypt) and Johannesburg (South Africa) could double their buying power while Abuja (Nigeria) and Huambo (Angola) have the potential to increase their purchasing capacities five-fold. Of the 15 African cities surveyed, six are expected to register GDP per capita in excess of US$20,000 while the remainder will vary between US$12,989 (Oran) and US$16,013 (Cape Town).
Figure 36: Economic size, economic growth and wealth
City GDP per capita estimates (US$ 000s) 30 Port Louis Casablanca Gaborone 24 Johannesburg Algiers Luanda 18 Cairo
12 Nairobi Lagos Abidjan Accra Addis Ababa 6 Dakar Kampala Dar es Salaam Lusaka Maputo 0 Kinshasa 3% 4% 5% 6% 7% 8% 9% 10% GDP growth 2013 - 2017
Source: IHS Global Insight, Jones Lang LaSalle Data as at September 2014
What cities do investors look at the most?
According to EY’s latest attractiveness survey, South African cities are perceived as the most attractive in which to do business. Attractiveness is still very dependent on infrastructure and transport links, and also the ease of doing business.
Figure 37: Most attractive cities to do business in
Can’t say None Dakar Luanda Accra Maputo Durban Dar es Salaam Abidjan Lagos Nairobi Cape Town Johannesburg
0 5 10 15 20 25 30 35 40 45 50
Total mentions First mention Source: EY Data as at September 2014
54 | RMB Global Markets A number of aspects have to be taken into consideration when investing in certain hubs. EY narrows these aspects down to the consumer base, skilled and productive labour, business support services, and infrastructure development, to name a few.
From a global standpoint, African cities remain relatively uncompetitive. This is borne out by the EIU’s Global City Competitiveness Index that evaluates 120 cities according to eight broad categories. Not one African city featured in the top 50th percentile. The report, identifying hot spots in 2025, names Johannesburg, Cape Town, and Durban as reasonable contenders, ranking 66th, 77th and 95th respectively. The anticipated growth in Cairo’s market size should improve its global appeal, but the remaining African cities are seen as stagnant.
Figure 38: Bottom 50th percentile of the EIU’s Global City Competitiveness Index (2012)1 (1 = most competitive; 120 = least competitive)
Tehran Lagos Beirut Alexandria Dhaka Guadalajara Surabaya Nairobi Hanoi Karachi Bandung Kolkata Colombo Almaty Cairo Belo Horizonte Ahmedabad Ankara Monterrey Chennai Hyderabad Pune Chongqing Porto Alegre Ho Chi Minh City Durban Bangalore Hangzhou Saint Petersburg Medellín Kiev Guangzhou Riyadh Kraków Chengdu Bogotá Suzhou Dalian Qingdao Tianjin Bucharest Manila Athens Cape Town Rio de Janeiro Lima Jakarta Nagoya Mexico City Fukuoka Istanbul Shenzhen Rome Buenos Aires Johannesburg Panama City Muscat Kuwait City Bangkok Santiago 0 20 40 60 80 100 120
Note: 1 Categories comprising index and respective weightings = economic strength (30%); physical capital (10%); financial maturity (10%); institutional effectiveness (15%); social and cultural character (5%); human capital (15%); environment and natural hazards (5%); and global appeal (10%). Source: EIU Data as at September 2014
RMB Global Markets | 55 Finance
Chapter 5.1: cities – Finance
Regulatory reforms, the emergence of an elite urban middle class and technological advancements are allowing financial institutions access to a previously unbanked population.
56 | RMB Global Markets Finance
Africa’s financial roots are visibly deepening across the continent as a broader spectrum of services is being offered to enterprises and households alike. Rapid credit growth, particularly in SSA, is testament to the expansion of Africa’s financial sector, albeit off a low base. Regulatory reforms, the emergence of an elite urban middle-class and technological advancements are allowing financial institutions access to a previously unbanked population. Despite these developments, access to financing remains a key constraint for resident and non- resident firms.
In this section, we identify Africa’s financial hubs, various means of accessing funds in local African markets, and highlight strategies to mitigate exchange rate risks.
Africa’s financial hotbeds
Of the 40 African economies surveyed by the WEF, 23 are regarded as above average in terms of the level of their financial development, registering scores greater than 3.5. Southern African economies excel in this respect, with seven countries (South Africa, Mauritius, Namibia, Zambia, Botswana, Swaziland, and Malawi) placed in the top 50th percentile of the WEF’s 2013/2014 financial development index (comprising 148 countries).
Figure 39: Extent of financial market development1
1 = underdeveloped, 7 = developed 7
6
5
4
3
2
1
0 Mali Libya Chad E gypt Benin unisia Kenya Liberia Ghana T Gabon N igeria A lgeria Guinea A ngola Zambia Malawi anzania Gambia S enegal Lesotho Uganda Burundi E thiopia R wanda N amibia T Morocco Mauritius Botswana S eychelles S waziland Zimbabwe Cameroon Mauritania Cabo Verde Madagascar S ierra Leone S outh A frica Burkina Faso Côte d’ I voire Mozambique
Note: 1 Countries marked in green are in the lower 50th percentile of the scoring. Source: WEF Data as at September 2014
RMB Global Markets | 57 Finance
Cityscapes — assessing Africa’s financial landscape
Only a handful of cities in Africa are considered to be international financial centres (IFCs). IFCs typically feature a heavy concentration of financial institutions, highly developed commercial and communications infrastructure, and facilitate a host of domestic and international trading transactions. We have pinpointed a few cities that have achieved IFC status and those actively pursuing it.
South Africa maintains its number one position as the most financially developed country in Africa, supported by strong corporate governance practices and superior accounting and auditing standards. Globally, it is ranked third, behind Hong Kong and Singapore (ranked one and two respectively) in three of the eight categories exemplifying financial development (namely affordability of financial services, ease of access to loans, and availability of venture capital) but is lauded for the soundness of its banks, availability of financial services, and regulation of its securities exchange.
Figure 40: Breakdown of financial development pillars
10
8
6
4
2
0 Availability of Affordability of Financing through Ease of access Venture capital Soundness Regulation of Legal rights financial services financial services local equity market to loans availability of banks securities exchanges index
Hong Kong Singapore South Africa Source: WEF Data as at September 2014
Johannesburg is South Africa’s (and perhaps Africa’s) financial nucleus. It ranks 50th in the Global Financial Centres Index (GFCI), which provides profiles, ratings and rankings for 83 financial centres worldwide, drawing on influential factors and responses to an online survey. GFCI rankings are powerful in that they are used by multinational companies scouting for financial centres to serve their regional operations. The index describes South Africa’s financial hub as relatively broad, indicating that it is well-diversified.
Figure 41: Middle East and Africa centres in the Global Financial Centres Index1
Rank 84
70
56
42
28
14
0 viv Qatar Dubai el A R iyadh T Bahrain I stanbul A bu Dhabi Casablanca Johannesburg Current GFCI ranking Prior GFCI ranking Note: 1 Casablanca is a new entrant. Source: WEF Data as at September 2014
58 | RMB Global Markets Morocco stands out in North Africa, having successfully weathered the Arab Spring. Casablanca’s financial centre is second to Johannesburg in terms of size and is ranked 62nd in the GFCI rankings (Figure 41). The government believes that the creation of the Casablanca Finance City (CFC) to the west of the capital will attract significant offshore interest by offering market access to French-speaking Africa, fiscal and financial incentives to financial institutions, professional services, and large multinational firms with regional headquarters. But, unlike South Africa, Morocco’s legal regulatory framework is not aligned to international standards, putting it at a distinct disadvantage. The existing structure, for example, does not allow local banks to trade derivatives as hedging contravenes laws prohibiting gambling. The Ministry of Finance has called on Clifford Chance to draft legislation governing hedge and swap transactions, which should enable greater access to finance.
Mauritius is South Africa’s closest rival in SSA, offering companies a favourable tax environment characterised by low tax rates, generous tax credits, and the free repatriation of profits. Authorities have distanced themselves from the term tax haven due to its negative connotations and prefer to focus on Port Louis’ status as an international financial centre. Its stable political and economic environment and strict regulatory practices have drawn many international investors to its shores. It now boasts more than 26,906 Global Business Companies (GBCs) and 905 funds. Corporations present in Mauritius specifically for tax purposes are typically GBC Category 1 licence holders and stand to benefit from the country’s 35 double-tax agreements. Firms that fall outside of this definition are exempt from tax but are not eligible for double taxation relief.
Technological innovation and the use of electronic banking channels by domestic banks are particularly enticing to corporate and retail clients seeking distribution channels that are more easily accessible than physical branches. This is also characteristic of the South African market with FirstRand’s retail and commercial banking arm, First National Bank, named the most innovative bank in the world in 2012.
Kenya is certainly East Africa’s gateway for foreign investment. There are plans to transform Nairobi into an international banking and financial hub in the next two decades, but authorities face a plethora of challenges (including an inefficient legal system, graft, and the failure to put into practice a double taxation treaty with Uganda and Tanzania) that hamper access to finance. Kenya’s Ministry of Finance is intent on overcoming these stumbling blocks and has appointed a 10-man steering committee to fashion Nairobi after London to gain a stronger presence in SSA’s blossoming financial services market and compete with the likes of Port Louis and Johannesburg. This is greatly dependent on the development of high-speed internet facilities to support financial operations. TheCityUK — an independent membership body promoting the UK-based financial and professional services industry — is assisting the Kenyan Markets Authority to attract UK investment.
Lagos in Nigeria is a primary contender for IFC status in West Africa as it offers a liquid and diversified financial market. The Financial Systems Strategy (FSS) is an ambitious developmental programme designed to create an international financial hub in Nigeria as well as evolve a financial infrastructure to fund the country’s objective of joining the top 20 economies in the world by 2020. There has been a gradual broadening of tradable and investible financial instruments supported by policy guidelines and regulations. The country’s capital market, which has been largely driven by exchange-traded securities, is expected to change significantly with the emergence of the NASD and the FMDQ, which will provide issuers and investors with alternative outlets for raising funds and investing their capital.
Meanwhile, Senegal is attempting to market itself as a centre for Islamic finance in West Africa by adjusting its policies to be able to sell debt that complies with Shariah laws. It aims to capitalise on this niche by drawing on its substantial Muslim population and targeting large financial institutions in the Gulf.
Libya, Burundi, Angola, Algeria, and Mauritania are ranked poorly by the WEF. Attaining financing in their respective centres is more problematic as financial services are costly and/or scarce. A problem commonly cited by investors is the shallowness of local capital markets. A lack of creditworthiness means that most African cities are invisible to investors searching for opportunities in sub-sovereign capital markets. Tables A17 and A18 (Appendices) outline the extent of financial market development in Africa.
RMB Global Markets | 59 Finance
Knocking on different doors to access financing
In the 2013/14 edition of Where to Invest in Africa, we detailed various approaches to financing. We reiterate a few of the options below.
Banks
Commercial credit provides support to a large spectrum of businesses across Africa. Obtaining credit, however, is usually cumbersome for both local and international companies as the size of bank credit tends to be limited. While the total assets of Africa’s 200 largest banks amounted to almost US$1 trillion in 2010, most banks remain largely undercapitalised, restricting lending activity. When measuring financial intermediation by looking at the domestic credit extended by the banking sector as a percentage of GDP, most African nations are still lagging behind South Africa (Figure 42).
Figure 42: Domestic credit provided by the financial sector1
% of GDP 200
150
100
50
0
-50
-100 ogo Mali C AR D R C T Libya N iger Chad E gypt Benin unisia Kenya S udan E ritrea Liberia Ghana T Gabon Congo A lgeria N igeria Guinea A ngola Malawi Zambia anzania Gambia S omalia Lesotho Djibouti S enegal Burundi Uganda E thiopia R wanda N amibia T Morocco Comoros Mauritius Botswana S eychelles S waziland Zimbabwe Cameroon Mauritania Cabo Verde Madagascar S ierra Leone S outh A frica Burkina Faso Côte d’ I voire S outh udan Mozambique Guinea-Bissau omé and P ríncipe E quatorial Guinea S ão T
Note: 1 Includes all credit to various sectors on a gross basis, with the exception of credit to the central government, which is net. The financial sector includes monetary authorities and deposit money banks, as well as other financial corporations where data is available. Source: World Bank Data as at September 2014 Banks are reluctant to extend credit in countries where collateral is not enforceable and systems used to store debtor information are poor.
60 | RMB Global Markets According to the WEF (2013/14), it is most difficult to obtain a bank loan in Burkina Faso, Burundi, Angola, Mozambique, Sierra Leone, and Nigeria (these countries are also ranked in the bottom 15 in the world). Interestingly, it has become easier to acquire a loan in Lesotho and Algeria, which have improved their scores by 0.79 and 0.69 respectively since 2012. South Africa, Seychelles, Mauritius, Rwanda, and Botswana are the five easiest countries in Africa to access bank loans (Table A18 in the Appendices).
Banks are reluctant to extend credit in countries where collateral is not enforceable and systems used to store debtor information are poor. Attaining financing, especially by larger concerns, can also be complicated by regulatory issues such as leasing and legal barriers, which make debt enforcement more challenging. Further limitations to accessing banking sector credit include poor credit discipline, high transaction costs, ceilings on bank lending rates, and insufficient collateral (as some banks only accept certain assets as surety). Aside from access to information, foreign banks are also challenged by the cost of credit and varied interest rate spreads.
Non-bank institutions
Obtaining financing from institutional investors like pension funds and insurance companies is very difficult (barring in South Africa). Insurance penetration rates average a mere 3% in Africa. In low-income countries, high levels of poverty prevent people from purchasing insurance or obtaining pension cover.
Aside from Libya, the insurance sector is largely inactive in North Africa. Morocco, Tunisia, and Algeria’s markets are led by small local insurers and growth is limited due to low levels of income. Though present, foreign companies are fairly docile in these economies. The outlook for the sector remains bleak as recent political events have largely halted progress in the various insurance sectors.
According to the African Insurance Organisation, there is rising demand for more sophisticated insurance cover. However, there is a shortage of firms in Africa with the relevant expertise to underwrite certain types of businesses, such as those in the oil and gas industry. Insurance portfolios are also largely unbalanced as companies compete on price and not service.
Although political risk has slid down the list of problematic factors for doing business, recent events have shown that Africa’s political risk situation remains tenuous and cannot be ignored when contemplating a pan-African strategy. Political risks are broad-based and include the breach of contracts, regulatory changes, currency convertibility transfer restrictions, sovereign non- payment, confiscation, expropriation and nationalisation, political interference, bureaucracy, etc. Political risk insurance (PRI) can help mitigate and manage unpredictable risks and facilitate better access to finance (PRI generally gives comfort to lenders). It can be obtained through private PRI companies, public providers (usually national export credit agencies that support investors and lenders from their home countries) and several multilateral agencies. This mechanism, however, is likely to increase project costs as agencies demand strict environmental, social and other preconditions. As with any insurance undertaking, it would be prudent to formalise a contract ahead of an investment project rather than at the first sign of trouble.
Development and microfinance
Small and medium enterprises (SMEs) make up the bulk of firms in SSA and provide the primary source of employment in low- income economies (second only to subsistence farming). According to the UN Economic Commission for Africa, SMEs account for 70% of jobs in Nigeria and 55% in South Africa, two of the continent’s largest economies. However, the contribution of SMEs to GDP growth is negligible, partly due to financing constraints. Access to credit is restricted as small businesses are unable to comply with the conditions set by financial institutions. This means that capital is derived from retained earnings, informal savings, or loan associations.
Non-financial intermediaries such as microfinance institutions are particularly helpful in this regard. Although microfinance has low penetration rates in Africa, it is growing in prevalence as a preferred source of start-up capital for many small businesses. Historically, the interest rate charged on microcredit (i.e. small loans to new businesses) was extremely high due to large administrative charges. However, the burden on smaller firms has lessened due to increasing competition between microfinancing institutions and commercial banks. According to the AfDB, one of the most effective policy instruments for gaining access to credit for SMEs is the provision of guarantees to ensure the timely repayment of loans to financial institutions. The AfDB, in conjunction with the Danish and Spanish governments, has initiated the African Guarantee Fund, which is a permanent regional conduit channelling guarantees and technical assistance to financial institutions with the aim of increasing growth in the SME sector in Africa.
RMB Global Markets | 61 Finance
Private equity
Private equity provides a useful alternative to self-financing or capital market funding and is said to make local companies more attractive to trade with buyers from other African countries. While a large proportion of FDI is channelled into raw materials and extractive industries, private equity tends to focus on consumer or communications ventures, characterising its dynamism and diversity as a substitute to classic financing. Moreover, private equity partners can raise investment standards in Africa by bringing skill, savoir-faire, technical support, and networks to portfolio companies.
Local equity markets
While 28 countries in Africa have established stock exchanges, they vary in turnover and size (Table A22). The WEF’s latest statistics show that attaining financing through local equity markets is the easiest in South Africa, Ghana, Kenya, Mauritius, and Morocco. These countries all score above 4 (out of 7, where 7 is easy), implying that it is relatively easy to raise money by issuing shares on their stock markets.
When considering listed domestic companies, South Africa’s securities exchange (the JSE) has the largest market capitalisation (roughly US$757bn as at the end of 2013). Egypt and Nigeria follow suit with capitalisations of US$67bn and US$54bn respectively. Despite its size, the Nigerian Stock Exchange is not as easily accessible as the JSE or Nairobi Stock Exchange, ranking ninth in Africa.
Dodging the foreign exchange bullet
A key obstacle for operating in financial markets is the foreign exchange complexities: the ability to transact in a foreign currency can prove challenging, especially in countries operating managed exchange rate regimes (Table A20). Although managed currencies do not display the same level of volatility as free floating exchange rates such as the rand, which is the most volatile currency in the world (Figure 43), they are subject to sharp once-off movements in periods of extreme stress like the naira in 2008.
62 | RMB Global Markets Figure 43: Cross-country risk comparison for selected African currencies (realised volatility)
ZAR MZN PLN BRL ZMW AUD BWP NZD KRW CZK MUR MWK SEK NOK TRY MXN CHF IDR JPY CAD RUB DKK EUR GBP GHS KES CFA CDF ILS INR UGX TZS NGN AOA MYR PHP SGD ARS THB TWD CNY 0% 4% 8% 12% 16% 20%
Source: Bloomberg, RMB Global Markets Data as at September 2014
Foreign exchange liquidity is often constrained in heavily managed exchange rate environments. Supply and demand dynamics are in many cases affected by stringent exchange controls and local tax obligations. Liquidity conditions typically improve at month-end when local financing commitments are due — and US dollars are sold into the market — and tend to worsen towards the middle of the month when export proceeds begin to diminish. Managed currencies, like the Angolan kwanza, Ethiopian birr and Nigerian naira, are predisposed to weakness when supply shortages escalate, increasing the cost of foreign loans.
Aside from the intricacies involved in being able to buy foreign currency, corporates should be aware of foreign currency regulations, which are on average the 12th most problematic factor for doing business and pose one of the biggest challenges in Malawi, Ethiopia, and The Gambia.
While transacting in foreign currencies might be difficult in certain countries, there are measures available to hedge currency exposure. South African markets are deep and liquid and offer a huge range of potential risk management structures from simple forwards and swaps through to exotic options. A variety of countries have operational forward markets, although in many cases liquidity and tenure can be tricky to attain. Botswana, Kenya, and Zambia have liquid markets, with instruments out at least 1-year and occasionally longer. Ghana, Tanzania, and Uganda have operational but less liquid (and occasionally completely illiquid) markets.
The 2014 edition of RMB’s Africa Investor Guide is dedicated to giving our clients a deeper understanding of Africa’s financial markets. It provides a snapshot of 22 sub-Saharan African countries, their macroeconomic and regulatory environments, and important details pertaining to their foreign exchange, fixed income and equities markets. It also provides a list of the products transacted by RMB Global Markets in RMB and FNB’s presence countries.
When hedging instruments are not available, alternative (proxy) hedges are an option, i.e. a more liquid market to which the exchange rate is correlated. Strictly speaking, the euro and rand are proxy hedges for the CFA and CMA countries. But given the very limited risk of devaluations, these can almost be treated as perfect hedges. Outside of these two cases, however, proxy hedges are limited.
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Chapter 5.2: cities – Infrastructure
The World Bank claims that it will take 50 years for most African countries to attain universal access to modern infrastructure. While Africa’s infrastructure shortage is undeniable, there has been progress.
64 | RMB Global Markets INFRASTRUCTURE
Mind the widening infrastructure gap
Infrastructure is a key constraint to all-inclusive growth. While Africa outpaced Asia in the 1970s in areas like power generation capacity and landline telephone density, investment into infrastructure has largely stagnated over the last 10 years.
It is unsurprising that the continent has fallen behind other developing economies, especially if we compare infrastructure stocks. Table 11 highlights the growing disparity between Africa and its emerging market peers.
Table 11: International perspective on Africa’s infrastructure deficit
Normalised units Africa1 Other1 Paved road density (per 100km of arable 284 461 land) Total road density (per 100km of arable 381 106 land) Landline density (per 1,000 population) 142 252 Mobile density (per 1,000 population) 277 557 Internet density (per 1,000 population) 82 235 Generation capacity (MW per 1 million 293 648 population) Electricity coverage (% of population) 37 88 Improved water (% of population) 82 91 Improved sanitation (% of population) 53 82
Note: 1 Refers to middle-income economies. Source: International Bank for Reconstruction and Development, World Bank Data as at September 2014
The World Bank claims that it will take 50 years for most African countries to attain universal access to modern infrastructure. It estimates that US$38bn of investment is required annually to redress Africa’s infrastructure gap while a further US$37bn is needed for operations and maintenance, amounting to roughly US$75bn per year (equivalent to 12% of the continent’s GDP). The institution’s assessment was made in 2008, which means that the burden could be appreciably larger owing to escalations in overhead costs linked to changes in domestic macroeconomic fundamentals or simply inadequate competition for tenders.
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Although infrastructure needs vary across the continent, power is a common necessity, demanding more than 50% of total investment as countries struggle to generate sufficient capacity to keepICT: pace with rising demand. Improvements to and extensions of transport networks areCLOSING no less importantTHE CIRCLE but require a smaller percentage of investment. The AfDB has identified Africa’s primary broadband, river, road and power networks (Figure 44).
Figure 44: Africa’s primary infrastructure networks
ICT Tunisia Morocco
Algeria Libya Egypt
Western Sahara Cabo Verde
Mauritania Mali Niger
Chad Eritrea Senegal Sudan Burkina Gambia Djibouti Guinea Faso Bissau Guinea Sierra Leone Côte Nigeria Central d'Ivoire Ghana African South Ethiopia Republic Sudan Liberia Togo Benin Cameroon Democratic Somalia Republic of Equatorial Uganda Guinea Congo Kenya Gabon
Congo Rwanda
Burundi Tanzania
Angola Malawi Zambia Mozambique
RIVER BASINS: Zimbabwe MANAGING COMMONS Madagascar Namibia Botswana
Swaziland
South Africa Lesotho
Existing or under construction Missing
Tunisia River basins Morocco Broadband Network
Existing or under constructionAlgeria Libya Egypt Western MissingSahara
Cabo Verde
Mauritania Mali Niger
Senegal Chad Eritrea Gambia Sudan Burkina Djibouti Guinea Guinea Faso Bissau Nigeria Sierra Leone Côte Ethiopia d'Ivoire Ghana Central African South Liberia Republic Sudan Togo Benin Cameroon Democratic Somalia Equatorial Uganda Guinea Republic of Kenya Gabon Congo Congo
Rwanda
Burundi
Tanzania
Angola Malawi Zambia Mozambique
Zimbabwe Madagascar Namibia Botswana
National border Swaziland South Africa International river basin Lesotho
66 | RMB Global Markets
International river basins and countries, territories and areas of Africa.
National border International river basin ROADS: CONNECTING THE DOTS Although infrastructure needs vary across the continent, power Roads Tunisia Morocco is a common
Algeria Libya Egypt necessity. Western Sahara
Cabo Verde
Mauritania Mali Niger
Senegal Eritrea Chad Sudan Gambia Burkina Faso Djibouti Guinea Bissau Guinea Sierra Leone Nigeria Côte Ethiopia d'Ivoire Ghana Central African South Republic Sudan Liberia Togo Benin Cameroon Somalia Democratic Equatorial Uganda Guinea Republic of Kenya Gabon Congo Congo
Rwanda
Burundi
Tanzania
Angola Malawi POWER: Zambia Mozambique TOWARD REGIONAL POOLS
Zimbabwe Madagascar Namibia Botswana
Swaziland South Africa Good or fair Lesotho Poor or missing
Tunisia Power Morocco
Algeria Libya Egypt Main road corridorsWestern Sahara
Cabo Verde Good or fair
Poor or missingMauritania Mali Niger
Senegal Eritrea Chad Sudan Gambia Burkina Guinea Faso Djibouti Bissau Guinea Nigeria Ghana Sierra Leone Central African South Liberia Republic Sudan Cameroon Ethiopia Togo Benin Somalia Democratic Uganda Equatorial Côte Congo Republic of d'Ivoire Guinea Kenya Gabon Congo Rwanda
Burundi
Tanzania
Angola Malawi Zambia Mozambique
Zimbabwe
Botswana Madagascar Existing Namibia Swaziland Missing South Africa Lesotho Source: AfDB Data as at September 2014 RMB Global Markets | 67
Power network
Existing Missing INFRASTRUCTURE
From skyscrapers to slums: judging the quality of infrastructure
Namibia continues to boast the best quality of infrastructure in Africa. Respondents to the World Bank’s latest Global Competitiveness Report hold the country’s roads, ports and energy infrastructure in high regard and with good reason.
The country’s extensive road network facilitates regional trade by connecting its major economic hubs with its SADC counterparts, providing sea access to landlocked neighbours. The main corridors are the Trans-Caprivi, Trans-Kalahari and Trans-Kunene highways that connect to Botswana and South Africa. Several upgrades are also underway including the transformation of the 204km stretch of road between Ruacana and Omakange, which forms part of the link within the Trans-Kunene Corridor, linking Angola to many of Namibia’s border posts. The Walvis Bay port is a gateway for international trade though it suffers from capacity constraints. The Walvis Bay Corridor Group, a public- private partnership, strongly advocates infrastructural improvements to position Namibia as a logistical hub in Southern Africa by 2030. This includes an expansion of the port’s NAMIBIA TRANSPORT NETWORKhandling capabilities and the development of alternative anchorage at North Port to the north of Walvis Bay to service SADC’s landlocked areas.
Figure 45: Namibia’s transport network
Angola Zambia
Ohangwena Caprivi
Omusatioshana Kavango Oshikoto
Kunene Airports = ‘000 passengers per year
Otjozondjupa >5,000
750 - 5,000
Erongo Omaheke Botswana <750
Khomas Road type condition Poor Hardap Fair Good
Karas Regional roads Railway Ports South Africa Capital
Source: AfDB
Airports = ’000 passengersData as per at yearSeptember 2014
>5,000 750 - 5,000 <750Ironically, Angola, just north of Namibia, is perceived as having the poorest quality of infrastructure despite an intensive rehabilitation programme that was instituted at the Road type conditionend of the civil war in 2002. A mere 17% of classified and urban roads are paved, Poorwhich compares unfavourably with other countries in SSA. Many provincial capitals are Fair inaccessible by road due to poor quality, low road density, and a shortage of bridges (most Good of which were damaged or planted with landmines during the war). Regional connectivity is marred by poor corridors limiting the use of the ports of Luanda and Lobito. Although Regionalthe roads Port of Luanda has benefited from investment to restore, expand and upgrade it, long Railroaddelays are still prevalent. Ports
Capital
68 | RMB Global Markets Building bridges over troubled waters
Africa’s infrastructure shortage is undeniable but provides abundant investment opportunities, particularly for the construction sector. In its assessment of global industry trends, the BMI notes the growth in SSA’s construction sector should outpace that of other emerging markets, creating a substantial demand for building materials. This is primarily being met by regional players like Nigeria’s Dangote Cement, illustrating the broader investment benefits accruing from infrastructure development.
There are a number of infrastructure projects underway across the continent. EY recorded more than 800 active infrastructure projects in 2012, citing South Africa as the foremost destination for development with 134 initiatives on the go. One hundred and six projects were reportedly in progress in Nigeria while 82 ventures were in full swing in Egypt. The sum of capital invested in these three countries alone was US$286bn. East Africa is also brimming with activity, evidenced by the number of initiatives in Uganda, Kenya, Mozambique, and Tanzania. Naturally, a vast number of projects identified by EY were related to power and transport.
Figure 46: Top 10 African destination countries for infrastructure projects1
There are a number of infrastructure projects underway across the continent. South Africa is the foremost destination for development with 134 initiatives on the go.
Note: 1 Number of projects and capital invested. Source: Africa Project Access, Business Monitor International, EY Data as at September 2014
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The need for urban infrastructure has inspired innovation across the continent with several projects receiving global acclaim. Six of the urban projects identified in the World Cities Edition of KPMG’s Infrastructure 100 report, published in 2012, are African.
The BRICS cable project is a hugely ambitious initiative designed to connect the Brazilian, Russian, Indian, Chinese, and South African markets with a 34,000km, superfast broadband submarine cable to reduce the group’s reliance on telecommunication hubs in the US and Europe.
The O3b Networks is a continent-wide project that aims to empower several billion users in 177 different countries by providing highly sophisticated internet access to Africa and other emerging markets that currently have limited access to broadband.
South Africa’s Durban Waste to Energy Project converts methane gas from household waste into electricity that is delivered to 5,000 to 6,000 low-income households per day via the city’s existing grid. Durban’s municipality will benefit from the sale of electricity and carbon credits.
The Lagos Metro Blue Line in Nigeria is a ground-breaking public-private partnership (PPP). Lagos State government is responsible for the financing of track and station infrastructure while the trains, control systems and fare collection will be supplied by Eko Rail under a 25-year equip, operate, and maintain concession.
The Ethiopia Djibouti Railway is the cornerstone of Ethiopia’s plans to develop national railway infrastructure. The 656km line will connect Addis Ababa with Djibouti, which is Ethiopia’s only access to the sea. If successful, the US$1.2bn project will significantly reduce Ethiopia’s transportation costs and exert a positive impact on economic growth in the Horn of Africa.
Lesotho’s Queen Mamohato Memorial Hospital is on the cutting edge of innovation. The US$120m hospital was built to replace the deteriorating 450-bed Queen Elizabeth II Hospital in Maseru. According to KPMG, the 390-bed public hospital promises to transform healthcare services by offering clinical and non-clinical services to two million people.
70 | RMB Global Markets All for one, one for all — a regional approach to infrastructure development
In recognition of the fact that infrastructure is a continental rather than individual problem, various African leaders and development agencies have formulated the Programme for Infrastructure Development in Africa (PIDA). The core of PIDA is the Priority Action Plan (PAP), a list of 51 immediately actionable programmes across four main infrastructure sectors, to be initiated by 2020 (Table 12). Though well-intentioned, we realise that these programmes might encounter setbacks that would delay the intended completion dates but thought them important to highlight as they would inform regional expansion strategies.
Table 12: Overview of 51 PIDA PAP programmes/projects
Northern Multimodal Modernize the high-priority multimodal African Regional Transport Integration Network (ARTIN) Corridor corridor in East Africa. Will facilitate travel by people and goods across the borders between Kenya, Uganda, Rwanda, Burundi, and the DRC, with a spur to South Sudan. North-South Multimodal Modernize the high-priority multimodal ARTIN corridor in Southern Africa and facilitate transport Corridor of people and goods across the borders between South Africa, Botswana, Zimbabwe, Zambia, Malawi, and the DRC. Central Corridor Modernize the priority ARTIN corridor in East Africa and facilitate travel for people and goods across the borders between Tanzania, Uganda, Rwanda, Burundi, and the DRC.
Southern Africa Hub Port Develop sufficient port capacity to handle future demand from both domestic sources and and Rail Programme landlocked countries.
Djibouti-Addis Corridor Revive the rail system in the high-priority multimodal ARTIN corridor in East Africa and increase the flow of goods across the border between Djibouti and Ethiopia.
Lamu Gateway Develop sufficient port capacity to handle future demand from both domestic sources and Development landlocked countries, with priority given to the Lamu project in Kenya.
Beira/Nacala Multimodal Modernize and upgrade the rail and port systems serving a major coal export area at Moatize, Corridor Mozambique. This is part of the Beira and Nacala corridors.
Trans-African Highway (TAH) Focus on completing the missing links in TAH Phase I of this continental connectivity programme. programme
Single African Sky Phase 1 Create a high-level, satellite-based air navigation system for the continent. Transport
Yamoussoukro Decision (YD) Identify countries ready to fully execute YD (aims to improve air transport efficiency), and discuss Implementation launch of a voluntary open-skies club on full-membership basis.
Smart Corridor Programme Develop model smart-corridor technology and design/implement a continental and regional Phase I corridor efficiency monitoring system.
Abidjan-Lagos Coastal Modernize the heavily travelled ARTIN corridor in West Africa to promote trade facilitation, one- Corridor stop border posts (OSBPs), capacity enhancement, and implementation of PPPs in five countries.
Dakar-Niamey Multimodal Modernize the heavily travelled ARTIN corridor in West Africa to promote trade facilitation, OSBPs, Corridor capacity enhancement, and implementation of PPPs in four countries.
Praia-Dakar-Abidjan Improve marine transport and connectivity between island and mainland countries by creating a Multimodal Corridor new maritime service between regional ports, as well as a modern information system to link the maritime service with ports and roads in the Dakar-Abidjan Corridor. Abidjan-Ouagadougou/ Modernize and rehabilitate the multimodal corridor damaged by civil war in Côte d’Ivoire. Bamako Corridor
West Africa Hub Port and Address future capacity problems in West African ports with two components: a regional hub port Rail Programme and rail link master plan, and port expansion.
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West Africa Air Transport Improve air transport service in West Africa, which is currently limited by the lack of a regional air hub.
Pointe-Noire, Brazzaville/ Revive river transport in the Congo-Ubangi River basin, and modernize road transport along the Kinshasa, Bangui, corridor. N’Djamena Multimodal Corridor Kinshasa-Brazzaville Bridge Improve regional transportation and trade systems by building a crossing linking Kinshasa and Road and Rail Project, and Brazzaville, ensuring continuity in railway traffic from Matadi and Pointe-Noire to the eastern rail link to Ilebo border of the DRC and Eastern and Southern Africa. Douala-Bangui Douala- Modernize the highest priority multimodal ARTIN corridor in Central Africa and facilitate travel for N’Djamena Corridor people and goods across the borders between Cameroon, Chad, and CAR.
Transport Central African Inter- Provide several missing inter-capital connectors. Capitals Connectivity
Central Africa Air Transport Improve air transport service and upgrade airports in Central Africa, which currently lacks a regional air hub.
Central Africa Hub Port and Address Central African port capacity constraints through a regional hub, a rail link master plan, Rail Programme and port expansion.
Trans-Maghreb Highway Improve travel for people and goods across the Maghreb, where trade and travel are limited by artificial barriers. Includes designing and implementing a smart corridor system along the highway.
Nphamda-Nkuwa Build a hydroelectric power plant with a capacity of 1,500 MW for export to the Southern African Power Pool market.
Lesotho HWP Phase II Supply power to Lesotho and export power to South Africa. (hydropower component)
Batoka Build a hydroelectric plant with a capacity of 1,600 MW to enable export of electricity. Involves Zambia and Zimbabwe.
Ruzizi III Build a hydroelectric plant with a capacity of 145 MW to share power between Rwanda, Burundi, and the DRC.
Uganda-Kenya Pipeline Establish a 300km pipeline for a lower-cost mode of transport of petroleum products between Uganda and Kenya.
Great Millennium Build a 5,250 MW plant to supply the domestic market in Ethiopia and export electricity to the Renaissance Dam Eastern African Power Pool market.
North-South Power Establish an 8,000km line from Egypt through Sudan, South Sudan, Ethiopia, Kenya, Malawi, Transmission Corridor Mozambique, Zambia, and Zimbabwe to South Africa.
Inga Hydro Phase 1 Build a 4,200 MW capacity run-of-the-river hydropower station on the Congo River with eight turbines in the DRC. Energy Central African Establish a 3,800km line from the DRC to South Africa through Angola, Gabon, and Namibia and Interconnection to Equatorial Guinea, Cameroon, and Chad to the north.
Sambagalou Provide 128 MW of hydropower capacity, 930km from the mouth of the Gambia River to supply Senegal, Guinea, Guinea Bissau and The Gambia.
West African Power Establish a 2,000km line along the coast connecting with an existing line involving Guinea, Guinea Transmission Corridor Bissau, The Gambia, Sierra Leone, Liberia, Côte d’Ivoire, and Ghana.
North Africa Transmission Establish a 2,700km line from Morocco to Egypt through Algeria, Tunisia, and Libya.
Kaleta Generate hydropower of 117 MW in Guinea.
Rusumo Falls Produce hydropower of 61 MW for Burundi, Rwanda, and Tanzania.
Nigeria-Algeria Pipeline Establish a 4,100km gas pipeline from Warri to Hassi R’Mel in Algeria for export to Europe. Involves Nigeria, Niger, and Algeria.
72 | RMB Global Markets Lesotho HWP Phase II (water Supply water to Gauteng Province in South Africa via a water transfer programme. transfer component)
Palambo Improve the navigability of Obangui River with an added hydropower component.
Fomi Build a hydropower station in Guinea with irrigation water supply for Mali and regulation of the Niger River. Involves nine countries.
Multisectoral Investment Identify and prepare investment programmes in the Zambezi River Basin. Opportunity Studies
Gourbassy Regulate the Senegal River in four countries via a multipurpose dam located in Guinea. Water Noumbiel Build a multipurpose dam with hydropower generation component for Burkina Faso and Ghana.
Nubian Sandstone Aquifer Implement a regional strategy for using the aquifer system. System
North-West Sahara Aquifer Conduct pre-feasibility studies for the improved use of the aquifer system. System
Iullemeden Aquifer System Conduct pre-feasibility studies for the improved use of the aquifer system.
ICT Enabling Environment Improve the environment for the private sector to invest in high-speed broadband infrastructure.
ICT Terrestrial for Secure each country connection by at least two broadband cables.
ICT Connectivity
Internet Exchange Point Provide an adequate internet node exchange to maximize internal traffic. (IXP) Programme
Source: WEF, African Development Fund, Boston Consulting Group Data as at September 2014
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Satellite cities
Rapid urbanisation, the enormity of slums and scarcity of employment opportunities in major city centres have necessitated the creation of new urban centres. Satellite cities that are well-organised, self-contained spaces are progressively being built on the periphery of major city centres across Africa. These areas, which are typically managed by private investors, are targeted at Africa’s burgeoning middle-class and are designed around the work-live-play concept. The participation of private investors allows governments to prioritise their capital expenditure and reduces the bureaucracy often associated with large-scale, state-led projects. Aside from decongesting major city centres, the new areas are focused on harnessing the various countries’ competitive advantages. For example, Konza Technology City in Nairobi (or Africa’s Silicon Sahara as it is more commonly known) is Kenya’s flagship megaproject designed to foster growth in the technology industry.
Despite its intended purpose, the developments are often cited as “urban fantasises” catering to high-income individuals. The UN contends that this type of urban planning could lead to the proliferation of informal settlements as low-income workers struggle to afford housing, widening the disparity between rich and poor. Additional concerns relate to accessibility and the cost of commuting between major city centres and the satellite areas. Nova Cidade de Kilamba in Angola remains largely unoccupied due to its expensive housing and unfavourable location. Urban planning commissions argue that many of the concerns are not insurmountable and can be addressed through effective design and planning.
Figure 47: A selection of satellite cities across Africa
Source: RMB Global Markets Data as at September 2014
74 | RMB Global Markets The price tag
While the demand for infrastructure is growing, public financing has become more difficult to obtain. Capital investment is primarily sourced through the public sector and carried out by the state while funds for operations and maintenance are derived from user charges and administered by state-owned enterprises. Domestic resources, however, are scant or poorly managed, resulting in significant shortfalls. Although sectoral allocations are gradually increasing, specifically in more developed economies, implementation remains troublesome with governments reporting execution rates of roughly 66%.
There is no doubt that Africa is still underserved. Public funding is constrained while traditionally supported aid flows are diminishing, demanding greater multilateral and private sector assistance.
Pulling in the private sector
In the past 10 years, PPPs have grown in importance as a mechanism for infrastructure investment by strengthening governments’ programming and contracting capacities, and by providing financial independence to local authorities and public enterprises. Between 2000 and 2010, 42 countries across the continent carried out 248 projects with a combined value of US$55.1bn. Nigeria and South Africa tend to dominate the PPP spectrum, accounting for 25% of total investments in SSA. However, a number of governments are fostering greater PPP activity. Familiar projects funded in this manner include Uganda’s Bujagali hydroelectric power station, Tanzania’s Songas processing plant, Algeria’s Skikda Desalination Plant, Lesotho’s National Referral Hospital and the Dakar-Diamniadio Highway.
The realisation of private-public ingenuity is dependent on strong institutional and regulatory frameworks as well as adequate risk and reward sharing between the participants. Inadequate bureaucratic capacity within African governments’ PPP units has often resulted in projects falling victim to technical delays, allegations of corruption and cost overruns. Academic evidence shows that adopting institutional reforms has yielded dramatic results in PPP investment in the telecommunications sector but provided limited benefits elsewhere, notably the transport sector (Figure 48).
Figure 48: Status of institutional reform across infrastructure sectors
Ratio of reforms 0.6
0.5
0.4
0.3
0.2
0.1
0.0
elecommunications T
Utilities P ower Water P orts Transport R ail
Governance Regulation Reform Source: Vagliasindi and Nellis, 2008 Data as at September 2014
A number of initiatives have been adopted to mitigate the risks attendant to PPP including the AfDB’s Africa50 Fund, which aims to mobilise private financing to accelerate the speed of infrastructure delivery, thereby creating a new platform for Africa’s growth.
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Using an alternative funding highway — infrastructure bonds
A growing avenue of infrastructure financing is through local currency infrastructure bonds (IFBs), which allow institutional investors to participate in projects through listed, tradable securities that can offer superior risk-adjusted returns.
