Africa by Numbers 2013–14 Assessing Risk and Opportunity in Africa

Africa by numbers 2013–14 Assessing risk and opportunity in Africa

1 | Africa by numbers 2013–14 Africa’s rise is real

Over the past three years, EY’s Africa Africa’s economic output attractiveness reports have highlighted the (GDP, US$b) continent’s steady rise. Our research, which includes investor surveys and analysis 899.9 of greenﬁ eld foreign direct investment 798.7 (FDI) and broader socioeconomic trends, 741.2 has helped to provide some quantitative 692.6 618.7 substance to the growing perception that African markets offer an exciting growth 527.7 449.8 and investment opportunity. 1844.6 1607.6 While skeptics still abound, and there 1415.7 287.1 1295.8 1334.2 are people who still seek to debate the 251.7 949.5 point, the evidence of the continent’s clear 877.2 560.9 progress over the past decade is irrefutable. 344.1 The reality is that a diverse range of African 2000 2004 2007 2009 2011 2012 2013 2015 2017 countries have now experienced consistent and robust growth for over a decade – Sub–Saharan Africa North Africa certainly the longest period of sustained Source: IMF World Economic Outlook Database; EY analysis. growth since most countries attained independence in the early 1960s. In the Multiple *CAGR *CAGR period since 2002, the size of the overall since 2002 2002–12 2007–12 African economy has more than trebled Sub-Saharan Africa x3.8 14.2% 8.7% (and grown at twice the population growth rate) – over this period, the size of the sub- North Africa x3 11.6% 9.0% Saharan African (SSA) economy has grown Africa x3.5 13.3% 8.8% *Compound Annual Growth Rate well over three-and-a-half times.

What makes this economic performance At the same time, many of the companies continue to struggle, Africa clearly offers all the more remarkable is that half of that have pursued a longer-term African an exciting opportunity for investment and that decade has been marked by a deeply growth strategy are generating excellent growth, and an alternative to the ultra- troubled global economy. Although many returns from their investments. In fact, competitive Asian and other rapid-growth African economies have been negatively empirical analysis reveals that ROI from markets. It is little surprise, therefore, that impacted by the situation in key trading investments in Africa have consistently investor interest in Africa has been on the partner countries in Europe and North been among the highest (if not the highest) increase. Our 2013 Africa attractiveness America, most have remained remarkably in the world since the 1990s.1 report shows that FDI projects into SSA resilient. A diverse group, including the grew at a compound rate of 22.3% between For companies seeking to grow and likes of Angola, Ghana, Ethiopia, Tanzania, 2007 and 2012. investors seeking higher returns, the Mozambique, Nigeria and Zambia, are African growth story should therefore stand among the fastest growing in the world, out. While most developed economies with growth of 7%+ over a sustained period.

1 See, for example, “Foreign Direct Investment in Africa: Performance and Potential,” UNCTAD, 1999; Boston Consulting Group, “The African Challengers: Global competitors emerge from the overlooked continent”; Warnholz, “Is Investment in Africa low despite high proﬁ ts?” Working Paper, Centre for Study of African Economics, 2008; Collier and Warnholz, “Now’s the Time to Invest in Africa,” Harvard Business Review, Feb 2009; “Lions on the move: The progress and potential of African economies,” McKinsey Global Institute, June 2010.

Africa by numbers 2013–14 | 2 But the continent is an inherently challenging place to do business

Despite our optimism, and the signifi cant However, for most companies, very operating across borders in Africa means progress made across many parts of few of these individual markets are having to come to terms with very different the continent, Africa remains a complex likely to provide the kind of scale, in (and often fragmented) sets of rules, and challenging environment for doing the shorter term at least, that makes regulations and stakeholders. business. For any organization with growth them commercially attractive in and of Making well-informed choices about which ambitions, there is still a need to proceed themselves. As a result, any kind of growth markets to enter, when and via which mode with care and due diligence. While we strategy in Africa almost invariably has to is therefore crucial. At the same time would argue that many African markets take account of multiple markets. And, as though, market selection is also framed by are not fundamentally different to markets one looks to sort through opportunities the challenge of effectively “connecting in other rapid-growth regions, there are and risks across these markets, it quickly the dots” across multiple operations and some key differences. Foremost among becomes clear that opportunities and risks territories; not only ensuring that the these is the sheer scale of the continent differ widely from country to country and African “portfolio” (whatever shape or form and the diversity of its many countries. region to region. To further complicate that may take) is big enough to matter, but Although many of us still sometimes lump analysis, language and cultural dynamics also that multiple in-country and cross- “Africa” together in our commentary and are as diverse as anywhere else in the world, border risks are effectively managed, comparisons as if it is was a single market, with French, Arabic, English, Portuguese, operating effi ciencies are gained and, it does, of course, comprise 54 sovereign German, Spanish, Dutch and Italian ultimately, the whole is greater than the states – representing more than a quarter of infl uences mixed with numerous indigenous sum of the parts. all independent countries in the world. languages and cultures. At the same time,

Starting with the numbers

Whether entering into or expanding across Africa, we believe it is critical to develop a structured analytical framework for prioritizing markets into which to expand and for assessing different strategic options. Too often, we have found that thinking on Africa generally and on specifi c markets is based on ill-informed opinion – either unduly pessimistic or overly optimistic – and completely divorced from current realities. We therefore stress the importance of having fact-based conversations about Africa, informed from a basis of rational Growing Beyond Borders™ analysis rather than anecdotes and conjecture. In identifying and prioritizing markets for investment, there should be a thorough process In our 2012 Africa by numbers publication, of fact-based due diligence, including sector-specifi c tax, legal and regulatory factors (which we introduced a framework to support a are often material enabling or constraining factors in the African context). A key challenge in process of strategic conversation among such a process is the apparent scarcity of information. However, once one starts digging a bit, key stakeholders and decision-makers there is actually a large quantity of Africa-related data available. The challenge more often is on growth options in Africa. Drawing on that data is fragmented across various sources, and so can be diffi cult to collate and present a balanced set of risk and opportunity in a coherent and meaningful way. We therefore developed Growing Beyond Borders™, a indicators from our proprietary Growing map-based interactive software tool, with a twofold capability to help our clients address this Beyond Borders™ tool – an interactive map- challenge. First, it provides an information portal, aggregating a range of indicators, indices based data portal – we developed a market and other data from various sources together for easy access. Second, we have found that assessment matrix that provides a simple the visual presentation of the information via the map-based interface is intuitive for most but effective framework to rationally assess people, and provides a commonly understood reference point for strategic discussion on the pros and cons of different African investment decisions. markets.