These are commonly used in emerging markets (EMs) such as Brazil, Chile, India, and Malaysia as alternative financing mechanisms to traditional forms of funding such as bank loans or debentures. It is estimated that 10% to 20% of Brazil’s 25 pipeline infrastructure projects in energy and transportation, which have been earmarked by the government for investment, will be funded by IFBs. Figure 49 illustrates the tremendous growth in Brazil’s IFB market over a six-month period.
Figure 49: Development of Brazil’s IFB market
BRLbn 1.00
0.80
0.60
0.40
0.20
0.00 Oct-12 Dec-12 Dec-12 Autobahn, tenor = 5-yrs, Cart, tenor = 12-yrs, Ecovias, tenor = 7- and 11-yrs, yield - 2.71 % + IPCA yield - 5.80% + IPCA yield - 3.80% + IPCA, 4,20% + IPCA
Source: Ministry of Finance, Brazil Data as at September 2014
Africa’s experience with IFBs
IFBs are scarce in Africa (apart from in South Africa). They are typically issued in more developed bond markets like Kenya, which has been particularly successful in raising funds for specific stand-alone projects since 2009. The former Central Bank of Nigeria Governor, Lamido Sanusi, lauded Kenya’s success in deepening its capital market framework through the issuance of IFBs4, which has facilitated corporate issuances, notably KenGen and Safaricom. Of the six bonds issued since 2009, each have been oversubscribed and drew interest from a broad institutional and retail audience, including commercial banks, pension funds, and cooperatives. Kenya attributes its success to the aggressive marketing and promotion of the bonds’ specific incentives, which tend to be more appealing than shilling-denominated sovereign bonds. The government is also cognisant of the sizeable diaspora who are keen to participate in the enhancement of Kenya’s infrastructure.
Nigerian authorities have identified IFBs as a potential source of funding but are content with the financing derived from Eurobonds, which have been set aside specifically for infrastructure development. Several state governments in Nigeria have issued bonds for infrastructure purposes, highlighting the importance of utilities and parastatals in the development of the bond market as investors and regulators are acquainted with the asset class and different aspects of credit risk.
4. Comments made by the former CBN governor at an event organised by the West African Institute for Financial and Economic Management in November 2013.
76 | RMB Global Markets Benefits for the government
• Sharing the role of financier among the public and private sector and diversification of project risk.
• Projects are delivered promptly and offer cost savings to the government, which assumes operational, design and maintenance over and above the traditional cost.
Benefits for investors
• Steady long-term performance.
• Stable returns with a low market correlation.
A slow journey for Africa — challenges in implementing IFBs
African bonds still comprise a small portion of global project finance funding. Bank loans are dominant due to lower interest rate risk, repayment structures (i.e. amortising versus bullet payments) and flexibility in drawdown schedules that offset negative carry. Bonds are perceived to have insufficient liquidity at a required tenor, prove difficult in structuring a cash profile to best match investments, and are subject to long and expensive ratings and disclosure procedures. Underdeveloped capital markets are also considered to be primary deterrents to investment. Disparities in the pace of capital market development and lack of depth and liquidity in the investor base, therefore, restrict the use of IFBs.
The challenge in attracting an audience for IFBs in Africa is appropriate risk management due to the level of development risk. This has deterred government institutions in the most developed of capital markets in Africa, notably South Africa, from using this type of funding as it carries a significant premium relative to on-balance sheet senior debt raised through the bond market. To reduce the level of risk and lower the pricing by attaining a higher credit rating, project financiers advise completion guarantees or support from sponsors or respective governments to safeguard bondholders against start-up and construction risks.
Though viable for EMs, infrastructure bonds are likely to be confined to larger capital markets in Africa until the necessary preconditions are met and risk mitigation strategies are made available. Nevertheless, it presents a novel method of financing to service one of Africa’s most dire needs and, if managed correctly, could provide superior risk-adjusted returns akin to countries in South America and Emerging Asia.
RMB Global Markets | 77 Manufacturing
Chapter 5.3: Cities – Manufacturing
Manufacturing’s share of GDP, particularly in SSA, has held steady at 10% – 15% over the past few years. Africa has a number of advantages when it comes to developing a successful manufacturing sector including low labour costs, an abundance of natural resources and raw materials, and growing domestic markets.
78 | RMB Global Markets Manufacturing
Africa is in a strong position to industrialise, yet manufacturing is still one of the sectors battling to take shape. Nothing much has changed from our previous edition in terms of significant developments. Africa’s estimated share of global manufacturing remains a mere 1%.
However, the potential is strong — manufacturing’s share of GDP, particularly in SSA, has held steady at 10% – 15% over the past few years. Africa has a number of advantages when it comes to developing a successful manufacturing sector, including low labour costs, an abundance of natural resources and raw materials, and growing domestic markets. Once governments unblock barriers to growth in the sector, high growth rates will be a given.
The industrial areas of most countries are situated within or on the outskirts of the capitals or major cities. These cities are viewed as an entry point for industrial development because of domestic demand and more developed infrastructure in the urban areas. The development of modern facilities in key business zones will assist in securing new industry and manufacturing business.
Advantages and disadvantages for growth in the sector
Africa has some advantages for developing a successful manufacturing sector:
• Low wages — with factory wages rising in China and other parts of Asia, some multinational companies are considering moving their production plants elsewhere, particularly Africa;
• Abundance of natural resources and raw materials (animal skins, soft timber, and land for the agribusiness industry);
• Duty-free and quota-free access to developed markets like the US and EU for light manufacturers under the Africa Growth and Opportunity Act and the Cotonou Agreement;
• Large flows of FDI that could augment the region’s comparative advantage in low wage labour — but a surge in private investment has not yet ensued; and
• Growing domestic markets — the expanding middle class and rising urbanisation means increasing demand for consumer staples.
It also has some disadvantages:
• The high cost of inputs as a result of poor infrastructure has led to elevated prices of locally manufactured products, thereby limiting their competitiveness in the regional markets;
• Low electrification rates;
• Institutional hurdles and uncompetitive policies — regulatory and governance risks are high;
• Poor trade logistics;
• China dominates the global export market in light manufactures;
• Not enough investment into the sector to facilitate the benefits of a flood of FDI;
• Access to finance;
• Access to industrial land;
• Worker skills; and
• Entrepreneurial skills.
RMB Global Markets | 79 Manufacturing
Who is gaining traction?
According to McKinsey, low-wage countries like Ethiopia, Kenya, Senegal, and Uganda have the potential to grow their manufacturing sectors by 6.6% annually between now and 2020, while diversified economies with more developed manufacturing sectors, like Egypt, Morocco, and South Africa, should achieve annual manufacturing growth of 4.3% over the next decade. Those countries with strong currencies (mainly driven by the oil sector) still have robust domestic markets. Therefore, manufacturing growth is expected to reach around 6% annually over the next few years (especially in Angola and Nigeria), while a more diversified country like Algeria’s manufacturing growth should reach around 4%.
The top industrial exporters include South Africa, Tunisia, Morocco, Egypt, Mauritius, and Algeria. If you look at the manufacturing sector’s contribution to GDP, only 15 out of 54 countries have a manufacturing sector that reaches 10% and above.
Table 13: Manufacturing as a percentage of GDP and exports
Exports Manufacturing (% of merchandise Top 10 (% of GDP) exports) Swaziland 42.2 2.87 Côte d’Ivoire 21.0 8.29 Mauritius 17.7 0.38 Zimbabwe 17.1 56.82 Senegal 14.1 10.16 Namibia 13.5 40.93 South Africa 13.3 0.52 Mozambique 13.3 10.16 Malawi 11.9 40.93 Lesotho 11.7 65.45 Kenya 11.0 12.21
Source: World Development Indicators Data as at September 2014
80 | RMB Global Markets The sector is becoming popular for investors
When looking at investment into manufacturing, there has been a declining trend of greenfield investment mainly because of the weakening flows into resource-based industries (coke, petroleum products, and metals). In stark contrast, merger and acquisitions in the manufacturing sector have risen significantly especially in the food- processing industry, construction, and pharmaceuticals.
Most investment, and therefore industrial development, on the continent has been in light industries such as textiles and food processing. The World Bank characterises SSA’s light manufacturing sectors as a few medium-sized formal firms providing products to niche or protected markets and as a large number of small, low-productivity informal companies providing low-quality products to the domestic market. The continent has an underlying comparative advantage in certain industries, particularly leather goods, garments, and agricultural processing. The agro-processing industry is the largest driver of manufacturing growth in Africa. We believe it will grow significantly over the next few years due to foreign interest and increased investment by governments into the agricultural sectors.
Cheap labour but low productivity
Labour (more importantly, wages and productivity) is one of the main areas to focus on when looking to set up a base for manufacturing in Africa. According to the International Labour Organisation (ILO), wage growth has been moderate since 2006 (Figure 50), barring 2010, where South Africa carried the largest weight in the estimate and its real average wages increased by nearly 10%. African wages increased by slightly more than the world average.
Figure 50: Annual average real wage growth in Africa
% 8
6
4
2
0 2006 2007 2008 2009 2010 2011
Africa World Source: ILO Data as at September 2014
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To narrow it down, we have added the monthly minimum wages of different regions worldwide to illustrate that Africa still has the lowest minimum wages in the world (Figure 51).
Figure 51: Monthly minimum wages
Regional distribution (%) 60
45
30
15
0 All regions Africa Asia & the Pacific Europe & CIS Americas Middle East
Less than US$50 US$50 - US$149 US$150 - US$299 US$300 - US$999 US$1,000 or more No minimum wage Source: ILO Data as at September 2014
The moderate pace of wage growth in Africa is beneficial as China’s advantage in this area is diminishing due to the steep cost increases associated with rising wages and non-wage labour costs (Figure 52).
Figure 52: Lowest and highest global minimum wages1
CAR Ethiopia Tanzania Malawi Gambia Guinea-Bissau DRC Liberia Madagascar Botswana Cameroon Mali Kenya Swaziland Niger Benin Senegal Burkina Faso Togo Côte d’Ivoire Ghana Mauritius Mozambique Mauritania Zambia Congo South Africa Nigeria Chad Sudan Lesotho Tunisia Angola Morocco China Algeria Equatorial Guinea Gabon Note: Libya 1 The lowest general minimum wage used in calculations. Brazil Source: Respective statistics offices and labour websites, US RMB Global Markets 0 2,000 4,000 15,000 Data as at September 2014 Annual US$
82 | RMB Global Markets But labour productivity remains a thorn in Africa’s side. There was some improvement in output in the early 2000s, demonstrating that economic growth is progressively driven by rising productivity in some countries. The IMF has studied structural transformation (the shift of workers from low to high average productivity activities) and found that countries like Ethiopia, Kenya, Mozambique, and Tanzania have developed manufacturing sectors because of this structural transformation. The rest of Africa registered only slow growth in labour productivity (Figure 53).
Without a substantial acceleration in productivity growth rates, average productivity will remain well below current levels in the developed economies for many years to come.
Figure 53: Labour productivity
Output per worker (%) 75
60
45
30
15
0 Central and East Asia Southeast South Asia Latin America Middle East North Africa Sub-Saharan South-Eastern Asia and the Africa Europe Pacific
1994 2004 2014 Source: ILO Data as at September 2014
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Where are the industrial zones within each country?
Turning our focus to cities, Knight Frank Research has examined where the industrial markets are situated in each country and how developed they are (Table 14).
Table 14: Industrial markets
Country Industrial market explained Algeria Industry remains concentrated around Algiers and Oran. Hydrocarbon-related processing plants dominate, while cement factories, carpet mills, and chemical plants are also prominent. Industrial activity still accounts for around 60% of Algeria’s GDP and operations have been established by a number of European manufacturers. Industrial building stock generally comprises older general-purpose warehousing and a relatively few modern, high-bay logistics buildings. Angola Sonils OSC, north of Luanda's city centre, is the main industrial area. Other concentrations of industrial property are found to the east in Viana and to the south in Benfica. The Special Economic Zone at Viana, located near to the planned international airport, is designed to accommodate 73 factories. There is strong demand for warehousing and manufacturing space due to the expansion of industries related to petroleum, diamonds, brewing, textiles, and construction. Botswana Most industrial activity is in Gaborone, where a lack of office space has resulted in inflated rental prices and industrial locations being used to compensate. Zoning is now being more stringently applied which, in conjunction with an increased supply of office space, is changing the nature of the market. A small amount of new construction is being seen in locations within 10km of the city centre and en route to the airport, mostly for owner-occupation.
Cameroon Douala is an important industrial centre and is the location for one of West Africa’s major ports, which also services some of Central Africa’s landlocked countries. Industrial property is generally located close to the port at Bonabéri, where there are major cement operations. Centre Industriel to the east of the city is mainly an automotive industry area, and is also home to the country’s biggest brewery, SABC. Yaoundé is a less important industrial location, being inland and without a port. It is more of a regional distribution centre (mainly for coffee, cocoa, copra, sugar cane, timber, and rubber) than a manufacturing location. CAR Industrial activity tends to be focused close to the port at Bangui and along the river. Development tends to extend to the west and south of the city, and not to the east where the water is shallow. There is no international manufacturing in Bangui. In the past, factories have been a target for looting, while the massive UCATEX factory near the airport has been looted and abandoned for around a decade.
Chad Demand for industrial property in N’Djamena is low and generally satisfied by older unrefurbished buildings or the refurbishment of disused structures. Owner-occupation is common. There is an industrial zone at Farcha, west of N’Djamena, where a number of multinational oil companies have sites. The Chinese firm Soluxe International has agreed to build a new industrial zone at Djarmaya at a cost of US$150m.
Côte d'Ivoire There is local industrial activity throughout the peripheral areas of Abidjan and in densely packed residential zones such as Marcory and Yopougon. The most significant manufacturing sites are in Treichville and the Vridi industrial zone, where petrochemical, cement, and food manufacturing industries are located. One of the most important international businesses is Unilever, which can be found on Boulevard de Vridi.
DRC Kinshasa’s principal industrial area is in the vicinity of Route des Poids Lourds and Kingabwa alongside the Congo River and around the port. It comprises mainly older stock, most of it owner-occupied, that is often dilapidated. There are no modern industrial estates and poor infrastructure poses difficulties in terms of transport and logistics. Potential challenges relating to title ownership exist. However, there is increasing demand for warehousing and storage space to support industrial expansion and, with new and planned roads, more areas should open up for modern warehouse development. Egypt Since the creation of the Industrial Development Authority (IDA) in 2005, there has been a huge drive to attract new industrial activity to Egypt. In Cairo this has mainly been focused on the locations of 6th of October City and 10th of Ramadan City. Government land is available for purchase at a cost of US$15/m2 – US$25/m2, about half the typical price of other commercial land. Investors should apply to the IDA for the allocation of land within the new industrial zones. Equatorial The industrial market is almost entirely owner-occupied and largely relates to international companies from the oil Guinea and construction sectors. In Malabo, industrial activity is mainly located to the south and west of the city. There is also a cluster of development activity at Luba, approximately 45km south of Malabo on Bioko Island, where there is a deep water port.
84 | RMB Global Markets Country Industrial market explained Ethiopia The Ethiopian industrial sector is nascent, and mainly comprises local and light industrial activity. Industrial “zones” are just starting to appear, located in areas such as Akaki Kality. Prime rents are currently in the order of US$3/m2 – US$4/m2 per month. Ghana Factories have traditionally been located in Accra, as well as the industrial zone to the east of the city near the port of Tema. Land price inflation resulting in rising rental prices in the central areas of Accra will increase the pressure on centrally located heavy industries to relocate to lower-cost sites on the outskirts of Accra, which will help to free up land for redevelopment. Currently, prime warehouse rents are around US$8/m2 per month.
Kenya Kenya has not traditionally experienced a high degree of speculative industrial development, with most businesses tending to own their property. However, this market is now beginning to emerge, particularly along the Mombasa Road in Nairobi. Rents are very low and take-up is slow, so it will be some time before the rental market becomes an established force in Kenya’s property market. Some developers are looking at purpose-built speculative logistics parks, which could see a migration of light industrial occupiers from the traditional industrial centre to new locations on the periphery of Nairobi, thereby taking advantage of the new road infrastructure. Libya Much of the industrial activity in Libya relates to oil and gas. The promotion of private sector industry and the diversification of the economy are seen as priorities, and will require the development of properly planned industrial zones. Free zones are also being suggested to encourage private industrial development. Madagascar The main industrial areas are located in the south of Antananarivo. There is a mixed-use area to the south of the city centre with lower quality buildings, Madagascan businesses, and airline companies. About 5km to the south of the city centre, the Zone Industrielle Forello is where some of the heavier industries are based. There is also a small amount of light industrial activity slightly south of the airport.
Malawi The industrial sector continues to face a serious challenge in the form of electricity blackouts leading to below- capacity production. This has led to retrenchments and the closure of some businesses. The current reduced level of industrial activity is reflected in weaker demand for industrial property, resulting in stagnation in rental levels and property values. Recent economic reforms aimed at boosting local industry are still unfolding, but these reforms are expected to boost demand for logistics and warehouse properties. Mali The industrial market continues to be based around local tradesmen, with no international manufacturers in Bamako. The main industrial zone is to the east of the commercial centre where the new bridge, which is the third to span the Niger River in Bamako, is improving access and reducing traffic congestion. The bridge is one of the largest Chinese-aided projects in West Africa. Occupiers in the industrial zone comprise a number of government organisations and pharmaceutical companies. Mauritania The industrial market in Nouakchott consists mainly of local companies housed in basic buildings. There is some industry out towards the port, including heavy industries such as cement production, in addition to some oil and gas support operations. Mauritius The Mauritian government continues to promote non-traditional industries. New areas for growth include fishing, light engineering goods, printing and publishing, high-precision plastics, and pharmaceutical products. Major industrial locations include Plaine Lauzun, Les Pailles, Phoenix, Coromandel, Riche Terre, the port area, and La Tour Koenig.
Morocco Morocco boasts in excess of 75 industrial zones, although much of the industrial stock is old and does not meet modern building safety standards. Casablanca has the country’s largest industrial market, which is traditionally centred on Aïn Sebaâ, although there are new areas in outlying areas of the city that are becoming increasingly important, including Bouskoura and Sidi Maârouf. Mozambique A congestion charge for large commercial vehicles inside the Maputo city limits and escalating land prices are forcing industrial business to move to peripheral locations. Traditional industrial areas in the centre of Maputo and close to the port and airport are generally seeing property being converted to higher-value offices or retail warehouses. Prime warehouse rents are high, around US$10/m2 per month, but this reflects their location and that they are often used as offices. Namibia Manufacturing activity in Windhoek is fairly limited, and the industrial property market mainly focuses on the provision of warehousing space. Warehouses are concentrated in the city’s Southern Industrial Area and the Northern Industrial Area. Several large-scale industrial projects are planned elsewhere in Namibia, many of which are associated with the country’s growing uranium industry, e.g. Vision Industrial Park near Swakopmund. Nigeria Multinational businesses have shown increased interest in investing in Nigeria, with companies such as Procter & Gamble, GSK, Nestlé, Diageo, and SABMiller making huge investments in new production facilities supplying the Nigerian market. Several multinationals are creating secondary manufacturing hubs outside of Lagos State, particularly in south-east Nigeria, following a period of increased political calm. However, development is held back by Nigeria’s chronically poor power supply, which has previously led to the departure of major manufacturers and continues to act as a deterrent to investors.
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Country Industrial market explained Rwanda Rwanda’s industrial market is still at an embryonic stage, particularly in Kigali, and it remains largely owner-occupied. Approximately 60% – 70% of all manufactured products are imported from Kenya and Uganda. However, as part of the Kigali Master Plan, the government has proposed to relocate industrial developments at its own cost from Gikondo, which is to be preserved as a wetland, to a special economic zone in Nyarugunga sector, near Masaka. The relocation is expected to take some time, but should lead to the growth of the industrial market in Kigali. Senegal Senegal does not have an established industrial market and, to date, there has been little interest in the country from international firms as a manufacturing or distribution location. Small local industrial units are found throughout Dakar, many of which are involved in food manufacturing. However, the focus for big business is the port, which also represents one of the main exits from the peninsula along the Route de Rufisque. The high level of owner- occupation precludes the development of a sizeable leasing market which, in turn, inhibits speculative development in the industrial sector. Sierra Leone The city’s economy revolves largely around its harbour and Queen Elizabeth II Quay. Freetown has the largest natural harbour in Africa. Much of the city’s industrial development is to the east of its main port and in areas around Kissy, where the massive oil terminal is located. Approximately 5km to the east of the city is the Wellington Industrial Zone. In general, the industrial stock is poor quality and much of it is accessed from roads that are not paved. Owner-occupation is a common feature of the market. Industries in Sierra Leone include food and beverage processing, fish packing, rice milling, petroleum refining, diamond cutting, and the manufacture of cigarettes, paint, shoes, and beer. South Africa While the recent economic uncertainty may dampen short-term growth prospects, industrial market fundamentals remain broadly positive, as shown by falling vacancy rates and upward pressure on capital values in some areas. However, despite falling availability and the increasing willingness of investors to commit to speculative development in anticipation of a resumption in growth, the balance of power in the industrial market remains largely in favour of occupiers. On a positive note, forthcoming spending on infrastructure projects should boost employment and help to stimulate occupier demand. South Sudan Most of the industrial activity in Juba is focused in Konyo Konyo and close to the port. Konyo Konyo is also the location of many hotels, providing camp-style accommodation alongside the White Nile. The market appears unlikely to attract significant international corporate activity given the small population, an investment climate that is not favourable to foreigners and Juba’s extremely challenging logistics. Sudan The industrial market in Khartoum is very limited with most units being owner-occupied. Most industrial property is not located in the city centre, but is typically on the river banks opposite the CBD. The main industrial areas are to the north and east of the city. The country’s largest industrial complex, Giad Industrial City, is located on the western bank of the Blue Nile. Tanzania The industrial sector in Tanzania continues to be dominated by owner-occupiers and is largely focused on the provision of warehousing space and light industrial activities. The Millennium Business Park remains the only major industrial development in Dar es Salaam, although new stock has become available in the industrial area on Nyerere and Mandela Roads as a result of the redevelopment of older warehouses. Tunisia Manufacturing industries are a major source of economic growth and revenue, accounting for about 70% of exports in 2011. There are pockets of industrial property dotted around Tunis, with the major new areas generally being located around the southern suburbs of the city. There are also a number of areas further out from central Tunis where available land is relatively cheap. These include locales that could benefit from progressive market dynamics created by the development of the new airport and port at Enfidha. The older industrial area around Tunis Airport (Charguia) remains popular but generally contains smaller units and has seen a shift in use towards call centres. Uganda Kampala’s main industrial location is the Kampala Industrial and Business Park, which lies approximately 15km to the east on the Kampala-Jinja Highway. The government is encouraging factories and industries that have acquired plots to relocate to the business park or run the risk of losing their land. Its growth has boosted the area’s critical mass and industrial land values along the main road have risen steadily. A number of large manufacturers such as Riley Packaging, APDL and some Chinese companies have built state-of-the-art factories on vast plots of land to accommodate their future expansion plans. Zambia There is increasing interest from developers as the industrial market is undersupplied and underserviced and does not cater to the requirements of modern international companies. The development of new facilities in key areas will assist in securing new industry and manufacturing business. Interest focuses on Lusaka as it is viewed as an entry point from South Africa into the centre of the sub-Saharan market. Zimbabwe Demand for industrial space has reduced in recent years, as Zimbabwe has become more of a consumer of imported goods than a manufacturer. Void rates are increasing and rents are depressed. Tenant viability is questionable in the current difficult economy, putting the security of income streams at risk. Industrial investments are considered the least attractive of all sectors and the recent sales that have taken place have been entirely for owner-occupation.
Source: Knight Frank Data as at September 2014
86 | RMB Global Markets Now that we have identified where industrial markets lie within each country, it is important to take a closer look at operational costs such as property. Some cities ask very high rental prices for industrial areas, especially Angola, Nigeria, and Mozambique (Figure 54).
Figure 54: Prime industrial rentals
US$/m2/month 16 14 12 10 8 6 4 2 0 unis Juba ripoli T Cairo Kigali Lomé A ccra Lagos Dakar T H arare Lusaka A lgiers Bangui Douala N airobi Luanda Malabo A bidjan Maputo Bamako Kampala Kampala Kinshasa Lilongwe F reetown P ort Louis G aborone Khartoum N ’Djamena Casablanca N ouakchott A ddis baba A ntananarivo Johannesburg Dar es S alaam
Source: Knight Frank Data as at September 2014
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Chapter 5.4: cities – Resources
The outlook for resources remains positive. Our continent boasts high quality and large-scale deposits, while more reserves are being discovered every day. Meanwhile, agriculture is becoming a very important sector when looking at growth potential.
88 | RMB Global Markets RESOURCES
The outlook for resources remains positive. Our continent boasts high quality and large-scale deposits, while more reserves are being discovered every day. Most importantly, resource-rich countries that were previously impossible to penetrate due to the challenging business environments are now opening their doors. The opportunities are enormous, not just for investors but for African economies alike — in some instances, many countries remain unexplored and do not have data to assess the value of mineral reserves. As exploration increases, so does determining the real value of mineral resources.
Table 15: Resource reserves in Africa (2012)
Total reserves — % of world Key resource Units Africa World reserves reserves Platinum Million kg 63 71 89 Diamond Million carats 385 600 64 Cobalt Thousand MT 3,670 7,500 48 Chromium Million MT 200 460 43 Iron ore (crude and iron content) Billion MT 30 250 12 Manganese Million MT 180 630 28 Gold Thousand MT 8 52 15 Gas Trillion cubic feet 513 7,331 7 Crude oil Trillion barrels 132 1,655 8 Coal Billion tonnes 31 861 4 Copper Million MT 40 680 6 Uranium Million tonnes 1 5 20 Agriculture Million hectares 590 970 60
Source: PwC, US Geological Survey, BP Data as at September 2014
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Table 16: Proven resource reserves
Manganese Diamonds Iron ore Copper (thousands Bauxite Platinum Gold (metric (million (million Coal (million (thousands Cobalt metric tons Nickel (metric Oil (thousand Gas (trillion (thousands Lead (thousand Arable land (% Country (kilograms) tons) carats) metric tons) tonnes) metric tons) (metric tons) gross weight) tons) million barrels) cubic metres) metric dry tons) metric tons) of land area) Algeria 12.2 4.5 3.2 Angola 12.7 3.3 Botswana 130 0.5 Chad 1.5 3.9 DRC 150 20,000 3,400,000 1.6 3.0 Egypt 4.3 2 2.9 Equatorial Guinea 1.7 4.6 Gabon 24,000 2 1.3 Ghana 2,000 21.1 Guinea 7,400,000 11.6 Libya 48 1.5 1.0 Madagascar 1,600,000 6.0 Nigeria 37.2 5.2 39.5 South Africa 63,000,000 6,000 70 1,000 30,156 150,000 300 9.9 South Sudan 3,700,000 3.5 - Sudan 1.5 7.2 Tunisia 0.4 18.3 Zambia 20,000 270,000 4.6 Zimbabwe 502 10.6
Source: US Geological Survey, EIA Data as at September 2014
90 | RMB Global Markets Table 16: Proven resource reserves
Manganese Diamonds Iron ore Copper (thousands Bauxite Platinum Gold (metric (million (million Coal (million (thousands Cobalt metric tons Nickel (metric Oil (thousand Gas (trillion (thousands Lead (thousand Arable land (% Country (kilograms) tons) carats) metric tons) tonnes) metric tons) (metric tons) gross weight) tons) million barrels) cubic metres) metric dry tons) metric tons) of land area) Algeria 12.2 4.5 3.2 Angola 12.7 3.3 Botswana 130 0.5 Chad 1.5 3.9 DRC 150 20,000 3,400,000 1.6 3.0 Egypt 4.3 2 2.9 Equatorial Guinea 1.7 4.6 Gabon 24,000 2 1.3 Ghana 2,000 21.1 Guinea 7,400,000 11.6 Libya 48 1.5 1.0 Madagascar 1,600,000 6.0 Nigeria 37.2 5.2 39.5 South Africa 63,000,000 6,000 70 1,000 30,156 150,000 300 9.9 South Sudan 3,700,000 3.5 - Sudan 1.5 7.2 Tunisia 0.4 18.3 Zambia 20,000 270,000 4.6 Zimbabwe 502 10.6
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Table 17: Resource production
Manganese Diamonds Iron ore Copper (thousands Bauxite Aluminium Platinum Gold (metric (million (million Coal (million (thousands Cobalt metric tons Nickel (metric Oil (thousand Gas (billion (thousands Lead (thousand (thousand Country (kilograms) tons) carats) metric tons) tonnes) metric tons) (metric tons) gross weight) tons) million barrels) cubic metres) metric dry tons) metric tons) metric tons) Algeria 1,667 81.5 560 Angola 1,784 Botswana 22 Chad 101 Congo 296 DRC 17 900 57,000 Egypt 728 60.9 Equatorial Guinea 283 Gabon 2,000 245 Ghana 87 Guinea 17,000 Libya 1,509 12.2 Madagascar 26,000 Nigeria 2,417 43.2 South Africa 133,000 145 4 67 260 3,800 52 820 South Sudan 48,000 31 Sudan 82 Tunisia 65 Zambia 830 5,200 Zimbabwe 12,000 3
Source: US Geological Survey, EIA Data as at September 2014
92 | RMB Global Markets Table 17: Resource production
Manganese Diamonds Iron ore Copper (thousands Bauxite Aluminium Platinum Gold (metric (million (million Coal (million (thousands Cobalt metric tons Nickel (metric Oil (thousand Gas (billion (thousands Lead (thousand (thousand Country (kilograms) tons) carats) metric tons) tonnes) metric tons) (metric tons) gross weight) tons) million barrels) cubic metres) metric dry tons) metric tons) metric tons) Algeria 1,667 81.5 560 Angola 1,784 Botswana 22 Chad 101 Congo 296 DRC 17 900 57,000 Egypt 728 60.9 Equatorial Guinea 283 Gabon 2,000 245 Ghana 87 Guinea 17,000 Libya 1,509 12.2 Madagascar 26,000 Nigeria 2,417 43.2 South Africa 133,000 145 4 67 260 3,800 52 820 South Sudan 48,000 31 Sudan 82 Tunisia 65 Zambia 830 5,200 Zimbabwe 12,000 3
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Global demand is the key driver behind the continued inflow of investment. Although the Chinese economy has experienced a downturn is recent years, mining and infrastructure investment is still needed to fill its shortfall of minerals like iron ore and copper. India, with its own restricted opportunities, is also a consumer of Africa’s resource prospects. Importantly, the US is experiencing an economic recovery, which will lead to a natural increase in the demand for certain resources.
Figure 55: China’s percentage of global production and construction for select items (2012)
60%
50%
40%
30%
20%
10%
0% Bauxite Copper Iron ore Lead Nickel Tin Zinc (Aluminium) (Steel)
Mine output Refined consumption Source: BMI Data as at September 2014
The FDI inflows discussed in Chapter 1 are still mainly focussed on the resources sector because of the great potential it holds, and are evidence that mineral wealth and potential outweigh investor concerns.
Which country has the most potential?
Moody’s identified two tiers of countries that are important destinations for mining companies. The criteria comprise current and future high mineral potential and the number of mining companies that have already established large operations in-country. Tier 1 comprises South Africa, Ghana, the DRC, and Zambia as countries attracting the most investment and whose output is the largest. Tier 2 countries are Botswana, Tanzania, Mozambique, Burkina Faso, Mauritania, Mali, Guinea, and the Congo.
Geologic and production considerations are important, but assessing how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment is a necessity. The Fraser Institute delves into these aspects in its Policy Perception Index (PPI) (Figure 56). Out of 112 countries, Botswana is the highest ranked in Africa at 25. Tanzania saw the largest improvement in Africa, moving to 62nd place from 74th in the previous survey due to improvements in political stability and land claims.
94 | RMB Global Markets Figure 56: Policy Perception Index 20131
Ranking 120
96
72
48
24
0 Mali D R C I ndia Brazil Niger S pain China Kenya R ussia E ritrea Liberia Ghana Nigeria Guinea A ngola Zambia anzania E thiopia Namibia T Botswana Venezuela Zimbabwe Kyrgyzstan Madagascar S ierra Leone S outh A frica Burkina Faso Côte d’ I voire Mozambique
Note: 1 Ranking out of 112 countries. Source: Fraser Institute Data as at September 2014
Risks to resources
The risks to doing business in the resources sector remain the usual suspects: the infrastructure deficit, labour issues, and the regulatory environment. EY digs a bit deeper and has pointed out the top 10 business risks for mining and metals companies globally:
1. Capital dilemmas — capital allocation and access;
2. Margin protection and productivity movement;
3. Resource nationalism;
4. Social licence to operate;
5. Skills shortages;
6. Price and currency volatility;
7. Capital project execution;
8. Sharing benefits;
9. Infrastructure access; and
10. Threat of subsidies.
Infrastructure
The large deficit is one of the biggest and most obvious risks to growth in Africa and more specifically to the resources sector. The demand for mining in Africa has increased significantly over the past 15 years, but infrastructure development has yet to catch up. The funding mismatch stems from governments having to fund the groundwork upfront but only receiving revenue from production much later. Narrowing it down, electricity shortages have been highlighted as the major infrastructure bottleneck for mining companies.
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Labour issues
South Africa has been the poster child for intensified labour issues in recent years. Strikes in the mining industry are a common occurrence in South Africa — powerful unions are usually unwavering in their demands for wage hikes as seen in 2014. The shortage of skilled labour is another concern. Experienced engineers emigrate for better opportunities globally, while firms then have to upskill local staff, which can be a long process.
Resource nationalism and regulatory environment
Resource nationalism can take different forms, but the main risk areas include local ownership rules, changes to taxes and royalties, and export bans. Zimbabwe’s indigenisation law has had a crippling effect on its mining industry. Mozambique and Tanzania have also mentioned the possibility of raising their stakes in new and existing mining projects.
Table 18: Recent regulatory developments
Angola In 1Q13 the Angolan government announced a reduction in mining taxes to 25% to attract more investment into the sector. Botswana The government cut taxes in 2012 and maintains a pro-business approach to mining taxation. Plans are underway to enhance the minerals legislative framework to attract non-diamond miners into the sector. Burkina Faso The government has implemented a modern mining code, attracting a multitude of new players into the mining space. Major effort at tackling corruption. Côte d'Ivoire New mining code to boost government revenue from the sector. However, some specific large players have been granted exemptions. The government is in talks to harmonize mining regulation with other West African countries. DRC Higher taxes on copper and cobalt concentrates. Ongoing uncertainty due to the government's history of cancelling licences with little notice. Ghana In 4Q13 the government announced plans to introduce a windfall tax on miners' profits. The bill has yet to be ratified by Parliament. Guinea The government has reduced taxes and royalties but takes a 15% stake in projects with the option to purchase up to 35%. The government is in talks to harmonize mining regulation with other West African countries. Mali The new government is conducting a complete inventory of the mining sector and will review all contracts. However, it is keen to reduce corruption and attract foreign investment into the mining sector. Mauritania Favourable tax regime designed to provide incentives for direct investment into the mining sector. Mozambique The government wants to raise its stake in new mining projects and has stated its intention for citizens to gain more from the extraction of the country's mineral resources. Namibia The government scrapped plans for a tax hike to 44%, but the mining sector remains a key target for government revenue. Sierra Leone Conducting a review of mining revenue and contracts. The government is in talks to harmonize mining regulation with other West African countries. South Africa The government is having second thoughts about implementing a new mining code, which would increase taxes and demand greater beneficiation. The outcome is uncertain. Tanzania The government is pushing for greater local ownership of mining projects. Zambia In 4Q13 the government announced a 10% export duty on semi-processed base metals. It has also intervened when companies have attempted to retrench employees. Zimbabwe The government has threatened to seize assets without compensation if miners do not comply with its indigenisation policy.
Source: BMI Data as at September 2014
96 | RMB Global Markets Some countries have a bad track record with regulatory changes, mostly as a result of governments wanting to benefit more from the booming resource sector. This is not surprising as governments have been known to sell mining concessions too cheaply, and want to reverse the mistake. But, often it is the degree of regulatory change that is the problem, not necessarily the change itself. Amendments to the regulatory framework should be gradual and transparent. Some countries, especially those facing fiscal adversity, have introduced tax increases, export duties, ownership laws, and royalties without any forewarning.
Table 19: Royalty rates in major African mining countries
Precious metals Base metals Botswana 5% 3% Burkina Faso 3% 5% Cameroon 2.5% 2.5% CAR 3% 4% Congo 5% 3% DRC 2.5% 1% Gabon 4% – 6% 4% – 6% Ghana 5% 5% Guinea 5% 3.5% Côte d’Ivoire 3% Not specified Liberia 3% – 10% 3% – 10% Mali 3% 3% Mauritania 4% 2% Morocco 3% 3% Namibia 3% 3% Niger 5.5% Not specified Nigeria Not specified Not specified Senegal 3% 3% Sierra Leone 5% 3% South Africa 0.5% – 7% 0.5% – 7% Tanzania 4% 3% Uganda 3% 3% Zambia 5% 3%
Source: AfDB Resource Data as at September 2014 nationalism can take different forms, but the main risk areas include local ownership rules, changes to taxes and royalties, and export bans.
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Table 20: SSA mining pressure and government participation is high and on the rise
Main provision South Africa DRC Zambia Ghana
Corporate tax rate 28% 30% 30% 35%
Mineral royalties 0.5% – 7% 0.5% – 2.5% 6% 5% Export duty on No –1 10% No concentrates Tax stability agreements No Yes Yes 3 Yes 3 available Government participation in No 10%2 10% – 20%2 10% mines
Note: 1 Ban on exports of copper and cobalt concentrates deferred. 2 Ongoing discussions for the government to take stakes of up to 35% in mining projects. 3 Under review (Ghana) or challenged (Zambia). Source: Moody’s, PwC Data as at September 2014
Although the continent still faces regulatory risks, other attractive but less mature jurisdictions globally contend with the same challenges. We have seen more efforts by governments in recent years to make the regulatory framework more predictable and to address their risk profiles. Memberships to initiatives like the Extractive Industries Transparency Initiative (a global drive to improve the management of resource revenues) have increased. For example, countries like Mozambique, Ghana, and Zambia are compliant.
The flavour of the month
Iron ore and the coal sector have been getting a lot of attention of late. Global demand for these resources is expected to remain strong over the forecast period, while Africa has high-grade mineral reserves of both, providing some of the world’s largest margins.
We have seen an increased trend of large iron ore projects coming online, especially in West and Central Africa, with countries like Sierra Leone, Guinea, Mauritania, and Liberia being the main targets. More specifically, Chinese companies are showing growing interest in joint ventures in the region. Known for having one of the most vastly underdeveloped mineral deposits on the continent, Liberia has significant potential to become a large supplier of iron ore. It produced 1.3 million tonnes of iron ore in 2011 from nothing in 2010. Overall, we expect the multinationals to dominate the scene as there have been no government announcements of whole or shared ownership.
98 | RMB Global Markets Figure 57: West Africa to drive iron ore boom
Million tonnes 35
28
21
14
7
0 2011 2012 2013 2014 2015 2016 2017
Sierra Leone Guinea Mauritania Liberia Source: BMI Data as at September 2014
The coal sector is still dominated by South Africa, but countries like Mozambique are slowly increasing in importance. BMI expects total coal production to reach 35 million tonnes in 2017, with the bulk being exported. Coking coal is the most predominant — in fact, Mozambique is the world’s eighth-largest coking coal exporter, with around 3 million tonnes leaving the country annually.
Figure 58: African coal production forecasts
Million tonnes 350
280
210
140
70
0 2009 2010 2011 2012 2013 2014 2015 2016 2017
Africa total Mozambique South Africa Source: BMI, EIA Data as at September 2014
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Strong Chinese demand for coal will continue. However, inadequate infrastructure will hold the sector back from its potential as ports and rail improvements are slow in Mozambique.
Figure 59: Coal consumption in China by sector
Million tonnes 6
5
4
3
2
1
0 Electricity Industrial Other sectors Total
2007 2020 2035 Source: EIA Data as at September 2014
Cities born from resource wealth
Resources are not necessarily based close to urban areas, but it is interesting to see how they have in many instances been the backbone of urbanisation and development of certain towns and cities. Johannesburg is a prime example of a little town that boomed after the discovery of the main Witwatersrand gold reef. Large infrastructure development began in the 1930s as South Africa went off the gold standard.
Over the past few years we have seen increased development in Kitwe, Zambia’s most populated city after Lusaka. It started building in size as the copper mines expanded and is now the base for a number of mining operations. Even more recent examples of cities in the making include towns like Tete in Mozambique, which is in the centre of the fledgling coal mining industry. Although it lacks formal supermarkets and hotels, the opportunities for development are significant.
Takoradi in Ghana is another good example: it is the nearest commercial port to Ghana’s offshore oilfield and has become one of the new hotspots for African property developers wanting to capitalise on the vast interests of investors in the oil and gas industry.
100 | RMB Global Markets Agriculture — mouths to feed
Although agriculture employs around 60% of the African labour force, its contribution to GDP remains low at an average of 25% due to productivity levels and earnings. However, according to the latest EY attractiveness survey, agriculture is becoming an increasingly important sector when looking at growth potential. Business leaders across the world were asked which sectors have the highest potential for growth in Africa in the next two years (Figure 60).
Figure 60: Sectors with highest growth potential
Mining and metals 26.3%
Agriculture 25.6%
Infrastructure, roads, highways and ports 17.7%
Oil and gas 17.1%
Financial services 15.2%
Information and telecommunication 14.8%
Consumer products 13.5%
Hotel and tourism 12.0%
Alternative or renewable energy or cleantech 11.1%
Real estate and construction 9.8%
Education 7.0%
Heavy industry 6.3%
Healthcare 5.9%
Logistics 5.7%
Automotive 5.6%
Power and utilities 5.5%
Retail 4.5%
Software and IT services 4.0%
Life sciences 3.1%
Chemicals and allied products 2.9%
Can’t say 3.7%
0% 5% 10% 15% 20% 25% 30% % of 500 respondents
Source: EY Data as at September 2014
The major risks for companies wanting to enter the market include infrastructure deficits (lack of strong distribution centres), land procurement, access to technologies, information and skills, government intervention, regulatory challenges, and affordable finance. But the opportunities are countless. The continent is home to more than half the world’s agriculturally suitable land. But, in Africa’s favour, demand for agricultural products is rapidly on the rise, especially as the continent and densely populated countries like China and India increasingly have more mouths to feed.
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Governments not paying enough attention
The lack of investment is a major impediment for the agricultural sector: an estimated US$11bn is needed annually to achieve sustainable and successful expansion of agricultural production in Africa. The sector is still neglected by state budgets in most African countries. Governments across the continent agreed to an African Union proposal to adopt sound agricultural policies and to allocate a minimum of 10% of their national budgets to the sector. However, less than 20% of the AU members have committed to this. Malawi and Ethiopia, however, are prime examples of governments dedicated to investing in agriculture.
Figure 61: Percentage of budgets allocated to agriculture (2010)
Malawi Ethiopia Senegal Congo Niger Mali Burkina Faso Zambia Burundi Togo Ghana Madagascar Gambia São Tomé & Príncipe Tanzania Rwanda Mauritania Chad Nigeria Mozambique Tunisia Swaziland Kenya Africa Uganda Mauritius Algeria Angola Cabo Verde Namibia Liberia Benin Lesotho Botswana Côte d’Ivoire CAR South Africa Egypt Sierra Leone Morocco Seychelles Cameroon DRC Guinea-Bissau Equatorial Guinea
0% 6% 12% 18% 24% 30%
Source: NEPAD Data as at September 2014
102 | RMB Global Markets More to eat every year
Production continues to increase in Africa. Weather conditions in 2013 and 2014 were favourable in most key agricultural locations. Although we noted that governments aren’t investing enough, the funds they do provide are invaluable to output. Some countries subsidise seed and fertilizer prices, while other governments buy crops at a price beneficial to the local farmers.
Figure 62: Top 10 crop production — snapshot of selected countries (tonnes)
Côte d’Ivoire
Yams 5,674,696 Cassava 2,412,371 Sugar cane 1,866,748 Cocoa 1,650,000 Plantains 1,577,043 Rice 725,000 Maize 654,738 Cashew nuts 450,000 Palm oil 417,770 Rubber 256,000
Ethiopia
Maize 6,158,318 Sorghum 3,604,262 Wheat 3,434,706 Sugar cane 2,700,000 Pulses 2,690,165 Barley 1,781,652 Sweet potatoes 1,185,050 Potatoes 863,348 Millet 742,297 Yams 350,000
Ghana
Cassava 14,547,279 Yams 6,638,867 Maize 1,949,897 Cocoa 879,34 Rice 481,134 Groundnuts 475,056 Sorghum 279,983 Millet 179,684 Sugar cane 148,000 Sweet potatoes 135,000
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Kenya
Sugar cane 5,822,633 Maize 3,600,000 Potatoes 2,915,067 Bananas 1,394,412 Cassava 893,122 Sweet potatoes 859,549 Pulses 845,903 Wheat 441,754 Tea 369,400 Sorghum 166,627
Malawi
Cassava 4,692,202 Maize 3,618,699 Potatoes 3,255,780 Sugar cane 2,800,000 Pulses 539,524 Groundnuts 384,869 Bananas 380,000 Rice 110,964 Soybeans 106,592 Sorghum 66,497
Mozambique
Cassava 10,051,364 Sugar cane 3,393,904 Maize 1,177,390 Sweet potatoes 900,000 Pulses 602,406 Bananas 470,000 Rice 280,000 Sorghum 239,000 Potatoes 205,000 Groundnuts 112,913
104 | RMB Global Markets Nigeria
Cassava 54,000,000 Yams 38,000,000 Maize 9,410,000 Sorghum 6,900,000 Millet 5,000,000 Rice 4,833,000 Sweet potatoes 3,400,000 Groundnuts 3,070,000 Pulses 2,560,000 Sugar cane 1,450,000
Rwanda
Cassava 2,716,421 Potatoes 2,337,706 Sweet potatoes 1,005,305 Maize 573,038 Pulses 459,412 Sorghum 138,695 Sugar cane 115,000 Rice 84,079 Wheat 75,913 Yams 42,469
Tanzania
Cassava 5,462,454 Yams 5,104,248 Maize 3,018,175 Cocoa 2,900,000 Rice 2,524,740 Groundnuts 1,914,878 Sorghum 1,800,551 Millet 1,235,041 Sugar cane 838,717 Sweet potatoes 810,000
Source: Grow Africa, FAOSTAT Data as at September 2014
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TTechnoechno savvy Agribusiness the way forward
Another trtrendend we have noticed is the grgrowthowth in technological innovation, especially via Although funding is a major impediment for the agriculture sector, we have seen strong growth (although from a low base) in the mobile telephony (Figur(Figuree 63). The Africa PrProgressogress Panel found that Africa’Africa’ss prproductivityoductivity in agribusiness (supply, processing, marketing and retailing) sector. Agricultural production contributes an average of 24% to Africa’s annual farming and fifisheries sheries has has accelerated accelerated because because of of this. this. growth, while agribusiness adds around 20% to overall GDP. It is estimated that if agribusiness growth accelerates even further, Africa’s food market could reap US$1 trillion by 2030. We have already seen top international companies taking advantage of the growth in the sector.
FigurFiguree 63: TTechnicalechnical innovation Table 21: Top companies investing in the Africa food sector MLOUMA COMMUNITY Connects farmers to food SURVEILLANCE PROJECT purchasers by displaying real-time Helps fi shing communities fi ght market prices and localizations. against illegal, unreported and Country of No. of unregulated fi shing through the use of mobile phones and GPS- Company name origin projects enabled cameras. Nestlé Switzerland 21 Shoprite South Africa 13 MAGRI Provides best practice information on Pick n Pay South Africa 8 planting, harvesting, and pest and Olam International Singapore8 disease management to farmers. Lonrho UK 6 EFMIS-KE Provides fi sherfolk with greater Nakumatt Holdings Kenya 5 access to market information. Associated British Foods UK 5 M-PESA Mobile money transfer. Choppies Botswana 5 Uchumi Kenya 5 ICOW APP Naivas Kenya 4 Uses mobile phones to encourage best practice for dairy farmers and increase milk production. Source: fDi Intelligence, Land Portal, World Bank M-FARM Data as at September 2014 ESOKO Connects farmers with each other Enables farmers to in a virtual space. Helps farmers collect and send collectively buy inputs directly from out market data manufacturers and sell produce to There have also been a large number of land acquisition deals that have given international investors access to arable land in various using simple text the market. messages. E-WALLET countries across the continent (Figure 64). Allows farmers to INTELLECT TECH COCOALINK receive subsidised Helps farmers and insurance Connects cocoa seeds and fertilizer fi rms track compensation claims farmers with vouchers on their in real time. information about mobile phones. good farming Figure 64: Reported land acquisition deals by outside investors practices. FARMING INSTRUCTOR Provides online and offl ine FARMERLINE agricultural information to farmers and their communities. Sudan 17 Uses voice and SMS to collect Ethiopia 56 data, share new Madagascar 36 farming techniques, and better link MOBILE AGRIBIZ E-VOUCHER M-MALAWI Mozambique 96 Uses web and mobile smallholder farmers Helps cash-strapped Supports and advances the technologies to improve Tanzania 41 to other actors along POULTRY GUIDE small scale farmers growth of mobile money in access to agriculture the agricultural value Provides poultry farmers access agricultural Malawi through a series of Sierra Leone 21 information and market chain. with information inputs. coordinated interventions. accessibility for small and market linkages Benin 9 Number of deals (= actual + reported) farmers. to improve their Liberia 5 productivity and profi ts. Kenya 8 Ghana 7 SourSource:ce: GrGrowow Africa, FFAOSTATAOSTAT Angola 4 Nigeria 18 Data as at September 2014 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Hectares
Source: fDi Intelligence, Land Portal, World Bank Data as at September 2014
Most African countries have a comparative advantage in agriculture. The continent is home to more than half of the world’s agriculturally suitable yet unused land and its massive water resources have hardly been tapped. It also has abundant natural resources, large yield gaps, and an improving investment climate. Moreover, the booming market in Southeast Asia has become crowded, competitive, and expensive for doing agribusiness, making way for growing opportunities in Africa. It is time Africa takes advantage of this large potential.
106 || RMRMBB GlobalGlobal MarketsMarkets RMB Global Markets | 107 Agribusiness the way forward
Although funding is a major impediment for the agriculture sector, we have seen strong growth (although from a low base) in the agribusiness (supply, processing, marketing and retailing) sector. Agricultural production contributes an average of 24% to Africa’s annual growth, while agribusiness adds around 20% to overall GDP. It is estimated that if agribusiness growth accelerates even further, Africa’s food market could reap US$1 trillion by 2030. We have already seen top international companies taking advantage of the growth in the sector.
Table 21: Top companies investing in the Africa food sector
Country of No. of Company name origin projects Nestlé Switzerland 21 Shoprite South Africa 13 Pick n Pay South Africa 8 Olam International Singapore 8 Lonrho UK 6 Nakumatt Holdings Kenya 5 Associated British Foods UK 5 Choppies Botswana 5 Uchumi Kenya 5 Naivas Kenya 4
Source: fDi Intelligence, Land Portal, World Bank Data as at September 2014
There have also been a large number of land acquisition deals that have given international investors access to arable land in various countries across the continent (Figure 64).
Figure 64: Reported land acquisition deals by outside investors
Sudan 17 Ethiopia 56 Madagascar 36 Mozambique 96 Tanzania 41 Sierra Leone 21 Benin 9 Number of deals (= actual + reported) Liberia 5 Kenya 8 Ghana 7 Angola 4 Nigeria 18
0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 Hectares
Source: fDi Intelligence, Land Portal, World Bank Data as at September 2014
Most African countries have a comparative advantage in agriculture. The continent is home to more than half of the world’s agriculturally suitable yet unused land and its massive water resources have hardly been tapped. It also has abundant natural resources, large yield gaps, and an improving investment climate. Moreover, the booming market in Southeast Asia has become crowded, competitive, and expensive for doing agribusiness, making way for growing opportunities in Africa. It is time Africa takes advantage of this large potential.
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Chapter 5.5: cities – Retail
Cities and regions have their own unique consumer characteristics. Disposable income is expected to grow at an average rate of 5.5% annually up to 2030. By then, Africa’s highest- performing cities are projected to have reached a combined purchasing power of US$1.3 trillion.
108 | RMB Global Markets RETAIL
Africa’s retail sector continues to grow at a robust pace. Developing nations will continue to lure global retailers, with smaller untapped markets providing new profit frontiers, less international competition, and greater pricing flexibility. Favourable demographics are driving this growth. It is impossible to ignore the positive consumer environment in Africa — the continent boasts a large and fast-growing population, GDP per capita growth, high urbanisation levels, and an expanding middle class. Moreover, 70% of the population is under 30, which provides a huge demographic boost. Looking at forecasts, 128m households are expected to have moved into the middle class by 2020 with 1.1bn individuals falling into that category by 2060.
Who’s the fairest of them all?
We created an equally weighted index combining demographic variables into a single measure. These variables include current population size, forecast population growth rates, current GDP per capita, forecast GDP per capita growth, and forecast urbanisation rates. This index provides us with a gauge of which countries rank the highest within each category, as well as when all four measures are taken into account (Tables 22 and 23).
Table 22: Ranking of top 10 countries in each key consumption criteria
GDP per capita Population growth Urbanisation growth GDP per capita Population (m) growth rate (%) rate (%) rate (%) (US$) 2013 (2014 – 2018) (2014 – 2018) (2010 – 2030) Equatorial Guinea Nigeria Libya Zambia Niger Seychelles Ethiopia Niger Uganda Guinea-Bissau Gabon Egypt Kenya Eritrea Liberia Libya DRC São Tomé and Príncipe Mali Uganda Mauritius South Africa Mozambique Niger Burundi Botswana Tanzania Egypt South Sudan DRC South Africa Kenya Sierra Leone DRC Mali Angola Algeria Eritrea Angola Chad Namibia Uganda Liberia Tanzania Angola Algeria Sudan Côte d'Ivoire Côte d'Ivoire Burkina Faso
Source: IMF, RMB Global Markets Data as at September 2014
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When combining these crucial consumer aspects, we can pinpoint those countries that offer the most potential for firms chasing growing consumer demand. Nigeria, Egypt, and Ethiopia have the most favourable macroeconomic backdrops for consumption spending growth, but that stems mainly from their large population sizes.
Table 23: Top 15 consumer markets (combining the macroeconomic variables)
Rank Country 1 Nigeria 2 Egypt 3 Ethiopia 4 DRC 5 Libya 6 Tanzania 7 Uganda 8 Kenya 9 Morocco 10 Mauritania 11 Angola 12 Ghana 13 Algeria 14 Malawi 15 South Africa
Source: RMB Global Markets Data as at September 2014
110 | RMB Global Markets But demographics should not be the only measure
It is not only the macroeconomic aspects that are important. A.T. Kearney released its latest African Retail Development Index, which ranks the top 10 countries in sub-Saharan Africa for retail expansion by considering market size, time pressure, country risk, and market saturation (Figure 65).
Figure 65: The 2014 African Retail Development Index1
70.3 64.2 60.2 59.5 58.9 56.9 55.5 54.3 54.2 53.7 100 71 19 65 41 28 79 35 38 0 65 87 17 6 71 89 75 94 79 100 100 72 94 56 80 81 71 71 100 62 48 55 61 50 66 22 23 34 19 29 Ghana Gabon Nigeria anzania E thiopia R wanda Namibia T Botswana S outh A frica Mozambique
Time pressure Market saturation Country risk Market size Note: 1 Time pressure: 0 = rapidly advancing retail sector (short-term opportunity); 100 = slow developing retail sector. Market saturation: 0 = highly concentrated and saturated market; 100 = fragmented market. Country risk: The higher the rating, the lower the risk of failure and doing business. Market size: 0 = underdeveloped/small retail market; 100 = mature retail market and mostly urban dwellers. Source: A.T. Kearney Data as at September 2014
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We have summarised the main factors that have led to these countries making the top 10 and have included Kenya, Angola and Uganda due to their importance to a number of our retail clients (Table 24).
Table 24: The Africa Retail Development Index in more detail
Rank Country Why? Challenges 1 Rwanda Efficient government; strong macroeconomic Low incomes — price and affordability important; indicators; easy business environment; efficient reluctant to change brands; informal market for transport infrastructure; easy access to neighbouring fresh food; prefer stores close to home than malls far consumers away; landlocked 2 Nigeria Largest population; largest economy; largest and Regulations, especially on imports; land availability; most populous city (Lagos); retail is a large GDP supplier and distributor capabilities contributor; online shopping becoming popular; modern supermarkets with local and international presence 3 Namibia High GDP per capita; formal retail dominates in Limited to competitive and differentiated products; Windhoek; high- and low-end goods market; dominated by South African brands and local efficient transport system independent stores; becoming more saturated 4 Tanzania Large market size; looks at price but moving into Dukas (family-owned shops) still popular; poor quality and services; most retail goods imported; port transport infrastructure; low GDP per capita facilities; supermarkets becoming popular for middle- to high-income earners; part of EAC 5 Gabon Rich economy for a small country; limited brands; Market still in early development; ease of imports large market centre; retail sales growth of 13% low; poor distribution and supply capabilities annually 6 Ghana Retail sales growth of 10% annually; advanced Open-air markets account for two-thirds of retail retail market; supermarkets growing; stable business sales environment 7 South Africa Second largest market in Africa; most established Limited to competitive and differentiated products; retail market; highest consumer spending in Africa; more saturated market; dominated by South African large and growing middle class; brand and price brands and local independent stores; retail sales important; attractive to consumers of all incomes; growth only 3% annually e-commerce increasing 8 Botswana High GDP per capita; formal retail dominates in More saturated market; dominated by South African Gaborone; high- and low-end goods market; brands and local independent stores; retail sales efficient transport system growth only 3% annually; landlocked 9 Mozambique Close proximity to South Africa; South African chains Poor infrastructure; low GDP per capita popular; rising middle class; use formal retail stores for bulk buying; centralised distribution centres 10 Ethiopia Fast growing economy; second largest population; Few local producers and exclusive branded consumption patterns changing to packaged food; distributors dominate market; product availability distribution gaining momentum in Addis Ababa and price stability major challenges; tedious customs procedures; no reliable supply chain; poor road infrastructure 12 Angola Large population; Luanda a large metropolitan area; Difficult business environment — red tape and major seaport bureaucracy 17 Uganda Large population; member of EAC; stable economic Small retail environment; low GDP per capita growth 20 Kenya Large population; large cities; member of EAC Strong local retail brands — strong competition
Source: RMB Global Markets, A.T. Kearney Data as at September 2014
112 | RMB Global Markets A.T. Kearney also compared the market size and market saturation of the top 10 countries to assess which approach retailers should take, including “start with the basics”, “move quickly”, “differentiate” or “opt out” (Figure 66).
Figure 66: Comparing market size and saturation scores for the right go-to market1
100 Start with the Move quickly basics Ethiopia
Tanzania Gabon 80 Rwanda Nigeria
60 Mozambique Ghana
Opt out Differentiate 40
20 Botswana
Namibia South Africa
0 0 10 20 30 40 50 60 70 80 90 100 Market size
Note: 1 scoring: Market saturation: 100 = unsaturated; 0 = fully saturated. Market size: 100 = largest; 0 = smallest. Start with the basics: Opportunities limited due to underdevelopment and much lower consumer spending than mature markets. Move quickly: Rapidly evolving retail dynamics and many companies already entered or are entering. Annual per capita retail sales surpass US$1,000. Differentiate: Advanced retail sector, therefore differentiated products are needed. Retail sales per capita average around US$2,500 annually. Source: A.T. Kearney Data as at September 2014
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Retail therapy: which cities to target
Cities and regions have their own unique consumer characteristics. Disposable income is expected to grow at an average rate of 5.5% annually up to 2030. By then, it is projected that Africa’s highest-performing cities might reach a combined purchasing power of US$1.3 trillion. We narrowed our search to see which cities in Africa are attractive to retailers.
Where does the purchasing power lie?
Income elasticities, which measure the change in the quantity of goods demanded in response to a change in real income, affect the type of goods that can be sold in different markets. Food products are usually highly inelastic, while the demand for durable items is more elastic. Importantly, annual household incomes of above US$5,000 represent the level at which individuals begin spending more than half their disposable income on items other than food, according to McKinsey. Therefore, food products are likely to dominate consumer spending in income brackets less than US$5,000, while durable goods such as clothing and apparel will be more popular above this level. Growth in discretionary income should result in greater demand for hard goods like electronics and furniture.
Table 25: Income brackets (in cities with a population above 500,000)
Income brackets (number of individuals) Household US$2,001 US$5,001 US$10,001 consumption – – – Geography City Population (US$PPP)
114 | RMB Global Markets Income brackets (number of individuals) Household US$2,001 US$5,001 US$10,001 consumption – – – Geography City Population (US$PPP)
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Income brackets (number of individuals) Household US$2,001 US$5,001 US$10,001 consumption – – – Geography City Population (US$PPP)
Source: Canback Dangel Data as at September 2014
A more telling indicator for retailers when attempting to define their target markets is LSM (Living Standards Measure) levels. This data is available for developed countries and emerging markets like South Africa, but the rest of Africa (especially SSA) is a work in progress. The most reliable data we have available is income brackets, which serve as a proxy for a high-level indication of where a retailer’s target market lies.
116 | RMB Global Markets Population densities
Population density is another good measure of where retail opportunities lie — the more people living in an area, the more consumers that can be reached without too many transport or infrastructure concerns. On average, continental density is expected to increase from 34 to 79 persons per square kilometre between 2010 and 2050. The top five most densely populated cities are Côte d’Ivoire’s Yamoussoukro; Somalia’s Mogadishu; the DRC’s Kananga; Egypt’s Port Said; and Senegal’s Dakar.
Table 26: Population density (population of 500,000 and over)
Land area Density Country City Population (km2) (/km2) Algeria Algiers 3,126,935 453 6,898.92 Algeria Constantine 903,645 98 9,181.52 Angola Huambo 1,282,116 130 9,900.51 Angola Luanda 5,903,626 894 6,606.93 Benin Cotonou 1,044,768 194 5,378.47 Burkina Faso Bobo-Dioulasso 862,001 101 8,533.82 Burkina Faso Ouagadougou 2,523,841 466 5,413.64 Burundi Bujumbura 738,333 78 9,502.36 Cameroon Douala 2,758,760 205 13,483.02 Cameroon Yaoundé 2,761,307 231 11,979.12 CAR Bangui 773,054 111 6,941.31 Chad N'Djamena 1,211,050 166 7,306.04 Congo Brazzaville 1,764,138 181 9,730.49 Congo Pointe-Noire 914,021 101 9,048.82 DRC Bukavu 729,476 44 16,567.70 DRC Kananga 1,013,704 54 18,637.69 DRC Kinshasa 9,921,322 583 17,025.01 DRC Kisangani 934,626 57 16,402.70 DRC Kolwezi 705,753 49 14,341.66 DRC Lubumbashi 1,769,812 155 11,388.75 DRC Mbuji-Mayi 1,713,304 122 14,074.62 Côte d'Ivoire Abidjan 4,751,971 324 14,677.90 Côte d'Ivoire Bouake 883,673 98 8,978.59 Côte d'Ivoire Yamoussoukro 1,211,061 57 21,254.14 Egypt Alexandria 4,803,877 293 16,413.97 Egypt Cairo 11,722,921 1,761 6,656.21 Egypt Port Said 643,806 36 17,755.27 Egypt Suez 564,190 73 7,779.78 Ethiopia Addis Ababa 3,191,966 389 8,216.13 Gabon Libreville 731,173 181 4,032.95 Ghana Accra 2,899,946 971 2,985.79 Ghana Kumasi 2,280,807 337 6,774.00 Guinea Conakry 2,033,453 161 12,663.18 Kenya Mombasa 1,083,051 85 12,671.71 Kenya Nairobi 3,795,253 557 6,815.58 Liberia Monrovia 615,520 194 3,168.70 Libya Benghazi 743,948 119 6,244.32 Libya Tripoli 1,174,153 194 6,044.55 Madagascar Antananarivo 2,296,264 220 10,430.45 Malawi Blantyre 859,582 101 8,509.87
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Land area Density Country City Population (km2) (/km2) Malawi Lilongwe 884,398 70 12,646.90 Mali Bamako 2,337,113 311 7,519.67 Mauritania Nouakchott 874,019 85 10,226.03 Morocco Agadir 863,171 91 9,522.02 Morocco Casablanca 3,196,805 272 11,755.12 Morocco Fes 1,161,014 83 14,008.37 Morocco Marrakech 1,003,410 80 12,497.32 Morocco Rabat 1,959,636 184 10,656.57 Morocco Tangier 871,331 96 9,092.47 Mozambique Maputo 1,231,365 414 2,971.44 Mozambique Matola 890,108 370 2,405.70 Niger Niamey 1,546,880 130 11,945.02 Nigeria Aba 973,835 91 10,742.80 Nigeria Abuja 2,466,608 225 10,946.65 Nigeria Benin City 1,527,713 228 6,702.85 Nigeria Enugu 913,839 78 11,761.12 Nigeria Ibadan 3,288,310 466 7,053.43 Nigeria Ilorin 910,214 83 10,982.31 Nigeria Jos 863,036 70 12,341.43 Nigeria Kaduna 1,699,888 153 11,124.19 Nigeria Kano 3,755,906 251 14,950.07 Nigeria Lagos 12,623,728 907 13,925.79 Nigeria Maiduguri 946,761 155 6,092.41 Nigeria Onitsha 1,041,052 148 7,051.76 Nigeria Port Harcourt 2,168,498 158 13,725.54 Nigeria Warri 1,145,342 142 8,040.31 Nigeria Zaria 743,723 88 8,445.64 Rwanda Kigali 1,154,750 114 10,132.94 Senegal Dakar 3,391,748 194 17,460.74 Senegal Touba 730,858 142 5,130.63 Sierra Leone Freetown 1,044,669 91 11,524.20 Somalia Mogadishu 1,972,668 96 20,585.08 South Africa Cape Town 3,750,744 816 4,597.35 South Africa Durban 3,172,368 1,062 2,987.45 South Africa East Rand 3,542,669 2,590 1,367.83 South Africa Emfuleni 1,271,586 337 3,776.61 South Africa Johannesburg 4,051,427 1,645 2,462.87 South Africa Port Elizabeth 1,182,478 389 3,043.70 South Africa Pretoria 1,589,543 1,230 1,292.05 Sudan Khartoum 5,016,725 932 5,380.44 Tanzania Dar es Salaam 4,177,116 570 7,330.85 Tunisia Tunis 834,845 363 2,302.39 Uganda Kampala 1,908,336 492 3,877.94 Zambia Kitwe 611,893 117 5,250.05 Zambia Lusaka 2,077,572 179 11,625.38 Zimbabwe Bulawayo 786,823 233 3,375.47 Zimbabwe Harare 1,629,756 596 2,735.87
Source: Canback Dangel, RMB Global Markets, Demographia Data as at September 2014
118 | RMB Global Markets With opportunities come the challenges
Of course the challenges faced by retailers wanting to expand their footprint are still enormous. Most importantly, supply chains are woefully underdeveloped, while populations remain widely spread regardless of accelerating urbanisation. The infrastructure deficit and poverty remain a harsh reality. And consumers attach significant importance to prices, quality and brand.
Furthermore, the informal sector still dominates the retail scene. Around 90% of commerce on the continent is dominated by informal retailers with little stores, kiosks, stalls at markets, etc. (Figure 67). Although formal retail is still in its infancy, the trend is increasing but limited to urban areas. Retailers like Shoprite and Nakumatt in East Africa dominate the scene, and international firms like Walmart and Carrefour are sticking their toes in the water.
Figure 67: The share of formal vs. informal grocery retail1
100% 19
80% 49 51 55 64 67 74 78 60% 80 82
40% 81 51 49 45 20% 36 33 26 22 20 18
0% South Angola Kenya Algeria Senegal Morocco Nigeria Ethiopia Ghana Egypt Africa
Informal Formal Note: 1 Percentage of grocery spending in surveyed cities. Source: McKinsey Africa Consumer Insights Centre Data as at September 2014
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Real estate, real growth
The real estate industry is responding to the rapid urbanisation and the need for modern real estate infrastructure for the retail sector. Although shopping mall stock is still low relative to other developed countries, Jones Lang LaSalle explains that it is increasing at a rate of 20% annually, driven mainly by Nairobi, Lagos, Cairo, and Casablanca (Figure 68).
Figure 68: Africa’s commercial real estate stock
North Africa Sub-Saharan Africa1 South Africa
2 2 Offices 4 million m 2 million m 15 million sq m2
Shopping 1 million m2 0.5 million m2 21 million m2 malls
210 million 830 million 52 million Population
Note: 1 Excluding South Africa. Source: Jones Lang LaSalle Data as at September 2014
We have chosen three countries (Angola, Ghana, and Nigeria) to highlight the growth and development in the real estate market due to the strong demand for retail space.
120 | RMB Global Markets Table 27 reflects completed investment-grade real estate developments in these three countries relative to South Africa.
Table 27: Completed investment grade buildings
Commercial/office Retail GLA1 m2 GLA m2 Angola 48,500 1,227,000 Nigeria 113,000 250,000 Ghana 35,000 200,000 Total 196,500 1,677,000 South Africa 21,000,000 15,000,000
Note: 1 GLA = gross leasable area. Source: Broll, Abacus, Jones Lang LaSalle Data as at September 2014
Angola
Luanda has become the focus of retail development due to its large population and the fact that it is the country’s political and economic hub (Table 28). Formal retail offerings of varying grades exist or are planned for completion in Angola, suggesting a retail pipeline of more than 125,000m2.
Table 28: Retail offerings
Year of Number of Development completion Location GLA (m2) shops Belas Shopping 2007 Talatona, Luanda 19,500 100 Millennium Lubango 2009 Lubango n/a 113 Atrium Nova Vida 2012 Talatona, Luanda 9,000 35 Ginga Shopping 2012 Viana, Luanda 20,000 70 Shopping Fortaleza 20151 Marginal, Luanda n/a n/a Shopping do Kinaxixi 20151 Kinaxixe, Luanda n/a 200 Galeries Sky Centre 20151 Kinaxixe, Luanda 11,000 40 3 Torres 20151 Kinaxixe, Luanda 5,250 n/a Vista Shopping 20151 Cidade Baixa, Luanda 7,600 50 Luanda Shopping 20161 Alvalade, Luanda 60,000 208 Muxima Shopping 20161 Viana, Luanda 26,000 113 Patriota Shopping 20161 Benfica, Luanda 15,200 70
Note: 1 Anticipated year of completion. Source: RMB Westport Data as at September 2014
Depending on the size of the shop and quality of the mall, rentals in Luanda range between US$60/m2 and US$150/m2.
RMB Global Markets | 121 RETAIL
Ghana
Ghana’s positive growth over the past decade and increasing GDP per capita have given rise to burgeoning consumer demand.
Table 29: Retail offerings in Accra
Year of Number of Development completion Location GLA (m2) shops Accra Mall 2008 East Lagon, Accra 20,000 85 Marina Mall 2012 Airport City, Accra 9,000 45 Oxford Street Mall 2012 Osu, Accra 6,000 27 Junction Shopping Centre 20141 Nungua, Accra 12,000 52 Westhills 20141 Westhills, Greater Accra 28,000 100
Note: 1 Anticipated year of completion. Source: RMB Westport Data as at September 2014
Depending on the size of the shop and quality of the mall, rentals in Accra range between US$35/m2 and US$50/m2.
Nigeria
Nigeria’s 170m-strong population is very attractive to retailers and shopping mall developments are being pursued aggressively.
Table 30: Retail offerings in Nigeria
Development Year of completion Location GLA (m2) Ceddi Plaza 2004 Abuja 10,000 The Palms Mall 2007 Lekki, Lagos 21,000 Silverbird Entertainment Centre 2009 Abuja 23,000 Ikeja Mall 2011 Alausa, Lagos 22,650 Polo Park Mall 2011 Enugu 22,500 Ado Bayero Mall 2014 Kano 24,000 Ibadan Mall 20141 Ibadan 18,500 Festival Mall 20141 Festac, Lagos 11,000 Port Harcourt Mall 20141 Port Harcourt 13,000 Jabi Lake Mall 20151 Abuja 26,000 Osapa Mall 20151 Lekki, Lagos 14,000 Delta Mall 20151 Warri 15,000 Calabar Mall 20151 Calabar 12,000 Royal Gardens Mall 20171 Lekki, Lagos 30,000 Asokoro Mall 20171 Asokoro, Abuja 28,000 Lekki Peninsula Mall 20171 Lekki, Lagos 22,000 Capital Mall 20171 Abuja 21,500 Benin City Mall 20171 Benin 13,300 Onitsha Mall 20171 Onitsha 12,100 Kwara Mall 20171 Ilorin 12,000 Abia 20171 Umuahia 11,000
Note: 1 Anticipated year of completion. Source: RMB Westport 122 | RMB Global Markets Data as at September 2014 Rentals range between US$55/m2 and US$90/m2, however, retail malls in Lagos and Abuja are premium locations and command higher rentals than other cities.
Figure 69: Prime retail rentals
US$ /m2 per month
150
125
100
75
50
25
0 unis own ripoli T Cairo A ccra L agos Dakar A buja T H arare A lgiers L usaka Douala Nairobi L uanda Durban A bidjan Maputo Kampala Kinshasa L ilongwe Gaborone Khartoum Cape T Casablanca A ddis baba Johannesburg Dar es S alaam
Source: Knight Frank Data as at September 2014
A solution to retail space demand: RMB Westport
RMB Westport is a real estate investment management and development fund established in 2008 that focusses on property developments in sub-Saharan Africa. It targets real estate where investment flows and broad-based economic growth is most lucrative, and the supply-demand mismatch of high-grade office space and modern retail offerings is most severe. The team has earmarked Nigeria, Ghana, and Angola as key targets in which to develop high-grade real estate assets, harnessing the African growth story to generate outstanding investment returns while transforming the continent’s skyline.
RMB Westport currently has two assets under construction and boasts two successfully completed assets:
1. Completed — Ikeja City Mall — currently the largest shopping centre in Lagos and only one of two Western-standard shopping centres in Nigeria. The mall continues to trade well with an average of more than 800,000 visitors a month.
2. Completed — Stanbic Heights — Accra’s first A-grade office block in the city’s modern Airport City precinct. The building offers tenants high-grade office and retail space in close proximity of Kotoka International Airport, access to main highways, upmarket residential areas and Accra Mall.
3. Under construction — The Junction, in Accra, and Osapa Mall in Lagos — these retail malls are due to commence trading in 2014 and 2015 respectively.
RMB Global Markets | 123 Chapter 6: country snapshots
A brief overview of each country’s macroeconomic landscape.