3 | Africa by numbers 2013–14 On the horizontal (x) axis, we plot where It is important not to view this as a different priorities, and as priorities change each country ranks on a composite risk deﬁ nitive assessment on any of these over time, so will the answers. index, while, on the vertical (y) axis, the markets. As much as we believe it is A matrix such as this is therefore inherently ranking on an opportunity index is plotted. critically important to begin from a ﬂ exible. Positions will change depending A third dimension (indicated by the size rational basis of fact, we also recommend on the indicators included (which will be of the bubble) can be included to add not simply reducing market analysis to a determined by key drivers of risk and some richness to the conversation. To closed model in which various indicators opportunity in a particular organization), as illustrate, we have provided an example of are simply combined in terms of their well as relative weightings given to those what a matrix may look like for a company weighted importance. Such models can indicators. The categorization of markets looking for consumer-related opportunities, provide a useful starting point, but can give will also depend on where you set your overweighting those indicators that we feel the misleading impression that there are “thresholds” on the risk and opportunity are more indicative of attractive consumer absolute answers in searching for market axes. growth trends. potential. In reality, there will be different answers for different organizations with

Risk opportunity matrix orientated toward consumer-facing sectors

Higher risk – higher reward Lower risk – higher reward

South Africa Higher opportunity

Nigeria

Egypt

Angola Ghana DRC Ethiopia Tunisia

Mozambique Zambia Namibia Botswana Ugandad Tanzania Kenya Mauritius Cameroon Cote d’Ivoire Senegal Rwanda

Opportunity Zimbabwe

Size of bubbles = FDI new projects (2007–12)

Higher risk – lower reward Lower risk – lower reward Lower opportunity Lower Higher risk Risk Lower risk

Source: The World Bank; OECD National Accounts; United Nations Population Division & World Urbanization Prospects; Oxford Economics; ITU International; Transparency International; International Bank for Reconstruction and Development; Polity IV Project; Mo Ibrahim Index of African Governance; Worldwide Governance Indicators; WEF Global Competitiveness Report; EY Worldwide Corporate Tax Guide.

Africa by numbers 2013–14 | 4 In developing this particular matrix, we used a set of 10 “opportunity indicators” and 10 “risk indicators” (i.e., 20 in total) that we think can provide us an approximate fi x on the relative attractiveness of different African countries from a consumer-orientated perspective. We have further subjectively applied different weightings to each of these indicators. Indicators are rebalanced and normalized to refl ect a high score as favorable, meaning that both the opportunity and the risk axis refl ect a positive and favorable outcome the higher up a country scores. Different indicators and their weightings will be more or less relevant to different organizations, and should be adjusted accordingly.

Opportunity indicators Risk indicators 1. GDP (current US$b) 1. Ease of doing business overall rank (out of 184 countries) 2. Population (m) 2. Transparency International Corruption Perceptions Index (0=highly corrupt, 3. Urban population (% of total) 100=very clean) 4. Real GDP (compound average growth rate): 5-year forecast (2018) 3. Strength of investor protection index (0 =unfavorable, 10=favorable) 5. Real GDP (compound average growth rate): 10-year historical (2003) 4. Quality of overall infrastructure (1=extremely underdeveloped, 7=extensive 6. GDP per capita (US$): 5-year forecast (2018) and efﬁ cient by international standards) 7. Country wealth (1=low income, 2=lower income, 3=upper middle, 4=high 5. Corporate maximum tax rate (%) income (non-OECD), 5=high income (OECD)) 6. Logistics Performance Index: overall score (1=worst, 5=best) 8. Mobile penetration (% of population with mobile access) 7. Perceptions of governance: regulatory quality percentile rank (0=lowest, 9. Population growth (annual %) 100=best) 10. Literacy rate (total population %) 8. Perceptions of governance: rule of law percentile rank (0=lowest, 100=best) 9. Democracy score (-10=autocratic, +10=democratic) 10. Mo Ibrahim Index of African Governance: overall score (0=worst, 100=best)

In terms of the classiﬁ cation in our illustrative matrix, we have four broad categories of markets:

Lower risk, higher reward: this is clearly the most attractive quadrant, suggesting a relatively stable business 1 environment together with high potential for growth. South Africa is squarely in this category, with the other fairly mature southern African markets of Botswana and Namibia, together with Mauritius, on the cusp (all scoring favorably on the risk side, as well as on some of the key opportunity indicators – although the relatively small size of their respective populations will be a limiting factor). With its large population and a generally improving business environment, Nigeria is considered by many investors to offer the most attractive consumer market in Africa. Also in this category is Ghana in West Africa, reﬂ ected in the strong growth we have seen in FDI projects in services sectors over the past few years. As a region, East Africa – led by Kenya and Tanzania – is likely to offer an attractive proposition for consumer-facing companies in the coming years.

Higher risk, higher reward: there are a number of countries that are on the cusp, growing at consistently high 2 rates, making steady political and social progress and generally creating environments that are increasingly conducive to doing business. Ethiopia has the third-largest population in Africa and, as its economy continues to grow and open up, it too is increasingly on the radar of consumer-facing companies. Even though it is a comparatively small market in terms of population size, Angola is the third-largest economy in SSA and, in this particular analysis, is among the markets with the strongest growth characteristics. Due to the recent political turmoil, Egypt has lost some ground from a risk perspective, but continues to score highly on the opportunity dimension. For all markets in this quadrant, risk indicators are more pronounced and will need to be deliberately factored into the decision-making process.

Lower risk, lower reward: countries such as Namibia, Rwanda, Botswana and Mauritius (as well as some of the 3 other island nations) are likely to tend toward this category. They all perform relatively strongly from a risk perspective, but are all smaller markets and display relatively weaker characteristics in terms of some of the growth factors that would make them attractive to a consumer-facing company.

Higher risk, lower reward: this category would comprise countries that are relatively high-risk environments 4 and do not exhibit particularly exciting growth characteristics. This is another illustration of the sheer diversity of markets on the continent. Logically, these are the obvious markets to say no to, although some may still be worth a closer look or at least keeping on a “watch list”. Zimbabwe is arguably a good case in point – an economy with solid fundamentals and tremendous potential for growth.

5 | Africa by numbers 2013–14 Applying multiple lenses

Conducting rational, fact-based and numbers into a framework for informed organizational and circumstantial factors. cross-comparative analysis provides an conversation, the market assessment However, for illustrative purposes, let us essential starting point for developing matrix provides this enabling tool. continue with our example of the company strategies for growth in Africa. However, looking for consumer-related growth Building on this kind of quantitative we suggest not overinvesting in a process opportunities and assume expansion exercise, we also recommend conducting of this nature. Assessing markets and from an initial base in South Africa by qualitative analysis by applying relevant developing strategies for growth in Africa an organization that is largely English- “thematic lenses” to whatever kind of is a complex exercise, and too much time speaking. ranking system or matrix you may have and energy is sometimes spent looking for developed. Interchanging different lenses In addition to the quantitative analysis defi nitive answers in a spreadsheet. The onto various markets will help build up that generated the initial risk-opportunity numbers should instead be an aid to help a greater richness of perspective and matrix, we will now apply a set of lenses defi ne growth priorities, risk appetite and lead to far more robust decision-making. framed by simple hypotheses to help investment criteria more clearly, and to What is relevant to any organization will narrow and stress test our choices: enable informed strategic dialogue and clearly depend on various sector-specifi c, decision-making. By converting a set of

Lens 1 Lens 2 Lens 3 Lens 4 Lens 5 Lens 6

Language and Infrastructure Regional groupings Urbanization trends FDI trends Company footprints geographic proximity investment trends

• Countries • Countries that form • Markets with more • Countries with • Countries with higher- • Countries with strong geographically part of more coherent highly concentrated higher levels of FDI quality infrastructure presence of consumer- proximate to South regional groupings are and urbanizing investment are more and higher levels of facing and/or potential Africa and that have more attractive. populations are more attractive. active infrastructure corporate clients are English as their attractive. projects are more more attractive. language of business attractive. Hypothesis are more attractive.

Geographic and cultural proximity Regional groupings at forecast growth rates, the EAC grouping 1 2 will have a population approaching 200 million people and an economy that is the When doing a cross-comparative analysis of Executing growth strategies in a structured size of Nigeria or Chile today (and twice the various African markets, one can lose sight way based on logical groups of markets size of the likes of Vietnam, Bangladesh of just how large and complex the continent can help provide focus, coherence and and Hungary). is. The large distances between key critical mass. Overlaying the analysis of markets such as South Africa, Nigeria and individual markets with a regional view is Kenya must be a very real consideration. therefore critical. Analyzing regionalization Urbanization trends The continent’s vast geography trends will help provide forward-looking 3 combined with underdeveloped logistics perspectives on, for example, coherent infrastructure means that moving goods market groupings and where movement Cities may, in some respects, be at least as and people between markets will be one of goods and people across borders may important a unit of analysis as countries. of the biggest challenges many companies become a critical differentiator. The East Today, Africa has more than 50 cities with face. This challenge is compounded African Community (EAC), for example, a population over 1 million (about the same by diversity across markets in terms of comprising Kenya, Uganda, Tanzania, as Western Europe and North America), language, culture, regulatory frameworks Rwanda and Burundi, is actively deepening with UN-Habitat predicting that number and levels of development. From a practical and widening cooperation among its will grow to over 80 cities by 2025.2 While perspective, it will often therefore make member states, including harmonizing this would include better-known cities sense to ﬁ rst expand into countries that are legislation relating to the EAC Customs such as Johannesburg, Lagos, Nairobi and geographically proximate to a hub market. Union and common market protocols Cairo, among the fastest-growing cities are Similarly, language and cultural afﬁ nity (providing interesting opportunities for the likes of Kinshasa (DRC), Abidjan (Cote should be important qualitative factors growth out of a hub based in one of these d’Ivoire), Dar es Salaam (Tanzania), and when stress testing market selection. countries). Furthermore, in 10 years time, Kampala (Uganda). In addition to cities,

2 UN-Habitat, The State of African Cities 2010: Governance, inequalities, and urban land market.

Africa by numbers 2013–14 | 6 emerging urban corridors and clusters FDI trends should also be considered. These develop 4 in parallel with transport infrastructure and trade routes, and are often the backbone We believe that FDI plays a critical role in of national and even regional economies. helping to grow and diversify emerging So, for instance, while Nigeria and the economies, and makes an important broader West African region may look contribution to job creation, SME and skills daunting in terms of market development, development and technology transfer. the Greater Ibadan-Lagos-Accra (GILA) FDI trends provide another useful “lead” urban corridor has a population of over 25 indicator of future sector and market million consumers, and provides a more potential. A number of the key African manageable and focused market. markets we profi le saw robust growth in FDI with signifi cant diversifi cation away from resources toward services sectors.

Top 10 destinations: highest growth rate in FDI projects CAGR 2007–12

50.8% 47.6% 43.1% 43.1%

Ghana Republic of Kenya Cote d’Ivoire the Congo

38.9% 33.0% 30.6% 24.6% 24.6% 23.4%

TanzaniaMozambique Zambia Zimbabwe Cameroon Nigeria

Source: fDi Markets; EY analysis.

• In West Africa, FDI projects into Ghana between 2007 and 2012. Cote d’Ivoire • In southern Africa, South Africa have grown at a compound rate of over and Cameroon have also seen positive continues to dominate FDI project 50% over the past fi ve years, a clear growth in FDI infl ows. infl ows, attracting one in fi ve FDI indicator of the health and relative projects in Africa in 2012 (the majority • In East Africa, FDI projects into Kenya investment attractiveness of that being in various service sectors, as well experienced a robust compound annual market. That the majority of these as manufacturing and infrastructure- growth rate of 43% between 2007 and projects have been in services sectors, related projects) and having grown 2012. Communications, fi nancial and notably communications, consumer projects at a compound rate of 22% business services, software and IT are products, fi nancial and business since 2007. South Africa is, however, among the major sectors attracting services, makes us optimistic about the playing an increasingly important role investment. Similarly, FDI projects into likely future health and attractiveness as an investor itself into other parts Tanzania grew at a 39% compound rate, of the Ghanaian economy. There has of Africa, helping to propel FDI growth with the primary focus being fi nancial been healthy growth in FDI projects rates in West and East Africa, as well services and communications, but into Nigeria too, with communications, as in more proximate markets such as increasing levels of interest in consumer fi nancial and business services alone Mozambique, Zambia and Zimbabwe. products and infrastructure. attracting a third of total projects