Kampala
124 | RMB Global Markets COUNTRY SNAPSHOTS
ALGERIA Snapshot (2013 statistics)
Capital Algiers Business language French, Arabic Population (millions) 37.9 (8 out of 54) GDP/capita (market prices) US$5,438 (10 out of 54) RMB’s investment attractiveness 2014 5.1 (8 out of 54) GDP (purchasing power) US$5.438bn (4 out of 54) GDP (average annual growth 2013 - 2018) 4.3% (41 out of 54) Primary export Hydrocarbons Primary export destination Italy Primary import Capital goods Primary import source France Operating environment (RMB score: 2014) 4.4 (22 out of 54) Most problematic factor for doing business Inefficient government bureaucracy
ANGOLA
Snapshot (2013 statistics)
Capital Luanda Business language Portuguese Population (millions) 20.8 (17 out of 54) GDP/capita (market prices) US$5,846 (8 out of 54) RMB’s investment attractiveness 2014 4.6 (18 out of 54) GDP (purchasing power) US$130.1bn (6 out of 54) GDP (average annual growth 2013 - 2018) 5.1% (30 out of 54) Primary export Crude oil Primary export destination China Primary import Consumer goods Primary import source Portugal Operating environment (RMB score: 2014) 3.5 (41 out of 54) Most problematic factor for doing business Corruption
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 125 COUNTRY SNAPSHOTS
BENIN Snapshot (2013 statistics)
Capital Porto-Novo Business language French Population (millions) 10.3 (31 out of 54) GDP/capita (market prices) US$805 (33 out of 54) RMB’s investment attractiveness 2014 4.0 (32 out of 54) GDP (purchasing power) US$16.7bn (31 out of 54) GDP (average annual growth 2013 - 2018) 5.1% (29 out of 54) Primary export Copper Primary export destination China Primary import Capital goods Primary import source China Operating environment (RMB score: 2014) 4.2 (28 out of 54) Most problematic factor for doing business Corruption
BOTSWANA
Snapshot (2013 statistics)
Capital Gaborone Business language English Population (millions) 2.1 (42 out of 54) GDP/capita (market prices) US$7,136 (6 out of 54) RMB’s investment attractiveness 2014 5.0 (12 out of 54) GDP (purchasing power) US$34.1bn (18 out of 54) GDP (average annual growth 2013 - 2018) 4.1% (39 out of 54) Primary export Diamonds Primary export destination UK Primary import Machinery and electrical goods Primary import source South Africa Operating environment (RMB score: 2014) 6.9 (2 out of 54) Most problematic factor for doing business Poor work ethic in national labour force
126 | RMB Global Markets BURKINA FASO Snapshot (2013 statistics)
Capital Ouagadougou Business language French Population (millions) 16.8 (20 out of 54) GDP/capita (market prices) US$729 (35 out of 54) RMB’s investment attractiveness 2014 4.5 (20 out of 54) GDP (purchasing power) US$26.6bn (23 out of 54) GDP (average annual growth 2013 - 2018) 6.8% (13 out of 54) Primary export Gold Primary export destination China Primary import Petroleum oils, other than crude Primary import source Côte d’Ivoire Operating environment (RMB score: 2014) 4.4 (21 out of 54) Most problematic factor for doing business Access to financing
BURUNDI
Snapshot (2013 statistics)
Capital Bujumbura Business language French, English Population (millions) 9.0 (32 out of 54) GDP/capita (market prices) US$303 (52 out of 54) RMB’s investment attractiveness 2014 3.4 (41 out of 54) GDP (purchasing power) US$5.8bn (42 out of 54) GDP (average annual growth 2013 - 2018) 4.9% (32 out of 54) Primary export Coffee Primary export destination Switzerland Primary import Intermediate goods Primary import source Saudi Arabia Operating environment (RMB score: 2014) 3.9 (35 out of 54) Most problematic factor for doing business Access to financing
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 127 COUNTRY SNAPSHOTS
CAMEROON Snapshot (2013 statistics)
Capital Yaoundé Business language French, English Population (millions) 22.0 (16 out of 54) GDP/capita (market prices) US$1,271 (23 out of 54) RMB’s investment attractiveness 2014 4.5 (22 out of 54) GDP (purchasing power) US$53.3bn (15 out of 54) GDP (average annual growth 2013 - 2018) 5.1% (31 out of 54) Primary export Petroleum products Primary export destination China Primary import Manufactured products Primary import source China Operating environment (RMB score: 2014) 4.0 (34 out of 54) Most problematic factor for doing business Corruption
CABO VERDE
Snapshot (2013 statistics)
Capital Praia Business language Portuguese Population (millions) 0.5 (52 out of 54) GDP/capita (market prices) US$3,837 (12 out of 54) RMB’s investment attractiveness 2014 3.0 (46 out of 54) GDP (purchasing power) US$2.2bn (50 out of 54) GDP (average annual growth 2013 - 2018) 3.2% (48 out of 54) Primary export Fuel (re-exports) Primary export destination Spain Primary import Consumer goods Primary import source Portugal Operating environment (RMB score: 2014) 5.6 (10 out of 54) Most problematic factor for doing business Access to financing
128 | RMB Global Markets CENTRAL AFRICAN REPUBLIC Snapshot (2013 statistics)
Capital Bangui Business language French Population (millions) 4.6 (37 out of 54) GDP/capita (market prices) US$334 (51 out of 54) RMB’s investment attractiveness 2014 2.6 (51 out of 54) GDP (purchasing power) US$2.5bn (48 out of 54) GDP (average annual growth 2013 - 2018) -2% (53 out of 54) Primary export Diamonds and timber Primary export destination China Primary import Refined petroleum Primary import source Netherlands Operating environment (RMB score: 2014) 3.1 (47 out of 54) Most problematic factor for doing business Resolving insolvency
CHAD
Snapshot (2013 statistics)
Capital N’Djamena Business language French Population (millions) 11.0 (26 out of 54) GDP/capita (market prices) US$1,218 (25 out of 54) RMB’s investment attractiveness 2014 3.9 (33 out of 54) GDP (purchasing power) US$28bn (21 out of 54) GDP (average annual growth 2013 - 2018) 5.6% (26 out of 54) Primary export Crude petroleum Primary export destination US Primary import Telephones Primary import source China Operating environment (RMB score: 2014) 3.1 (46 out of 54) Most problematic factor for doing business Access to financing
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 129 COUNTRY SNAPSHOTS
COMOROS Snapshot (2013 statistics)
Capital Moroni Business language French Population (millions) 0.7 (51 out of 54) GDP/capita (market prices) US$920 (32 out of 54) RMB’s investment attractiveness 2014 2.7 (48 out of 54) GDP (purchasing power) US$0.9bn (52 out of 54) GDP (average annual growth 2013 - 2018) 3.9% (43 out of 54) Primary export Cloves Primary export destination Netherlands Primary import Petroleum products Primary import source Pakistan Operating environment (RMB score: 2014) 3.8 (38 out of 54) Most problematic factor for doing business Resolving insolvency
CONGO
Snapshot (2013 statistics)
Capital Brazzaville Business language French Population (millions) 4.2 (38 out of 54) GDP/capita (market prices) US$3,295 (14 out of 54) RMB’s investment attractiveness 2014 3.8 (35 out of 54) GDP (purchasing power) US$20.0bn (27 out of 54) GDP (average annual growth 2013 - 2018) 7.0% (11 out of 54) Primary export Petroleum Primary export destination China Primary import Crude oil Primary import source France Operating environment (RMB score: 2014) 2.9 (48 out of 54) Most problematic factor for doing business Paying taxes
130 | RMB Global Markets CÔTE D’IVOIRE Snapshot (2013 statistics)
Capital Yamoussoukro Business language French Population (millions) 24.1 (14 out of 54) GDP/capita (market prices) US$1,175 (27 out of 54) RMB’s investment attractiveness 2014 4.7 (16 out of 54) GDP (purchasing power) US$43.8bn (17 out of 54) GDP (average annual growth 2013 - 2018) 7.6% (8 out of 54) Primary export Fuel products Primary export destination Ghana Primary import Capital equipment Primary import source Nigeria Operating environment (RMB score: 2014) 4.1 (33 out of 54) Most problematic factor for doing business Access to financing
DJIBOUTI
Snapshot (2013 statistics)
Capital Djibouti Business language French Population (millions) 0.9 (49 out of 54) GDP/capita (market prices) US$1,595 (21 out of 54) RMB’s investment attractiveness 2014 2.9 (47 out of 54) GDP (purchasing power) US$2.5bn (47 out of 54) GDP (average annual growth 2013 - 2018) 6.1% (24 out of 54) Primary export Refined petroleum Primary export destination Sudan Primary import Palm oil Primary import source China Operating environment (RMB score: 2014) 4.1 (32 out of 54) Most problematic factor for doing business Protecting investors
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 131 COUNTRY SNAPSHOTS
DEMOCRATIC REPUBLIC OF CONGO Snapshot (2013 statistics)
Capital Kinshasa Business language French Population (millions) 77.0 (4 out of 54) GDP/capita (market prices) US$398 (50 out of 54) RMB’s investment attractiveness 2014 4.2 (26 out of 54) GDP (purchasing power) US$49.9bn (16 out of 54) GDP (average annual growth 2013 - 2018) 7.9% (5 out of 54) Primary export Cobalt and copper Primary export destination China Primary import Machinery and transport equipment Primary import source South Africa Operating environment (RMB score: 2014) 2.9 (49 out of 54) Most problematic factor for doing business Enforcing contracts
EGYPT
Snapshot (2013 statistics)
Capital Cairo Business language Arabic, English Population (millions) 84.2 (3 out of 54) GDP/capita (market prices) US$3,226 (15 out of 54) RMB’s investment attractiveness 2014 5.3 (6 out of 54) GDP (purchasing power) US$553.6bn (2 out of 54) GDP (average annual growth 2013 - 2018) 3.4% (46 out of 54) Primary export Crude petroleum Primary export destination Italy Primary import Semi-finished goods Primary import source China Operating environment (RMB score: 2014) 4.6 (15 out of 54) Most problematic factor for doing business Policy instability
132 | RMB Global Markets EQUATORIAL GUINEA Snapshot (2013 statistics)
Capital Malabo Business language Spanish, English Population (millions) 0.8 (50 out of 54) GDP/capita (market prices) US$20,572 (1 out of 54) RMB’s investment attractiveness 2014 2.1 (53 out of 54) GDP (purchasing power) US$17.7bn (30 out of 54) GDP (average annual growth 2013 - 2018) -4.7% (54 out of 54) Primary export Oil and gas Primary export destination Japan Primary import Oil products Primary import source Spain Operating environment (RMB score: 2014) 3.2 (44 out of 54) Most problematic factor for doing business Resolving insolvency
ERITREA
Snapshot (2013 statistics)
Capital Asmara Business language English Population (millions) 6.3 (34 out of 54) GDP/capita (market prices) US$544 (43 out of 54) RMB’s investment attractiveness 2014 2.6 (50 out of 54) GDP (purchasing power) US$4.5bn (43 out of 54) GDP (average annual growth 2013 - 2018) 2.1% (52 out of 54) Primary export Food and live animals Primary export destination – Primary import Machinery & equipment Primary import source – Operating environment (RMB score: 2014) 2.7 (51 out of 54) Most problematic factor for doing business –
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 133 COUNTRY SNAPSHOTS
ETHIOPIA Snapshot (2013 statistics)
Capital Addis Ababa Business language English Population (millions) 88.9 (2 out of 54) GDP/capita (market prices) US$542 (44 out of 54) RMB’s investment attractiveness 2014 5.2 (7 out of 54) GDP (purchasing power) US$121.4bn (7 out of 54) GDP (average annual growth 2013 - 2018) 7.6% (9 out of 54) Primary export Coffee Primary export destination China Primary import Capital goods Primary import source China Operating environment (RMB score: 2014) 4.6 (16 out of 54) Most problematic factor for doing business Foreign currency regulations
GABON
Snapshot (2013 statistics)
Capital Libreville Business language French Population (millions) 1.6 (46 out of 54) GDP/capita (market prices) US$12,302 (3 out of 54) RMB’s investment attractiveness 2014 4.5 (21 out of 54) GDP (purchasing power) US$30.4bn (19 out of 54) GDP (average annual growth 2013 - 2018) 6.2% (22 out of 54) Primary export Crude petroleum Primary export destination Japan Primary import Machinery Primary import source France Operating environment (RMB score: 2014) 4.4 (24 out of 54) Most problematic factor for doing business Access to financing
134 | RMB Global Markets GAMBIA Snapshot (2013 statistics)
Capital Banjul Business language English Population (millions) 1.8 (44 out of 54) GDP/capita (market prices) US$453 (48 out of 54) RMB’s investment attractiveness 2014 3.3 (42 out of 54) GDP (purchasing power) US$3.7bn (45 out of 54) GDP (average annual growth 2013 - 2018) 6.2% (21 out of 54) Primary export Natural gas Primary export destination China Primary import Machinery & equipment Primary import source China Operating environment (RMB score: 2014) 4.4 (20 out of 54) Most problematic factor for doing business Access to financing
GHANA
Snapshot (2013 statistics)
Capital Accra Business language English Population (millions) 25.6 (13 out of 54) GDP/capita (market prices) US$1,730 (18 out of 54) RMB’s investment attractiveness 2014 5.5 (3 out of 54) GDP (purchasing power) US$88.5bn (10 out of 54) GDP (average annual growth 2013 - 2018) 6.3% (19 out of 54) Primary export Gold Primary export destination France Primary import Machinery & equipment Primary import source China Operating environment (RMB score: 2014) 6.0 (6 out of 54) Most problematic factor for doing business Access to financing
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 135 COUNTRY SNAPSHOTS
GUINEA Snapshot (2013 statistics)
Capital Conakry Business language French Population (millions) 11.1 (25 out of 54) GDP/capita (market prices) US$565 (42 out of 54) RMB’s investment attractiveness 2014 4.1 (30 out of 54) GDP (purchasing power) US$12.5bn (36 out of 54) GDP (average annual growth 2013 - 2018) 6.6% (18 out of 54) Primary export Gold Primary export destination India Primary import Capital goods Primary import source China Operating environment (RMB score: 2014) 3.6 (40 out of 54) Most problematic factor for doing business Corruption
GUINEA-BISSAU
Snapshot (2013 statistics)
Capital Bissau Business language Portuguese Population (millions) 1.6 (45 out of 54) GDP/capita (market prices) US$524 (45 out of 54) RMB’s investment attractiveness 2014 2.5 (52 out of 54) GDP (purchasing power) US$1.9bn (51 out of 54) GDP (average annual growth 2013 - 2018) 3.2% (47 out of 54) Primary export Coconuts, Brazil nuts, and cashews Primary export destination Japan Primary import Machinery and electrical equipment Primary import source India Operating environment (RMB score: 2014) 3.1 (45 out of 54) Most problematic factor for doing business Resolving insolvency
136 | RMB Global Markets KENYA Snapshot (2013 statistics)
Capital Nairobi Business language English Population (millions) 44.4 (7 out of 54) GDP/capita (market prices) US$1,016 (30 out of 54) RMB’s investment attractiveness 2014 5.0 (11 out of 54) GDP (purchasing power) US$80.4bn (11 out of 54) GDP (average annual growth 2013 - 2018) 6.2% (20 out of 54) Primary export Tea Primary export destination Uganda Primary import Industrial supplies Primary import source India Operating environment (RMB score: 2014) 4.7 (14 out of 54) Most problematic factor for doing business Corruption
LESOTHO
Snapshot (2013 statistics)
Capital Maseru Business language English Population (millions) 1.9 (43 out of 54) GDP/capita (market prices) US$1,194 (26 out of 54) RMB’s investment attractiveness 2014 3.5 (39 out of 54) GDP (purchasing power) US$4.3bn (44 out of 54) GDP (average annual growth 2013 - 2018) 5.5% (27 out of 54) Primary export Clothing Primary export destination South Africa Primary import Manufactured goods Primary import source South Africa Operating environment (RMB score: 2014) 4.8 (13 out of 54) Most problematic factor for doing business Access to financing
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 137 COUNTRY SNAPSHOTS
LIBERIA Snapshot (2013 statistics)
Capital Monrovia Business language English Population (millions) 4.1 (39 out of 54) GDP/capita (market prices) US$494 (47 out of 54) RMB’s investment attractiveness 2014 3.2 (43 out of 54) GDP (purchasing power) US$2.9bn (46 out of 54) GDP (average annual growth 2013 - 2018) 7.8% (7 out of 54) Primary export Rubber Primary export destination US Primary import Passenger and cargo ships Primary import source South Korea Operating environment (RMB score: 2014) 4.5 (19 out of 54) Most problematic factor for doing business Access to financing
LIBYA
Snapshot (2013 statistics)
Capital Tripoli Business language English, Arabic Population (millions) 6.1 (35 out of 54) GDP/capita (market prices) US$11,046 (4 out of 54) RMB’s investment attractiveness 2014 4.6 (19 out of 54) GDP (purchasing power) US$70.4bn (13 out of 54) GDP (average annual growth 2013 - 2018) 9.6% (3 out of 54) Primary export Hydrocarbon products Primary export destination Italy Primary import Machinery and transport equipment Primary import source Italy Operating environment (RMB score: 2014) 2.8 (50 out of 54) Most problematic factor for doing business Inefficient government bureaucracy
138 | RMB Global Markets MADAGASCAR Snapshot (2013 statistics)
Capital Antananarivo Business language French, English Population (millions) 23.0 (15 out of 54) GDP/capita (market prices) US$488 (46 out of 54) RMB’s investment attractiveness 2014 4.2 (27 out of 54) GDP (purchasing power) US$22.3bn (25 out of 54) GDP (average annual growth 2013 - 2018) 4.0% (40 out of 54) Primary export Cloves Primary export destination France Primary import Capital goods and raw materials Primary import source China Operating environment (RMB score: 2014) 4.4 (23 out of 54) Most problematic factor for doing business Policy instability
MALAWI
Snapshot (2013 statistics)
Capital Lilongwe Business language English Population (millions) 17.1 (18 out of 54) GDP/capita (market prices) US$223 (53 out of 54) RMB’s investment attractiveness 2014 4.1 (28 out of 54) GDP (purchasing power) US$15.0bn (33 out of 54) GDP (average annual growth 2013 - 2018) 6.1% (23 out of 54) Primary export Tobacco Primary export destination Canada Primary import Refined petroleum Primary import source South Africa Operating environment (RMB score: 2014) 4.2 (30 out of 54) Most problematic factor for doing business Foreign currency regulations
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 139 COUNTRY SNAPSHOTS
MALI Snapshot (2013 statistics)
Capital Bamako Business language French Population (millions) 16.9 (19 out of 54) GDP/capita (market prices) US$657 (38 out of 54) RMB’s investment attractiveness 2014 4.1 (29 out of 54) GDP (purchasing power) US$18.6bn (28 out of 54) GDP (average annual growth 2013 - 2018) 4.6% (35 out of 54) Primary export Gold Primary export destination China Primary import Refined petroleum Primary import source France Operating environment (RMB score: 2014) 4.2 (29 out of 54) Most problematic factor for doing business Access to financing
MAURITANIA
Snapshot (2013 statistics)
Capital Nouakchott Business language French Population (millions) 3.7 (40 out of 54) GDP/capita (market prices) US$1,127 (28 out of 54) RMB’s investment attractiveness 2014 3.8 (36 out of 54) GDP (purchasing power) US$8.2bn (39 out of 54) GDP (average annual growth 2013 - 2018) 6.7% (16 out of 54) Primary export Iron ore Primary export destination China Primary import Equipment for extractive industries Primary import source China Operating environment (RMB score: 2014) 3.9 (36 out of 54) Most problematic factor for doing business Access to financing
140 | RMB Global Markets MAURITIUS Snapshot (2013 statistics)
Capital Port Louis Business language English Population (millions) 1.3 (47 out of 54) GDP/capita (market prices) US$9,160 (5 out of 54) RMB’s investment attractiveness 2014 4.8 (15 out of 54) GDP (purchasing power) US$20.9bn (26 out of 54) GDP (average annual growth 2013 - 2018) 3.8% (44 out of 54) Primary export Textiles Primary export destination UK Primary import Machinery and transport equipment Primary import source India Operating environment (RMB score: 2014) 7.2 (1 out of 54) Most problematic factor for doing business Inefficient government bureaucracy
MOROCCO
Snapshot (2013 statistics)
Capital Rabat Business language French Population (millions) 32.9 (11 out of 54) GDP/capita (market prices) US$3,199 (16 out of 54) RMB’s investment attractiveness 2014 5.4 (4 out of 54) GDP (purchasing power) US$179.2bn (5 out of 54) GDP (average annual growth 2013 - 2018) 4.9% (33 out of 54) Primary export Fertilisers and chemicals Primary export destination France Primary import Fuel and lubricants Primary import source Spain Operating environment (RMB score: 2014) 5.5 (11 out of 54) Most problematic factor for doing business Inefficient government bureaucracy
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 141 COUNTRY SNAPSHOTS
MOZAMBIQUE Snapshot (2013 statistics)
Capital Maputo Business language Portuguese Population (millions) 25.9 (12 out of 54) GDP/capita (market prices) US$593 (41 out of 54) RMB’s investment attractiveness 2014 4.7 (17 out of 54) GDP (purchasing power) US$28.2bn (20 out of 54) GDP (average annual growth 2013 - 2018) 7.8% (6 out of 54) Primary export Aluminium Primary export destination South Africa Primary import Mega-projects Primary import source South Africa Operating environment (RMB score: 2014) 4.4 (25 out of 54) Most problematic factor for doing business Access to financing
NAMIBIA
Snapshot (2013 statistics)
Capital Windhoek Business language English Population (millions) 2.2 (41 out of 54) GDP/capita (market prices) US$5,667 (9 out of 54) RMB’s investment attractiveness 2014 4.4 (23 out of 54) GDP (purchasing power) US$17.8bn (29 out of 54) GDP (average annual growth 2013 - 2018) 4.5% (37 out of 54) Primary export Diamonds Primary export destination South Africa Primary import Machinery & equipment Primary import source South Africa Operating environment (RMB score: 2014) 5.6 (8 out of 54) Most problematic factor for doing business Inadequately educated workforce
142 | RMB Global Markets NIGER Snapshot (2013 statistics)
Capital Niamey Business language French Population (millions) 16.6 (21 out of 54) GDP/capita (market prices) US$443 (49 out of 54) RMB’s investment attractiveness 2014 4.2 (25 out of 54) GDP (purchasing power) US$13.8bn (35 out of 54) GDP (average annual growth 2013 - 2018) 8.7% (4 out of 54) Primary export Uranium Primary export destination South Korea Primary import Refined petroleum Primary import source China Operating environment (RMB score: 2014) 3.8 (39 out of 54) Most problematic factor for doing business Trading across borders
NIGERIA
Snapshot (2013 statistics)
Capital Abuja Business language English Population (millions) 169.3 (1 out of 54) GDP/capita (market prices) US$1,692 (19 out of 54) RMB’s investment attractiveness 2014 5.6 (2 out of 54) GDP (purchasing power) US$479.3bn (3 out of 54) GDP (average annual growth 2013 - 2018) 6.8% (14 out of 54) Primary export Crude petroleum Primary export destination US Primary import Manufactured goods Primary import source China Operating environment (RMB score: 2014) 4.2 (27 out of 54) Most problematic factor for doing business Inadequate infrastructure
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 143 COUNTRY SNAPSHOTS
RWANDA Snapshot (2013 statistics)
Capital Kigali Business language French, English Population (millions) 10.6 (29 out of 54) GDP/capita (market prices) US$698 (37 out of 54) RMB’s investment attractiveness 2014 5.1 (9 out of 54) GDP (purchasing power) US$16.4bn (32 out of 54) GDP (average annual growth 2013 - 2018) 7.1% (10 out of 54) Primary export Cassiterite (tin ore) Primary export destination China Primary import Consumption goods Primary import source Uganda Operating environment (RMB score: 2014) 6.8 (3 out of 54) Most problematic factor for doing business Access to financing
SÃO TOMÉ AND PRÍNCIPE
Snapshot (2013 statistics)
Capital São Tomé Business language Portuguese Population (millions) 0.2 (53 out of 54) GDP/capita (market prices) US$1,612 (20 out of 54) RMB’s investment attractiveness 2014 2.7 (49 out of 54) GDP (purchasing power) US$0.4bn (53 out of 54) GDP (average annual growth 2013 - 2018) 5.3% (28 out of 54) Primary export Cocoa Primary export destination Netherlands Primary import Investment goods Primary import source Portugal Operating environment (RMB score: 2014) 3.2 (43 out of 54) Most problematic factor for doing business Getting credit
144 | RMB Global Markets SENEGAL Snapshot (2013 statistics)
Capital Dakar Business language French Population (millions) 14.1 (23 out of 54) GDP/capita (market prices) US$1,073 (29 out of 54) RMB’s investment attractiveness 2014 4.3 (24 out of 54) GDP (purchasing power) US$27.7bn (22 out of 54) GDP (average annual growth 2013 - 2018) 4.8% (34 out of 54) Primary export Petroleum products Primary export destination Mali Primary import Fuels Primary import source France Operating environment (RMB score: 2014) 4.3 (26 out of 54) Most problematic factor for doing business Access to financing
SEYCHELLES
Snapshot (2013 statistics)
Capital Victoria Business language English, French Population (millions) 0.1 (54 out of 54) GDP/capita (market prices) US$15,046 (2 out of 54) RMB’s investment attractiveness 2014 3.1 (45 out of 54) GDP (purchasing power) US$2.5bn (49 out of 54) GDP (average annual growth 2013 - 2018) 3.6% (45 out of 54) Primary export Canned tuna Primary export destination France Primary import Machinery and transport equipment Primary import source Saudi Arabia Operating environment (RMB score: 2014) 6.0 (7 out of 54) Most problematic factor for doing business Access to financing
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 145 COUNTRY SNAPSHOTS
SIERRA LEONE Snapshot (2013 statistics)
Capital Freetown Business language English Population (millions) 6.1 (36 out of 54) GDP/capita (market prices) US$784 (34 out of 54) RMB’s investment attractiveness 2014 4.1 (31 out of 54) GDP (purchasing power) US$9.4bn (38 out of 54) GDP (average annual growth 2013 - 2018) 9.7% (2 out of 54) Primary export Iron ore Primary export destination China Primary import Capital goods Primary import source China Operating environment (RMB score: 2014) 4.1 (31 out of 54) Most problematic factor for doing business Access to financing
SOMALIA
Snapshot (2013 statistics)
Capital Mogadishu Business language English Population (millions) 10.5 (30 out of 54) GDP/capita (market prices) US$108 (54 out of 54) RMB’s investment attractiveness 2014 – GDP (purchasing power) US$0bn (54 out of 54) GDP (average annual growth 2013 - 2018) 2.6% (50 out of 54) Primary export Chemicals Primary export destination UAE Primary import Chemicals Primary import source Djibouti Operating environment (RMB score: 2014) 1.7 (53 out of 54) Most problematic factor for doing business –
146 | RMB Global Markets SOUTH AFRICA Snapshot (2013 statistics)
Capital Pretoria Business language English Population (millions) 53.0 (5 out of 54) GDP/capita (market prices) US$6,621 (7 out of 54) RMB’s investment attractiveness 2014 5.7 (1 out of 54) GDP (purchasing power) US$596.5bn (1 out of 54) GDP (average annual growth 2013 - 2018) 2.7% (49 out of 54) Primary export Platinum Primary export destination US Primary import Petrochemicals Primary import source Germany Operating environment (RMB score: 2014) 6.4 (4 out of 54) Most problematic factor for doing business Inadequately educated workforce
SOUTH SUDAN
Snapshot (2013 statistics)
Capital Juba Business language English Population (millions) 10.9 (28 out of 54) GDP/capita (market prices) US$1,262 (24 out of 54) RMB’s investment attractiveness 2014 3.1 (44 out of 54) GDP (purchasing power) US$14.7bn (34 out of 54) GDP (average annual growth 2013 - 2018) 12.2% (1 out of 54) Primary export Crude petroleum Primary export destination China Primary import – Primary import source – Operating environment (RMB score: 2014) 1.5 (54 out of 54) Most problematic factor for doing business Resolving insolvency
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 147 COUNTRY SNAPSHOTS
SUDAN Snapshot (2013 statistics)
Capital Khartoum Business language Arabic, English Population (millions) 34.4 (10 out of 54) GDP/capita (market prices) US$2,040 (17 out of 54) RMB’s investment attractiveness 2014 3.8 (34 out of 54) GDP (purchasing power) US$90.5bn (9 out of 54) GDP (average annual growth 2013 - 2018) 4.6% (36 out of 54) Primary export Crude petroleum Primary export destination UAE Primary import Machinery and equipment Primary import source China Operating environment (RMB score: 2014) 2.3 (52 out of 54) Most problematic factor for doing business Dealing with construction permits
SWAZILAND
Snapshot (2013 statistics)
Capital Mbabane Business language English Population (millions) 1.1 (48 out of 54) GDP/capita (market prices) US$3,313 (13 out of 54) RMB’s investment attractiveness 2014 3.4 (40 out of 54) GDP (purchasing power) US$6.8bn (41 out of 54) GDP (average annual growth 2013 - 2018) 2.2% (51 out of 54) Primary export Miscellaneous edibles Primary export destination China Primary import Manufactured goods Primary import source India Operating environment (RMB score: 2014) 5.0 (12 out of 54) Most problematic factor for doing business Tax rates
148 | RMB Global Markets TANZANIA Snapshot (2013 statistics)
Capital Dodoma Business language English Population (millions) 46.3 (6 out of 54) GDP/capita (market prices) US$703 (36 out of 54) RMB’s investment attractiveness 2014 5.0 (10 out of 54) GDP (purchasing power) US$79.4bn (12 out of 54) GDP (average annual growth 2013 - 2018) 7.0% (12 out of 54) Primary export Gold Primary export destination India Primary import Capital goods Primary import source India Operating environment (RMB score: 2014) 4.5 (18 out of 54) Most problematic factor for doing business Access to financing
TOGO
Snapshot (2013 statistics)
Capital Lomé Business language French Population (millions) 6.8 (33 out of 54) GDP/capita (market prices) US$640 (39 out of 54) RMB’s investment attractiveness 2014 3.6 (37 out of 54) GDP (purchasing power) US$7.4bn (40 out of 54) GDP (average annual growth 2013 - 2018) 5.8% (25 out of 54) Primary export Tea Primary export destination India Primary import Industrial supplies Primary import source China Operating environment (RMB score: 2014) 3.8 (37 out of 54) Most problematic factor for doing business Paying taxes
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 149 COUNTRY SNAPSHOTS
TUNISIA Snapshot (2013 statistics)
Capital Tunis Business language French, English Population (millions) 10.9 (27 out of 54) GDP/capita (market prices) US$4,345 (11 out of 54) RMB’s investment attractiveness 2014 5.3 (5 out of 54) GDP (purchasing power) US$108.4bn (8 out of 54) GDP (average annual growth 2013 - 2018) 4.0% (42 out of 54) Primary export Textiles Primary export destination France Primary import Refined petroleum Primary import source France Operating environment (RMB score: 2014) 6.0 (5 out of 54) Most problematic factor for doing business Policy instability
UGANDA
Snapshot (2013 statistics)
Capital Kampala Business language English Population (millions) 36.8 (9 out of 54) GDP/capita (market prices) US$626 (40 out of 54) RMB’s investment attractiveness 2014 4.9 (13 out of 54) GDP (purchasing power) US$54.6bn (14 out of 54) GDP (average annual growth 2013 - 2018) 6.8% (15 out of 54) Primary export Coffee Primary export destination UAE Primary import Petroleum products Primary import source Kenya Operating environment (RMB score: 2014) 4.5 (17 out of 54) Most problematic factor for doing business Corruption
150 | RMB Global Markets ZAMBIA Snapshot (2013 statistics)
Capital Lusaka Business language English Population (millions) 14.5 (22 out of 54) GDP/capita (market prices) US$1,542 (22 out of 54) RMB’s investment attractiveness 2014 4.9 (14 out of 54) GDP (purchasing power) US$25.5bn (24 out of 54) GDP (average annual growth 2013 - 2018) 6.7% (17 out of 54) Primary export Copper Primary export destination China Primary import Capital goods Primary import source South Africa Operating environment (RMB score: 2014) 5.6 (9 out of 54) Most problematic factor for doing business Access to financing
ZIMBABWE
Snapshot (2013 statistics)
Capital Harare Business language English Population (millions) 13.1 (24 out of 54) GDP/capita (market prices) US$987 (31 out of 54) RMB’s investment attractiveness 2014 3.5 (38 out of 54) GDP (purchasing power) US$10.3bn (37 out of 54) GDP (average annual growth 2013 - 2018) 4.1% (38 out of 54) Primary export Tobacco Primary export destination China Primary import Machinery & transport equipment Primary import source South Africa Operating environment (RMB score: 2014) 3.4 (42 out of 54) Most problematic factor for doing business Access to financing
Sources: WEF, World Bank, EIU, IMF, UN Comtrade, RMB Global Markets
RMB Global Markets | 151 APPENDICES
CHAPTER 7: APPENDICES
NAIROBI
152 | RMB Global Markets appendices
Appendices contents
Table A1: RMB's investment attractiveness rating and subcomponents 154
Table A2: Investment attractiveness scores over time 156
Table A3: Participation in Regional Economic Communities 158
Table A4: Economic size and composition of GDP 160
Table A5: Long-term real GDP forecasts according to different sources 162
Table A6: Concentration of exports 164
Table A7: Operating environment scores over time 166 Table A8: General indices characterising the economic/business 168 operating environment Table A9: Global competitiveness indices (pillars) 170
Table A10: Additional operating environment indicators 174
Table A11: Strength of the legal and administrative environment 176
Table A12: Human Development Indicators 178
Table A13: Sovereign long-term foreign currency ratings 180
Table A14: Political risk for trade and investment 182
Table A15: Tax indicators (resident companies) 184
Table A16: Tax indicators (non-resident companies) 192
Table A17: Depth of financial markets 200
Table A18: Additional financial market indicators 202
Table A19: Features of domestic financial markets 204
Table A20: Currency regimes 206
Table A21: Ease of getting credit 208
Table A22: Stock exchanges 210
Table A23: Infrastructure quality and investment spending 212
Table A24: Household income data 214
Table A25: Drivers of consumption 218
Methodology 220
Sources and further information 221
RMB Global Markets | 153 appendices
Table A1: RMB’s investment attractiveness ratings and subcomponents
Investment attractiveness Operating Score Africa World Market environment 1 = poor; 1 = best; 1 = best; Market size growth 1 = poor; 10 = good 53 = worst 182 = worst US$bn PPP % p.a. 10 = good Africa Algeria 5.1 8 67 302 4.3 4.4 Angola 4.6 18 100 139 5.5 3.5 Benin 4.0 32 139 18 5.0 4.2 Botswana 5.0 12 75 36 4.1 6.9 Burkina Faso 4.5 20 107 29 6.8 4.4 Burundi 3.4 41 157 6 5.1 3.9 Cabo Verde 3.0 46 168 2 3.8 5.6 Cameroon 4.5 22 114 57 5.2 4.0 CAR 2.6 51 181 3 4.9 3.1 Chad 3.9 33 140 31 5.5 3.1 Comoros 2.7 48 178 1 4.0 3.8 Congo 3.8 35 146 22 6.7 2.9 Côte d’Ivoire 4.7 16 96 48 7.2 4.1 Djibouti 2.9 47 174 3 6.2 4.1 DRC 4.2 26 128 55 7.4 2.9 Egypt 5.3 6 59 575 3.7 4.6 Equatorial Guinea 2.1 53 183 18 -5.5 3.2 Eritrea 2.6 50 180 5 2.5 2.7 Ethiopia 5.2 7 60 132 7.1 4.6 Gabon 4.5 21 111 33 6.1 4.4 Gambia 3.3 42 158 4 6.1 4.4 Ghana 5.5 3 49 94 6.0 6.0 Guinea 4.1 30 136 13 9.0 3.6 Guinea-Bissau 2.5 52 182 2 3.9 3.1 Kenya 5.0 11 72 87 6.4 4.7 Lesotho 3.5 39 155 5 5.4 4.8 Liberia 3.2 43 161 3 7.7 4.5 Libya 4.6 19 103 66 11.0 2.8 Madagascar 4.2 27 131 23 4.5 4.4 Malawi 4.1 28 132 16 6.2 4.2 Mali 4.1 29 135 20 5.0 4.2 Mauritania 3.8 36 147 9 7.4 3.9 Mauritius 4.8 15 88 22 4.0 7.2 Morocco 5.4 4 50 189 5.1 5.5 Mozambique 4.7 17 97 31 7.9 4.4 Namibia 4.4 23 116 19 4.5 5.6 Niger 4.2 25 127 15 9.4 3.8 Nigeria 5.6 2 43 829 6.6 4.2 Rwanda 5.1 9 70 18 7.5 6.8 São Tomé and Príncipe 2.7 49 179 0 5.7 3.2 Senegal 4.3 24 122 29 5.0 4.3 Seychelles 3.1 45 165 3 3.6 6.0 Sierra Leone 4.1 31 138 11 7.7 4.1 Somalia - - - - - 1.7 South Africa 5.7 1 35 620 2.9 6.4 South Sudan 3.1 44 164 16 9.0 1.5 Sudan 3.8 34 145 94 4.7 2.3 Swaziland 3.4 40 156 7 2.1 5.0 Tanzania 5.0 10 71 86 7.0 4.5 Togo 3.6 37 152 8 5.8 3.8 Tunisia 5.3 5 58 113 4.2 6.0 Uganda 4.9 13 79 59 7.0 4.5
154 | RMB Global Markets Investment attractiveness Operating Score Africa World Market environment 1 = poor; 1 = best; 1 = best; Market size growth 1 = poor; 10 = good 53 = worst 182 = worst US$bn PPP % p.a. 10 = good Africa Zambia 4.9 14 86 28 6.7 5.6 Zimbabwe 3.5 38 154 11 4.3 3.4
Developed economies Germany 6.4 - 12 3,338 1.4 8.1 Japan 6.3 - 14 4,835 1.0 7.9 UK 6.5 - 3 2,497 2.5 8.2 US 7.1 - 1 17,528 2.7 8.3
Emerging Asia China 7.0 - 2 14,625 6.9 5.6 Hong Kong 6.4 - 8 402 3.9 8.7 India 6.4 - 7 5,425 6.4 4.9 Indonesia 6.0 - 23 1,383 5.9 5.2 Malaysia 6.4 - 9 561 5.0 7.4 Pakistan 5.7 - 36 602 6.4 4.7 Philippines 5.9 - 29 493 6.2 5.4 Singapore 6.4 - 10 367 3.7 9.0 South Korea 6.5 - 4 1,755 3.8 7.6 Taiwan 6.5 - 5 973 4.1 7.7 Thailand 6.1 - 22 701 4.1 6.6 Vietnam 5.6 - 41 386 5.8 5.1
Emerging Europe and Middle East Bulgaria 5.1 - 68 108 2.7 6.2 Czech Republic 5.4 - 54 296 2.2 6.4 Hungary 5.2 - 62 205 1.8 6.6 Israel 5.8 - 30 287 3.4 7.3 Poland 6.1 - 20 856 3.4 6.9 Romania 5.4 - 52 296 3.0 6.0 Russia 5.6 - 45 2,630 2.3 5.2 Turkey 6.0 - 27 1,219 3.2 6.3
Emerging Latin America Argentina 4.9 - 78 794 1.5 4.6 Brazil 5.8 - 34 2,505 2.9 5.3 Chile 6.1 - 17 352 4.2 7.6 Colombia 6.0 - 26 560 4.5 6.4 Mexico 6.2 - 16 1,927 4.2 6.2 Peru 6.0 - 24 369 5.8 6.4
Source: RMB Global Markets, IMF Data as at September 2014
RMB Global Markets | 155 appendices
Table A2: Investment attractiveness scores over time (1 = poor; 10 = good)
1995 2000 2005 2012 2013 2014 Africa Algeria 4.4 4.8 5.0 4.9 4.9 5.1 Angola - - 4.9 4.7 4.5 4.6 Benin - 3.8 3.8 3.9 3.9 4.0 Botswana 4.2 4.7 4.9 4.9 5.0 5.0 Burkina Faso - 3.5 3.9 4.4 4.5 4.5 Burundi - 2.0 2.7 3.2 3.3 3.4 Cabo Verde 3.6 4.0 4.2 4.4 4.5 4.5 Cameroon - 3.0 3.1 3.1 3.1 3.0 CAR - - 2.3 2.8 3.0 2.6 Chad - 3.0 4.3 3.6 3.9 3.9 Comoros - - - 2.6 2.6 2.7 Congo - 2.7 3.4 3.6 4.0 3.8 Côte d’Ivoire 4.0 4.0 3.4 4.5 4.6 4.7 Djibouti - 2.2 2.6 2.7 2.8 2.9 DRC 1.9 1.9 3.4 3.9 3.9 4.2 Egypt 4.5 5.0 5.0 5.5 5.6 5.3 Equatorial Guinea - 3.5 4.5 3.6 2.5 2.1 Eritrea - - 2.5 2.6 2.6 2.6 Ethiopia 4.1 4.5 4.5 5.1 5.1 5.2 Gabon 3.8 3.8 3.7 3.9 4.4 4.5 Gambia - 2.7 2.9 3.2 3.4 3.3 Ghana 4.2 4.4 4.7 5.4 5.5 5.5 Guinea 3.3 3.4 3.4 4.0 4.1 4.1 Guinea-Bissau - 1.9 2.2 2.6 2.7 2.5 Kenya - 4.3 4.3 5.0 5.0 5.0 Lesotho - 2.7 2.8 3.1 3.2 3.5 Liberia - - - 2.9 3.1 3.2 Libya - 3.5 4.2 5.3 5.2 4.6 Madagascar 3.1 3.4 3.8 4.2 4.2 4.2 Malawi 3.5 3.8 3.5 3.9 4.2 4.1 Mali 3.1 3.5 3.9 4.2 4.2 4.1 Mauritania - 2.9 3.9 3.6 3.9 3.8 Mauritius - 4.4 4.4 4.8 4.9 4.8 Morocco 4.6 5.0 4.9 5.3 5.4 5.4 Mozambique 3.4 4.0 4.2 4.5 4.6 4.7 Namibia - 4.0 4.1 4.4 4.4 4.4 Niger - 2.9 3.2 3.9 3.9 4.2 Nigeria 4.1 4.7 5.1 5.5 5.6 5.6 Rwanda - 2.5 3.4 4.8 4.9 5.1 São Tomé and Príncipe - - - 2.7 3.4 2.7 Senegal - 3.9 4.1 4.2 4.2 4.3 Seychelles - - 2.4 3.0 3.1 3.1 Sierra Leone 1.5 1.5 3.2 3.9 4.1 4.1 Somalia ------South Africa 5.4 5.6 5.8 5.8 5.8 5.7 South Sudan - - - - - 3.1 Sudan - - 3.9 3.3 3.7 3.8 Swaziland 3.1 3.3 3.3 2.9 3.1 3.4 Tanzania 3.6 4.0 4.5 5.0 5.1 5.0 Togo - 2.9 2.9 3.2 3.5 3.6 Tunisia 5.0 5.2 5.1 5.4 5.4 5.3 Uganda - 4.3 4.5 4.8 4.9 4.9 Zambia 3.1 3.2 4.0 4.8 4.9 4.9 Zimbabwe - 3.8 2.0 3.2 3.3 3.5
156 | RMB Global Markets 1995 2000 2005 2012 2013 2014 Developed economies Germany 6.1 6.3 6.1 6.3 6.3 6.4 Japan 6.1 6.1 6.2 6.4 6.4 6.3 UK 6.5 6.5 6.6 6.5 6.4 6.5 US 7.2 7.3 7.1 7.1 7.2 7.1
Emerging Asia China 6.6 6.6 6.8 7.2 7.2 7.0 Hong Kong 5.8 5.8 6.1 6.4 6.4 6.4 India 5.5 5.7 6.0 6.5 6.4 6.4 Indonesia 5.1 4.6 5.4 6.0 6.0 6.0 Malaysia 6.3 5.9 6.0 6.2 6.3 6.4 Pakistan 5.2 5.2 5.4 5.2 5.2 5.7 Philippines 4.7 5.2 5.1 5.3 5.5 5.9 Singapore 6.4 6.3 6.1 6.4 6.4 6.4 South Korea 6.3 6.2 6.3 6.5 6.5 6.5 Taiwan 6.3 6.4 6.0 6.5 6.5 6.5 Thailand 5.7 5.2 6.1 6.2 6.2 6.1 Vietnam 5.1 5.0 5.4 5.7 5.5 5.6
Emerging Europe and Middle East Bulgaria 2.7 3.8 5.2 5.0 5.1 5.1 Czech Republic 5.0 5.1 5.4 5.4 5.4 5.4 Hungary 4.6 5.4 5.4 5.2 5.1 5.2 Israel 5.9 5.6 5.3 5.8 5.8 5.8 Poland 5.7 5.9 5.5 5.9 5.9 6.1 Romania 4.0 4.1 5.4 5.4 5.3 5.4 Russia 3.2 4.8 6.1 5.7 5.7 5.6 Turkey 5.7 5.6 5.4 5.9 6.1 6.0
Emerging Latin America Argentina 5.9 5.5 4.9 5.5 5.2 4.9 Brazil 5.1 5.5 5.5 5.8 5.9 5.8 Chile 6.2 5.9 6.0 6.1 6.2 6.1 Colombia 5.3 4.8 5.3 5.9 5.9 6.0 Mexico 5.6 6.0 5.7 6.0 6.1 6.2 Peru 5.1 5.3 5.2 6.0 6.1 6.0
Source: RMB Global Markets Data as at September 2014
RMB Global Markets | 157 appendices
Table A3: Participation in Regional Economic Communities UMA IGAD ECCAS SADC ECOWAS COMESA CEN-SAD WAEMU MRU CEMAC CEPGL EAC IOC SACU
Algeria ü Angola ü ü Benin ü ü ü Botswana ü ü Burkina Faso ü ü ü Burundi ü ü ü ü Cabo Verde ü Cameroon ü ü CAR ü ü ü Chad ü ü ü Comoros ü ü ü Congo ü ü Côte d’Ivoire ü ü ü Djibouti ü ü ü DRC ü ü ü ü Egypt ü ü Equatorial Guinea ü ü Eritrea ü ü ü Ethiopia ü ü Gabon ü ü Gambia ü ü ü Ghana ü ü ü Guinea ü ü ü ü Guinea-Bissau ü ü ü Kenya ü ü ü Lesotho ü ü Liberia ü ü ü ü Libya ü ü ü Madagascar ü ü ü Malawi ü ü Mali ü ü ü Mauritania Mauritius ü ü ü Morocco ü ü Mozambique ü Namibia ü ü Niger ü ü ü Nigeria ü ü ü Rwanda ü ü ü São Tomé and Príncipe ü ü Senegal ü ü ü Seychelles ü ü ü Sierra Leone ü ü ü ü Somalia ü ü
158 | RMB Global Markets UMA IGAD ECCAS SADC ECOWAS COMESA CEN-SAD WAEMU MRU CEMAC CEPGL EAC IOC SACU
South Africa ü ü South Sudan Sudan ü ü ü Swaziland ü ü ü Tanzania ü ü Togo ü ü ü Tunisia ü ü Uganda ü ü ü Zambia ü ü Zimbabwe ü ü
Source: AEC, World Trade Organisation Data as at September 2014
RMB Global Markets | 159 appendices
Table A4: Economic size and composition of GDP
Value added (% of GDP)1 Composition of economic expenditure (% of GDP)1 2
Market size US$bn PPP Agriculture Industry Services Household consumption Government consumption Investment Exports Imports
Africa Algeria 302.5 9 49 42 33 20 13 37 28 Angola 139.1 10 60 30 50 20 3 60 42 Benin 17.9 32 13 54 77 12 7 15 27 Botswana 36.0 3 35 62 52 19 27 44 50 Burkina Faso 28.7 35 26 38 61 18 10 27 34 Burundi 6.1 41 17 43 76 24 15 9 37 Cabo Verde 2.3 8 18 74 63 19 34 32 53 Cameroon 56.7 20 31 49 70 14 13 29 32 CAR 2.6 54 14 32 88 8 6 12 22 Chad 31.4 56 13 31 77 6 16 29 39 Comoros 1.0 46 12 42 106 15 8 15 52 Congo 22.0 3 77 20 12 10 9 87 35 Côte d’Ivoire 48.1 25 26 49 74 9 7 47 39 Djibouti 2.7 4 17 79 57 25 25 57 77 DRC 55.0 45 22 33 70 15 15 55 67 Egypt 574.7 14 39 46 81 11 11 17 26 Equatorial Guinea 17.5 3 94 3 14 4 24 84 61 Eritrea 4.6 15 22 63 78 21 2 14 23 Ethiopia 132.4 49 10 41 78 7 22 14 32 Gabon 32.7 4 62 34 36 9 21 57 31 Gambia 4.0 20 13 67 89 10 11 29 51 Ghana 94.1 23 27 50 66 14 22 46 56 Guinea 13.3 21 45 33 90 11 13 30 62 Guinea-Bissau 2.0 59 13 28 91 6 5 17 32 Kenya 86.7 30 17 53 80 17 14 27 44 Lesotho 4.6 7 35 58 92 38 21 47 108 Liberia 3.1 39 16 45 116 15 18 32 90 Libya 65.9 2 78 20 23 9 6 67 27 Madagascar 23.3 29 16 55 78 10 29 26 37 Malawi 16.2 30 19 50 74 20 7 30 39 Mali 20.1 42 23 35 79 11 13 31 38 Mauritania 8.9 17 46 37 84 15 31 58 94 Mauritius 22.0 3 25 72 74 13 17 55 67 Morocco 189.1 15 30 56 60 19 26 36 50 Mozambique 31.0 30 23 47 79 14 36 30 71 Namibia 18.9 10 31 59 61 25 14 43 52 Niger 14.9 38 20 41 71 14 24 25 44 Nigeria 828.5 22 27 26 59 12 0 32 23 Rwanda 17.9 33 16 51 89 8 10 13 34 São Tomé and Príncipe 0.4 16 17 67 - - - 11 53 Senegal 29.4 17 24 59 74 17 16 24 42 Seychelles 2.6 2 14 84 - - - 45 98 Sierra Leone 10.9 57 8 35 87 10 30 16 39 Somalia - 65 10 28 105 17 - 10 38 South Africa 619.8 3 28 69 61 22 12 28 31 South Sudan 16.0 0 48 0 94 27 6 10 43 Sudan 94.3 28 31 41 76 12 16 6 18 Swaziland 7.0 7 48 45 84 15 5 67 75 Tanzania 86.4 28 25 47 62 17 30 30 47 Togo 8.0 31 16 53 89 10 10 40 57
160 | RMB Global Markets Value added (% of GDP)1 Composition of economic expenditure (% of GDP)1 2
Market size US$bn PPP Agriculture Industry Services Household consumption Government consumption Investment Exports Imports
Africa Tunisia 113.4 9 30 61 72 14 21 48 59 Uganda 59.0 26 29 45 83 8 19 23 39 Zambia 27.8 20 38 42 56 16 16 46 43 Zimbabwe 10.9 14 35 51 80 27 20 44 76
Developed economies Germany 3,338.0 1 31 69 58 19 - 52 46 Japan 4,835.0 1 26 73 61 20 - 15 17 UK 2,497.3 1 21 79 66 22 - 32 34 US 17,528.4 1 20 79 69 16 - 14 17
Emerging Asia China 14,625.2 10 45 45 35 14 25 27 25 Hong Kong 402.3 0 7 93 64 9 0 225 224 India 5,425.4 18 26 56 60 12 23 24 31 Indonesia 1,382.9 14 47 39 57 9 0 24 26 Malaysia 561.5 10 41 49 49 14 15 87 75 Pakistan 601.9 24 22 54 83 10 10 12 20 Philippines 493.4 12 31 57 74 11 17 31 34 Singapore 366.9 0 27 73 41 10 - 201 178 South Korea 1,755.0 3 39 58 54 16 - 57 53 Taiwan 973.3 ------Thailand 701.1 12 44 44 56 14 23 75 74 Vietnam 385.7 20 39 42 63 6 - 80 77
Emerging Europe and Middle East Bulgaria 108.3 6 30 63 64 16 18 67 70 Czech Republic 295.9 2 37 60 51 21 - 78 72 Hungary 205.2 4 31 65 63 - - 94 87 Israel 286.8 0 0 0 56 23 - 36 36 Poland 855.6 4 32 65 61 18 - 46 46 Romania 296.0 6 42 52 72 7 - 40 45 Russia 2,629.7 4 36 60 48 19 19 29 22 Turkey 1,219.2 9 27 64 70 15 16 26 32
Emerging Latin America Argentina 793.8 9 31 60 59 17 - 20 17 Brazil 2,505.2 5 26 68 62 21 16 13 14 Chile 352.2 4 36 61 63 12 - 34 34 Colombia 559.7 7 38 56 62 17 11 18 20 Mexico 1,926.6 4 36 61 67 12 17 33 34 Peru 368.8 7 35 58 60 10 23 26 24
Note: 1 Last available data point recorded on World Development Indicators. 2 Net exports = Exports – Imports. Source: IMF, World Bank Data as at September 2014
RMB Global Markets | 161 appendices
Table A5: Long-term real GDP forecasts according to different sources
Standard IMF IHS Global Insight BMI Average growth deviation Africa Algeria 4.3 3.9 3.5 3.9 0.4 Angola 5.5 5.4 6.0 5.6 0.3 Benin 5.0 3.9 4.4 4.5 0.5 Botswana 4.1 4.0 5.0 4.3 0.5 Burkina Faso 6.8 4.8 6.9 6.2 1.2 Burundi 5.1 5.7 3.6 4.8 1.1 Cabo Verde 3.8 4.7 5.1 4.5 0.7 Cameroon 5.2 4.7 5.1 5.0 0.3 CAR 4.9 5.8 2.6 4.4 1.7 Chad 5.5 2.9 5.1 4.5 1.4 Comoros 4.0 4.6 - 4.3 0.4 Congo 6.7 5.1 7.3 6.4 1.1 Côte d’Ivoire 7.2 4.0 8.6 6.6 2.3 Djibouti 6.2 5.6 3.7 5.2 1.3 DRC 7.4 6.0 7.2 6.9 0.8 Egypt 3.7 4.7 4.1 4.2 0.5 Equatorial Guinea -5.4 4.4 -1.9 -1.0 5.0 Eritrea 2.5 3.0 1.0 2.2 1.1 Ethiopia 7.1 7.0 6.1 6.7 0.6 Gabon 6.1 4.0 5.8 5.3 1.1 Gambia 6.1 4.9 5.0 5.3 0.6 Ghana 6.1 5.4 6.3 5.9 0.5 Guinea 9.1 4.8 9.0 7.7 2.5 Guinea-Bissau 3.9 3.2 3.1 3.4 0.5 Kenya 6.4 6.9 6.0 6.4 0.4 Lesotho 5.4 5.2 3.2 4.6 1.2 Liberia 7.7 5.4 11.0 8.0 2.8 Libya 11.8 4.5 9.2 8.5 3.7 Madagascar 4.5 4.2 3.6 4.1 0.5 Malawi 6.2 5.9 6.3 6.1 0.2 Mali 5.0 4.5 5.5 5.0 0.5 Mauritania 7.4 4.3 5.6 5.8 1.6 Mauritius 4.0 4.7 4.2 4.3 0.3 Morocco 5.1 3.7 3.9 4.2 0.8 Mozambique 7.9 14.0 8.8 10.2 3.3 Namibia 4.5 3.5 4.5 4.2 0.6 Niger 9.5 4.8 6.2 6.8 2.4 Nigeria 6.9 5.7 6.9 6.5 0.7 Rwanda 7.5 7.1 7.0 7.2 0.3 São Tomé and Príncipe 5.7 4.1 2.9 4.2 1.4 Senegal 5.0 4.3 5.0 4.8 0.4 Seychelles 3.6 4.5 4.0 4.0 0.5 Sierra Leone 7.8 5.3 9.9 7.7 2.3 Somalia - 2.1 2.6 2.3 - South Africa 2.9 4.3 3.0 3.4 0.8 South Sudan 9.1 4.7 8.8 7.6 2.5 Sudan 4.7 3.8 4.4 4.3 0.5 Swaziland 2.1 2.3 1.7 2.0 0.3 Tanzania 7.0 6.7 7.8 7.2 0.5 Togo 5.8 3.8 5.0 4.9 1.0 Tunisia 4.3 4.4 4.5 4.4 0.1 Uganda 7.0 8.9 6.9 7.6 1.1 Zambia 6.7 6.6 6.7 6.7 0.0 Zimbabwe 4.3 5.1 3.4 4.2 0.9
162 | RMB Global Markets Standard IMF IHS Global Insight BMI Average growth deviation Developed economies Germany 1.4 1.7 1.5 1.5 0.1 Japan 1.0 1.0 0.8 0.9 0.2 UK 2.5 2.3 2.5 2.4 0.1 US 2.7 2.5 2.5 2.6 0.1
Emerging Asia China 7.0 8.0 6.1 7.0 1.0 Hong Kong - 3.4 3.7 3.5 0.2 India 6.4 7.9 6.4 6.9 0.9 Indonesia 5.9 5.2 6.2 5.7 0.5 Malaysia 5.0 4.3 4.2 4.5 0.5 Pakistan 4.2 4.7 4.0 4.3 0.4 Philippines 6.2 4.6 5.4 5.4 0.8 Singapore 3.7 4.1 3.3 3.7 0.4 South Korea 3.8 3.0 4.3 3.7 0.6 Taiwan 4.1 3.4 3.9 3.8 0.4 Thailand 4.1 4.2 3.7 4.0 0.3 Vietnam 5.8 5.9 6.3 6.0 0.3
Emerging Europe Bulgaria 2.7 3.9 3.2 3.2 0.6 Czech Republic 2.2 3.5 2.5 2.7 0.7 Hungary 1.8 3.4 2.5 2.6 0.8 Israel 3.4 3.8 4.2 3.8 0.4 Poland 3.4 4.2 3.2 3.6 0.5 Romania 3.0 3.5 3.5 3.3 0.3 Russia 2.3 3.3 2.1 2.6 0.6 Turkey 3.2 4.0 3.4 3.5 0.4
Emerging Latin America Argentina 1.5 4.2 3.8 3.2 1.5 Brazil 2.9 3.8 3.1 3.3 0.5 Chile 4.2 4.4 4.3 4.3 0.1 Colombia 4.5 4.6 4.6 4.5 0.0 Mexico 3.6 3.6 3.8 3.7 0.1 Peru 5.8 4.5 5.2 5.1 0.6
Source: IMF, BMI, IHS Global Insight, RMB Global Markets Data as at September 2014
RMB Global Markets | 163 appendices
Table A6: Concentration of exports
Exports (% of merchandise exports)2 Agricultural Exports (% of Concentration raw Ores and GDP) (2012) index (2012)1 materials Food Fuels Manufactures metals Africa Algeria 37.2 0.5 0.0 0.4 97.1 2.2 0.2 Angola 60.1 1.0 0.0 0.3 94.8 0.0 4.9 Benin - 0.3 23.6 60.8 0.0 14.7 0.9 Botswana 44.5 0.8 0.2 2.0 0.6 88.4 8.6 Burkina Faso 27.5 0.5 51.7 38.5 0.0 8.3 1.5 Burundi 9.0 0.4 4.3 68.8 0.0 12.9 13.7 Cabo Verde 31.8 0.4 0.0 87.1 0.0 12.9 0.0 Cameroon 29.2 0.4 15.7 17.2 55.6 9.3 1.6 CAR 11.6 0.4 31.5 1.2 0.6 4.2 62.2 Chad 29.5 0.8 66.9 16.2 7.9 7.7 0.8 Comoros - 0.5 0.1 72.7 0.0 27.1 0.0 Congo - 0.8 1.3 0.5 67.7 30.5 0.0 Côte d’Ivoire - 0.3 11.5 46.8 30.9 10.5 0.3 Djibouti - 0.2 0.0 0.4 6.5 90.7 0.3 DRC 55.5 0.5 1.9 32.5 1.3 4.8 51.8 Egypt 17.4 0.2 2.5 14.3 31.5 45.5 6.0 Equatorial Guinea 84.4 0.7 30.0 57.9 1.7 4.0 7.5 Eritrea 0.0 0.9 26.0 42.0 0.0 30.3 1.8 Ethiopia 13.9 0.3 8.0 80.3 0.0 8.8 0.6 Gabon 56.9 0.8 8.9 0.8 83.1 4.2 3.0 Gambia 28.6 0.3 2.2 81.7 0.0 6.9 9.2 Ghana 45.9 0.4 2.2 48.1 39.2 8.6 2.0 Guinea 29.7 0.5 4.9 2.5 1.5 31.9 59.2 Guinea-Bissau 17.3 0.9 0.2 98.7 0.8 0.1 0.6 Kenya 27.3 0.2 10.9 47.9 4.3 34.7 2.0 Lesotho 46.5 0.5 3.5 8.9 0.0 83.7 0.1 Liberia 32.4 0.4 25.6 8.6 0.0 0.4 64.8 Libya - 0.8 0.0 0.0 97.7 2.3 0.0 Madagascar - 0.2 2.3 32.8 7.0 38.0 19.5 Malawi - 0.5 5.1 75.7 0.1 9.0 8.8 Mali 31.1 0.5 52.0 20.3 0.3 23.6 3.4 Mauritania 58.0 0.5 0.0 26.7 15.0 0.0 58.3 Mauritius 54.8 0.2 0.4 36.0 0.0 61.7 0.9 Morocco 36.2 0.2 1.1 17.2 4.0 65.4 12.1 Mozambique 29.8 0.3 4.5 16.5 27.8 12.2 39.0 Namibia 42.6 0.3 0.9 27.7 1.0 40.9 29.3 Niger 24.8 0.4 3.1 10.5 19.4 3.0 56.2 Nigeria 31.7 0.8 7.3 5.3 84.0 2.9 0.4 Rwanda 13.2 0.4 5.0 51.2 0.0 10.2 33.6 São Tomé and Príncipe 11.2 0.5 0.3 87.2 0.7 11.6 0.1 Senegal 24.3 0.2 2.0 31.2 16.6 45.4 4.8 Seychelles - 0.5 0.0 58.5 0.0 2.4 0.0 Sierra Leone - 0.3 0.8 91.6 1.6 7.5 1.4 Somalia - 0.7 0.7 93.7 1.1 1.3 0.0 South Africa 28.3 0.2 2.0 8.5 12.5 45.4 31.5 South Sudan 10.2 0.0 - 0.0 0.0 0.0 Sudan 6.3 0.5 1.3 6.7 90.9 0.5 0.4 Swaziland - 0.2 7.1 21.1 1.3 69.8 0.5 Tanzania 29.6 0.2 8.6 38.3 1.9 25.2 24.5 Togo 0.0 0.2 9.7 16.6 2.0 56.8 14.9 Tunisia 48.0 0.2 0.5 10.1 14.6 73.2 1.7 Uganda 23.2 0.2 6.1 46.5 6.7 34.2 1.1 Zambia 46.4 0.6 1.9 6.9 0.5 10.0 80.7 Zimbabwe 44.3 0.2 8.5 31.3 1.2 10.4 48.6
164 | RMB Global Markets Exports (% of merchandise exports)2 Agricultural Exports (% of Concentration raw Ores and GDP) (2012) index (2012)1 materials Food Fuels Manufactures metals Developed economies Germany 51.8 0.1 0.8 5.5 2.7 82.5 3.0 Japan 14.7 0.1 0.8 0.6 1.7 89.6 2.9 UK 31.5 0.1 0.7 6.2 13.9 66.4 3.8 US 13.5 0.1 2.5 10.2 10.3 63.4 3.7
Emerging Asia China 27.3 0.1 0.5 2.7 1.5 93.9 1.3 Hong Kong 224.8 0.2 3.4 10.4 3.2 68.6 13.3 India 24.0 0.2 2.0 10.5 18.5 64.8 3.3 Indonesia 24.3 0.2 5.9 17.9 33.6 36.2 6.3 Malaysia 87.1 0.2 2.4 12.5 20.4 61.7 2.3 Pakistan 12.3 0.2 2.5 17.1 1.4 75.8 2.0 Philippines 30.8 0.2 0.8 9.0 2.4 82.6 5.1 Singapore 200.7 0.2 0.3 2.2 18.5 69.8 1.1 South Korea 56.5 0.1 1.1 1.2 10.4 85.1 2.1 Taiwan - 0.2 - - - - - Thailand 75.0 0.1 4.9 13.8 6.2 73.8 1.4 Vietnam 80.0 0.1 2.7 17.1 9.9 69.4 0.6
Emerging Europe and Middle East Bulgaria 66.6 0.1 1.3 15.4 16.2 47.6 20.2 Czech Republic 78.0 0.1 1.4 4.7 3.8 87.6 1.9 Hungary 0.0 0.1 0.8 8.9 3.9 80.0 1.7 Israel 36.2 0.3 0.6 3.1 1.7 92.3 1.5 Poland 46.2 0.1 1.3 12.0 4.9 76.8 3.9 Romania 40.0 0.1 2.3 8.5 5.1 77.5 3.9 Russia 29.4 0.4 1.8 3.2 70.9 16.3 5.3 Turkey 26.4 0.1 0.5 10.8 5.3 77.7 4.3
Emerging Latin America Argentina 19.7 0.2 0.9 53.9 6.3 32.1 4.2 Brazil 12.6 0.1 3.8 32.2 11.0 35.0 15.6 Chile 34.2 0.4 5.2 18.9 0.9 14.1 60.9 Colombia 18.3 0.4 2.4 9.2 69.6 17.5 1.1 Mexico 32.9 0.1 0.4 5.9 14.4 74.3 3.8 Peru 25.6 0.2 1.1 20.0 14.8 14.6 49.4
Note: 1 The concentration index shows how exports and imports of individual countries or group of countries are concentrated on several products. 2 Last available data point. Source: World Bank, UNCTAD Data as at September 2014
RMB Global Markets | 165 appendices
Table A7: Operating environment scores over time (1 = poor; 10 = good)
1995 2000 2005 2010 2011 2012 2013 2014 Africa Algeria 4.4 4.5 4.4 4.6 4.4 4.3 4.3 4.4 Angola - - 3.4 3.5 3.3 3.4 3.2 3.5 Benin - 4.9 4.2 4.0 4.0 4.0 4.2 4.2 Botswana 6.0 6.7 6.8 6.7 6.6 6.7 6.8 6.9 Burkina Faso - 3.7 3.8 4.4 4.3 4.3 4.5 4.4 Burundi - 3.1 3.4 3.2 3.3 3.4 3.5 3.9 Cabo Verde - 4.5 4.9 4.9 5.2 5.4 5.5 5.6 Cameroon 4.1 3.5 3.8 3.7 3.8 4.0 4.0 4.0 CAR - - 3.7 2.9 3.0 3.1 3.2 3.1 Chad - 3.0 3.3 3.2 3.1 3.2 3.2 3.1 Comoros - - - 3.3 3.3 3.4 3.6 3.8 Congo - 2.7 3.0 2.8 3.0 2.9 3.0 2.9 Côte d’Ivoire 3.7 3.6 3.9 3.8 3.8 3.8 3.8 4.1 Djibouti - 3.8 3.8 3.6 3.8 3.6 3.8 4.1 DRC 2.8 2.4 2.7 2.7 2.8 2.8 2.8 2.9 Egypt 3.5 4.1 4.2 5.1 5.1 4.9 4.9 4.6 Equatorial Guinea - 3.0 3.4 3.1 3.3 3.2 3.2 3.2 Eritrea - - 2.9 2.9 2.9 2.8 2.8 2.7 Ethiopia 4.3 4.9 4.5 4.6 4.7 4.7 4.5 4.6 Gabon 4.6 4.6 4.4 3.9 3.8 3.9 4.3 4.4 Gambia - 4.1 4.5 4.5 4.6 4.6 4.6 4.4 Ghana 4.7 4.9 4.9 5.3 5.8 5.7 5.9 6.0 Guinea 3.9 3.8 3.8 3.2 3.1 3.1 3.5 3.6 Guinea-Bissau - 2.4 3.0 2.8 3.0 3.2 3.3 3.1 Kenya - 4.9 4.9 4.9 4.7 4.8 4.7 4.7 Lesotho - 4.3 4.7 4.4 4.3 4.2 4.5 4.8 Liberia - - - 3.8 3.8 3.9 4.5 4.5 Libya - 3.6 3.6 3.9 3.7 3.5 4.1 2.8 Madagascar 3.2 3.4 4.3 4.6 4.4 4.6 4.5 4.4 Malawi 5.4 5.5 4.7 4.5 4.5 4.4 4.3 4.2 Mali 3.7 4.1 4.0 4.0 4.2 4.2 4.4 4.2 Mauritania - 3.6 4.5 3.8 3.8 3.9 4.0 3.9 Mauritius - 6.8 6.4 7.2 7.2 7.1 7.3 7.2 Morocco 5.4 5.7 4.8 4.9 5.1 5.4 5.4 5.5 Mozambique 3.9 4.3 4.1 4.3 4.4 4.3 4.2 4.4 Namibia - 7.0 6.1 6.0 5.9 5.8 5.7 5.6 Niger - 2.9 3.3 3.5 3.5 3.5 3.7 3.8 Nigeria 3.7 4.5 4.2 4.6 4.3 4.4 4.5 4.2 Rwanda - 3.0 3.6 5.5 6.1 6.5 6.5 6.8 São Tomé and Príncipe - - - 3.3 3.4 3.6 4.0 3.2 Senegal - 4.4 4.2 4.3 4.2 4.3 4.3 4.3 Seychelles - - 5.6 5.0 5.1 5.3 5.9 6.0 Sierra Leone 3.4 3.1 3.1 3.6 3.7 3.8 4.0 4.1 Somalia - - - 2.0 2.0 1.9 1.7 1.7 South Africa 7.0 6.9 6.7 6.6 6.5 6.4 6.4 6.4 South Sudan ------1.5 Sudan - - 2.2 2.3 2.8 2.8 2.5 2.3 Swaziland 5.7 5.6 5.4 4.9 4.7 4.6 4.7 5.0 Tanzania 3.7 3.7 4.0 4.5 4.6 4.6 4.7 4.5 Togo - 3.3 3.4 3.5 3.5 3.4 3.8 3.8 Tunisia 6.3 6.2 5.9 6.0 6.4 6.2 6.1 6.0 Uganda - 4.5 4.8 4.8 4.7 4.7 4.8 4.5 Zambia 4.9 5.5 4.7 5.1 5.3 5.3 5.3 5.6 Zimbabwe 4.8 4.8 3.4 2.9 3.0 3.1 3.1 3.4
166 | RMB Global Markets 1995 2000 2005 2010 2011 2012 2013 2014 Developed economies Germany 8.1 7.8 8.0 8.0 8.1 8.1 8.1 8.1 Japan 8.0 7.3 7.6 8.1 8.1 8.1 7.9 7.9 UK 8.6 8.5 8.6 8.3 8.2 8.3 8.2 8.2 US 8.5 8.3 8.5 8.4 8.2 8.2 8.3 8.3
Emerging Asia China 4.5 5.3 5.2 5.5 5.6 5.6 5.6 5.6 Hong Kong 8.1 8.4 8.6 8.7 8.8 8.8 8.7 8.7 India 4.1 4.3 4.5 4.8 4.8 4.8 4.9 4.9 Indonesia 4.3 4.3 4.3 4.9 4.9 4.9 5.0 5.2 Malaysia 7.7 7.2 6.9 6.9 6.9 7.1 7.3 7.4 Pakistan 5.2 5.2 4.9 5.0 4.8 4.7 4.8 4.7 Philippines 4.5 5.3 4.5 4.4 4.5 4.6 4.9 5.4 Singapore 8.9 8.9 9.0 9.0 9.0 9.0 9.0 9.0 South Korea 6.9 6.6 6.8 7.4 7.4 7.5 7.4 7.6 Taiwan 7.1 7.2 7.2 7.1 7.5 7.6 7.7 7.7 Thailand 6.6 6.5 6.5 6.7 6.7 6.6 6.7 6.6 Vietnam 4.4 4.5 4.7 5.0 5.2 5.1 5.1 5.1
Emerging Europe and Middle East Bulgaria 4.9 4.8 5.9 6.1 6.0 5.9 6.1 6.2 Czech Republic 6.8 6.5 6.1 6.4 6.4 6.4 6.5 6.4 Hungary 5.4 6.4 6.2 6.6 6.5 6.5 6.6 6.6 Israel 7.8 7.6 7.3 7.3 7.3 7.2 7.2 7.3 Poland 5.9 6.0 5.7 6.2 6.5 6.5 6.7 6.9 Romania 4.2 5.3 5.1 6.1 6.0 5.8 6.0 6.0 Russia 5.0 4.9 5.0 4.6 4.5 4.7 4.9 5.2 Turkey 5.7 5.7 4.9 6.0 6.0 6.0 6.2 6.3
Emerging Latin America Argentina 6.6 5.9 4.7 4.7 4.8 4.7 4.7 4.6 Brazil 4.3 5.2 5.2 5.0 5.1 5.1 5.2 5.3 Chile 7.7 7.4 7.8 7.3 7.5 7.6 7.6 7.6 Colombia 5.6 5.3 5.5 6.3 6.2 6.3 6.3 6.4 Mexico 5.7 5.6 5.9 6.1 6.0 6.0 6.2 6.2 Peru 5.3 6.3 5.5 6.1 6.3 6.3 6.4 6.4
Source: RMB Global Markets Data as at September 2014
RMB Global Markets | 167 appendices
Table A8: General indices characterising the economic/business operating environment
Composite operating environment index Ease of Doing Global Com- Index of Corruption Ranking Ranking Business petitiveness Economic Perceptions Score Africa World Index Index Freedom Index 1 = poor; 1 = best; 1 = best; 1 = best; 1 = poor; 0 = poor; 0 = high; 10 = good 54 = worst 185 = worst 185 = worst 7 = good 100 = good 10 = low Africa Algeria 4.4 22 138 153 3.8 50.8 3.6 Angola 3.5 41 164 179 3.1 47.7 2.3 Benin 4.2 28 146 174 3.4 57.1 3.6 Botswana 6.9 2 40 56 4.1 72.0 6.4 Burkina Faso 4.4 21 137 154 3.2 58.9 3.8 Burundi 3.9 35 155 140 2.9 51.4 2.1 Cabo Verde 4.0 34 154 168 3.7 52.6 2.5 Cameroon 5.6 10 90 121 3.5 66.1 5.8 CAR 3.1 47 173 188 - 46.7 2.5 Chad 3.1 46 172 189 2.9 44.5 1.9 Comoros 3.8 38 159 158 - 51.4 2.8 Congo 2.9 48 174 185 - 43.7 2.2 Côte d’Ivoire 4.1 33 151 167 3.5 57.7 2.7 Djibouti 4.1 32 150 160 - 55.9 3.6 DRC 2.9 49 175 183 - 40.6 2.2 Egypt 4.6 15 125 128 3.6 52.9 3.2 Equatorial Guinea 3.2 44 170 166 - 44.4 1.9 Eritrea 2.7 51 179 184 - 38.5 2.0 Ethiopia 4.6 16 128 125 3.5 50.0 3.3 Gabon 4.4 24 141 163 3.7 57.8 3.4 Gambia 4.4 20 136 150 3.7 59.5 2.8 Ghana 6.0 6 76 67 3.7 64.2 4.6 Guinea 3.6 40 163 175 2.9 53.5 2.4 Guinea-Bissau 3.1 45 171 180 - 51.3 1.9 Kenya 4.7 14 124 129 3.8 57.1 2.7 Lesotho 4.8 13 117 136 3.5 49.5 4.9 Liberia 4.5 19 134 144 3.5 52.4 3.8 Libya 2.8 50 177 187 3.7 0.0 1.5 Madagascar 4.4 23 139 148 3.4 61.7 2.8 Malawi 4.2 30 148 171 3.3 55.4 3.7 Mali 4.2 29 147 155 3.3 55.5 2.8 Mauritania 3.9 36 156 173 3.2 53.2 3.0 Mauritius 7.2 1 31 20 4.4 76.5 5.2 Morocco 5.5 11 91 87 4.1 58.3 3.7 Mozambique 4.4 25 142 139 3.3 55.0 3.0 Namibia 5.6 8 85 98 3.9 59.4 4.8 Niger 3.8 39 160 176 - 55.1 3.4 Nigeria 4.2 27 144 147 3.6 54.3 2.5 Rwanda 6.8 3 45 32 4.2 64.7 5.3 São Tomé and Príncipe 3.2 43 169 169 - - 4.2 Senegal 4.3 26 143 178 3.7 55.4 4.1 Seychelles 6.0 7 77 80 4.1 56.2 5.4 Sierra Leone 4.1 31 149 142 3.0 50.5 3.0 Somalia 1.7 53 184 - - 0.0 0.8 South Africa 6.4 4 58 41 4.4 62.5 4.2 South Sudan 1.5 54 185 186 - - 1.4 Sudan 2.3 52 181 149 - 0.0 1.1 Swaziland 5.0 12 110 123 3.5 61.2 3.9 Tanzania 4.5 18 133 145 3.5 57.8 3.3 Togo 3.8 37 158 157 - 49.9 2.9
168 | RMB Global Markets Composite operating environment index Ease of Doing Global Com- Index of Corruption Ranking Ranking Business petitiveness Economic Perceptions Score Africa World Index Index Freedom Index 1 = poor; 1 = best; 1 = best; 1 = best; 1 = poor; 0 = poor; 0 = high; 10 = good 54 = worst 185 = worst 185 = worst 7 = good 100 = good 10 = low Africa Tunisia 6.0 5 72 51 4.1 57.3 4.1 Uganda 4.5 17 131 132 3.4 59.9 2.6 Zambia 5.6 9 89 83 3.9 60.4 3.8 Zimbabwe 3.4 42 - 170 3.4 35.5 2.1
Developed economies Germany 8.1 - 14 21 5.5 73.4 7.8 Japan 7.9 - 17 27 5.4 72.4 7.4 UK 8.2 - 12 10 5.4 74.9 7.6 US 8.3 - 10 4 5.5 75.5 7.3
Emerging Asia China 5.6 - 84 96 4.8 52.5 4.0 Hong Kong 8.7 - 3 2 5.5 90.1 7.5 India 4.9 - 112 134 4.3 55.7 3.6 Indonesia 5.2 - 106 120 4.5 58.5 3.2 Malaysia 7.4 - 26 6 5.0 69.6 5.0 Pakistan 4.7 - 121 110 3.4 55.2 2.8 Philippines 5.4 - 98 108 4.3 60.1 3.6 Singapore 9.0 - 1 1 5.6 89.4 8.6 South Korea 7.6 - 24 7 5.0 71.2 5.5 Taiwan 7.7 - 18 16 5.3 73.9 6.1 Thailand 6.6 - 52 18 4.5 63.3 3.5 Vietnam 5.1 - 107 99 4.2 50.8 3.1
Emerging Europe and Middle East Bulgaria 6.2 - 67 58 4.3 65.7 4.1 Czech Republic 6.4 - 63 75 4.4 72.2 4.8 Hungary 6.6 - 53 54 4.2 67.0 5.4 Israel 7.3 - 30 35 4.9 68.4 6.1 Poland 6.9 - 39 45 4.5 67.0 6.0 Romania 6.0 - 73 73 4.1 65.5 4.3 Russia 5.2 - 105 92 4.2 51.9 2.8 Turkey 6.3 - 65 69 4.5 64.9 5.0
Emerging Latin America Argentina 4.6 - 129 126 3.8 44.6 3.4 Brazil 5.3 - 101 116 4.3 56.9 4.2 Chile 7.6 - 23 34 4.6 78.7 7.1 Colombia 6.4 - 62 43 4.2 70.7 3.6 Mexico 6.2 - 68 53 4.3 66.8 3.4 Peru 6.4 - 60 42 4.3 67.4 3.8
Source: World Bank, WEF, Heritage Foundation, Transparency International, RMB Global Markets Data as at September 2014
RMB Global Markets | 169 appendices
Table A9: Global competitiveness indices (pillars)
Macroeconomic Health and Institutions Infrastructure environment primary education Higher education 1 = worst; 7 = best 1 = worst; 7 = best 1 = worst; 7 = best 1 = worst; 7 = best 1 = worst; 7 = best Africa Algeria 3.04 3.14 5.48 5.40 3.55 Angola 2.76 1.92 5.03 3.69 2.07 Benin 3.36 2.40 4.31 4.53 2.95 Botswana 4.67 3.43 5.76 4.55 3.56 Burkina Faso 3.34 2.13 4.44 3.24 2.39 Burundi 2.78 1.92 3.67 4.21 2.03 Cabo Verde 3.93 2.79 3.67 5.68 3.71 Cameroon 3.35 2.49 4.92 4.43 3.25 CAR - - - - - Chad 2.54 1.71 4.95 2.58 2.09 Comoros - - - - - Congo - - - - - Côte d’Ivoire 3.40 3.13 4.21 3.25 3.03 Djibouti - - - - - DRC - - - - - Egypt 3.33 3.34 3.15 5.32 3.08 Equatorial Guinea - - - - - Eritrea - - - - - Ethiopia 3.58 2.61 3.81 4.67 2.55 Gabon 3.72 2.83 6.09 4.08 2.62 Gambia 4.42 3.43 3.49 3.95 3.48 Ghana 3.89 3.02 3.08 4.48 3.42 Guinea 3.06 1.73 3.11 3.59 2.42 Guinea-Bissau - - - - - Kenya 3.62 3.24 3.64 4.52 3.54 Lesotho 3.61 2.56 5.35 3.56 2.88 Liberia 3.80 2.38 5.08 3.22 2.86 Libya 3.22 3.21 6.03 4.52 3.52 Madagascar 3.09 2.26 4.18 4.52 2.66 Malawi 3.81 2.21 2.85 4.43 2.65 Mali 3.02 3.05 4.44 3.05 2.55 Mauritania 2.95 2.71 4.59 3.72 2.07 Mauritius 4.58 4.44 4.82 6.01 4.32 Morocco 4.12 4.30 4.42 5.48 3.54 Mozambique 3.30 2.38 4.34 3.67 2.34 Namibia 4.22 4.20 4.67 4.43 3.12 Niger - - - - - Nigeria 3.08 2.29 5.17 3.04 3.03 Rwanda 5.20 3.20 4.41 5.37 3.00 São Tomé and Príncipe - - - - - Senegal 3.69 2.78 4.41 4.17 3.14 Seychelles 4.33 4.64 4.43 5.90 4.13 Sierra Leone 3.62 2.13 3.32 2.74 2.36 Somalia - - - - - South Africa 4.53 4.13 4.39 3.89 3.94 South Sudan - - - - - Sudan - - - - - Swaziland 3.83 3.34 4.54 3.57 3.09 Tanzania 3.55 2.30 3.65 4.64 2.54 Togo - - - - - Tunisia 3.85 3.90 4.37 5.98 4.22 Uganda 3.33 2.31 3.64 4.35 2.72 Zambia 4.20 2.76 4.56 4.41 3.05 Zimbabwe 3.50 2.59 4.01 4.55 2.95
170 | RMB Global Markets Macroeconomic Health and Institutions Infrastructure environment primary education Higher education 1 = worst; 7 = best 1 = worst; 7 = best 1 = worst; 7 = best 1 = worst; 7 = best 1 = worst; 7 = best Developed economies Germany 6.24 5.68 5.68 6.36 5.90 Japan 5.25 6.03 3.68 6.50 5.28 UK 5.43 6.12 3.98 6.39 5.45 US 4.64 5.77 3.95 6.10 5.75
Emerging Asia China 4.51 6.29 6.29 6.06 4.23 Hong Kong 6.74 6.09 6.09 6.18 5.24 India 3.65 4.10 4.10 5.30 3.88 Indonesia 4.17 5.75 5.75 5.71 4.30 Malaysia 4.85 5.19 5.35 6.10 4.68 Pakistan 3.23 2.70 2.89 4.26 2.76 Philippines 3.76 3.40 5.34 5.33 4.28 Singapore 6.04 6.41 6.01 6.72 5.91 South Korea 3.84 5.85 6.32 6.37 5.41 Taiwan 4.95 5.77 5.60 6.49 5.65 Thailand 3.79 4.53 5.61 5.52 4.29 Vietnam 3.54 3.69 4.44 5.78 3.69
Emerging Europe and Middle East Bulgaria 3.93 5.61 5.61 6.00 4.25 Czech Republic 4.71 5.01 5.01 5.84 4.85 Hungary 4.37 4.51 4.51 5.88 4.72 Israel 4.92 4.65 4.65 6.07 5.00 Poland 4.01 3.96 4.88 6.03 4.88 Romania 3.34 3.33 5.14 5.47 4.41 Russia 3.28 4.61 5.93 5.71 4.66 Turkey 4.08 4.45 4.62 5.86 4.29
Emerging Latin America Argentina 3.52 4.07 4.07 5.84 4.62 Brazil 4.02 4.63 4.63 5.43 4.22 Chile 4.54 6.02 6.02 5.68 4.87 Colombia 3.50 5.59 5.59 5.32 4.33 Mexico - - 5.11 5.69 4.03 Peru 3.36 3.50 5.91 5.36 4.01
Source: WEF Data as at September 2014
RMB Global Markets | 171 appendices
Table A9: Global competitiveness indices (pillars) (continued)
Goods market Labour market Financial market Technological Business efficiency efficiency development readiness sophistication 1= worst; 7 = best 1= worst; 7 = best 1= worst; 7 = best 1= worst; 7 = best 1= worst; 7 = best Africa Algeria 3.20 2.91 2.61 2.48 4.35 Angola 3.03 3.66 2.40 2.47 3.84 Benin 3.47 4.11 3.33 2.55 2.51 Botswana 4.10 4.51 4.34 3.11 3.03 Burkina Faso 3.73 4.19 3.17 2.41 2.79 Burundi 3.39 3.84 2.33 2.20 1.71 Cabo Verde 3.91 3.74 3.32 3.34 1.30 Cameroon 4.03 4.19 3.59 2.80 3.26 CAR - - - - - Chad 2.83 3.76 2.78 2.09 2.77 Comoros - - - - - Congo - - - - - Côte d’Ivoire 3.91 4.32 3.76 3.03 3.17 Djibouti - - - - - DRC - - - - - Egypt 3.88 3.00 3.41 3.21 4.82 Equatorial Guinea - - - - - Eritrea - - - - - Ethiopia 3.56 3.99 3.32 2.47 3.74 Gabon 3.65 4.31 3.58 2.97 2.72 Gambia 4.07 4.53 3.86 3.09 1.55 Ghana 4.28 4.14 4.36 3.21 3.67 Guinea 3.54 4.28 2.97 2.43 2.44 Guinea-Bissau - - - - - Kenya 4.21 4.62 4.68 3.36 3.58 Lesotho 4.22 4.17 3.43 2.45 1.94 Liberia 4.42 4.37 3.60 2.43 1.55 Libya 3.13 3.53 2.30 2.68 3.51 Madagascar 4.07 4.60 2.93 2.63 2.73 Malawi 3.90 4.59 3.96 2.40 2.50 Mali 3.93 3.96 3.38 2.91 2.63 Mauritania 3.38 3.23 2.71 2.71 2.16 Mauritius 4.85 4.45 4.73 3.90 2.80 Morocco 4.28 3.86 4.01 3.53 4.16 Mozambique 3.80 3.80 3.13 2.77 2.96 Namibia 4.10 4.39 4.51 3.34 2.66 Niger - - - - - Nigeria 4.09 4.48 4.04 3.08 4.66 Rwanda 4.52 5.06 4.23 3.10 2.46 São Tomé and Príncipe - - - - - Senegal 4.33 4.33 3.72 3.26 2.94 Seychelles 4.36 4.69 3.87 3.87 1.46 Sierra Leone 3.97 4.09 3.46 2.65 2.19 Somalia - - - - - South Africa 4.75 3.93 5.80 3.92 4.89 South Sudan - - - - - Sudan - - - - - Swaziland 4.05 4.01 4.03 2.72 2.03 Tanzania 3.89 4.49 3.72 2.70 3.59 Togo - - - - - Tunisia 4.10 3.67 3.56 3.47 3.86 Uganda 3.88 4.69 3.90 2.82 3.28 Zambia 4.61 4.12 4.45 2.97 2.80 Zimbabwe 3.66 3.40 3.56 2.98 2.12
172 | RMB Global Markets Goods market Labour market Financial market Technological Business efficiency efficiency development readiness sophistication 1= worst; 7 = best 1= worst; 7 = best 1= worst; 7 = best 1= worst; 7 = best 1= worst; 7 = best Developed economies Germany 4.92 4.57 4.69 5.72 6.02 Japan 5.01 4.82 4.80 5.59 6.14 UK 5.05 5.35 5.00 6.06 5.80 US 4.93 5.37 5.26 5.72 6.94
Emerging Asia China 4.32 4.63 4.32 3.44 6.85 Hong Kong 5.57 5.74 6.02 6.03 4.84 India 4.18 4.08 4.83 3.22 6.25 Indonesia 4.40 4.04 4.18 3.66 5.32 Malaysia 5.23 4.79 5.45 4.17 4.87 Pakistan 3.99 3.46 4.04 2.90 4.70 Philippines 4.19 4.08 4.41 3.58 4.66 Singapore 5.59 5.77 5.82 6.01 4.66 South Korea 4.68 4.21 3.89 5.57 5.61 Taiwan 5.26 4.67 4.95 5.19 5.24 Thailand 4.67 4.35 4.61 3.56 5.10 Vietnam 4.25 4.40 3.76 3.14 4.64
Emerging Europe and Middle East Bulgaria 4.19 4.36 3.95 4.45 3.87 Czech Republic 4.41 4.20 4.20 4.88 4.50 Hungary 4.23 4.18 3.93 4.35 4.26 Israel 4.28 4.39 4.81 5.56 4.35 Poland 4.34 4.20 4.54 4.47 5.14 Romania 3.89 3.96 3.95 4.14 4.44 Russia 3.80 4.31 3.39 3.97 5.78 Turkey 4.52 3.74 4.40 4.05 5.30
Emerging Latin America Argentina 3.06 3.15 3.05 3.38 4.95 Brazil 3.82 4.13 4.40 4.14 5.65 Chile 4.64 4.53 4.83 4.48 4.49 Colombia 4.01 4.16 4.08 3.39 4.70 Mexico 4.19 3.94 4.19 3.66 5.61 Peru 4.37 4.50 4.50 3.39 4.46
Source: WEF Data as at September 2014
RMB Global Markets | 173 appendices
Table A10: Additional operating environment indicators
Average time Rental costs: Rental costs: Rental costs: Electricity to clear exports Total effective Office Retail Industrial outages through customs tax rate1 (US$/sq m/ (US$/sq m/ (US$/sq m/ (hours/month) (days) (%) month) month) month) Africa Algeria 6.3 14 72 45 50 9 Angola 55.5 7 53 150 120 15 Benin 9.3 7 66 - - - Botswana 10.3 6 25 14 31 7 Burkina Faso 29.4 7 44 - - - Burundi 97.4 - 53 - - - Cabo Verde - - 37 - - - Cameroon 27.4 15 49 16 20 3 CAR 208.8 10 65 8 8 2 Chad 147.0 12 65 30 35 6 Comoros - - 218 - - - Congo 636.4 - 63 - - - Côte d’Ivoire 4.8 17 40 10 46 6 Djibouti 1.8 - 39 - - - DRC 134.0 18 118 35 40 8 Egypt - 6 43 40 100 4 Equatorial Guinea - - 46 35 25 5 Eritrea 0.3 10 85 - - - Ethiopia 43.7 16 33 15 30 4 Gabon 16.6 4 44 - - - Gambia 128.1 - 284 - - - Ghana 117.8 - 34 40 45 8 Guinea 198.5 - 73 - - - Guinea-Bissau 52.5 - 46 - - - Kenya 30.9 11 44 15 31 4 Lesotho 12.7 5 16 - - - Liberia 2.6 - 27 - - - Libya - - - 40 100 8 Madagascar 21.7 14 37 14 35 5 Malawi 1.9 10 35 12 17 4 Mali 8.4 13 52 14 10 3 Mauritania 8.6 4 68 9 12 2 Mauritius 1.4 10 29 34 45 6 Morocco 0.4 2 50 26 35 7 Mozambique 3.5 10 34 30 40 10 Namibia 0.3 - 23 18 30 6 Niger 27.8 3 44 - - - Nigeria 196.6 8 34 85 65 12 Rwanda 10.8 10 31 18 22 3 São Tomé and Príncipe - 0 33 - - - Senegal 70.2 7 46 20 20 4 Seychelles - 0 26 - - - Sierra Leone 120.6 0 32 17 17 3 Somalia - 0 - - - - South Africa 1.8 5 33 20 45 6 South Sudan - - - 25 25 4 Sudan - - 36 25 30 10 Swaziland 2.7 2 37 - - - Tanzania 46.9 17 46 21 30 6 Togo 31.4 7 50 30 35 8 Tunisia - - 63 10 15 4 Uganda 44.7 11 37 19 25 10 Zambia 10.9 2 15 20 35 5 Zimbabwe 33.5 5 36 12 25 4
174 | RMB Global Markets Average time Rental costs: Rental costs: Rental costs: Electricity to clear exports Total effective Office Retail Industrial outages through customs tax rate1 (US$/sq m/ (US$/sq m/ (US$/sq m/ (hours/month) (days) (%) month) month) month) Developed economies Germany - - 47 - - - Japan - - 50 - - - UK - - 36 - - - US - - -
Emerging Asia China 0.1 8 64 - - - Hong Kong - - 23 - - - India - - 62 - - - Indonesia 0.9 2 35 - - - Malaysia - 3 25 - - - Pakistan 66.6 3 35 - - - Philippines 0.3 10 47 - - - Singapore - - 28 - - - South Korea - 7 30 - - - Taiwan - - 36 - - - Thailand 2.5 1 38 - - - Vietnam 3.3 4 35 - - -
Emerging Europe and Middle East Bulgaria 1.0 4 29 - - - Czech Republic 0.7 6 49 - - - Hungary 0.3 4 50 - - - Israel - - 31 - - - Poland 0.3 6 44 - - - Romania 4.5 2 44 - - - Russia 0.3 6 54 - - - Turkey 5.5 5 41 - - -
Emerging Latin America Argentina 2.3 7 108 - - - Brazil 1.0 16 69 - - - Chile 0.4 11 28 - - - Colombia 0.5 9 74 - - - Mexico 4.2 7 53 - - - Peru 0.4 16 41 - - -
Note: 1 Total tax rate as a percentage of commercial profits. Sources: IFC, World Bank, PwC, Knight Frank Data as at September 2014
RMB Global Markets | 175 appendices
Table A11: Strength of the legal and administrative environment Overall ranking 1 = worst environment; 7 = best environment Judicial independence 1 = heavily influenced; independent 7 = entirely of investor Strength protection 1 – 10 (best) scale rights Property 1 = very weak; 7 = very strong of legal Efficiency framework in settling disputes inefficient; 1 = extremely 7 = highly effective of legalEfficiency framework in challenging regulations inefficient; 1 = extremely 7 = highly effective Intellectual property protection at all; 1 = not protected 7 = fully protected
Africa Algeria 3.04 3.21 5.30 3.22 3.05 2.31 2.18 Angola 2.76 2.44 5.70 2.76 2.74 2.22 2.38 Benin 3.36 2.74 3.30 3.44 3.28 3.23 3.15 Botswana 4.67 5.30 6.00 4.94 4.75 4.38 4.06 Burkina Faso 3.34 2.10 3.70 3.67 3.30 3.02 3.41 Burundi 2.78 1.67 6.00 2.67 2.55 2.48 2.30 Cabo Verde 3.93 4.12 4.00 3.87 3.66 3.53 3.02 Cameroon 3.35 2.28 4.30 3.85 3.30 3.05 3.16 CAR ------Chad 2.54 2.02 3.30 2.43 2.41 2.17 2.18 Comoros ------Congo ------Côte d’Ivoire 3.40 2.44 3.30 3.42 3.44 3.17 2.72 Djibouti ------DRC ------Egypt 3.33 3.46 5.30 3.72 3.21 3.19 3.23 Equatorial Guinea ------Eritrea ------Ethiopia 3.58 2.86 4.30 3.70 3.56 2.86 3.49 Gabon 3.72 2.65 3.30 4.13 3.49 3.26 2.61 Gambia 4.42 3.97 2.70 4.36 4.51 3.86 4.19 Ghana 3.89 4.41 6.00 4.24 4.07 3.52 3.89 Guinea 3.06 2.24 2.70 2.99 2.49 2.86 2.22 Guinea-Bissau ------Kenya 3.62 3.97 5.00 3.91 3.89 3.66 3.45 Lesotho 3.61 3.49 5.00 3.28 3.58 3.40 3.26 Liberia 3.80 3.43 3.70 3.76 3.77 3.65 3.71 Libya 3.22 3.20 0.00 3.44 2.89 2.89 2.17 Madagascar 3.09 2.14 5.70 2.95 2.94 2.80 2.91 Malawi 3.81 3.98 5.30 3.83 3.89 3.88 3.40 Mali 3.02 2.63 3.70 3.27 3.15 3.31 2.70 Mauritania 2.95 2.42 3.70 2.77 2.80 2.82 2.53 Mauritius 4.58 5.00 7.70 5.08 4.85 4.40 4.00 Morocco 4.12 3.39 5.00 4.81 3.69 3.41 3.29 Mozambique 3.30 2.56 6.00 3.46 3.25 2.86 2.68 Namibia 4.22 4.71 5.30 5.09 4.54 3.93 4.32 Niger ------Nigeria 3.08 3.21 5.70 3.44 3.60 3.22 2.79 Rwanda 5.20 5.04 6.30 5.24 5.14 4.49 4.71 São Tomé and Príncipe ------Senegal 3.69 3.07 3.00 4.01 3.94 3.59 3.22 Seychelles 4.33 4.13 5.70 4.45 4.09 3.96 4.07 Sierra Leone 3.62 3.06 6.30 3.72 3.73 2.72 3.43 Somalia ------South Africa 4.53 5.48 8.00 5.62 5.32 4.87 5.46 South Sudan ------Sudan ------Swaziland 3.83 3.47 4.30 4.17 3.84 3.49 3.95 Tanzania 3.55 3.23 5.00 3.79 3.64 3.32 3.24
176 | RMB Global Markets Overall ranking 1 = worst environment; 7 = best environment Judicial independence 1 = heavily influenced; independent 7 = entirely of investor Strength protection 1 – 10 (best) scale rights Property 1 = very weak; 7 = very strong of legal Efficiency framework in settling disputes inefficient; 1 = extremely 7 = highly effective of legalEfficiency framework in challenging regulations inefficient; 1 = extremely 7 = highly effective Intellectual property protection at all; 1 = not protected 7 = fully protected
Africa Togo ------Tunisia 3.85 3.55 6.00 4.25 3.90 3.51 3.19 Uganda 3.33 3.12 4.00 3.66 3.81 3.52 2.81 Zambia 4.20 3.75 5.30 4.66 4.42 3.74 3.88 Zimbabwe 3.50 2.72 4.30 2.65 3.59 2.79 3.00
Developed economies Germany 5.30 6.03 5.00 5.84 5.24 4.91 5.56 Japan 5.25 5.96 7.00 5.81 4.71 4.08 5.73 UK 5.43 6.23 8.00 6.16 5.56 5.17 5.85 US 4.64 5.04 8.30 5.17 4.73 4.32 5.18
Emerging Asia China 4.24 4.01 5.00 4.62 4.20 3.83 3.94 Hong Kong 5.61 6.29 9.00 6.10 5.82 5.59 5.74 India 3.86 4.74 6.00 4.38 3.84 3.75 3.68 Indonesia 3.97 3.66 6.00 4.07 4.08 3.75 3.90 Malaysia 4.85 4.55 8.70 5.20 5.08 4.71 4.81 Pakistan 3.23 4.06 6.30 3.34 3.15 3.00 2.90 Philippines 3.76 3.17 4.30 4.35 3.61 3.48 3.59 Singapore 6.04 5.68 9.30 6.33 6.15 4.90 6.12 South Korea 3.84 3.54 6.00 4.55 3.53 3.05 4.03 Taiwan 4.95 4.54 6.30 5.80 4.20 3.73 5.21 Thailand 3.79 3.80 7.70 4.08 3.87 3.55 3.13 Vietnam 3.54 3.36 3.00 3.51 3.40 3.33 2.86