7 | Africa by numbers 2013–14 Infrastructure investment trends looking perspective, this kind of insight Company footprints 5 should materially improve the relative 6 attractiveness of Mozambique in any Underdeveloped infrastructure poses a kind of comparative analysis. Another lens that we often overlay on top key operating challenge in many African of the broader FDI trends is identifying • Although some potential investors markets. In our most recent Africa markets in which various fi rms are investing may have some concerns about the attractiveness survey, respondents across the continent. Using our Growing quality of infrastructure in Nigeria, our already doing business on the continent Beyond Borders™ tool, we map footprints analysis shows that there are active identifi ed improving transport and logistics of peers, competitors, suppliers and/or infrastructure projects with a combined infrastructure as the single biggest factor clients to get a quick visual representation value of $95b. A large proportion of for improving the ease of doing business of investment patterns and relative these are in the logistics and power on the continent. Power shortages and concentration in a market or group of sectors. outages are another critical impediment markets. This can provide an indication to doing business, particularly for fi rms • Angola has active infrastructure of relative confi dence and likely future engaging in any kind of industrial or mining projects with the next highest capital development in that market. For suppliers activity. Market choices should therefore be value in SSA after South Africa and and business service providers, it can informed by the kind of analysis of active Nigeria. also provide a more direct indication of infrastructure investment programs that we business development opportunity. In the • Kenya has emerged as a major player provide in the “country profi le” pages in this simple example below, we have mapped in renewable energy, which accounts report. the African footprints of a small selection for at least half of all power projects in of retail and consumer products companies. • Looking at Mozambique as an example, the country. Substantial logistic spend The largely “Anglophone” bias of these there are currently $32b worth of active is being focused on upgrading the main particular companies does stand out, with a infrastructure projects – more than the Northern corridor that links Mombasa to heavy concentration of activity in English- value of projects in Zambia, Zimbabwe, Uganda, while the Lamu Port-Southern speaking West, East and Southern Africa. Botswana and Namibia combined. Road Sudan-Ethiopia Transport (LAPSET) Mozambique is the most obvious exception, and rail transport networks linking the corridor - once completed, will be the partly because of its geographical proximity country’s huge coal reserves to main country’s second-largest transport to and a strong trading and investment corridors is a key focus area, with new corridor after the Mombasa-Ugandan relationship with South Africa. and existing port facility expansion link. included in this. From a forward-

African footprint of selected retail and consumer product companies

Highest concentration

• South Africa: 6 • Nigeria: 5 Nestle • Zambia: 5 • Mozambique: 5 Unilever • Botswana: 4 • Ghana: 4 Pick ‘n Pay • Kenya: 4 Shoprite • Tanzania: 4 • Uganda: 4 Nakumatt • Angola: 3 Tiger Brands • Zimbabwe: 3 • Namibia: 3 Massmart • Mauritius: 3 Source: EY Growing Beyond Borders

Africa by numbers 2013–14 | 8 “As the world grapples with [an economic] crisis, new poles of growth are a key part of the solution. With its growing young, urbanizing population, Africa is the low-hanging fruit in terms of infrastructure investment,

agribusiness, IT and more.”

Dr. Donald Kaberuka, President of the African Development Bank

Conclusion: from strategy to execution

By systematically working through an assessment process of this nature – one that combines both fact-based analysis and strategic dialogue among key decision-makers – the logical sequencing for growth across the continent generally becomes clearly evident. Although priorities and time lines should obviously be periodically reviewed, the emphasis can now shift to the challenge of execution.

Quantitative Qualitative Growth sequence

Higher risk – higher reward Lower risk – higher reward Tunisia Lens 1 co South Africa c

Higher opportunity Language and geographic proximity Moro Nigeria Algeria Western Libya Egypt

Egypt Sahara

Angola Ghana Lens 2 Cape Ethiopia Tunisia DRC Verde Mauritania Mali Mozambique Regional groupings Niger Zambia Namibia Botswana Chad Eritrea Ugandad Tanzania Sudan Kenya Mauritius Senegal Burkina Faso Cameroon Cote d’Ivoire Senegal Rwanda Gambia Djibouti

Opportunity Zimbabwe Nigeria Lens 3 Guinea South Ethiopia Bissau Benin Central African Sudan Urbanization trends Ghana Republic Guinea Togo Cameroon Uganda Somalia Size of bubbles = FDI new projects (2007–12) Equatorial Guinea Democratic Kenya Sierra Leone Republic of Liberia Sao Tome Congo Seychelles Lens 4 Côte d’Ivoire Gabon Rwanda Congo Burundi Tanzania FDI trends Comoros Higher risk – lower reward Lower risk – lower reward Lower opportunity Lower Angola Higher risk Risk Lower risk Zambia Malawi r Mauritius Lens 5 Shorter term Zimbabwe ca as Namibia g Infrastructure investment trends Longer term a Botswana ad Wild cards M Reunion Mozambique Swaziland Lens 6 South Africa Company presence Lesotho

While there no doubt remain challenges kind of tool – which we have named Growing questions from this or any kind of analytical with regard to the availability and reliability Beyond Borders™ – demonstrates a fast- exercise; doing business in Africa means of data for some African countries, this improving ability to make sense of Africa’s learning to deal with uncertainty and should not be viewed as a barrier to the data defi cits and produce workable, fact- complexity on an ongoing basis. The key development and execution of strategies based analysis for the purposes of strategic is to use both quantitative and qualitative for growth in Africa. For a start, there is, in planning. methods – such as the ones suggested our view, suffi cient macro data available to in this report – to critically evaluate risks, The frameworks and content provided in conduct robust cross-comparative analysis opportunities and strategic options based this report are aimed at helping to further of different markets and regions. Although on your unique business drivers and critical enhance confi dence to develop growth this data does tend to be fragmented across success factors. The sooner the shift is then strategies for Africa and to accelerate various sources, we have overcome this made from analysis to getting feet on the the transition from strategy development obstacle by combining numerous diverse ground in key markets, the better. to execution mode. It is important not to data points together into a single database expect defi nitive answers to your strategic with a map-based interactive interface. This

9 | Africa by numbers 2013–14 A selection of country proﬁ les

Cameroon Egypt Ethiopia Ghana Kenya Mozambique Nigeria South Africa

Africa by numbers 2013–14 | 10 Tunisia o cc

Moro Algeria Cameroon Libya Western Egypt Sahara Cape Verde Mauritania Mali Niger Chad Sudan Eritrea Senegal Burkina Faso Gambia Djibouti Nigeria Guinea South Ethiopia Bissau Benin Central African Sudan Ghana Republic Guinea Togo Cameroon Uganda Somalia Equatorial Guinea Democratic Kenya Sierra Leone Republic of Liberia Sao Tome Congo Seychelles Côte d’Ivoire Gabon Rwanda Congo Burundi Tanzania Garoua Comoros Angola Zambia Malawi r Mauritius Zimbabwe Namibia gasca a