Emerging Europe and Middle East Bulgaria 3.38 2.60 6.00 3.54 2.86 2.79 3.04 Czech Republic 3.64 3.79 5.00 3.89 3.07 2.69 3.82 Hungary 3.67 3.86 4.30 3.70 3.12 2.37 3.85 Israel 4.56 5.77 8.30 4.98 4.20 4.10 4.65 Poland 4.01 4.09 6.00 4.29 2.95 2.94 3.65 Romania 3.34 2.83 6.00 3.94 2.78 2.61 2.90 Russia 3.28 2.68 4.70 3.03 2.99 2.81 2.89 Turkey 4.08 3.41 5.70 4.68 3.87 3.85 3.61
Emerging Latin America Argentina 2.79 2.38 4.70 2.47 2.63 1.89 2.33 Brazil 3.73 3.87 5.30 4.60 3.30 3.51 3.54 Chile 4.88 5.29 6.30 5.10 4.67 4.38 3.84 Colombia 3.35 3.04 8.30 3.84 3.37 3.20 3.23 Mexico 3.56 3.35 6.00 4.19 3.35 3.34 3.59 Peru 3.36 2.54 7.70 3.70 3.19 3.00 2.80
Source: WEF Data as at September 2014
RMB Global Markets | 177 appendices
Table A12: Human Development Indicators
Poverty Population Labour Education Human Multi- Development dimensional Employment Life Index poverty line Urban to expectancy (rank out of PPP $1.25 (% of (% of total population1 at birth Mean years 186) a day population) population) (%) (years) of schooling Africa Algeria 93 - - 74 44 73 8 Angola 148 - - 60 76 52 5 Benin 166 47 72 46 81 57 3 Botswana 119 - - 62 74 53 9 Burkina Faso 183 45 84 27 86 56 1 Burundi 178 81 85 11 89 51 3 Cabo Verde 132 - - 63 67 74 4 Cameroon 150 10 53 53 80 52 6 CAR 180 - - 39 83 49 4 Chad 184 62 63 22 77 50 2 Comoros 169 - - 28 63 62 3 Congo 142 54 41 64 79 58 6 Côte d’Ivoire 168 24 62 52 73 56 4 Djibouti 164 19 29 77 0 58 4 DRC 186 88 74 35 83 49 4 Egypt 112 2 6 44 51 74 6 Equatorial Guinea 136 - - 40 87 51 5 Eritrea 181 - - 22 84 62 3 Ethiopia 173 39 87 17 84 60 2 Gabon 106 - - 87 68 63 8 Gambia 165 34 60 58 81 59 3 Ghana 135 29 31 53 81 65 7 Guinea 178 43 83 36 79 55 2 Guinea-Bissau 176 - - 45 78 49 2 Kenya 145 43 48 24 76 58 7 Lesotho 158 43 35 28 60 49 6 Liberia 174 84 84 49 72 57 4 Libya 64 - - 78 54 75 7 Madagascar 151 81 67 33 91 67 5 Malawi 170 74 67 16 92 55 4 Mali 182 50 87 36 56 52 2 Mauritania 155 23 62 42 45 59 4 Mauritius 80 - - 42 61 74 7 Morocco 130 3 11 57 51 72 4 Mozambique 185 60 79 31 90 51 1 Namibia 128 32 40 39 57 63 6 Niger 186 44 92 18 66 55 1 Nigeria 153 68 54 50 62 52 5 Rwanda 167 63 69 19 92 56 3 São Tomé and 144 - 35 63 0 65 5 Príncipe Senegal 154 34 74 43 76 60 5 Seychelles 46 - - 54 0 74 9 Sierra Leone 177 53 77 40 77 48 3 Somalia - - 81 38 60 52 - South Africa 121 14 13 62 50 53 9 South Sudan - - - 18 59 - - Sudan 171 - - 33 59 62 3 Swaziland 141 41 20 21 56 49 7 Tanzania 152 68 66 27 84 59 5 Togo 159 39 54 39 84 58 5
178 | RMB Global Markets Poverty Population Labour Education Human Multi- Development dimensional Employment Life Index poverty line Urban to expectancy (rank out of PPP $1.25 (% of (% of total population1 at birth Mean years 186) a day population) population) (%) (years) of schooling Africa Tunisia 94 1 3 67 46 75 7 Uganda 161 52 70 16 87 55 5 Zambia 163 69 64 40 77 49 7 Zimbabwe 172 - 39 39 89 53 7
Developed economies Germany 5 - - 74 57 81 12 Japan 10 - - 92 60 84 12 UK 26 - - 80 59 80 9 US 3 - - 83 61 79 13
Emerging Asia China 101 13 13 52 75 74 8 Hong Kong 13 - - 100 61 83 10 India 136 33 54 32 61 66 4 Indonesia 121 18 21 52 70 70 6 Malaysia 64 - - 74 67 75 10 Pakistan 146 21 49 37 55 66 5 Philippines 114 18 13 49 69 69 9 Singapore 18 - - 100 69 81 10 South Korea 12 - - 84 65 81 12 Taiwan ------Thailand 103 0 2 34 77 74 7 Vietnam 127 - - - - 75 6
Emerging Europe and Middle East Bulgaria 57 - - 74 52 74 11 Czech Republic 28 - 3 73 60 78 12 Hungary 37 0 5 70 50 75 12 Israel 16 - - 92 61 82 12 Poland 39 - - 61 55 76 10 Romania 56 - - 53 57 74 10 Russia 55 0 1 74 63 69 12 Turkey 90 0 7 73 49 74 7
Emerging Latin America Argentina 45 1 3 93 63 76 9 Brazil 85 6 3 85 68 74 7 Chile 40 - - 89 63 79 10 Colombia 91 8 5 76 68 74 7 Mexico 61 1 4 78 64 77 9 Peru 77 5 16 78 77 74 9
Note: 1 ILO estimate. Source: Human Development Index Data as at September 2014
RMB Global Markets | 179 appendices
Table A13: Sovereign long-term foreign currency ratings
Fitch Moody’s Standard and Poor’s Africa Algeria - - - Angola BB- Ba3 BB- Benin - - - Botswana - A2 A- Burkina Faso - - B Burundi - - - Cabo Verde B - B Cameroon B - B CAR - - - Chad - - - Comoros - - - Congo - B3 B- Côte d’Ivoire - - - Djibouti - - - DRC - - - Egypt B- Caa1 B- Equatorial Guinea - - - Eritrea - - - Ethiopia B B1 B Gabon BB- - BB- Gambia - - - Ghana B B2 B Guinea - - - Guinea-Bissau - - - Kenya B+ B1 B+ Lesotho BB- - - Liberia - - - Libya - - - Madagascar - - - Malawi - - - Mali - - - Mauritania - - - Mauritius - Baa1 - Morocco BBB- Ba1 BBB- Mozambique B+ B1 B Namibia BBB- Baa3 - Niger - - - Nigeria BB- Ba3 BB- Rwanda B - B São Tomé and Príncipe - - - Senegal - B1 B+ Seychelles B - - Sierra Leone - - - Somalia - - - South Africa BBB Baa1 BBB- South Sudan - - - Sudan - - - Swaziland - - - Tanzania - - - Togo - - - Tunisia BB- Ba3 Uganda B B1 B Zambia B B1 B+ Zimbabwe - - -
180 | RMB Global Markets Fitch Moody’s Standard and Poor’s Developed economies Germany AAA Aaa AAA Japan A+ Aa3 AA- UK AA+ AA1 AAA US AAA Aaa AA+
Emerging Asia China A+ Aa3 AA- Hong Kong AA+ Aa1 AAA India BBB- Baa3 BBB- Indonesia BBB- Baa3 BB+ Malaysia A- A3 A- Pakistan - Caa1 B- Philippines BBB- Baa3 BBB Singapore AAA Aaa AAA South Korea AA- Aa3 A+ Taiwan A+ Aa3 AA- Thailand BBB+ Baa1 BBB+ Vietnam B+ B2 BB-
Emerging Europe and Middle East Bulgaria BBB- Baa2 BBB- Czech Republic A+ A1 AA- Hungary BB+ Ba1 BB Israel A A1 A+ Poland A- A2 A- Romania BBB- Baa3 BBB- Russia BBB Baa1 BBB- Turkey BBB- Baa3 BB+
Emerging Latin America Argentina CC Caa1 CCC- Brazil BBB Baa2 BBB- Chile A+ Aa3 AA- Colombia BBB Baa3 BBB Mexico BBB+ A3 BBB+ Peru BBB+ A2 BBB+
Source: Fitch, Moody’s, Standard & Poor’s Data as at September 2014
RMB Global Markets | 181 appendices
A14: Political risk for trade and investment Overall risk Exchange transfer Sovereign non-payment Political interference Supply chain disruption Legal and regulatory Political violence Risk of doing business Banking sector vulnerability Risk to fiscal stimulus Africa Algeria Very high ü ü ü ü ü ü ü Angola Medium high ü ü ü ü ü ü Benin Medium high ü ü ü ü ü ü ü Botswana Medium low ü Burkina Faso Medium high ü ü ü ü ü ü ü ü Burundi High ü ü ü ü ü ü ü ü Cabo Verde Medium ü ü ü ü ü ü ü ü ü Cameroon Medium high ü ü ü ü ü ü ü ü ü CAR High ü ü ü ü ü ü ü ü ü Chad Very high ü ü ü ü ü ü ü ü ü Comoros Medium high ü ü ü ü ü ü ü ü ü Congo High ü ü ü ü ü ü ü ü Côte d’Ivoire High ü ü ü ü ü ü ü ü Djibouti Medium high ü ü ü ü ü ü ü ü DRC Very high ü ü ü ü ü ü ü ü Egypt High ü ü ü ü ü ü ü ü Equatorial Guinea High ü ü ü ü ü ü ü ü Eritrea Very high ü ü ü ü ü ü ü ü ü Ethiopia Medium high ü ü ü ü ü ü ü ü ü Gabon Medium high ü ü ü ü ü Gambia Medium high ü ü ü ü ü ü Ghana Medium ü ü ü Guinea High ü ü ü ü ü ü ü ü ü Guinea-Bissau Very high ü ü ü ü ü ü ü ü ü Kenya Medium high ü ü ü ü ü ü ü ü Lesotho Medium ü ü ü ü Liberia High ü ü ü ü ü ü ü ü ü Libya High ü ü ü ü ü ü ü Madagascar High ü ü ü ü ü ü ü ü Malawi Medium high ü ü ü ü ü ü Mali High ü ü ü ü ü ü Mauritania High ü ü ü ü ü ü ü ü ü Mauritius Medium low ü ü Morocco Medium ü ü ü ü ü ü Mozambique Medium ü ü ü ü ü ü ü Namibia Medium ü ü ü Niger High ü ü ü ü ü ü ü ü ü Nigeria High - ü ü ü ü ü ü Rwanda Medium high ü ü ü ü São Tomé and Príncipe Medium high ü ü ü ü ü ü ü Senegal Medium high ü ü ü ü ü ü ü ü Seychelles Medium high ü ü ü ü ü ü Sierra Leone Medium high ü ü ü ü ü ü ü ü ü Somalia Very high ü ü ü ü ü ü ü ü ü South Africa Medium ü ü ü ü South Sudan Not rated Sudan Very high ü ü ü ü ü ü ü ü ü Swaziland Medium high ü ü ü ü ü ü ü ü Tanzania Medium high ü ü ü ü ü ü ü ü Togo Medium high ü ü ü ü ü ü ü ü ü
182 | RMB Global Markets Overall risk Exchange transfer Sovereign non-payment Political interference Supply chain disruption Legal and regulatory Political violence Risk of doing business Banking sector vulnerability Risk to fiscal stimulus Africa Tunisia Medium high ü ü ü ü ü ü ü Uganda Medium ü ü ü ü ü ü Zambia Medium ü ü Zimbabwe Very high ü ü ü ü ü ü ü ü ü
Developed economies Germany Not rated Japan Not rated UK Not rated US Not rated
Emerging Asia China Medium ü ü ü ü ü ü Hong Kong Medium high ü India Medium ü ü ü ü ü ü ü Indonesia Medium ü ü ü Malaysia Medium low ü Pakistan High ü ü ü ü ü ü ü ü ü Philippines Medium ü ü ü Singapore Low ü South Korea Not rated Taiwan Medium low Thailand Medium High ü ü ü ü Vietnam Medium high ü ü ü ü ü
Emerging Europe and Middle East Bulgaria Medium low Czech Republic Not rated Hungary Not rated Israel Not rated Poland Not rated Romania Medium low Russia Medium ü ü ü Turkey Not rated
Emerging Latin America Argentina High ü ü ü ü ü ü ü ü Brazil Medium ü ü Chile Not rated Colombia Medium ü ü Mexico Not rated Peru Medium ü ü ü
Source: Financial Times, Aon Risk Services Data as at September 2014
RMB Global Markets | 183 appendices
Table A15: Tax indicators (resident companies)
Income tax Tax on capital gains Value-added tax Africa Algeria 25% (19% for companies in the Generally part of ordinary business 17% (reduced rate of 7% applies tourism/manufacturing sector) income, except for sale of shares to certain goods/services) (15% for gains derived by residents from the disposal of shares in an Algerian company) Angola 35% 35% (as business income) n/a Benin 30% (industrial, mining and oil 30% (on business assets) (industrial, 18% companies are subject to income mining and oil companies are tax rate of 25%) subject to income tax rate of 25%) Botswana 22% (the income tax rate for 22% (effective capital gains tax rate 12% (a training levy applies at manufacturing and International on sale of shares for both resident 0.2% of turnover of less than P2 Financial Services Companies and non-resident companies is billion and 0.05% of turnover (“IFSC”) is 15%) 16.5% and 22.5% respectively. in excess of P2 billion. This is in Some exemptions apply) addition to VAT payable) Burkina Faso 27.5% Part of ordinary business income 18% (gains from real estate are taxed separately at 10%) Burundi 0.3% 30% (taxes as ordinary profit) 18% – 10% (reduced rate on specified goods) Cabo Verde 25% (a local surtax of 2% on IUR Generally part of ordinary business 15% due (“Taxa de Incêndio”) in Praia income. (A property tax (IUP) of (Island of Santiago) and Mindelo 1.5% applies to capital gains on (Island of Sao Vicente) applies. immovable properties) Once permanently established as a non-resident entity, resident (local) company tax applies Cameroon 38.5% (this includes a surcharge 38.5% (this includes a surcharge 19.25% (this includes a surcharge of 10%) of 10%. 16.5% applies to capital of 10%) gains from the transfer of stocks, bonds and other capital shares made by natural and legal persons, occasionally or habitually, either directly or through a financial establishment) CAR 30% (20% for agricultural 30% (20% for agricultural 19% companies) companies) Chad 40% 40% or 25% (taxable gains are 18% (0% for exports) treated as ordinary gains and subject to income tax at the standard rate of 40%. However, capital gains derived from real estate are subject to capital gains tax at a rate of 25%) Comoros 35% or 50% where turnover 20% on the transfer of rights in 1%, 3%, 5%, 10% and 0% is greater than KMF500m. An real property for certain imports and locally Alternative Minimum Tax (AMT) of manufactured goods (basic 1% is payable on turnover necessities) Congo 30% (35% to companies under 30% on properties 18% (+ 5% surtax) the simplified tax regime and oil companies (hydrocarbons code)) Côte d’Ivoire 25% 25% 18% Djibouti1 DRC 35% (30% for the mining sector) Base included in corporate tax 16% Egypt 25% (corporate income tax applies Treated as ordinary gains and n/a at a flat rate of 25%) subject to income at the standard rate of 25%. (corporate income tax applies at a flat rate of 25%)
184 | RMB Global Markets Income tax Tax on capital gains Value-added tax Africa Equatorial Guinea 35% (reduced to 17.5% for certain 35% (CIT rate) 15% (6% applies to the supply and companies) import of certain products) Eritrea 34% Generally part of ordinary business n/a income Ethiopia 30% 30% for share transfers. 15% for 15% the transfer of buildings held for business, including factories and offices Gabon 30% (35% for companies in Part of business income 18% (10% applicable to some the oil and mining sectors; 25% basic goods); 5% cement; for property developers and 0% exportations/international rental of premises owned by transportation public institutions and non-profit organisations) Gambia 31% (businesses that have been Companies and partnerships — the n/a issued with a Special Investment higher of 10% of the consideration Certificate or Free Zones Licence or 25% of the capital gain may benefit from income tax exemptions) Ghana Generally 25% (the corporate tax 15% on the capital gain made on 17.5% (includes 2.5% National rate for mining companies is 35% disposal of chargeable assets, with Health Insurance levy) and 20% for hotels. The proposed some exemptions windfall profit tax of 10% for mining operations has been put on hold indefinitely) Guinea 35% Part of income tax base and taxed 18% at 35% Guinea-Bissau1 Kenya 30% n/a 16% Lesotho 25% (10% for manufacturing Part of income 14% (5% on electricity and companies) telephone services; 0% on basic commodities and exports; 15% on alcohol and tobacco) Liberia 25% (a 4% presumptive turnover 25% (the gain on the disposal n/a tax in lieu of the 25% income tax of property is included in gross exists for businesses with annual income and subject to tax at 25% gross income of less than L$3 for a resident entity and/or for million (i.e. small taxpayers). The a non-resident with permanent 4% presumptive tax paid by small establishments (PE). Gains on taxpayers electing to file tax returns disposal of property by non- and pay taxes under the normal residents with no PE are subject tax regime is treated as an advance to withholding tax of 15% of the tax payment, creditable against acquisition price) the 25% corporate tax liability. The tax rate for mining and petroleum companies is 30%) Libya 20% 20% n/a Madagascar 20% (a resident company is Capital gains considered as normal 20% any company either established business income under the laws of Madagascar or a foreign company registered in Madagascar) Malawi 30% Malawi-sourced gains form part of 16.5% business income and are taxed at 30% with certain exemptions. Basis is original cost adjusted by the (CPI) published by the National Statistical Office (NSO) RMB Global Markets | 185 appendices
Table A15: Tax indicators (resident companies) (continued)
Income tax Tax on capital gains Value-added tax Africa Mali 30% Part of business income 18% Mauritania 25% or 30% (tax on industrial and 25% 14% (or 18% for oil products and commercial profits is 25% but 30% telecommunications) on non-commercial profits) Mauritius 15% (companies operating in the n/a 15% Freeport Zone are exempt from tax for an indefinite period. However, a freeport operator will be liable for income tax on its chargeable income derived from its trading activities on the local market) Morocco 30% (37% for leasing companies 30% (capital gains are taxable as 20% (reduced rates and and credit institutions; 10% applies part of ordinary income) exemptions apply to certain goods to small companies (less than and services) MAD300,000 income). Non-resident companies can, under certain conditions, opt for an alternative tax of 8% of the amount of their contract) Mozambique 32% Part of business income: 32% final 17% tax Namibia 33% (diamond mining companies: n/a 15% 55%; petroleum mining companies: 35%; other mining companies: 37.5%. Long-term insurance companies have different company tax rates) Niger 30% Part of ordinary business income 19% (VAT applies on certain (15% for capital gains on real imports and exports. Re-exportation estate) of goods from a customs warehouse or free zone enclaves is zero-rated) Nigeria 30% (an additional 2% tertiary 10% (disposal of shares is exempt 5% (there is a proposal to increase education tax applies to Nigerian from CGT) the VAT rate to 10%. There is companies while a 1% information limited scope for claiming input technology tax applies to certain VAT) companies. The tax rate is 85%, 65.75% or 50% for oil exploration and production companies) Rwanda 30% 30% (of business assets) 18% São Tomé and 25% (30% for oil companies) Part of business income. (As a Goods: 0% – 149%; services: 5% Príncipe general rule, under re-investment relief available, only 50% of the gains are taxable if they relate to tangible fixed assets owned for at least one year) Senegal 30% Part of business income 18% (there is a specific VAT charged at 10% for tourism activities (meals and accommodation services provided by hotels)) Seychelles 25% on the first SCR1m of taxable n/a 15% (zero-rated or exempt supply) income and 30% on the remainder Sierra Leone 30% 30% n/a Somalia1
186 | RMB Global Markets Income tax Tax on capital gains Value-added tax Africa South Africa 28% Maximum effective tax rate: 14% companies – 18.6%; trusts – 26.7%; individuals – 13.3% South Sudan 10% for entities with a turnover of Capital gains are deemed as None less than SSP1m. 15% for entities business income subject to the with a turnover between SSP1m applicable corporate tax rate and SSP75m. 20% for entities with a turnover of over SSP75m Sudan 15% for service companies; 2% on land and real estate; 2% on Generally 17% (except 30% on 10% for manufacturing; 35% motor vehicles; 2% on bonds and telecommunications) for oil exploration (including shares subcontractors); 0% for agriculture; 30% for tobacco and 2.5% of revenue for telecommunication companies Swaziland 30% (27.5% from 1 January 2014) n/a 14% Tanzania 30% 30% 18% Togo 30% Treated as part of business income 18% but subject to some exemptions and roll-over relief Tunisia Generally 30% (35% remains On properties, generally part of 18% (reduced rates of 6% and applicable to certain activities business income 12% apply to certain activities) relating to banking, insurance, telecoms and hydrocarbon companies. In terms of finance law 2013: 20% for newly-listed companies (for a 5-year period); 10% for farming and handicraft companies; 10% for total export companies from 1 January 2013) Uganda 30% 30% 18% Zambia 35% (certain industries (such as n/a 16% mining) and other specific business activities are taxed at different rates) Zimbabwe 25.75% (the maximum rate Acquired on or after 1 February 15% includes an AIDS levy of 3% of the 2009 tax payable. This rate also applies Charged on gross proceeds: to “other” non-salary incomes of Listed securities – 1% individuals as well as trust income) Property – 20% Unlisted securities – 20% Charged on capital gain: Property – 20% Unlisted securities – 20%
Note: 1 No information available. Source: PwC Data as at September 2014
RMB Global Markets | 187 appendices
Table A15: Tax indicators (residents’ withholding tax)
Dividends Interest Royalties Africa Algeria 10% 10% or 50% (a final tax of 50% 24% (with a tax allowance of 80% applies to bearer instruments) where there is a contract relating to the use of software) Angola 0% (dividends paid by an Angolan 15% 10% company to another Angolan company in which it holds at least 25% share participation and has held the holding for more than one year are exempt from the 10% investment income tax, provided the recipient is subject to corporate income tax) or 10% Benin 10% 15% 1% or 5% (royalty payments made by registered enterprises are subject to tax of 1% while non-registered enterprises are subject to 5%) Botswana 8% 10% (interest accrued from a bank n/a or building society and which is subject to withholding tax at the rate of 10% is final tax) Burkina Faso 12.5% Bond and debentures – 6% Debt 5% instruments – 25% Burundi 15% 15% 15% (for individuals, taxed as part of profit for companies) Cabo Verde 0% (under the new tax codes, tax 15% (20% for interest on deposits. 15% will be levied on dividends) Interest derived by Cabo Verdean emigrants is exempt from tax) Cameroon 16.5% (this includes a surcharge 16.5% (this includes a surcharge of n/a of 10%) 10% on certain savings accounts) CAR 15% (if paid to a non-resident by a 15% (if paid to a non-resident by a n/a company situated in CAR) company situated in CAR) Chad 20% 20% n/a Comoros 0% 0% 10% Congo 20% 20% n/a Côte d’Ivoire 12% 18% 8% Djibouti1 DRC 20% 20% 14% Egypt n/a n/a n/a Equatorial Guinea n/a (part of business income) n/a (part of business income) n/a (part of business income) Eritrea 0% n/a n/a Ethiopia 10% 5% — interest on deposits; n/a for 5% interest on payments to foreign banks Gabon 15% for dividends paid to Interest on debt claims, deposits, n/a (part of business income) corporates; 20% for individuals guarantees, 15% for corporates (20% otherwise); 10% on other interest Gambia 15% (dividends paid to resident 15% (this excludes interest paid to n/a companies by Gambian companies a financial institution and interest are exempt from withholding tax) paid to resident individuals from savings at the Gambia Post Office) Ghana 8% (final taxes. Certain persons 8% (certain persons receiving 5% receiving dividends and/or interest dividends and/or interest are are exempt from withholding tax) exempt from withholding tax) Guinea 10% 10% n/a
188 | RMB Global Markets Dividends Interest Royalties Africa Guinea-Bissau1 Kenya 10% (dividends received by a 15% (25% rate applies on 5% resident with more than 12.5% interest bearer instruments of voting power are tax exempt) at least 2-years. 15% applies on government bearer bonds of at least 2-years) Lesotho 0% 10% 0% Liberia 15% (the resident and non-resident 15% (the resident and non-resident 15% — licence fees (natural withholding tax rates deductible by withholding tax rates deductible by persons are required to withhold mining, petroleum and renewable mining, petroleum and renewable tax on payments made in the resources entities when paying resources entities when paying course of business. Gaming dividends is 5%; interest is 5%; and dividends is 5%; interest is 5% and winnings are taxed at 20% for services is 6%) services is 6%) residents and 15% for non- residents. Mineral royalty rate on iron ore is 4.5%; gold and other base materials is 3%; and commercial diamonds is 5%) Libya n/a 5% (on bank deposits) Taxed on deemed profit basis Madagascar 0% 20% (0% on government 0% bonds called “Fanambina”. No withholding tax on interest paid on foreign bank loans) Malawi 10% 20% (on interest paid by banks and 20% interest on treasury bills, stocks, bonds or promissory notes raised by or on behalf of the government) Mali 10% 18% (15% in respect of interest on 15% business debt; 13% for interest on corporate bonds; and 9% on bank deposits) Mauritania 10% 10% 3% Mauritius 0% 0%/15% (interest income payable 10% by any person other than financial institutions operating under the Banking Act to a resident individual is subject to a withholding tax of 15%) Morocco 15% or exempted 20% or 30% n/a Mozambique 20% (dividends received by a 20% 20% Mozambican resident entity from another Mozambican resident entity, which is subject to corporate tax, are excluded from both dividend (withholding) tax and corporate tax, provided that the following conditions are met: (i) A shareholding requirement of at least 20%; and (ii) The shareholding has been held for at least two consecutive years prior to the payment of dividends Namibia 0% 10% (on interest received by any 0% person, other than a Namibian company, from a financial institution or unit trusts)
RMB Global Markets | 189 appendices
Table A15: Tax indicators (residents’ withholding tax) (continued)
Dividends Interest Royalties Africa Niger 10% 13%, 15% or 25% (generally, 7% (this tax applies to resident a withholding tax rate of 25% persons who are not registered for applies on interest payments. tax) However, interest on bonds with a maturity period of up to 5-years is subject to 13% withholding tax. Also, interest on bonds with more than 5-years’ maturity period and current and deposit accounts opened with a bank or agricultural credit union are subject to 15% withholding tax) Nigeria 10% 10% 10% or 5% (the withholding tax rate on royalties is 10% when the beneficiary of the income is a company and 5% when it is an individual) Rwanda 15% 15% 15% São Tomé and 20% (companies); 15% 20% (companies); 15% individuals) 20% (companies); 15% individuals) Príncipe (individuals) Senegal 10% (exempt if recipient owns a 16% (8% for interest on bank n/a minimum 20% participation) deposits; 6% for interest on government bonds with maturity equal to or more than five years; 20% on treasury bonds and 13% on other bonds) Seychelles 0% 0% 0% Sierra Leone 10% (a dividend received by a 15% final taxes 25% resident company from another resident company is exempt from tax. Final taxes) Somalia1 South Africa 15% n/a n/a South Sudan 10% 10% 10% Sudan n/a (a stamp duty of 1% applies n/a 15% on dividends paid by resident companies) Swaziland n/a for companies (individual 10%) n/a for companies (individual 10% n/a — exempt up to approximately US$2,700) Tanzania 10% 10% 15% Togo 13% 13% or 15% (withholding tax of 5% – 10% (withholding tax 13% applies to individuals while applicable to registered residents 15% applies to legal entities) is 5% while 10% applies to beneficiaries who are not registered for tax) Tunisia Exempt 20% Taxed as part of normal income Uganda 15% (withholding tax on dividends 15% (no withholding tax on n/a paid by companies listed on the interest paid to financial institutions Uganda Stock Exchange to resident except for interest derived from individuals is 10%) government securities)
190 | RMB Global Markets Dividends Interest Royalties Africa Zambia 15% (a final tax for non-residents. 15% (interest payable on a bill of 15% Tax payable on dividends may be exchange drawn for up to 180-days offset against withholding tax is not subject to withholding tax) suffered on dividends receivable. No withholding tax on dividends paid to resident individuals by companies listed on the Lusaka Stock Exchange. No withholding tax applies to dividends for companies engaging in mining operations. Dividends for the first five years from the commencement of operations declared by a rural business enterprise or business in a priority sector opening in a Multi-Facility Economic Zone or an industrial park are exempt) Zimbabwe Listed shares: 10%; unlisted 15% (5% for fixed deposits with 0% shares:15% tenure of more than 90-days. RTI and NRTI)
Note: 1 No information available. Source: PwC Data as at September 2014
RMB Global Markets | 191 appendices
Table A16: Tax indicators (non-resident companies)
Income tax Tax on capital gains Value-added tax Africa Algeria 24% withholding tax on payments 20% withholding tax on gains 17% (reductions of 7% apply to received in absence of double tax derived by a non-resident from the certain goods/services. VAT may treaties disposal on gains in an Algerian replace withholding tax on certain company. Restrictions apply on services provided by non-residents both direct and indirect transfers to Algerian consumers (especially of shares by a foreign investor in where a double tax treaty exists) an Algerian company with foreign ownership Angola 35% 35% (as business income) n/a Benin 30% (industrial, mining and oil 30% (on business assets. Industrial, 18% companies are subject to income mining and oil companies are tax rate of 25%) subject to income tax rate of 25%) Botswana 30% (the income tax rate for 30% (22.5% — the effective 12% (a training levy applies at manufacturing and International capital gains tax rate on sale 0.2% of turnover of less than P2bn Financial Services Companies of shares for both resident and and 0.05% of turnover in excess of (“IFSC”) is 15%) non-resident companies is 16.5% P2bn. This is in addition to the VAT and 22.5% respectively. Some payable) exemptions apply) Burkina Faso 28% Part of ordinary business income 18% (gains from real estate are taxed separately at 10%) Burundi 35% 30% 18% (10% reduced rate on specified goods) Cabo Verde 25% (a local surtax of 2% on IUR Generally part of business 15% due (“Taxa de Incêndio”) in Praia income (a property tax (IUP) of (Island of Santiago) and Mindelo 1.5% applies to capital gains on (Island of Sao Vicente) applies. A immovable properties) permanent establishment of non- resident entity is taxed as a resident (local) company) Cameroon 35% (as business income) n/a 0% CAR 30% (20% for agricultural 30% (20% for agricultural 19% companies) companies) Chad 25% (the tax on non-residents is 40% or 25% (taxable gains are 18% (0% for exports) in the form of a withholding tax. treated as ordinary gains and 12.5% applies to individuals and subject to income tax at the legal entities that execute public standard rate of 40%. However, contracts or work on behalf of oil capital gains derived from real projects and are not tax resident in estate are subject to capital gains Chad) tax at a rate of 25%) Comoros 35% (an Alternative Minimum Tax Taxed as ordinary income at the 1%, 3%, 5%, 10% and 0% (AMT) of 3% of turnover applies to standard rate of 35% for certain imports and locally branches) manufactured goods (basic necessities) Congo 20% (35% applies to companies On properties — 20% 18% (plus a surtax of 5%) under the simplified tax regime and oil companies (hydrocarbons code)) Côte d’Ivoire 25% 25% 18% Djibouti1 DRC 14% Base included in corporate tax 0% Egypt 20% withholding tax where non- Treated as ordinary gains and n/a residents provide services in Egypt subject to income at the standard rate of 25%. The corporate income tax applies at a flat rate of 25% Equatorial Guinea 10% of turnover 35% (CIT rate) 15% (6% applies to the supply and import of certain products)
192 | RMB Global Markets Income tax Tax on capital gains Value-added tax Africa Eritrea 34% Generally part of ordinary business n/a income Ethiopia 30% 30% for share transfers.15% for 15% (reverse VAT also applies on the transfer of buildings held for the supply of services) business, factories and offices Gabon 30% (35% applies to companies Part of business income 18% (10% applicable to some in the oil and mining sectors; 25% basic goods) applies to property developers and rental of premises owned by public institutions and non-profit organisations) Gambia 31% (businesses that have been Companies and partnerships — the n/a issued with a Special Investment higher of 10% of the consideration Certificate or Free Zones Licence or 25% of the capital gain may benefit from income tax exemptions) Ghana Generally 20% (the corporate tax 15% on the capital gain made 17.5% (includes 2.5% National rate for mining companies is 35% on disposal of chargeable assets Health Insurance levy) and 20% for hotels. The proposed connected with Ghana with some windfall profit tax of 10% for exemptions mining operations has been put on hold indefinitely) Guinea 35% Part of income tax base and taxed 18% at 35% Guinea-Bissau1 Kenya 37.5% n/a 16% Lesotho 25% Part of income 14% (5% on electricity and telephone services; 0% on basic commodities and exports; 15% on alcohol and tobacco) Liberia 25% (4% presumptive turnover tax 25% (the gain on the disposal n/a in lieu of the 25% income tax exists of property is included in gross for businesses with annual gross income and subject to tax at 25% income of less than L$3m (i.e. small for a resident entity and/or for taxpayers). The 4% presumptive tax a non-resident with permanent paid by small taxpayers electing to establishments (PE). Gains on file tax returns and pay taxes under disposal of property by non- the normal tax regime is treated as residents with no PE in Liberia are an advance tax payment, creditable subject to withholding tax at a rate against the 25% corporate tax of 15% of the acquisition price) liability. The tax rate for mining and petroleum companies is 30%) Libya 20% 20% n/a Madagascar 10% withholding tax applies Capital gains considered as normal 20% business income Malawi 35% for branches and 15% on Forms part of business income 16.5% Malawi-sourced income that is and is taxed at 15% with certain not attributed to a permanent exemptions establishment (PE) Mali 30% Part of business income 18% Mauritania 25% or 30% (tax on industrial and 25% 14% (or 18% for oil products and commercial profits is 25% while telecommunications) that on non-commercial profits is 30%) Mauritius 15% n/a 15%
RMB Global Markets | 193 appendices
Table A16: Tax indicators (non-resident companies) (continued)
Income tax Tax on capital gains Value-added tax Africa Morocco 30% (37% applies to leasing 30% (capital gains are taxable as 20% (reduced rates and companies and credit institutions. part of ordinary income) exemptions apply on certain goods 10% for small companies (less and services) than MAD300,000 of income). Non-resident companies can, under certain conditions, opt for an alternative tax of 8% of the amount of their contract) Mozambique 20% or 10% definitive withholding 32% final tax 17% tax Namibia 33% (diamond mining companies: n/a 15% 55%; petroleum mining companies: 35%; other mining companies: 37.5%. Long-term insurance companies have different company tax rates) Niger 30% Part of ordinary business income 19% (VAT applies on certain (15% for capital gains on real imports and exports. Re-exportation estate) of goods from a customs warehouse or free zone enclaves is zero-rated) Nigeria 6% of Nigeria turnover (an 10% (disposal of shares is exempt 5% (there is a proposal to increase additional 2% tertiary education from CGT) the VAT rate to 10%. There is tax applies to Nigerian companies limited scope for claiming input while a 1% information technology VAT) tax applies to certain companies. The tax rate is 85%, 65.75% or 50% for oil exploration and production companies) Rwanda 30% 30% (of business assets) 18% São Tomé and 25% 25% Goods: 0% – 149%; services: 5% Príncipe Senegal 30% Part of business income 18% (there is a specific VAT charged at 10% for tourism activities (meals and accommodation services provided by hotels)) Seychelles 1.5% on global taxable income for n/a 0% companies with special licence; 0% for international businesses Sierra Leone 30% 30% n/a Somalia1 South Africa 28% Maximum effective tax rate: 14% companies – 18.6%; trusts – 26.7%; individuals – 13.3% South Sudan 10% for entities with a turnover of Capital gains are deemed as n/a less than SSP1m. 15% for entities business income subject to the with a turnover between SSP1m applicable corporate tax rate and SSP75m. 20% for entities with a turnover of over SSP75m Sudan 15% for service companies; 2% – land and real estate; 2% – n/a 10% for manufacturing; 35% motor vehicles; 2% – bonds and for oil exploration (including shares (on gains derived by a non- subcontractors); 0% for agriculture; resident from the disposal of shares 30% for tobacco and 2.5%of in a Sudanese company) revenue for telecommunication companies
194 | RMB Global Markets Income tax Tax on capital gains Value-added tax Africa Swaziland 30% (27.5% from January 2014) n/a 14% Tanzania 30% (plus 10% repatriation tax) 30% 18% Togo 30% (27% for industrial companies Treated as part of business income 18% and 15% for non-residents without but subject to some exemptions a permanent establishment) and roll-over relief Tunisia Generally 30% (35% applicable On properties — 15% withholding 18% (reduced rates of 6% and to certain activities relating to tax applies 12% apply to certain activities) banking, insurance, telecoms and hydrocarbon companies. In terms of finance law 2013: 20% for newly listed companies (for a 5-year period); 10% for farming and handicraft companies; 10% for total export companies from 1 January 2013) Uganda 30% 30% 18% Zambia 35% (certain industries, such as n/a 16% mining, and other specific business activities are taxed at different rates) Zimbabwe 25.75% (the maximum rate Acquired before 1 February 2009 15% includes an AIDS levy of 3% of Charged on gross proceeds: the tax payable. This also applies Listed securities – 1% to “other” non-salary incomes of Property – 5% individuals as well as trust income) Unlisted shares – 5% Acquired on or after 1 February 2009 Charged on gross proceeds: Listed securities – 1% Charged on capital gain: Property – 20% Unlisted securities – 20%