Botswana ad Douala Yaoundé M Reunion Kribi Mozambique Swaziland South Africa Lesotho Country overview

Opportunity indicators Risk indicators Ease of doing business overall rank out of 184 GDP (current) US$24.98b 161 countries (34th in Africa) Transparency International Corruption Perceptions Population growth (annual) 2.16% Index (0=highly corrupt, 100=very clean; ranked 39th 26 in Africa) Strength of investor protection index (0 =unfavorable, Population (m) 20.93 4.3 10=favorable; ranked 24th in Africa) Mobile penetration (% of population with mobile Logistics Performance Index: overall rank out of 155 52.35% 106 access) countries (18th in Africa) Urban population (% of total) 52.09% Democracy score (0=lowest, 10=highest) 1 Real GDP growth (compound average growth rate): Mo Ibrahim Index of African Governance (rank out of 5.06% 36 5-year forecast (2018) 52 countries) Real GDP growth (compound average growth rate): Perceptions of governance – rule of law: percentile 3.37% 14.55 10-year historical (2003) rank (0=lowest, 100=highest) Perceptions of governance – regulatory quality: GDP per capita (US$): 5-year forecast (2018) US$1,582 23 percentile rank (0=lowest, 100=highest) Country wealth (1=low income, 2=lower middle, Quality of overall infrastructure (1=extremely 3=upper middle, 4=high income (non-OECD), 5=high 2 underdeveloped, 7=extensive and efﬁ cient by 3.2 income (OECD)) international standards) Literacy rate (total population %) 75.9% Corporate maximum tax rate (%) 38.5%

Joseph Pagop EY Country Leader

Tel: + 237 33 42 5109 Email: joseph.pagop.noupoue@ ey-avocats.com

11 | Africa by numbers 2013–14 FDI trends in Cameroon

Cameroon’s inﬂ ow of investments of FDI since 2003 Cameroon received 0.6% of Africa’s total FDI for new projects and 2.2% of capital invested since 2007. Foreign investment levels remain relatively low. Nearly 75% of capital and 44% of projects are directed into resources, though investments in power, logistics and manufacturing activity are attracting a lot of interest.

9 8,272 8

7,398 New projects Capital invested Jobs created % CAGR (2007–12) 24.6% -25.5% 22.5%

3 3 3 4,272 2 5,289 1 3,463 1 1 1

3,000 2,460 3,000

1,558 1,155 1,046 900 799 727 566 280 351 12 103 118 2003 2004 2005 20062007 2008 2009 2010 2011 2012

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Cameroon’s top 5 investors for FDI capital invested since 2007 (total = US$14,094m) Top sectors

Manufacturing projects in the non-resource sectors Other investors 9% France 37% account for 70% of project investments. United States 10%

South Korea 12%

India 13% Cameroon’s investment into top sectors (2007–12) Australia 19% by most projects

(Total = 27) Cameroon’s top 5 investors for FDI new projects since 2007 (total = 27)

Other sectors Metals 30% France 19% 30%

Other investors 37% South Korea 15%

Building and Australia 7% United States 11% construction China 11% materials 7%

Financial Coal, oil and Cameroon’s top 10 project investors since 2007 services 7% natural gas 15% Countries are ranked by most FDI new projects (2007–12). Food and French and US petroleum companies, as well as Australian, Canadian and South Korean tobacco 11% mining companies, provide the major capital investments. Other project activity sees food and tobacco as dominant. Cameroon’s investment into top sectors (2007–12) by most capital invested

(Total = US$14,094m) 8,701 5

Other sectors 4% Alternative 4 and renewable Coal, oil and energy 2% natural gas 5,188 3 3 41% Automotive 3,996 2 3,566 2 2 OEM 4% 3,000 2,620

1,690 1,634 1 1 1 1,424 950 842 1,907 1,543 125 49 26 57 272 100 160 France South Korea United States ChinaAustralia South Africa UK India Canada Nigeria Food and tobacco 17% Metals Capital invested FDI (US$m) Jobs created by FDI New project FDI 32% Source: All diagrams on this page have been sourced from fDi Markets and EY analysis.

Africa by numbers 2013–14 | 12 Cameroon’s top investors by their top sector FDI investments since 2007 Investors ranked by most new projects 2007–12. These top investors contribute to 67% of all project activity and 97% of capital invested into Cameroon since 2007.

3 8,000 3

5,040

1 1 1 111 111 1

3,566 3,000 2,620 2,150 1,728 1,907 1,313 1,311 855 799 588 500 323 272 275 350 89 118 59 259 95 70 113 118 Metals Metals Metals Chemicals Automotive OEM Automotive Food and tobacco Food and tobacco Food and tobacco Food Coal, oil and natural gas oil and natural Coal, Coal, oil and natural gas oil and natural Coal, Warehousing and storage Warehousing Alternative / renewable energy / renewable Alternative Building and construction materials and construction Building

FranceSouth Korea China United States Australia India 7% projects/ 4% projects/ 18.5% projects/37% capital 15% projects/12% capital 11% projects/6% capital 11% projects/10% capital 19% capital 13.5% capital

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Source: fDi Markets; EY analysis. Cameroon’s FDI outlook

FDI outlook

2000 2013 2018 Comments

Natural resources Large reserves of oil, gas and minerals.

Labor The workforce is relatively small, but also fairly well educated.

Market size A small to medium-sized economy with moderate growth rates.

Infrastructure is poor, but improving, while IMF funding and increasing oil revenues may Infrastructure lead to further improvements.

Cameroon is ranked in the bottom quartile of the World Bank's Doing Business Index, and Bureaucracy bureaucracy is considered an obstacle to business (although some progress has been made in recent years).

Cameroon has enjoyed a long period of stability, although political reform has been slow Political environment and there appears to be no clear presidential succession plan.

A wealth of natural resources is a strong pull for investment, but political reform and Overall outlook for FDI improvments to the business environment will be required to signiﬁ cantly boost investment.