Note: 1 No information available. Source: PwC Data as at September 2014
RMB Global Markets | 195 appendices
Table A16: Tax indicators (non-residents’ withholding tax)
Dividends Interest Royalties Africa Algeria 15% 10% or 50% 24% (with a tax allowance of 80% where there is a contract relating to the use of software) Angola 10% 15% 10% Benin 9% (10% on 90% of business 15% 25% or 30% on 40% of the assets) amount paid. (Royalty payments made to non-resident individuals are subject to a tax rate of 25% of 60% of the amount paid i.e. 15% of the gross amount paid while non-resident entities are subject to 30% of 60% of the amount paid i.e. 18% of the gross amount paid) Botswana 8% 15% (withholding tax on payments 15% (withholding tax on payments made to a resident of a country made to a resident of a country that has a double taxation that has a double taxation agreement (DTA) with Botswana agreement (DTA) with Botswana could range from 5% to 15% could range from 5% to 15% depending on the applicable DTA; depending on the applicable DTA; otherwise a non-reduced rate otherwise a non-reduced rate applies) applies) Burkina Faso 12.5% Bond and debentures – 6%; debt 20% instruments – 25% Burundi 15% 15% 15% Cabo Verde 0% (under the new tax codes, tax 20% 20% will be levied on dividends) Cameroon 15% 10% 5% CAR 15% (if paid to a non-resident by a 15% (if paid to a non-resident by a 15% company situated in CAR) company situated in CAR) Chad 20% 20% (25% in case of a loan, 25% deposits and securities) Comoros 0% 0% 10% Congo 20% 20% 20% Côte d’Ivoire 12% 18% 25% of 80% of revenue Djibouti1 DRC 20% 20% 14% Egypt n/a 20% 20% Equatorial Guinea 25% 25% 10% for non-CEMAC residents Eritrea 0% 10% 10% (royalties paid by a mining company are subject to 5% withholding tax) Ethiopia 10% 5% interest on deposits; 10% 5% interest on payments to foreign banks Gabon 15% for dividends paid to Interest on debt claims, deposits, 10% corporates; 10% on the guarantees, 15% for corporates remittances of branch profits (20% otherwise); 10% on other interest Gambia 15% 15% (this excludes interest paid to 15% a financial institution and interest paid to resident individuals from savings at the Gambia Post Office) Ghana 8% (final taxes) 8% (final taxes) 15% (final taxes) Guinea 10% 10% 15% Guinea-Bissau1
196 | RMB Global Markets Dividends Interest Royalties Africa Kenya 10% 15% (a 25% rate applies on 20% interest bearer instruments of at least 2-years. 15% applies on government bearer bonds of at least 2-years) Lesotho 25% (0% may apply in cases of 25% (0% may apply in cases of 25% (0% may apply in cases of payments made by manufacturing payments made by manufacturing payments made by manufacturing companies) companies) companies) Liberia 15% (the resident and non-resident 15% (the resident and non-resident 15% licence fees withholding tax rates deductible by withholding tax rates deductible by mining, petroleum and renewable mining, petroleum and renewable resources entities when paying resources entities when paying dividends is 5%; interest is 5%; and dividends is 5%; interest is 5% and services is 6%) services is 6%) Libya n/a 5% (on bank deposits) Taxed on deemed profit basis Madagascar 0% 20% (0% on government 10% bonds called “Fanambina”. No withholding tax on interest paid on foreign bank loans) Malawi 10% 15% 15% or 20% (15% final tax if it is not related to a permanent establishment (PE) of the recipient of the income. 20% if it relates to a PE (can be used to offset corporate income tax)) Mali 10% 18% (15% in respect of interest on 15% (30% applicable to 50% of business debt; 13% for interest on the gross amount) corporate bonds; and 9% on bank deposits) Mauritania 10% 10% 15% Mauritius 0% 0 or 15% (interest income received 0% or 15% (a royalty payment by non-residents is liable to made by a GBC1 company to a withholding tax at 15% (final tax). non-resident is exempt. However, Residents/non-resident individuals payments made by a local domestic do not pay withholding tax on company to a non-resident are interest income received from subject to a 15% withholding tax) financial institutions holding a banking licence under the Banking Act. Interest paid by a GBC1 company to a non-resident is exempt from tax) Morocco 15% 10% or exempted 10% Mozambique 20% 20% 20% Namibia 10% or 20% 10% (on interest received by any 30% of the corporate tax rate person, other than a Namibian (effective rate of 9.9%) company, from a financial institution or unit trusts) Niger 10% (on 75% of the gross amount 13%, 15% or 25% (generally, 16% of the pre-tax profits. Dividends 25% applies on interest payments. paid from a closed or open-ended However, interest on bonds with a investment fund are exempt from maturity of up to 5-years is subject withholding tax) to 13%. Also, interest on bonds with more than 5-years’ maturity and current and deposit accounts opened with a bank or agricultural credit union are subject to 15% withholding tax)
RMB Global Markets | 197 appendices
Table A16: Tax indicators (non-residents’ withholding tax) (continued)
Dividends Interest Royalties Africa Nigeria 10% 10% 10% or 5% (the withholding tax rate on royalties is 10% when the beneficiary of the income is a company and 5% when it is an individual) Rwanda 15% 15% 15% São Tomé and 20% (companies); 15% 20% (companies); 15% 20% (companies); 15% individuals) Príncipe (individuals); 0% (oil companies) (individuals); 0% (oil companies) Senegal 10% 16% (8% for interest on deposit 20% accounts. 10% for time deposit certificates. 6% for interest on government bonds with maturity equal to or more than 5-years) Seychelles 15% 15% 15% Sierra Leone 10% final taxes 15% final taxes 25% final taxes Somalia1 South Africa 15% 15% (interest withholding tax of 12% (royalty withholding tax will 15% is effective from 1 January increase to 15% from 12%, with 2015) effect from 1 January 2015) South Sudan 10% 10% 10% Sudan n/a (a stamp duty of 1% applies 15% 15% on dividends paid by resident companies) Swaziland 15% (12.5% for companies 10% 15% registered in Botswana, Lesotho and South Africa. Under the Double Tax Treaty with South Africa, the rate is further reduced to 10% where the shareholding exceeds 25%) Tanzania 10% 10% 15% Togo 13% 13% or 15% (withholding tax of 15% (withholding tax applicable 13% applies to individuals while to registered residents is 5% while 15% applies to legal entities) 10% applies to beneficiaries who are not registered for tax) Tunisia Exempt 20% (reduced to 5% for interest 15% on foreign bank loans (which is the final tax). 0% on interest on deposits and interest derived from bonds issued in foreign currency) Uganda 15% 15% (no withholding tax on 15% interest paid to financial institutions except for interest derived from government securities)
198 | RMB Global Markets Dividends Interest Royalties Africa Zambia 15% (withholding tax is a final tax 15% (interest payable on a bill of 20% for non-residents. Withholding tax exchange drawn for up to 180-days payable on dividends may be offset is not subject to withholding tax) against tax suffered on dividends receivable. No withholding tax on dividends paid to resident individuals by companies listed on the Lusaka Stock Exchange. No withholding tax applies on dividends for companies carrying on mining operations. Dividends for the first five years from the commencement of operations declared by a rural business enterprise or business in a priority sector opening in a Multi-Facility Economic Zone or an industrial park are exempt) Zimbabwe Listed shares – 10%; unlisted shares 0% – RTI and NRTI 15% –15%
Note: 1 No information available. Source: PwC Data as at September 2014
RMB Global Markets | 199 appendices
Table A17: Depth of financial markets
Financial market Availability of financial Affordability of financial Financing through local development services services equity market 1 = underdeveloped; 1 = not at all; 1 = not at all; 1 = very difficult; 7 = developed 7 = wide variety 7 = extremely well 7 = very easy Africa Algeria 2.61 3.22 2.72 2.09 Angola 2.40 2.38 3.06 1.43 Benin 3.33 3.34 3.25 2.59 Botswana 4.34 4.42 4.13 3.82 Burkina Faso 3.17 3.21 2.95 2.70 Burundi 2.33 2.53 2.56 1.82 Cabo Verde 3.32 3.67 3.59 2.99 Cameroon 3.59 3.85 3.69 2.99 CAR - - - - Chad 2.78 2.61 2.68 2.14 Comoros - - - - Congo - - - - Côte d’Ivoire 3.76 3.61 3.29 3.45 Djibouti - - - - DRC - - - - Egypt 3.41 3.79 3.70 3.86 Equatorial - - - - Guinea Eritrea - - - - Ethiopia 3.32 3.41 3.45 2.99 Gabon 3.58 3.53 3.27 3.06 Gambia 3.86 4.23 4.31 3.37 Ghana 4.36 4.43 4.10 4.24 Guinea 2.97 3.09 3.02 1.82 Guinea-Bissau - - - - Kenya 4.68 4.80 4.15 4.22 Lesotho 3.43 3.44 3.48 2.46 Liberia 3.60 3.76 3.68 2.52 Libya 2.30 2.48 2.32 1.86 Madagascar 2.93 3.59 3.21 2.29 Malawi 3.96 3.74 3.55 3.74 Mali 3.38 3.57 3.73 2.73 Mauritania 2.71 3.07 3.08 2.40 Mauritius 4.73 5.24 4.93 4.06 Morocco 4.01 4.57 4.16 4.02 Mozambique 3.13 3.67 3.28 2.54 Namibia 4.51 4.80 4.23 3.45 Niger - - - - Nigeria 4.04 3.98 3.84 3.75 Rwanda 4.23 4.57 4.18 3.53 São Tomé and - - - - Príncipe Senegal 3.72 3.85 3.63 2.92 Seychelles 3.87 4.00 3.92 3.21 Sierra Leone 3.46 3.67 3.47 2.27 Somalia - - - - South Africa 5.80 6.42 5.51 5.57 South Sudan - - - - Sudan - - - - Swaziland 4.03 4.52 4.41 3.25 Tanzania 3.72 3.70 3.56 3.11 Togo - - - - Tunisia 3.56 3.92 3.94 3.93 Uganda 3.90 4.23 3.59 3.25
200 | RMB Global Markets Financial market Availability of financial Affordability of financial Financing through local development services services equity market 1 = underdeveloped; 1 = not at all; 1 = not at all; 1 = very difficult; 7 = developed 7 = wide variety 7 = extremely well 7 = very easy Africa Zambia 4.45 4.43 4.03 3.91 Zimbabwe 3.56 3.83 3.19 3.51
Developed economies Germany 4.69 5.70 5.28 4.23 Japan 4.80 5.28 5.16 4.67 UK 5.00 6.11 5.29 4.82 US 5.26 6.09 5.59 5.06
Emerging Asia China 4.32 4.50 4.42 4.04 Hong Kong 6.02 6.29 6.10 5.85 India 4.83 5.01 4.78 4.57 Indonesia 4.18 4.88 4.61 4.35 Malaysia 5.45 5.54 5.42 4.92 Pakistan 4.04 4.14 3.78 3.60 Philippines 4.41 5.07 5.00 4.39
Emerging Asia Singapore 5.82 6.13 5.86 5.05 South Korea 3.89 4.02 4.14 3.38 Taiwan 4.95 5.51 5.51 5.47 Thailand 4.61 5.38 4.98 4.69 Vietnam 3.76 4.01 3.80 3.62
Emerging Europe and Middle East Bulgaria 3.95 3.81 3.47 3.01 Czech Republic 4.20 4.74 3.95 3.03 Hungary 3.93 4.57 3.65 2.71 Israel 4.81 5.03 4.09 3.75 Poland 4.54 4.86 4.59 3.56 Romania 3.95 3.86 3.90 2.96 Russia 3.39 4.08 3.82 3.08 Turkey 4.40 5.35 5.06 4.19
Emerging Latin America Argentina 3.05 3.13 2.92 2.27 Brazil 4.40 5.29 4.46 3.85 Chile 4.83 5.61 5.03 4.46 Colombia 4.08 4.86 3.77 3.66 Mexico 4.19 4.58 3.98 3.48 Peru 4.50 4.94 4.28 3.64
Source: WEF Data as at September 2014
RMB Global Markets | 201 appendices
Table A18: Additional financial market indicators
Venture capital Soundness of banks Regulation of securities Ease of access to loans availability 1 = insolvent; exchange 1 = very difficult; 1 = very difficult; 7 = healthy with good 1 = ineffective; 7 = very easy 7 = very easy balance sheet 7 = effective Africa Algeria 2.65 2.04 3.33 2.01 Angola 1.73 2.12 3.94 1.25 Benin 2.23 2.18 4.51 2.70 Botswana 3.21 2.80 5.52 4.28 Burkina Faso 1.64 1.68 4.07 3.02 Burundi 1.70 1.86 3.01 1.91 Cabo Verde 2.28 2.32 4.60 3.60 Cameroon 2.45 2.18 4.79 3.04 CAR - - - - Chad 1.90 1.74 3.39 2.05 Comoros - - - - Congo - - - - Côte d’Ivoire 2.42 2.13 5.26 3.76 Djibouti - - - - DRC - - - - Egypt 2.45 2.90 4.04 3.59 Equatorial Guinea - - - - Eritrea - - - - Ethiopia 1.99 2.15 4.46 3.69 Gabon 2.71 2.03 4.88 3.22 Gambia 2.46 2.48 5.13 3.94 Ghana 2.40 2.65 5.01 4.63 Guinea 2.19 1.79 3.87 2.22 Guinea-Bissau - - - - Kenya 3.21 2.97 5.09 4.38 Lesotho 3.09 2.53 4.19 2.80 Liberia 2.54 2.72 4.64 2.61 Libya 1.92 1.97 2.84 2.14 Madagascar 2.70 2.46 4.30 2.56 Malawi 2.60 2.37 5.06 3.91 Mali 2.77 2.33 4.11 2.52 Mauritania 1.89 1.91 3.49 2.56 Mauritius 3.51 2.98 6.08 5.26 Morocco 2.83 2.80 5.66 4.55 Mozambique 1.77 2.08 4.85 3.14 Namibia 2.94 2.46 5.89 4.63 Niger - - - - Nigeria 1.87 2.31 4.33 4.05 Rwanda 3.32 3.21 4.77 4.11 São Tomé and Príncipe - - - - Senegal 2.36 2.24 5.19 3.54 Seychelles 3.60 3.05 4.81 4.32 Sierra Leone 1.82 1.71 4.60 3.19 Somalia - - - - South Africa 3.63 3.29 6.60 6.56 South Sudan - - - - Sudan - - - - Swaziland 2.79 2.84 5.11 3.79 Tanzania 2.69 2.60 4.20 3.52 Togo - - - - Tunisia 2.87 3.01 3.85 4.10 Uganda 2.64 2.41 4.83 3.69 Zambia 2.75 2.54 5.26 4.45 Zimbabwe 2.06 1.79 3.42 4.12
202 | RMB Global Markets Venture capital Soundness of banks Regulation of securities Ease of access to loans availability 1 = insolvent; exchange 1 = very difficult; 1 = very difficult; 7 = healthy with good 1 = ineffective; 7 = very easy 7 = very easy balance sheet 7 = effective Developed economies Germany 3.21 3.23 5.13 4.85 Japan 3.36 3.13 5.61 5.02 UK 2.70 3.50 4.34 5.20 US 3.86 4.34 5.25 4.97
Emerging Asia China 3.40 3.76 5.01 4.27 Hong Kong 4.69 4.57 6.59 6.00 India 3.30 3.32 5.47 5.13 Indonesia 3.88 3.73 5.01 4.37 Malaysia 4.42 4.20 5.67 5.32 Pakistan 2.77 2.58 5.01 4.48 Philippines 3.31 3.06 5.72 4.82 Singapore 4.53 4.24 6.51 5.92 South Korea 2.21 2.13 4.21 3.77 Taiwan 3.97 4.15 5.50 5.41 Thailand 3.62 3.05 5.69 4.96 Vietnam 2.33 2.57 3.73 3.25
Emerging Europe and Middle East Bulgaria 3.27 2.69 4.75 3.37 Czech Republic 2.97 2.59 5.78 4.45 Hungary 2.06 2.05 4.68 4.65 Israel 2.88 4.19 5.94 4.55 Poland 2.50 2.27 5.33 4.85 Romania 2.74 2.44 4.38 3.41 Russia 2.85 2.61 4.04 3.61 Turkey 3.06 2.50 5.99 4.90
Emerging Latin America Argentina 1.67 1.75 4.39 3.47 Brazil 2.88 2.72 6.28 5.81 Chile 3.64 3.27 6.31 4.85 Colombia 2.79 2.58 5.87 4.01 Mexico 2.52 2.58 5.80 4.43 Peru 3.48 2.90 5.84 4.39
Source: WEF Data as at September 2014
RMB Global Markets | 203 appendices
Table A19: Features of domestic financial markets (%) (%) (%) (%) (%) (%) credit amount) investments investments investments investments (% of the loan or stock sales Proportion of Proportion Proportion of Proportion Proportion of Proportion Proportion of Proportion major constraint Firms identifying needed for a loan loan/line of credit Firms with a bank Value of collateral Value financed by banks financed by equity financed internally financed by supplier access to finance as a
Africa Angola 38.5 9.5 - 89.0 5.2 2.2 1.8 Benin 66.6 45.6 306.0 92.5 1.8 0.9 0.5 Botswana 25.5 50.0 151.3 66.7 24.7 2.8 3.5 Burkina Faso 75.0 28.4 175.4 77.2 15.6 3.7 2.4 Burundi 50.9 35.3 266.5 62.9 15.5 0.1 - Cabo Verde 36.7 41.5 176.4 56.7 23.9 3.5 13.9 Cameroon 55.1 30.3 213.1 67.3 13.0 10.9 3.5 CAR 46.0 26.0 233.4 73.9 4.8 6.4 8.2 Chad 46.5 20.6 136.4 83.8 2.3 9.1 2.5 Comoros ------Congo 44.8 12.8 47.3 84.6 4.0 6.6 1.2 Côte d’Ivoire 66.6 11.5 55.9 89.0 3.7 3.4 0.0 Djibouti ------DRC 73.3 10.7 261.0 87.8 1.6 5.6 1.0 Egypt 31.0 17.4 85.5 88.5 3.5 0.4 2.5 Equatorial Guinea ------Eritrea 0.9 10.9 - 94.0 1.3 0.0 1.1 Ethiopia 31.1 15.8 234.0 86.3 8.2 0.2 4.8 Gabon 30.4 9.0 - 92.9 3.2 1.2 0.4 Gambia 40.3 16.6 192.9 78.7 9.8 2.9 0.2 Ghana 66.2 22.2 128.3 86.5 9.6 1.8 0.6 Guinea 58.3 6.0 - 94.1 0.5 2.3 0.0 Guinea-Bissau 71.6 2.8 - 85.3 0.8 1.9 0.0 Kenya 16.8 35.9 187.8 60.8 24.1 5.3 7.7 Lesotho 28.6 32.2 66.9 50.9 23.3 9.1 6.6 Liberia 35.0 14.0 58.0 79.8 6.7 0.7 2.8 Libya ------Madagascar 39.4 20.6 106.1 79.5 6.1 8.6 2.0 Malawi 51.0 40.1 161.1 75.5 13.4 2.5 2.9 Mali 48.1 16.6 201.4 78.7 10.2 5.0 4.8 Mauritania 43.6 16.0 194.7 77.3 7.3 3.7 0.0 Mauritius 46.3 47.4 59.9 51.9 30.8 1.5 0.0 Morocco 31.6 33.4 171.2 75.4 12.2 5.7 1.1 Mozambique 50.1 14.2 92.0 86.0 4.7 7.0 0.2 Namibia 18.4 24.0 219.0 79.2 15.7 1.6 0.0 Niger 62.0 29.7 229.6 89.2 7.8 1.5 1.0 Nigeria 53.1 3.8 138.8 92.8 1.3 2.1 0.1 Rwanda 35.1 45.5 272.6 77.3 13.6 3.2 4.4 São Tomé and ------Príncipe Senegal 49.2 15.3 127.1 72.7 11.1 2.9 3.9 Seychelles ------Sierra Leone 34.6 17.4 62.8 87.0 3.7 0.2 5.2 Somalia ------South Africa 15.5 30.1 103.6 68.5 25.8 3.9 0.0 Sudan ------Swaziland 32.9 21.9 104.5 75.8 12.0 5.6 0.0 Tanzania 44.8 15.1 263.8 83.2 3.4 1.0 6.6 Togo 58.6 21.6 237.6 70.3 13.1 5.5 1.8
204 | RMB Global Markets (%) (%) (%) (%) (%) (%) credit amount) investments investments investments investments (% of the loan or stock sales Proportion of Proportion Proportion of Proportion Proportion of Proportion Proportion of Proportion major constraint Firms identifying needed for a loan loan/line of credit Firms with a bank Value of collateral Value financed by banks financed by equity financed internally financed by supplier access to finance as a
Africa Tunisia ------Uganda 20.2 9.8 159.4 79.5 3.3 3.2 13.0 Zambia 27.4 8.8 236.6 80.5 6.5 3.9 2.1 Zimbabwe 63.7 12.5 261.3 84.7 8.6 6.0 0.4
Developed economies Germany 15.0 - 126.0 50.6 22.6 4.2 9.3 Japan ------UK ------US ------
Emerging Asia China ------Hong Kong ------India ------Indonesia 14.3 18.2 0.1 85.8 6.0 1.1 3.0 Malaysia 14.9 60.4 64.6 46.1 32.8 5.4 3.2 Pakistan 17.7 8.6 67.7 88.8 8.4 0.0 0.7 Philippines 13.4 33.2 238.4 73.3 11.5 6.9 3.5 Singapore ------South Korea 12.1 - 132.9 65.0 20.0 0.1 8.1 Taiwan ------Thailand 26.4 72.5 131.1 28.2 53.0 2.6 9.7 Vietnam 15.0 49.9 217.7 74.7 12.0 0.8 3.8
Emerging Europe and Middle East Bulgaria 19.4 42.1 165.8 73.3 15.0 3.9 3.5 Czech Republic 23.7 46.6 106.9 69.5 16.2 9.9 3.0 Hungary 11.7 43.0 144.7 58.2 32.3 1.3 5.5 Israel ------Poland 22.0 50.1 129.3 58.3 23.0 6.8 7.0 Romania 36.9 42.3 127.7 55.3 21.1 4.6 13.0 Russia 28.0 21.6 154.0 84.3 6.3 3.3 2.8 Turkey 14.3 56.8 89.9 55.2 38.0 2.0 4.0
Emerging Latin America Argentina 43.5 49.3 181.3 63.2 13.9 14.9 4.2 Brazil 55.5 65.3 71.0 44.5 33.6 16.4 2.4 Chile 17.6 79.6 209.5 56.3 32.5 4.8 1.3 Colombia 41.4 57.2 169.6 43.9 21.2 10.1 2.6 Mexico 29.6 32.0 208.9 64.1 8.8 15.6 8.5 Peru 8.5 66.8 229.1 42.0 34.7 10.9 5.4
Source: World Bank Enterprise Survey Data as at September 2014
RMB Global Markets | 205 appendices
Table A20: Currency regimes
Currency Currency code IMF regime classification Africa Algeria Dinar DZD Managed float Angola Kwanza AOA Pegged to the dollar Benin Franc XOF Pegged to the euro Botswana Pula BWP Crawling peg Burkina Faso Franc XOF Pegged to the euro Burundi Franc BIF Managed float Cabo Verde Escudo CVE Pegged to the euro Cameroon Franc XAF Pegged to the euro CAR Franc XAF Pegged to the euro Chad Franc XAF Pegged to the euro Comoros Franc KMF Pegged to the euro Congo Franc XAF Pegged to the euro Côte d’Ivoire Franc XOF Pegged to the euro Djibouti Franc DJF Currency board with a peg to the dollar DRC Franc CDF Free floating Egypt Pound EGP Crawl-like arrangement Equatorial Guinea Franc XAF Pegged to the euro Eritrea Nakfa ERN Pegged to the dollar Ethiopia Birr ETB Crawling dollar peg Gabon Franc XAF Pegged to the euro Gambia Dalasi GMD Managed float Ghana Cedi GHS Managed float Guinea Franc GNF Managed float Guinea-Bissau Franc XOF Pegged to the euro Kenya Shilling KES Managed float Lesotho Loti LSL Pegged to the rand Liberia Dollar LRD Managed dollar peg Libya Dinar LYD Composite currency peg Madagascar Ariary MGA Managed float Malawi Kwacha MWK Managed float Mali Franc XOF Pegged to the euro Mauritania Ouguiya MRO Managed float Mauritius Rupee MUR Managed float Morocco Dirham MAD Composite currency peg Mozambique Metical MZM Managed float Namibia Dollar NAD Pegged to the rand Niger Franc XOF Pegged to the euro Nigeria Naira NGN Managed float Rwanda Franc RWF Crawl-like arrangement São Tomé and Príncipe Dobra STD Pegged to the euro Senegal Franc XOF Pegged to the euro Seychelles Rupee SCR Managed float Sierra Leone Leone SLL Managed float Somalia Shilling SOS Free floating South Africa Rand ZAR Managed float South Sudan Pound SSP Pegged to the dollar Sudan Pound SDG Managed float Swaziland Lilangeni SZL Pegged to the rand Tanzania Shilling TZS Managed float Togo Franc XOF Pegged to the euro Tunisia Dinar TND Crawl-like arrangement Uganda Shilling UGX Managed float Zambia Kwacha ZMW Free float Zimbabwe Dollar USD Pegged to the dollar
206 | RMB Global Markets Currency Currency code IMF regime classification Developed economies Germany Euro EUR Free floating Japan Yen JPY Free floating UK Pound GDP Free floating US Dollar USD Free floating
Emerging Asia China Yuan renminbi CNY Crawl-like arrangement Hong Kong Dollar HKD Currency board with a peg to the dollar India Rupee INR Managed float Indonesia Rupiah IDR Crawl-like arrangement Malaysia Ringgit MYR Managed float Pakistan Rupee PKR Managed float Philippines Peso PHP Free floating Singapore Dollar SGD Crawl-like arrangement South Korea Won KRW Managed float Taiwan New dollar TWD Free floating Thailand Baht THB Managed float Vietnam Vietnam dong VND Composite stabilized arrangement
Emerging Europe and Middle East Bulgaria Lev BGN Currency board with a peg to the euro Czech Republic Koruna CZK Free floating Hungary Forint HUF Managed float Israel Shekel ILS Free floating Poland Zloty PLN Free floating Romania New leu RON Managed float Russia Ruble RUB Managed float Turkey Lira TRY Free floating
Emerging Latin America Argentina Peso ARS Crawl-like arrangement Brazil Real BRL Managed float Chile Peso CLP Free floating Colombia Peso COP Managed float Mexico Peso MXN Free floating Peru Nuevo sol PEN Managed float
Source: IMF, RMB Global Markets Data as at September 2014
RMB Global Markets | 207 appendices
Table A21: Ease of getting credit
Getting credit 1 = easiest to get; Strength of legal Depth of credit Public registry Private bureau 183 = most difficult rights index information index coverage coverage to get 0 – 10 (best) 0 – 6 (best) % of adults % of adults Africa Algeria 130 3 4 2.4 0 Angola 130 3 4 1.8 0 Benin 130 6 1 10.9 0 Botswana 73 6 4 0.0 61 Burkina Faso 130 6 1 1.7 0 Burundi 170 3 1 0.3 0 Cabo Verde - - - 19.7 - Cameroon 109 6 2 9.1 0 CAR - - - 2.4 - Chad 130 6 1 1.0 0 Comoros 159 6 0 0.0 0 Congo - - - 8.3 - Côte d’Ivoire 130 6 1 2.9 0 Djibouti 180 2 1 0.2 0 DRC - - - 0.0 - Egypt - - - 4.3 - Equatorial Guinea 109 6 2 3.9 0 Eritrea 186 2 0 0.0 0 Ethiopia 109 4 4 0.1 0 Gabon 109 6 2 53.8 0 Gambia - - - 0.0 - Ghana 28 8 5 0.0 10 Guinea 159 6 0 0.0 0 Guinea-Bissau 130 6 1 1.1 0 Kenya 13 10 4 0.0 5 Lesotho 159 6 0 0.0 0 Liberia 86 7 2 1.1 0 Libya 186 1 1 - 0 Madagascar 180 2 1 0.1 0 Malawi 130 7 0 0.0 0 Mali 130 6 1 3.3 0 Mauritania 170 3 1 0.5 0 Mauritius 42 6 6 56.3 0 Morocco 109 3 5 0.0 20 Mozambique 130 3 4 4.4 0 Namibia 55 7 4 0.0 66 Niger 130 6 1 0.8 0 Nigeria 13 9 5 0.1 5 Rwanda 13 8 6 0.0 13 São Tomé and Príncipe - - - 0.0 - Senegal 130 6 1 4.6 0 Seychelles 170 4 0 0.0 0 Sierra Leone 86 7 2 0.7 0 Somalia - - - - - South Africa 28 7 6 0.0 56 South Sudan - - - - Sudan 167 4 0 0.0 0 Swaziland 53 6 5 0.0 48 Tanzania 129 7 0 0.0 0 Togo 129 6 1 2.8 0 Tunisia 104 3 5 27.8 0 Uganda 40 7 5 0.0 4
208 | RMB Global Markets Getting credit 1 = easiest to get; Strength of legal Depth of credit Public registry Private bureau 183 = most difficult rights index information index coverage coverage to get 0 – 10 (best) 0 – 6 (best) % of adults % of adults Africa Zambia 12 9 5 0.0 5 Zimbabwe 129 7 0 0.0 0
Developed economies Germany 23 7 6 1.3 100 Japan 23 7 6 0.0 100 UK 1 10 6 0.0 100 US 4 9 6 0.0 100
Emerging Asia China 70 6 4 27.7 0 Hong Kong 4 10 5 0.0 89 India - - - - - Indonesia 129 3 4 36.0 0 Malaysia 1 10 6 56.1 82 Pakistan 70 6 4 7.2 2 Philippines 129 4 3 0.0 9 Singapore 12 10 4 0.0 58 South Korea - - - - - Taiwan - - - - - Thailand 70 5 5 0.0 44 Vietnam 40 8 4 37.8 0
Emerging Europe and Middle East Bulgaria 40 8 4 56.3 0 Czech Republic 53 6 5 6.1 99 Hungary 53 7 4 0.0 16 Israel 12 9 5 0.0 100 Poland 4 9 6 0.0 77 Romania 12 9 5 14.0 45 Russia 104 3 5 0.0 45 Turkey 83 4 5 23.5 63
Emerging Latin America Argentina 70 4 6 37.0 100 Brazil 104 3 5 46.8 62 Chile 53 6 5 37.4 4 Colombia 70 5 5 0.0 73 Mexico 40 6 6 0.0 99 Peru 23 7 6 31.2 43
Source: World Bank Data as at September 2014
RMB Global Markets | 209 appendices
Table A22: Stock exchanges (end-2012)
Number of Market listed domestic capitalisation Turnover ratio2 companies1 (current, US$m) (%) Web address Africa Algeria - 0 0.0 Angola - 0 0.0 Benin 37 7,829 2.3 www.brvm.org Botswana 24 4,588 2.6 www.bse.co.bw Burkina Faso 37 7,829 2.3 www.brvm.org Burundi - 0 0.0 Cabo Verde - - - Cameroon - 0 0.0 www.douala-stock-exchange.com CAR - - - Chad - - - Comoros - - - Congo - - - Côte d’Ivoire 37 7,829 2.3 www.brvm.org Djibouti - - - DRC - - - Egypt 234 58,008 37.8 www.egx.com.eg Equatorial Guinea - - - Eritrea - - - Ethiopia - - - Gabon - - - Gambia - - - Ghana 34 3,465 1.6 www.gse.com.gh Guinea - - - Guinea-Bissau 37 7,829 2.3 www.brvm.org Kenya 57 14,791 8.1 www.nse.co.ke Lesotho - - - Liberia - - - Libya - - - Madagascar - - - Malawi 14 754 1.5 www.mse.co.mw Mali 37 7,829 2.3 www.brvm.org Mauritania - - - Mauritius 87 7,093 4.0 www.stockexchangeofmauritius.com Morocco 76 52,634 6.2 www.casablanca-bourse.com Mozambique - - - www.bvm.co.mz Namibia 7 1,305 1.7 www.nsx.com.na/about.php Niger 37 7,829 2.3 www.brvm.org Nigeria 192 56,389 8.8 www.nigerianstockexchange.com Rwanda - 0 0.0 www.rse.tw São Tomé and Príncipe - - - Senegal 37 7,829 2.3 www.brvm.org Seychelles - - 3.7 Sierra Leone - - - Somalia - - - South Africa 348 612,308 54.9 www.jse.co.za South Sudan - - - Sudan - - - www.kse.com.sd Swaziland - - - www.ssx.org.sz Tanzania 17 1,803 1.6 www.dse.co.tz Togo 37 7,829 2.3 www.brvm.org Tunisia 59 8,887 13.5 www.bvmt.com.tn Uganda 10 7,294 0.2 www.use.or.ug Zambia 20 3,004 5.6 www.luse.co.zm Zimbabwe 76 11,816 14.2 www.zse.co.zw
210 | RMB Global Markets Number of Market listed domestic capitalisation Turnover ratio2 companies1 (current, US$m) (%) Web address Developed economies Germany 665 1,486,315 134.5 www.deutsche-boerse.com Japan 3,470 3,680,982 108.9 www.tse.or.jp UK 2,179 3,019,467 137.9 www.londonstockexchange.com US 4,102 18,668,333 187.6 www.nyse.com/
Emerging Asia China 2,494 3,697,376 188.2 www.sse.com.cn Hong Kong 1,459 1,108,127 157.6 www.hkex.com.hk India 5,191 1,263,335 56.3 www.nse-india.com Indonesia 459 396,772 37.2 www.idx.co.id Malaysia 921 476,340 32.0 www.bursamalaysia.com Pakistan 573 43,676 28.6 www.kse.com.pk Philippines 268 264,143 20.4 www.pse.com.ph Singapore 472 414,126 74.8 www.sgx.com South Korea 1,767 1,180,473 195.1 eng.krx.co.kr/ Taiwan - - - www.twse.com.tw/en/ Thailand 502 382,999 85.1 www.set.or.th/en/index.html Vietnam 311 32,933 29.5 www.hnx.vn
Emerging Europe and Middle East Bulgaria 387 6,666 3.4 www.bse-sofia.bg/ Czech Republic 17 37,163 38.0 www.pse.cz Hungary 51 21,080 83.9 www.bse.hu/ Israel 532 148,436 64.7 www.tase.co.il Poland 844 177,730 58.4 www.wse.com.pl/ Romania 77 15,925 12.0 www.bvb.ro Russia 276 874,659 127.3 www.rts.ru/en/ Turkey 405 308,775 162.7 www.ise.org
Emerging Latin America Argentina 101 34,241 4.8 www.bcba.sba.com.ar/ Brazil 353 1,229,850 69.3 www.bmfbovespa.com.br Chile 225 313,325 18.6 www.bolsadesantiago.com/ Colombia 76 262,101 13.3 www.bvc.com.co/ Mexico 131 525,057 26.0 www.bmv.com.mx/ Peru 213 96,850 5.5 www.bvl.com.pe/
Note: 1 This indicator does not include investment companies, mutual funds or other collective investment vehicles. 2 Turnover ratio is the total value of shares traded during the period divided by the average market capitalisation for the period. Source: Respective stock exchanges, World Bank Data as at September 2014
RMB Global Markets | 211 appendices
Table A23: Infrastructure quality and investment spending
Infrastructure quality Investment spending (1 = poor; 7 = good) (% of GDP)
Overall Road Rail Ports Airports Electricity 2013 2019 Africa Algeria 3.8 3.3 2.3 2.7 3.0 4.2 32.9 30.9 Angola 2.0 2.4 1.7 2.9 3.4 1.7 13.3 11.3 Benin 2.8 2.8 1.4 3.7 3.0 2.2 25.6 20.2 Botswana 4.2 4.3 2.9 3.6 4.0 3.1 39.1 33.9 Burkina Faso 2.5 2.6 1.8 3.5 3.1 2.0 22.6 19.6 Burundi 2.5 3.0 0.0 2.8 2.7 1.8 19.6 20.0 Cabo Verde 3.6 4.1 0.0 3.8 4.0 1.9 36.5 38.8 Cameroon 3.1 2.8 2.5 3.7 3.5 2.6 20.6 21.0 CAR ------8.7 19.4 Chad 2.3 2.5 0.0 2.5 2.1 1.6 26.5 21.4 Comoros ------19.7 23.3 Congo ------33.5 25.9 Côte d’Ivoire 3.8 3.2 2.1 4.5 4.1 3.6 17.2 23.1 Djibouti ------29.6 28.9 DRC ------21.1 23.8 Egypt 3.3 2.7 2.7 4.1 4.8 3.4 14.2 14.5 Equatorial Guinea ------58.4 44.6 Eritrea ------8.8 6.6 Ethiopia 3.4 4.1 1.5 3.1 5.3 3.1 28.3 30.0 Gabon 2.9 2.3 2.4 2.7 3.6 2.3 30.6 24.1 Gambia 4.3 4.2 0.0 4.6 4.7 3.8 18.0 20.8 Ghana 3.8 4.1 2.1 4.2 4.3 2.7 33.4 33.7 Guinea 2.1 1.9 1.4 3.2 3.0 1.3 19.1 26.4 Guinea-Bissau ------5.5 10.6 Kenya 4.4 4.1 2.5 4.1 4.7 3.8 20.5 20.7 Lesotho 3.4 2.9 0.0 2.9 2.3 3.5 33.0 40.5 Liberia 3.5 2.9 2.0 3.4 3.1 2.6 0.0 0.0 Libya 2.3 2.5 0.0 3.0 2.9 3.9 21.1 18.1 Madagascar 3.2 2.6 2.0 3.5 3.6 2.5 25.2 n/a Malawi 3.2 3.3 1.9 3.3 2.9 2.6 20.4 17.9 Mali 3.8 3.5 2.4 4.0 4.1 3.4 18.2 23.8 Mauritania 2.6 2.7 2.0 2.9 2.3 3.3 35.8 19.8 Mauritius 4.8 4.5 0.0 4.9 5.0 5.1 23.2 24.2 Morocco 4.9 4.5 3.9 5.0 5.0 5.5 34.7 35.7 Mozambique 3.1 2.3 2.1 3.5 3.6 3.2 48.7 45.3 Namibia 5.2 5.3 3.5 5.3 4.8 5.5 24.7 19.6 Niger ------34.2 39.9 Nigeria 3.0 2.7 1.8 3.4 3.6 1.8 24.6 22.9 Rwanda 4.5 4.8 0.0 3.6 4.3 4.1 23.0 23.1 São Tomé and Príncipe ------41.9 39.4 Senegal 3.4 3.3 1.9 4.8 4.5 2.3 26.8 26.2 Seychelles 4.7 4.3 0.0 4.9 4.8 4.9 36.4 29.1 Sierra Leone 3.1 3.0 1.5 3.6 2.8 2.4 14.8 17.0 Somalia ------South Africa 4.5 4.9 3.4 4.7 6.1 3.8 19.4 20.4 South Sudan ------11.2 19.0 Sudan ------20.0 19.8 Swaziland 4.3 4.9 3.7 4.3 4.0 4.1 10.0 12.0 Tanzania 3.2 3.0 2.0 3.2 3.0 2.3 34.2 31.5 Togo ------18.8 21.1 Tunisia 4.1 3.8 3.4 4.0 4.5 5.3 23.3 29.6 Uganda 3.4 3.0 1.5 3.4 3.6 2.5 26.4 27.5 Zambia 3.8 3.4 2.1 3.5 3.5 3.1 25.5 27.4 Zimbabwe 3.2 3.3 2.3 4.1 3.3 2.0 14.0 14.8
212 | RMB Global Markets Infrastructure quality Investment spending (1 = poor; 7 = good) (% of GDP)
Overall Road Rail Ports Airports Electricity 2013 2019 Developed economies Germany 6.2 6.0 5.7 5.8 6.1 6.1 16.7 17.6 Japan 6.0 6.0 6.7 5.2 5.4 6.0 21.0 22.4 UK 5.4 5.3 5.0 5.7 5.6 6.7 14.4 17.1 US 5.7 5.7 4.9 5.7 5.9 6.2 19.5 21.9
Emerging Asia China 4.3 4.5 4.7 4.5 4.5 5.1 47.9 45.9 Hong Kong 6.5 6.2 6.5 6.6 6.7 6.8 23.5 23.0 India 3.9 3.6 4.8 4.2 4.8 3.2 34.7 35.3 Indonesia 4.0 3.7 3.5 3.9 4.5 4.3 33.6 35.3 Malaysia 5.5 5.4 4.8 5.4 5.8 5.8 26.3 27.3 Pakistan 3.3 4.0 2.5 4.5 4.1 2.0 14.2 20.7 Philippines 3.7 3.6 2.1 3.4 3.5 4.0 19.4 23.2 Singapore 6.4 6.2 5.6 6.8 6.8 6.7 26.2 29.7 South Korea 5.6 5.8 5.7 5.5 5.8 5.7 26.3 27.3 Taiwan 5.5 5.9 5.7 5.3 5.4 6.2 19.3 19.2 Thailand 4.5 4.9 2.6 4.5 5.5 5.2 29.3 26.8 Vietnam 3.4 3.1 3.0 3.7 4.0 4.0 26.6 20.9
Emerging Europe and Middle East Bulgaria 3.5 2.9 3.1 3.9 4.2 4.0 20.9 28.8 Czech Republic 5.1 3.7 4.6 4.4 5.8 6.4 22.3 23.2 Hungary 4.9 4.0 3.6 3.9 3.9 5.6 17.6 20.7 Israel 4.8 5.0 3.2 3.8 5.0 5.6 19.7 21.4 Poland 4.0 3.0 2.6 3.7 3.9 5.5 18.7 20.1 Romania 3.4 2.1 2.3 3.0 3.4 4.3 23.2 21.2 Russia 3.8 2.5 4.2 3.9 3.9 4.5 23.8 24.6 Turkey 5.1 4.9 3.1 4.3 5.5 4.8 21.6 19.8
Emerging Latin America Argentina 3.2 3.1 1.7 3.7 3.6 3.1 24.2 22.4 Brazil 3.4 2.8 1.8 2.7 3.3 4.8 18.3 19.0 Chile 5.0 5.4 2.7 5.2 5.2 5.2 24.0 23.3 Colombia 3.3 2.6 1.5 3.5 4.0 5.2 24.2 25.5 Mexico 4.4 4.6 2.8 4.4 4.7 4.7 22.2 24.5 Peru 3.6 3.3 1.8 3.7 4.2 4.9 27.6 29.9
Source: WEF Data as at September 2014
RMB Global Markets | 213 appendices
Table A24: Household income data
Number of Average number of Income grouping Population households people in household Africa Algeria Upper middle income 39,928,947 6,440,152 6 Angola Lower middle income 22,137,261 4,427,452 5 Benin Low income 10,599,510 1,892,770 6 Botswana Upper middle income 2,038,587 474,090 4 Burkina Faso Low income 17,419,615 2,765,019 6 Burundi Low income 10,482,752 1,871,920 6 Cabo Verde Lower middle income 503,637 102,783 5 Cameroon Lower middle income 22,818,632 4,753,882 5 CAR Low income 4,709,203 888,529 5 Chad Low income 13,211,146 2,642,229 5 Comoros Low income 752,438 129,731 6 Congo Lower middle income 4,558,594 772,643 6 Côte d’Ivoire Lower middle income 20,804,774 2,600,597 8 Djibouti Lower middle income 886,313 138,487 6 DRC Low income 69,360,118 10,837,519 6 Egypt Lower middle income 83,386,739 19,853,986 4 Equatorial Guinea High income: non-OECD 778,061 138,939 6 Eritrea Low income 6,536,176 1,307,236 5 Ethiopia Low income 96,506,031 18,208,686 5 Gabon Upper middle income 1,711,294 342,259 5 Gambia Low income 1,908,954 241,639 8 Ghana Lower middle income 26,442,178 6,780,045 4 Guinea Low income 12,043,898 1,824,833 7 Guinea-Bissau Low income 1,745,798 253,014 7 Kenya Low income 45,545,980 10,121,330 4 Lesotho Lower middle income 2,097,511 511,588 4 Liberia Low income 4,396,873 862,132 5 Libya Upper middle income 6,253,452 1,059,908 6 Madagascar Low income 23,571,962 5,124,339 5 Malawi Low income 16,829,144 3,739,809 5 Mali Low income 15,768,227 2,628,038 6 Mauritania Lower middle income 3,984,457 686,975 6 Mauritius Upper middle income 1,249,151 320,295 4 Morocco Lower middle income 33,492,909 6,319,417 5 Mozambique Low income 26,472,977 6,303,089 4 Namibia Upper middle income 2,347,988 479,182 5 Niger Low income 18,534,802 2,989,484 6 Nigeria Lower middle income 178,516,905 38,078,732 5 Rwanda Low income 12,100,049 2,688,899 5 São Tomé and Príncipe Lower middle income 197,882 48,740 4 Senegal Lower middle income 14,548,171 1,672,204 9 Seychelles Upper middle income 93,306 26,659 3 Sierra Leone Low income 6,205,382 1,034,231 6 Somalia Low income 10,805,651 1,863,043 6 South Africa Upper middle income 53,139,529 14,633,671 4 Sudan Lower middle income 38,764,090 6,252,272 6 Swaziland Lower middle income 1,267,704 198,078 6 Tanzania Low income 50,757,459 10,574,471 5 Togo Low income 6,993,244 1,165,541 6 Tunisia Upper middle income 11,116,899 2,470,421 5 Uganda Low income 38,844,624 8,264,813 5 Zambia Lower middle income 15,021,002 2,945,294 5 Zimbabwe Low income 14,599,325 3,244,295 4
214 | RMB Global Markets Number of Average number of Income grouping Population households people in household Developed economies Germany High income: OECD 82,652,256 38,255,889 2 Japan High income: OECD 126,999,810 49,352,931 3 UK High income: OECD 63,489,234 26,913,972 2 US High income: OECD 322,583,008 123,505,379 3
Emerging Asia China Upper middle income 1,370,401,767 437,944,019 3 Hong Kong High income: non-OECD 7,259,569 2,592,703 3 India Lower middle income 1,267,401,847 267,015,858 5 Indonesia Lower middle income 252,812,246 63,621,046 4 Malaysia Upper middle income 30,187,896 6,562,587 5 Pakistan Lower middle income 211,692,835 31,248,538 7 Philippines Lower middle income 100,096,497 19,799,514 5 Singapore High income: non-OECD 5,517,102 1,532,528 4 South Korea High income: OECD 49,512,025 18,799,888 3 Taiwan - 23,382,069 7,484,841 3 Thailand Upper middle income 67,222,971 17,753,546 4 Vietnam Lower middle income 92,547,959 20,206,978 5
Emerging Europe and Middle East Bulgaria Upper middle income 7,167,998 2,668,582 3 Czech Republic High income: OECD 10,740,468 4,296,188 2 Hungary High income: OECD 9,933,173 3,863,632 3 Israel High income: OECD 7,822,107 2,370,335 3 Poland High income: OECD 38,220,544 13,476,934 3 Romania Upper middle income 21,640,168 7,416,100 3 Russia Upper middle income 142,467,651 52,265,868 3 Turkey Upper middle income 75,837,021 17,101,077 4
Emerging Latin America Argentina Upper middle income 41,803,126 11,600,109 4 Brazil Upper middle income 202,033,674 55,609,397 4 Chile Upper middle income 17,772,871 5,227,315 3 Colombia Upper middle income 48,929,707 12,537,435 4 Mexico Upper middle income 123,799,211 29,801,930 4 Peru Upper middle income 30,769,077 7,155,600 4
Source: Canback Dangel, World Bank Data as at September 2014
RMB Global Markets | 215 appendices
Table A24: Household income data (continued)
Income brackets (number of individuals) US$2,001 – US$5,001 – US$10,001 –
216 | RMB Global Markets Income brackets (number of individuals) US$2,001 – US$5,001 – US$10,001 –
Emerging Asia China 565,008,560 513,607,684 203,588,199 69,067,517 18,743,000 Hong Kong 50,982 191,609 1,079,134 2,468,629 3,468,080 India 743,258,719 412,425,933 87,317,411 19,635,376 4,386,141 Indonesia 116,835,570 101,310,859 24,967,727 7,802,147 1,801,138 Malaysia 1,914,541 10,030,987 10,102,076 5,962,071 2,170,509 Pakistan 141,972,161 60,027,088 7,761,467 1,637,490 214,257 Philippines 51,533,922 31,975,263 11,434,581 3,973,431 1,151,478 Singapore 96,449 498,538 1,526,820 1,791,476 1,602,975 South Korea 569,202 1,899,570 9,673,474 23,522,283 13,841,716 Taiwan 79,505 534,506 4,278,856 10,374,402 8,112,410 Thailand 17,037,737 25,661,005 14,609,356 7,066,608 2,829,169 Vietnam 53,244,778 31,669,623 6,309,561 1,140,861 153,652