Very unattractive Unattractive Average Attractive Very attractive for FDI

Source: Oxford Economics; EY analysis

13 | Africa by numbers 2013–14 Cameroon’s infrastructure project breakdown

Cameroon’s active* infrastructure projects up to July 2013 Cameroon ranks 10th in Africa by number of projects and 19th by capital allocation.

Infrastructure’s % contribution by number of projects Infrastructure’s % contribution by capital value

Construction sectors 8% Logistics sectors 64% Power generation and Logistics sectors 48% transmission 18% Power generation and transmission 28% Construction sectors 34%

7 2,892

6 2,445

4 4 1,508

816 2 2

537

273

Power plants Roads & Bridges Ports RailAirports Industrial and transmission Construction grids Capital value (US$mn) Project number

*Active projects are categorized into thee phases: 1. conceptual to feasibility; 2. ﬁ nancial closure to early implementation; 3. in progress and near completion. Source: Africa Project Access, Business Monitor International; EY analysis. Examples of some active infrastructure projects in Cameroon

Project name Capacity and time frame Company involvement Other details

Cameroon Aluminium Smelter • Annual production of Cameroon Alumina Limited (CAL) is the Cameroon Alumina Limited (CAL) is waiting for and Hydroelectric Project around 8–9 million tonnes bauxite mining joint venture company permission from the Government to develop a At Ngaoundal, north of the of bauxite to be refi ned to responsible for the project, incorporated and combined bauxite mine and aluminium plant in capital, Yaoundé. an expected three million registered in Cameroon, it is a 100% subsidiary northern Cameroon. The aluminium smelter plant will tpa of Hydromine Global Mineral (HGM). CAL is a include construction of two hydroelectric plants at • Output is hoped to start in JV between parent US company Hydromine Mouséré (with guaranteed annual capacity of at least 2018 Inc, Hindalco Industries Ltd (India) and Dubai 290 MW) and Grand Eweng (with guaranteed annual Aluminium Company (DUBAL). capacity of 1,000 MW). Impregilo S.p.A. (Italy) is the EPC partner to Hydromine for the hydroelectric plants. Impregilo has also constructed fi ve such plants already in Cameroon. A railway link to the port of Kribi, 860km away, will also be required. Kribi Deep-Sea Harbour Port • Upon completion, the port State enterprise China Harbour Engineering Industrial complex and 20 different terminals will 200km from the country's depth will be 16–25 meters Company (CHEC) is the main EPC contractor allow for multipurpose docking, and house a 50,000 economic capital, Douala. and receive vessels close to for this turnkey project. Equipment TEU container facility. The Kribi port will be a key 100,000 tonnes in size requirements for the projects comes from one lever to the industrialization of Cameroon's economic • First phase is 60% of CHEC sister companies. The Cameroonian prospects, enhancing the competitiveness of its completed; fi rst commercial Government is carrying 15% of the cost and the products as it serves trade in and out of Central Africa. vessel is expected to anchor China Exim Bank the remaining 85%. The Kribi iron ore terminal will be connected by a new by mid-2014 500km heavy-haul railway line from the iron ore sites of Mbalam mine in southern Cameroon and Nabeba mine in Congo-Brazzaville. Memve’ele Hydropower Plant • 200 MW–annual production Chinese state-owned hydropower engineering Memve'ele hydroelectric dam also involved the On the Ntem River, in south- capacity of 1,140 GWh and construction company Sinohydro construction of a road to the project site, a power eastern Cameroon in the middle • In progress (greenfi eld Corporation Limited is the main EPC contractor. plant and electricity transmission lines to link into the of the equatorial rainforest. development); foundation China’s Exim Bank provided 60% of the national grid and neighboring networks of Gabon and stone laid in June 2012, (US$500m–US$540m) fi nance requirements, Equatorial Guinea. Cameroon depends on hydropower expected to be operational with DFI’s joint fi nancier of 30% of required for 95% of its energy generation. by end-2017 funds, and the remaining 10% coming from the Cameroonian Government.

Source: Africa Project Access, Business Monitor International; EY analysis.

Africa by numbers 2013–14 | 14 Tunisia o cc

Moro Algeria Egypt Libya Western Egypt Sahara Cape Verde Mauritania Mali Niger Chad Sudan Eritrea Senegal Burkina Faso Gambia Djibouti Nigeria Guinea South Ethiopia Bissau Benin Central African Sudan Ghana Republic Guinea Togo Cameroon Uganda Somalia Equatorial Guinea Democratic Kenya Sierra Leone Republic of Port Said Liberia Sao Tome Congo Alexandria Seychelles Gabon Rwanda Cairo Côte d’Ivoire Congo Burundi Tanzania Giza Comoros Angola Zambia Malawi r Mauritius Zimbabwe Namibia gasca a

Botswana ad

M Reunion Mozambique Swaziland South Africa Lesotho Country overview

Opportunity indicators Risk indicators Ease of doing business overall rank out of 184 GDP (current) US$257.3b 109 countries (11th in Africa) Transparency International Corruption Perceptions Population growth (annual) 1.68% Index (0=highly corrupt, 100=very clean; ranked 28th 32 in Africa) Strength of investor protection index (0 =unfavorable, Population (m) 85.36 5.3 10=favorable; ranked 15th in Africa) Mobile penetration (% of population with mobile Logistics Performance Index: overall rank out of 155 101.08% 57 access) countries (4th in Africa) Urban population (% of total) 43.54% Democracy score (0=lowest, 10=highest) na Real GDP growth (compound average growth rate): Mo Ibrahim Index of African Governance (rank out of 4.66% 14 5-year forecast (2018) 52 countries) Real GDP growth (compound average growth rate): Perceptions of governance – rule of law: percentile 4.5% 42.72 10-year historical (2003) rank (0=lowest, 100=highest) Perceptions of governance – regulatory quality: GDP per capita (US$): 5-year forecast (2018) US$4,031 41 percentile rank (0=lowest, 100=highest) Country wealth (1=low income, 2=lower middle, Quality of overall infrastructure (1=extremely 3=upper middle, 4=high income (non-OECD), 5=high 2 underdeveloped, 7=extensive and efﬁ cient by 3.8 income (OECD)) international standards) Literacy rate (total population %) 72% Corporate maximum tax rate (%) 25%

Emad Ragheb EY Country Leader

Tel: + 202 27 260 260 Email: [email protected]

15 | Africa by numbers 2013–14 FDI trends in Egypt

Egypt’s inﬂ ow of investments of FDI since 2003 Egypt received 10% of Africa’s total FDI for new projects and 13% of capital invested since 2007. Uncertainty in North Africa has led to caution among investors. Nevertheless, Egypt remains Africa’s second-largest destination for FDI projects. Investment is diverse, with only 28% of capital and 11% of project investments ﬂ owing into resources, and service sectors attracting two-thirds of all projects.

New projects Capital invested Jobs created 37,265 % CAGR (2007–12) 1.8% -5.4% -2.3%

108 28,720 28,017

88 23,197 76 20,678

17,702 20,456 60 57 55 17,980 1 52 14,122 48 14,161 43 14,694 16,473 15,480 35 12,548 10,205 14,392 7,721 6,578 6,247

1,697

2003 2004 2005 20062007 2008 2009 2010 2011 2012

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Egypt’s top 5 investors for FDI capital invested since 2007 (total = US$85,227m) Top sectors

Leading investor UAE‘s interests are mostly geared toward real estate followed by ﬁ nancial services, UAE 28% similar to other investors. However these others Other investors 37% have more diverse interests, among which, food, Qatar 17% textiles and professional services are the most Italy 5% attractive. UK 6% Lebanon 7%

Egypt’s investment into sectors (2007–12) by most Egypt’s top 5 investors for FDI new projects since 2007 (total = 439) projects UAE 14% (Total = 439) United States 14% Other sectors Financial services Other investors 48% 48% 19% France 12%

UK 6% Saudi Arabia 6% Coal, oil and natural gas 9% Egypt’s top 10 project investors since 2007 Textiles 7% Countries are ranked by most new projects (2007–12). Food and Middle Eastern investors provide nearly 60% of all capital investments and one-third of all Business services tobacco 9% 8% projects into Egypt, with another bloc consisting of the US, France and the UK also providing one-third of project activity, yet only 13% of capital. Egypt’s investment into sectors (2007–12) by most capital invested

63 (Total = US$85,227m) 60 28,715 51 Other sectors 8% 2,3811 Communications 26 26 2% Real estate 21 20 47% 15 14 14 11,624 9,484 Food and 5,098 5,302 5,443 tobacco 3% 4,648 4,851 3,008 3,876 3,773 2,454 2,679 2,875 2,980 2,792 1,540 1,410 1,259

Chemicals UAE United States France Saudi ArabiaUK Spain India Germany Italy China 4% Coal, oil and Capital invested FDI (US$m) Jobs created by FDI New project FDI natural gas 27% Source: All diagrams on this page have been sourced from fDi Markets and EY analysis.

Africa by numbers 2013–14 | 16 Egypt’s top investors by their top sector FDI investments 2007–12 Investor countries are ranked by most new projects. These top investors contribute to 55% of all project activity and 68% of capital invested into Egypt since 2007.

31 22,352 17,083

15 13 14 13 11,080 8 6 6 5 6 6 4 5 5 4 4 6,080 3 3 3 3 2 2 2 2 2 2 2 2 2 2 1 1 2 1 11 11 4,198 4,102 4,102 5811 3,300 3,588 3,600 2,306 1,886 1,751 1,288 1,351 1,263 1,215 1,235 1,217 1,065 1,123 1,177 854 660 632 663 585 601 527 416 411 432 518 307 135 399 198 413 477 252 323 293 121 67 364 291 216 215 343 364 344 196 241 157 192 75 42 112 119 50 62 159 203 60 55 95 138 198 62 32 53 121 17 9 21 Metals Textiles Textiles Chemicals Chemicals Real estate Real estate Real estate Real estate Real estate Pharmaceuticals Communications Communications Business services Business services Business Food and tobacco Food and tobacco Food and tobacco Food and tobacco Food and tobacco Food Financial services Financial services Financial services Financial services Hotels and tourism Hotels and tourism Hotels and tourism Hotels Consumer products Consumer Coal, oil and natural gas oil and natural Coal, gas oil and natural Coal, gas oil and natural Coal, gas oil and natural Coal, Coal, oil and natural gas oil and natural Coal, Software and IT services Software and IT services Software Building and construction Building Leisure and entertainment Leisure Alternative / renewable energy / renewable Alternative

UAEUnited States France Saudi Arabia UK Lebanon Qatar 2% projects/ 1% projects/ 14% projects/28% capital 14% projects/3.5% capital 12% projects/3% capital 6% projects/3% capital 6% projects/6% capital 7% capital 17% capital

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Source: fDi Markets; EY analysis. Egypt’s FDI outlook

FDI outlook

2000 2013 2018 Comments

Oil production is expected to fall, but will still attract investors, together with natural gas Natural resources and renewables.

Egypt's large, relatively well-educated workforce is attractive for investors, although the Labor relative inefﬁ ciency and inﬂ exibility of the labor market does create challenges.

In absolute size, the economy is large and attractive, but it will take a few more years before Market size the middle class has signiﬁ cant spending power.

Infrastructure is relatively well developed across the country and, despite the political Infrastructure uncertainty, there remains a fairly large number of active infrastructure projects.

Improvements were made during the 2000s, but very few since 2009. Signiﬁ cant amount Bureaucracy remains, which will continue to hinder business.

The political situation remains volatile and highly uncertain, and there remains a risk that Political environment the economic reforms of the 2000s could be reversed.

Assuming the political situation stabilizes in the medium term and reforms are continued, Overall outlook for FDI Egypt will regain its status as one of Africa's more attractive investment destinations.

Very unattractive Unattractive Average Attractive Very attractive for FDI

Source: Oxford Economics; EY analysis

17 | Africa by numbers 2013–14 Egypt’s infrastructure project breakdown

Egypt’s active* infrastructure projects up to July 2013 Egypt ranks 3rd in Africa by number of projects and 4th by capital allocation.

Infrastructure’s % contribution by number of projects Infrastructure’s % contribution by capital value

Oil and gas pipelines 2% Social and welfare 9% Oil and gas pipelines 1% Power generation Social and welfare 15% and transmission 37% Logistics sectors 40% Construction sectors 18% Power generation and transmission 18% Construction sectors 27% Logistics sectors 28%

31 13 860

9 437

7 705 7 650

6 048 5 247 4 797 9 9 3 864 8 6 5 333 3 1 082 2 905 1 0 0 Power Commercial Roads and Water RailPorts Airports Health care Industrial Residential Oil and gas Housing plants and construction bridges construction construction pipeline transmission grids Capital value (US$m) Project number

*Active projects are categorized into thee phases: 1. Conceptual to feasibility; 2. Financial closure to early implementation; 3. In progress and near completion. Source: Africa Project Access, Business Monitor International; EY analysis.