Emerging Europe and Middle East Bulgaria 134,154 1,236,108 3,172,466 2,158,908 464,995 Czech Republic 33,568 241,024 3,178,099 5,655,830 1,630,632 Hungary 47,827 1,168,007 3,942,672 3,652,955 1,120,169 Israel 86,157 477,586 1,782,682 2,692,567 2,782,190 Poland 301,649 4,608,699 13,092,107 13,706,132 6,505,865 Romania 453,365 5,643,487 8,900,038 4,935,363 1,703,675 Russia 3,612,071 33,944,425 46,894,898 36,768,626 21,219,899 Turkey 6,685,081 21,262,826 23,369,255 17,031,504 7,470,818
Emerging Latin America Argentina 4,924,783 10,235,431 11,317,231 9,278,945 6,038,101 Brazil 59,675,642 60,638,041 42,968,688 25,183,725 13,516,662 Chile 1,036,874 5,166,483 5,777,180 3,545,428 2,243,243 Colombia 13,750,454 16,758,230 10,266,954 5,074,804 3,066,153 Mexico 13,201,934 39,073,006 35,504,430 22,911,723 13,075,804 Peru 7,101,978 11,048,068 7,076,282 3,783,196 1,750,946
Source: Canback Dangel, World Bank Data as at September 2014
RMB Global Markets | 217 appendices
Table A25: Drivers of consumption
GDP per capita Population Urbanisation GDP per capita Population growth rate growth rate growth rate (US$) (m) (%) (%) (%) 2013 2013 (2014 – 2018) (2014 – 2018) (2010 – 2030) Africa Algeria 5,438 37.9 2.3 1.9 45 Angola 5,846 20.8 3.5 3.0 103 Benin 805 10.3 7.1 2.5 108 Botswana 7,136 2.1 3.7 1.2 44 Burkina Faso 729 16.8 8.4 2.4 163 Burundi 303 9.0 6.0 2.4 225 Cabo Verde 3,837 0.5 6.2 1.2 - Cameroon 1,271 22.0 6.6 2.5 66 CAR 334 4.6 7.9 2.0 68 Chad 1,218 11.0 6.1 2.6 152 Comoros 920 0.7 6.1 2.1 90 Congo 3,295 4.2 5.0 2.1 66 Côte d’Ivoire 1,175 24.1 8.5 3.0 73 Djibouti 1,595 0.9 6.0 2.8 42 DRC 398 77.0 5.8 3.0 148 Egypt 3,226 84.2 9.0 2.0 53 Equatorial Guinea 20,572 0.8 -7.9 2.7 - Eritrea 544 6.3 9.0 3.3 152 Ethiopia 542 88.9 6.0 2.2 138 Gabon 12,302 1.6 4.3 1.4 36 Gambia 453 1.9 4.9 2.8 83 Ghana 1,730 25.6 1.3 2.6 73 Guinea 565 11.1 7.2 2.5 122 Guinea-Bissau 524 1.6 5.0 2.1 - Kenya 1,016 44.4 9.9 2.7 130 Lesotho 1,194 1.9 8.1 0.3 74 Liberia 474 4.1 8.9 2.5 117 Libya 11,046 6.1 14.9 1.5 38 Madagascar 488 23.0 5.0 2.4 112 Malawi 223 17.1 5.8 2.9 157 Mali 657 16.9 6.2 3.1 145 Mauritania 1,127 3.7 7.0 2.4 84 Mauritius 9,160 1.3 6.5 0.5 33 Morocco 3,199 32.9 7.4 1.0 41 Mozambique 593 25.9 9.1 2.4 92 Namibia 5,667 2.2 6.5 0.8 68 Niger 443 16.6 11.1 3.1 177 Nigeria 1,692 169.3 5.6 2.8 83 Rwanda 698 10.6 7.6 2.1 135 São Tomé and Príncipe 1,612 0.2 9.8 1.9 - Senegal 1,073 14.1 6.4 2.9 82 Seychelles 15,046 0.1 4.8 1.1 32 Sierra Leone 784 6.1 9.0 1.8 98 Somalia - - - - 113 South Africa 6,621 53.0 3.3 1.4 25 South Sudan 1,262 10.9 1.1 3.0 - Sudan 2,040 34.4 -0.1 2.6 90 Swaziland 3,313 1.1 3.3 1.2 58 Tanzania 703 46.3 7.3 3.0 121 Togo 640 6.8 7.9 2.6 101 Tunisia 4,345 10.9 1.0 1.3 31 Uganda 626 36.8 5.1 3.3 180 Zambia 1,542 14.5 6.7 3.3 77 Zimbabwe 987 13.1 5.2 1.1 60
218 | RMB Global Markets GDP per capita Population Urbanisation GDP per capita Population growth rate growth rate growth rate (US$) (m) (%) (%) (%) 2013 2013 (2014 – 2018) (2014 – 2018) (2010 – 2030) Developed economies Germany 44,999 80.8 5.1 0.0 2 Japan 38,491 127.3 2.8 -0.3 1 UK 39,567 64.1 6.2 0.7 - US 53,101 316.4 3.9 0.8 -
Emerging Asia China 6,747 1360.8 8.3 0.5 45 Hong Kong 37,777 7.2 6.2 0.9 15 India 1,505 1243.3 7.2 1.3 67 Indonesia 3,510 248.0 4.4 1.4 50 Malaysia 10,548 29.6 7.6 1.7 44 Pakistan 1,308 182.6 3.2 2.0 86 Philippines 2,790 97.5 9.2 2.0 52 Singapore 54,776 5.4 3.0 1.1 13 South Korea 24,329 50.2 6.9 0.4 - Taiwan 20,930 23.4 5.6 0.2 - Thailand 5,674 68.2 3.3 0.4 43 Vietnam 1,902 89.7 6.8 1.0 76
Emerging Europe and Middle East Bulgaria 7,328 7.2 6.4 -0.5 - Czech Republic 18,858 10.5 2.4 0.1 1 Hungary 13,405 9.9 4.2 -0.2 4 Israel 37,035 7.9 3.1 2.2 28 Poland 13,394 38.5 6.0 0.0 1 Romania 8,910 21.3 7.3 -0.2 3 Russia 14,819 142.9 2.3 -0.1 - Turkey 10,815 76.5 2.7 1.0 33
Emerging Latin America Argentina 11,766 41.5 -5.7 1.1 20 Brazil 11,311 198.3 3.5 0.8 25 Chile 15,776 17.6 3.9 0.8 20 Colombia 8,098 47.2 4.0 1.2 30 Mexico 10,630 118.4 4.0 1.0 24 Peru 6,674 30.9 5.8 1.5 31
Source: IMF, UNCTAD Data as at September 2014
RMB Global Markets | 219 appendices
Methodology
RMB investment attractiveness ranking
We believe that the decision to invest is typically based on three key issues: market size, market growth, and the business environment. This is consistent with what theory suggests should be the case, and which surveys prove is actually the case. Our methodology is built on these three pillars and does not constitute a sovereign credit rating. We use logged GDP (to reduce wide-ranging sizes to smaller scopes) at purchasing power parity (PPP) to represent the market size; forecast economic growth rates for market growth; and a composite operating environment index for the business environment. These three pillars are adjusted to provide a score between 1 and 10 for each country. The composite investment attractiveness score is then a geometrically combined total of the three pillars. This type of averaging implies that a country must do well in all three areas to perform well overall.
While we believe our methodology is strong, it only provides a general overview of the attractiveness of each country rather than a specific rating that will be relevant to each company or each sector. We still highly recommend that individual companies look at the factors that are relevant to their particular businesses. Miners, for instance, will not be particularly interested in market size, but will rather focus on issues of infrastructure and corruption. If anything, our methodology is biased towards companies looking to sell into Africa but, even then, high- and low-end retailers would face different market sizes, neither of which would perhaps be adequately captured by GDP only.
One result of our methodology is that small countries will always struggle to compete with large ones. This isn’t totally restrictive: the city states of Hong Kong and Singapore are still ranked eighth and 10th in the world while Ghana is ranked third in Africa despite its small economy. We used logged GDP in our scoring, which limits the divergence between large and small countries. An economy may be small but, if it provides access to a larger market, then it might be a relevant place to set up a business.
Operating environment methodology
The operating environment index is arguably the most subjective. Our estimate uses the same four sources as in previous years: the World Bank’s Doing Business Report, the Heritage Foundation’s Index of Economic Freedom, the World Economic Forum’s (WEF) Global Competitiveness Report and Transparency International’s Corruption Perceptions Index, which are surveyed at different times of the year. We have used these four as they are highly regarded, have long histories, and contain a mix of hard and subjective data. There are many other indices that could be used. It could also be argued that some indices overlap or that certain indices should be given higher weights. However, we have found that most assessments of business operating conditions tend to be highly correlated: countries where corruption is high will also have prohibitive bureaucracy, less economic freedom, and be perceived as being less competitive. Quite simply, it probably would not make much difference which indices are included or with which weights. Individual indices will have their own idiosyncrasies, but taking an equally weighted average of four indices helps smooth individual anomalies. To combine the indices, we adjusted each of their scales so that the best possible score is 10 and the worst possible score is 1.
Alternative rankings
In this year’s edition we have looked at alternative rankings by placing a greater importance on market size, growth, and the operating environment in each chapter. We do this by doubling its weight when calculating the investment attractiveness score. For instance, in the operating environment chapter, the alternative weight is calculated as the operating score squared, times the market size score, times the growth score, and is then adjusted to give a score of between 1 and 10. A completely separate ranking is where we consider regionalisation. This will account for countries that may have small market sizes but have access to a much larger market through trade agreements.
220 | RMB Global Markets Sources and further information
Main reference documents
Rand Merchant Bank’s annual Africa Investor Guide provides details of macroeconomics and financial markets of seventeen economies. To log on to the research portal, go to: www.rmb.co.za/globalmarkets or rmb.grid.co.za
The US Commercial Service provides detailed Country Commercial Guides on almost all countries. These are rich in detail for the on-the- ground environment. http://www.buyusainfo.net/adsearch.cfm?search_type=int&loadnav=no
The International Monetary Fund’s World Economic Outlook provides economic data for all economies. http://www.imf.org/external/ns/cs.aspx?id=28
EY’s Attractiveness Survey 2014, Executing growth, is a well-regarded document, which is a key source of insight on foreign direct investment. The survey examines the attractiveness of African countries as an investment destination. http://www.ey.com/ZA/en/Issues/Business-environment/EY-africa-attractiveness-survey-2014
Market size and market growth
The University of Southern Denmark asks the question, Is Africa’s recent growth sustainable? The authors argue that the answer is yes. Differences in the level of institutional quality predict cross-country variation in Africa economic growth during the period 2005 to 2011. swopec.hhs.se/sdueko/abs/sdueko2013_008.htm
The International Monetary Fund’s working paper on The Quality of the Recent High-Growth Episode in sub-Saharan Africa explores the quality of the recent phenomenon by analysing the nature and pattern of growth over the past 15 years and if it has had an impact on socially desirable outcomes. www.imf.org/
The African Development Bank Group’s working paper on the Determinants of Foreign Direct Investment Inflows to Africa, 1980- 2007, examines the factors that result in FDI going to African countries, thus enabling the group to propose some measures for FDI promotion in Africa. http://www.afdb.org/en/documents/document/working-paper-136-determinants-of-foreign-direct-investment-inflows-to- africa-1980-2007-24606/
Franco and Rentocchini of the University of Trento ask the question, Why do firms invest abroad? They contend that motives underlying what they term “cherry-picking” must be considered essential as they shape and direct the different alternatives available to a firm. http://www.etsg.org/ETSG2008/Papers/Franco.pdf
The International Association for Research in Income and Wealth’s paper on the Comparability of GDP estimates in sub-Saharan Africa: the effect of revisions in sources and methods since structural adjustment discusses the likelihood of GDP revisions in sub-Saharan Africa based on visits to statistical offices in Ghana, Nigeria, Uganda, Tanzania, Kenya, Malawi and Zambia and looks at an email survey of national accounting statistics in SSA. http://mortenjerven.com/wp-content/uploads/2013/02/roiw12006.pdf
Nigeria’s National Bureau of Statistics presentation on The Results of Nigeria’s GDP re-basing/re-benchmarking exercise provides preliminary estimates of Nigeria’s nominal GDP and describes a change in the country’s economic structure. http://nigerianstat.gov.ng/
UNCTAD’s World Investment Report for 2014 provides valuable analysis that can inform global discussions on how to accelerate progress toward the Millennium Development Goals and shape a long-range vision for a more sustainable future beyond 2015. http://unctad.org/en/PublicationsLibrary/wir2014_overview_en.pdf
RMB Global Markets | 221 appendices
The African Centre for Economic Transformation’s report on Growing rapidly – transforming slowly shows that a transforming economy — more than just a growing economy — can weather the ups and downs of global product and service markets, the alternating liquidity and illiquidity of local and global financial markets, and the vicissitudes of commodity and construction boom. http://www.thebrokeronline.eu/content/download/56269/504798/version/1/file/ACET+Africa+Transformation+combined+low-res+0524. pdf
The United Nations University’s paper on The structural anatomy and institutional architecture of inclusive growth in sub-Saharan Africa identifies the distinct features of inclusive growth within the context of sub-Saharan Africa. The anatomy of growth is analysed by exploring the interrelationship among growth, inequality, and poverty. http://www.wider.unu.edu/publications/working-papers/2014/en_GB/wp2014-041/_files/91250377093349694/default/wp2014-041.pdf
The Centre for Strategic & International Studies report on Africa at a Crossroads looks at overcoming the obstacles to sustained growth and economic transformation. http://csis.org/files/publication/140417_Cooke_AfricaAtCrossroads_WEB.pdf
The African Journal of Economic and Management Studies’ editorial on Economic growth and poverty alleviation in Africa-linking hard and soft economics looks at overcoming the obstacles to sustained growth and economic transformation. http://vbn.aau.dk/en/publications/economic-growth-and-poverty-alleviation-in-africa--linking-hard-and-soft-economics(0d378bec-2d2e- 4393-a17a-2cc469937cf7).html
Brookings Africa Growth Initiative’s Foresight Africa: Top priorities for the continent in 2014, creates a dialogue on what critical issues Africa must pay attention to in the coming 12 months. http://www.brookings.edu/~/media/Research/Files/Reports/2014/foresight%20africa%202014/Foresight%20Africa_Full%20Report.pdf
Operating environment
The World Economic Forum’s annual Global Competitiveness Report provides cross-country rankings on over 100 economic, regulatory and political issues. It also provides survey results on the most problematic business-environment factors. A component of the annual Global Competitiveness Report is the Executive Opinion Survey, which polls over 13,000 business executives worldwide on the economic and business environment of the countries covered. http://www.weforum.org/issues/global-competitiveness
The World Bank’s Doing Business Report provides details on the costs, time and procedures to follow in various aspects of doing business (starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business). http://www.doingbusiness.org/
The Heritage Foundation’s Index of Economic Freedom report scores nations on 10 broad factors of economic freedom. It provides a two-page discussion on the operating environment for each country. The Fraser Institute’s Economic Freedom of the World Report and Freedom House’s Freedom in the World survey provide similar analysis/datasets. http://www.heritage.org/index/ http://www.freetheworld.com/release.html http://www.freedomhouse.org/report/freedom-world/freedom-world-2014#.U7p66vmSx8E
Transparency International’s Corruption Perceptions Index ranks almost 200 countries by their perceived level of corruption as determined by expert assessments and opinion surveys. It also has country survey data on perceptions of corruption (Global Corruption Barometer), the Bribe Payers Index, and the promotion of revenue transparency, which assess information disclosures in 41 resource-rich economies. http://www.transparency.org/policy_research/surveys_indices/cpi
The International Finance Corporation’s Enterprise Survey provides summary statistics on the business operating environment on issues of access to financing, regulations, electricity, taxes, crime, transportation, land, education, corruption, and customs duties. It also contains a database of the underlying survey data from 120,000 firms in 125 countries. http://www.enterprisesurveys.org/
222 | RMB Global Markets The PwC’s Paying Taxes 2014 measures tax rates and regimes. http://www.pwc.com/gx/en/paying-taxes/assets/pwc-paying-taxes-2014.pdf
Aon provides political risk insurance and analysis. http://www.aon.com/2014politicalriskmap/
The World Bank’s Investing Across Borders report provides selected indicators of FDI regulations in 87 countries, including information on restrictions in different sectors. It provides reference to FDI-related laws as well as contact details of experts in each country. http://iab.worldbank.org/Data/FDI-2012-Data
UNCTAD’s Investment Policy Reviews provide an objective evaluation of countries’ legal, regulatory and institutional frameworks for FDI from the perspective of what countries need to do to attract more FDI. This information is very useful, however, the reports are unfortunately often outdated. The same goes for the investment guides. http://unctad.org/en/Pages/DIAE/Investment%20Policy%20Reviews/Investment-Policy-Reviews.aspx
The World Economic Forum’s Enabling Trade Report ranks 125 countries on 45 issues, assessing the countries’ attributes for enabling trade. http://www.weforum.org/reports/global-enabling-trade-report-2014
The World Trade Organization provides extensive details on tariffs and trade matters globally. http://www.wto.org/
The World Trade Organization’s Trade Policy Reviews provide surveillance of national trade policies. http://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm
The International Trade Centre provides detailed information for exporters, including: trade trends, supply and demand statistics, alternative markets, competitors and custom tariffs. Data is available for all countries and covers 72 industries broken down into 5,300 products. The ITC’s web tools allow for extensive analysis. http://www.intracen.org
The World Bank’s Strength of Legal Rights Index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. http://data.worldbank.org/indicator/IC.LGL.CRED.XQ
Cities
MasterCard’s 2014 African Cities Growth Index – Understanding Inclusive Urbanisation examines the economic landscape and potential for growth in 74 African cities. This index ranks the cities according to their inclusive growth potential, and is a valuable resource for governments, investors, academics and the business community to map the continent’s future success from the perspective of inclusive urbanisation. http://newsroom.mastercard.com/mea/files/2014/06/African-Cities-Growth-Index-2014.pdf
UNDESA’s World Urbanization Prospects looks at revised estimates and projections of the urban and rural populations of all countries in the world and of their major urban agglomerations. http://www.un.org/en/development/desa/population/events/pdf/expert/13/Heilig.pdf
McKinsey Global Institute’s Urban world: Mapping the economic power of cities looks at urbanisation and the role of cities in the global economy. http://www.mckinsey.com/insights/urbanization/urban_world
A.T. Kearney’s 2014 Global cities index and emerging cities outlook: Global cities, present and future examines a comprehensive list of 84 cities on every continent, measuring how globally engaged they are across 26 metrics in five dimensions: business activity, human capital, information exchange, cultural experience, and political engagement. http://www.atkearney.com/research-studies/global-cities-index/full-report
RMB Global Markets | 223 appendices
PwC’s Cities of Opportunity 6 analyses the trajectory of 30 cities, all capitals of finance, commerce and culture and, through their current performance, seeks to open a window on what makes cities function best. http://www.pwc.com/us/en/cities-of-opportunity/index.jhtml
The EIU’s Best cities ranking and report discusses the outcomes of a competition that allowed them to combine data from the Worldwide Cost of Living and Liveability surveys with other sources to provide a ranking of their own. http://pages.eiu.com/rs/eiu2/images/EIU_BestCities.pdf
UN Habitat’s report on The State of African Cities 2014: Re-imagining sustainable urban transitions addresses the vulnerabilities and risks to which African populations are increasingly being exposed to. http://unhabitat.org/the-state-of-african-cities-2014/
The African Development Bank’s Tracking Africa’s Progress in Figures looks at the key megatrends of the last few decades that will shape Africa’s future. http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Tracking_Africa’s_Progress_in_Figures.pdf
Jones Lang LaSalle’s The African Century: Twelve Pillars of Africa’s Future Success explores the continent’s evolving urban network and assesses how the changing environment is impacting on current and future commercial real estate requirements. http://www.jll.eu/emea/en-gb/research/151/the-african-century-twelve-pillars-of-africa-s-future-success
The EIU’s Hot spots: Benchmarking global city competitiveness explores its ‘Global City Competitiveness Index’ that measures cities across eight distinct categories of competitiveness and 31 individual indicators. http://www.citigroup.com/citi/citiforcities/pdfs/hotspots2025.pdf
Sectors
Finance
The European Investment Bank’s report on Banking in sub-Saharan Africa provides an overview of the recent developments and trends in the sub-Saharan banking sector, as well as the challenges and opportunities that lie ahead. http://www.eib.org/attachments/efs/economic_report_banking_africa_en.pdf
A joint publication by the AfDB and World Bank on Financing Africa: Through the Crisis and Beyond targets the stakeholders in Africa’s financial system. It indicates viable paths to financial sector deepening and broadening. It includes a much broader array of data and includes a thorough discussion of the regulatory challenges of finance in Africa. http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Financing%20Africa%20Through%20the%20Crisis%20and%20 Beyond.pdf
The International Monetary Fund’s study on Access to Bank Credit in Sub-Saharan Africa examines measures that could help to facilitate private sector access to bank credit. http://www.imf.org/
PwC’s report on Investment prospects in the Sub-Saharan banking sector looks at prospects for investment and development in the region. http://www.pwc.com/ke/en/pdf/investment-prospects-in-sub-saharan-banking-sector.pdf
A background paper by NEPAD and the OECD on Deepening African Financial Markets for Growth and Investment reviews the main obstacles to efficient financial markets in many African countries and the policies that can be implemented to establish a well-functioning and inclusive market. www.oecd.org/investment/investmentfordevelopment/43966839.pdf
Clifford Chance’s report on Morocco’s ambitions to be the finance hub of North and West Africa looks at Morocco’s drive for reform, to open up the market and attract inbound investment. http://www.cliffordchance.com/briefings/2014/02/morocco_s_ambitionstobethefinancehubo.html
224 | RMB Global Markets Infrastructure
The African Development Bank’s Africa Infrastructure and Country Diagnostics website has data and analysis on the status of the main network infrastructures including energy, information and communication technologies, irrigation, transport, and water and sanitation. The analysis encompasses public expenditure trends, future investment needs and sector performance reviews. Their interactive mapping function is incredibly powerful — it allows for analysis of country infrastructure needs under assumptions that the user can set. Detailed reports are available on each sector with analysis of selected countries. http://www.infrastructureafrica.org/ http://www.infrastructureafrica.org/tools/maps
The African Development Bank’s report on Closing Africa’s Infrastructure Gap presents ideas on innovative financing and risks. http://www.afdb.org/en/documents/publications/
The African Development Bank’s report on Overhauling the Engine of Growth: Infrastructure in Africa looks at infrastructure’s role in attaining Africa’s development targets. http://www.afdb.org/en/documents/publications/
The International Bank for Reconstruction and Development in conjunction with the World Bank have compiled a comprehensive study on Africa’s Infrastructure designed to expand the world’s knowledge about physical infrastructure in Africa. http://www.infrastructureafrica.org/library/doc/552/africa%E2%80%99s-infrastructure-time-transformation
The Infrastructure Consortium for Africa provides details on large infrastructural projects across the continent — mainly those supported by donors. Its report on Infrastructure Financing Trends in Africa looks at the utilisation of development spending in the sectors it covers. http://www.icafrica.org/en/ http://www.icafrica.org/fileadmin/documents/Annual_Reports/ICA%20_AnnualReport%202012.pdf
The World Bank’s Private Participation in Infrastructure Database provides data for 4,600 projects in 137 low- and middle-income countries. http://ppi.worldbank.org/
The Commonwealth Business Council’s 2013 Africa Infrastructure Investment Report outlines the infrastructure deficit and challenges, highlights models for financing the continent’s ambitious projects and provides a sector-by-sector guide to the main priority areas, namely energy, transport, water and ICTs. http://www.cbcglobal.org/images/uploads/docs/The_CBC_Africa_Infrastructure_Investment_Report_2013.pdf
KPMG’s Infrastructure 100: World Cities Edition showcases 100 urban infrastructure projects that embody the spirit of innovation and stand as an inspiration to infrastructure participants and city leaders around the world. http://www.kpmg.com/Africa/en/Documents/Infrastructure-100-world-cities-2012.pdf
Deloitte’s African Construction Trends Report 2013 expands on content covered in the maiden edition with projects spanning the entire continent. The sampling basis required infrastructure construction projects to be valued at over US$50m and to have broken ground, but not been commissioned, by 1 June 2013. http://www.deloitte.com/assets/Dcom-SouthAfrica/Local%20Assets/Documents/Deloitte_Construction_Trends_Report.PDF
TASA’s Integrated Transport Master Plan for Namibia lays the foundation for the development of safe, secure, effective transport infrastructure services that are responsive to the socio-economic needs of Namibians and others in the region. http://www.tasa.na/serveFile.php?ref=NjI6MTg6bmV3c2V2ZW50cw
The Society for International Development’s report on The future of satellite cities in GHEA’s urbanisation looks at the formation of satellite cities — coherent structures, patterns and properties in the process of self-organisation in complex systems. http://www.foresightfordevelopment.org/sobipro/download-file/46-1032/54
RMB Global Markets | 225 appendices
Manufacturing
McKinsey Global Institute’s Africa at work: Job creation and inclusive growth shows that the continent must create wage-paying jobs more quickly to sustain these successes and ensure that growth benefits the majority of its people. http://www.mckinsey.com/insights/africa/africa_at_work
International Labour Organisation’s Global Wage Report 2012/2013 – Wages and equitable growth. The report looks at differences in wages around the globe and how they have been influenced by the economic crisis. It includes global and regional wage trends and statistics, as well as policy recommendations. An added feature is the Global Wage Database, which can be downloaded from the same website. http://www.ilo.org/global/research/global-reports/global-wage-report/2012/lang--en/index.htm
The ILO’s World of Work 2014: Developing with jobs focuses on developing countries and argues that quality jobs are a key driver for development. It draws on evidence from over 140 developing countries and finds that a common factor among those countries that have achieved higher per capita income and sustained growth was quality jobs. http://www.ilo.org/global/research/global-reports/world-of-work/2014/lang--en/index.htm
Knight Frank’s Africa Report 2013 provides an overview of the continent’s diverse property markets. Commentary is provided for 34 countries across Africa, along with guides to prime rents and yields in the office, retail, industrial and residential sectors. http://my.knightfrank.co.za/research-reports/africa-report.aspx
The World Bank’s Doing Business website provides a good cross-country summary of labour laws and costs and details of laws and regulations. http://www.doingbusiness.org/data/exploretopics/employing-workers http://www.doingbusiness.org/law-library
The World Bank’s Light Manufacturing in Africa – Targeted Policies to Enhance Private Investment and Create Jobs. The World Bank’s strategy for Africa’s future recognises the central importance of industrialisation in sub-Saharan Africa, and the consequent creation of productive jobs for Africans, which have long been a preoccupation of African leaders and policy-makers. This book represents an attempt to address these issues. http://econ.worldbank.org/WBSITE/EXTERNAL/ EXTDEC/0,,contentMDK:23130675~pagePK:64165401~piPK:64165026~theSitePK:469372,00.html
The Property Rights Alliance publishes an International Property Rights Index covering 120 countries. http://www.internationalpropertyrightsindex.org/
The Africa Business Panel surveys business leaders throughout the African community to gain a good understanding of trends and business activity across the continent. It also has a Africa Business Confidence Index measuring the activity in the Africa manufacturing and non-manufacturing sectors. http://www.africabusinesspanel.com/
Resources
The Fraser Institute’s Survey of Mining Companies looks at the best and worst countries for mining investment. http://www.fraserinstitute.org/
The US Geological Survey provides information on the ecosystem and environment, natural hazards, natural resources and climate and land-use change in the world. More specifically, it provides country-specific information on what resources and reserves are available in each country. http://www.usgs.gov/
The Resource Information Unit has published the Register of African Mining 2014, which is a useful source for companies considering investing in Africa’s resources sector. The book provides country-specific information ranging from the type of resources available, production figures, the laws and regulations covering mining and exploration, and the mining companies active in the particular countries. http://www.riu.com.au/
226 | RMB Global Markets McKinsey Global Institute’s Sustainability & Resource Productivity Practice looks at the demand for resources and how it is set to continue to rise precipitously even as supply constraints multiply, posing challenges for economic growth, the environment, and social well-being. http://www.mckinsey.com/client_service/sustainability/latest_thinking/mckinsey_on_sustainability
PwC’s mining report, Mine – A confidence crisis is a review of global trends in the mining industry for 2013. www.pwc.com/mining
Grow Africa’s Agricultural partnerships take root across Africa looks at the private sector investment in support of country-led transformations in Africa agriculture. http://growafrica.com/
NEPAD’s Agriculture in Africa – Transformation and outlook provides a clear diagnosis of the opportunities and challenges the agricultural sector faces, while adding NEPAD’s vision and priorities for the sector in the future. http://www.nepad.org/
Deloitte’s Tracking the trends 2014 provides an overview of the top 10 issues mining companies will face in the coming year. http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Energy-and-Resources/dttl-er-Tracking-the-trends-2014_EN_final.pdf
The International Food and Policy Research Institute’s Improved Performance of Agriculture in Africa South of the Sahara – Taking off or bouncing back. This paper looks at the improved performance of the agricultural sector in Africa south of the Sahara during the most recent decade (2000 – 2010) and what has driven the growth. http://www.ifpri.org/publication/improved-performance-agriculture-africa-south-sahara
The Food and Agriculture Organization of the United Nations provides time-series and cross-sectional data relating to food and agriculture for some 200 countries. http://faostat3.fao.org/faostat-gateway/go/to/home/E
The World Bank’s Growing Africa: Unlocking the Potential of Agribusiness. With global and regional food and agricultural markets growing at unprecedented rates, this new report is a valuable and timely contribution to our understanding of how to unlock and transform agriculture for development and opportunity across Africa. http://siteresources.worldbank.org/INTAFRICA/Resources/africa-agribusiness-report-2013.pdf
Retail
Canback Dangel provides a useful online tool for estimating the size of income groups per country. This can be valuable in estimating the present and forecast market size. This is a pay-for-use site. https://www.cgidd.com/
A.T. Kearney’s The 2014 African Retail Development Index – Seizing Africa’s Retail Opportunities focusses on a wide array of possibilities for retailers seeking to capture the immediate impact and growth advantage in developing countries. The report discusses its Global Retail Development Index, which ranks the top developing countries for retail investment. http://www.atkearney.com/documents/10192/4371960/Seizing+Africas+Retail+Opportunities.pdf/730ba912-da69-4e09-9b5d- 69b063a3f139
The United Nations Data Service provides good access to population and labour force figures. http://data.un.org/DataMartInfo.aspx
UN Habitat provides analysis on population trends and urbanisation. http://www.unhabitat.org/
McKinsey & Company’s The rise of the African consumer. The single-largest business opportunity in Africa will be its rising consumer market. The McKinsey report offers a detailed profile of African consumers, including their demographics, behavior, and needs. http://www.mckinsey.com/global_locations/africa/south_africa/en/rise_of_the_african_consumer
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General data sources and background to countries
The United Nations Data Service provides links to 33 official sources of country data on everything from agriculture to tourism. http://data.un.org/DataMartInfo.aspx
The World Bank’s World Development Indicators provides statistics on 420 economic, market and industry specific indicators for each country. http://data.worldbank.org/indicator
Euromonitor International provides detailed market analysis on industries, countries and consumers on a pay-per-report basis. Its African Marketing Data and Statistics report is the most extensive database on Africa that we have seen. http://www.euromonitor.com/
The OECD Country Reports give a good brief background to each country. http://www.oecd.org/
Business Monitor International, the Economic Intelligence Unit and the IHS Global Insight provide regular country reviews for a fee. http://www.businessmonitor.com/ http://www.eiu.com/ http://www.ihs.com/
Investment agencies
The Multilateral Investment Guarantee Agency promotes FDI into developing countries by providing political risk insurance (guarantees) to the private sector. Its World Investment and Political Risk report offers a snapshot of political risk perceptions of the largest multinational enterprises and perspectives of the political risk insurance industry. http://www.miga.org/
fDi Intelligence provides general and bespoke reports on locations, investment incentives and sectors worldwide for a fee. http://www.fdiintelligence.com/
The World Association of Investment Promotion Agencies provides links to all country promotion agencies. http://www2.waipa.org/cms/Waipa
Frontier Market Intelligence incorporates TradeInvest Africa, which provides good information on business opportunities as well as some general background information. http://www.tradeinvestafrica.com/
Other sources used for general information
Economist Intelligence Unit, Business Monitor International, IHS Global Insight, Moody’s Investor Services, Standard & Poor’s, Fitch Ratings, BP, US Energy Information Administration, African Development Bank, Bowman Gilfillan, Africa Progress Panel.
228 | RMB Global Markets Chapter 8: CONTACT DETAILS and disclaimer
RMB Global Markets | 229 contact details
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RMB Global Markets | 231 DISCLAIMER
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232 | RMB Global Markets Where to Invest in Africa RMB Global Markets Research 2014 | 2015 edition
Where to Invest in Africa Authors Nema Ramkhelawan-Bhana A guide to corporate investment and Celeste Fauconnier 2014 | 2015 edition Contributor John Cairns RMB Global Markets Research Data analyst Claudell van Aswegen
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