Examples of some active infrastructure projects in Egypt

Project name Capacity and time frame Company involvement Other details

North Giza Gas-Fired Combined- • 2,250 MW – suffi cient to Owned by the Egyptian Electricity Holding The project comprises the construction of a gas-fi red Cycle Power Plant (CCPP) serve more than fi ve million Company (EEHC), the national utility that has combined-cycle gas turbine (CCGT) power plant that The project is situated at a new households commissioned its wholly owned subsidiary will use the most effi cient thermal power generation site some 30km northwest of • Scheduled to be completed the Cairo Electricity Production Company technology. The additional fi nancing in 2012 was Cairo. in 2016 (CEPC) as the operator and executing agency. approved to fund the construction of an extra 750- The World Bank and its International Bank MW CCGT unit at the Giza North power plant, the For Reconstruction And Development (IBRD) associated gas pipeline and two 500 kV transmission provided funding – US$600mn in June 2010 lines, each with a length of approximately 25kms. and US$240mn in Feb 2012. Orascom Construction Industries is the main EPC contractor. El-Ain Sokhna Steam-Fuelled • 1,300 MW – consisting Owned by the Egyptian Electricity Holding The project involves the construction of a new super- Power Plant of two steam power Company (EEHC), the national utility that has critical steam power generating station that runs on Along the Gulf of Suez about generating units, each commissioned its wholly owned subsidiary natural gas as the primary fuel and heavy fuel oil as 52kms south from the city of rated at 650 MW West Delta Electricity Production Company the alternate fuel. The project includes a super-critical Suez. • In progress (greenfi eld); (WDEPC) as the operator and executing agency. steam generator and an indoor steam turbine, in scheduled closing date Main investors are the World Bank (WB) and addition to a power generator and condenser. The 2015 the International Bank For Reconstruction And ability to "dual fuel" the power plant (with natural gas Development (IBRD) together with signifi cant or heavy fuel oils) will provide security of electricity contributions from the African Development supply in the event that gas supplies are unavailable for Bank (AfDB) and the Arab Fund For Economic any reason. And Social Development (AFESD).

Source: Africa Project Access, Business Monitor International; EY analysis.

Africa by numbers 2013–14 | 18 Tunisia o cc

Moro Algeria Ethiopia Libya Western Egypt Sahara Cape Verde Mauritania Mali Niger Chad Sudan Eritrea Senegal Burkina Faso Gambia Djibouti Nigeria Guinea South Ethiopia Bissau Benin Central African Sudan Ghana Republic Guinea Togo Cameroon Uganda Somalia Equatorial Guinea Democratic Kenya Sierra Leone Republic of Liberia Sao Tome Congo Seychelles Côte d’Ivoire Gabon Rwanda Congo Burundi Tanzania Comoros Angola Addis Ababa Malawi Dire Dawa Zambia Nazret r Mauritius Zimbabwe Namibia gasca a

Botswana ad

M Reunion Moyale Mozambique Swaziland South Africa Lesotho Country overview

Opportunity indicators Risk indicators Ease of doing business overall rank out of 184 GDP (current) US$43.13b 127 countries (16th in Africa) Transparency International Corruption Perceptions Population growth (annual) 2.09% Index (0=highly corrupt, 100=very clean; ranked 26th 33 in Africa) Strength of investor protection index (0 =unfavorable, Population (m) 88.38 4.3 10=favorable; ranked 25th in Africa) Mobile penetration (% of population with mobile Logistics Performance Index: overall rank out of 155 16.67% 141 access) countries (34th in Africa) Urban population (% of total) 17.02% Democracy score (0=lowest, 10=highest) 1 Real GDP growth (compound average growth rate): Mo Ibrahim Index of African Governance (rank out of 6.38% 33 5-year forecast (2018) 52 countries) Real GDP growth (compound average growth rate): Perceptions of governance – rule of law: percentile 9.76% 29.11 10-year historical (2003) rank (0=lowest, 100=highest) Perceptions of governance – regulatory quality: GDP per capita (US$): 5-year forecast (2018) US$677 18 percentile rank (0=lowest, 100=highest) Country wealth (1=low income, 2=lower middle, Quality of overall infrastructure (1=extremely 3=upper middle, 4=high income (non-OECD), 5=high 1 underdeveloped, 7=extensive and efﬁ cient by 3.6 income (OECD)) international standards) Literacy rate (total population %) 42.7% Corporate maximum tax rate (%) 30%

Zemedeneh Negatu EY Country Leader

Tel: + 251 11 550 4933 Email: [email protected]

19 | Africa by numbers 2013–14 FDI trends in Ethiopia

Ethiopia’s inﬂ ow of investment of FDI since 2003 Ethiopia received 1.6% of Africa’s total FDI for new projects and 0.8% of capital invested since 2007. Nearly 43% of capital invested into Ethiopia went into manufacturing activities. Food and tobacco, textiles, ICT and automotives are the major sector 9671 New projects Capital invested Jobs created beneﬁ ciaries of FDI projects. % CAGR (2007–12) 5.4% -28.7% -32.5%

6,656

10 10

8 8

2,630 2,390

1,507 1,360 3 1,123 1,310 2 995 1,350 762 200 630 1 1 321 441 77 290 33 20 8 2003 2004 2005 20062007 2008 2009 2010 2011 2012

Capital invested FDI (US$m) Jobs created by FDI New projects FDI

Ethiopia’s top 5 investors for FDI capital invested since 2007 (total = US$4,833m) Top sectors Other investors 13% Food and tobacco, professional services, textiles and automotives accounted for 54% of project China 8% UAE 42% activity. Germany 9%

India 12% United States 16% Ethiopia’s investment into top sectors (2007–12) by most projects Ethiopia’s top 5 investors for FDI new project since 2007 (total = 69) (Total = 69)

Other sectors Food and tobacco Other investors 29% 46% 18% India 23% Germany 6% United States 19% Financial UAE 9% China 14% services 13% Textiles 10% Ethiopia’s top 10 project investors since 2007 Automotive OEM Metals 7% Countries are ranked by most new projects (2007–12). 6% The top investors show a diverse investment focus toward manufacturing-led activity, while the US’s capital ﬂ owed toward resource extraction and the UAE’s toward real estate Ethiopia’s investment into top sectors (2007–12) construction. by most capital invested

(Total = US$4,833m) 16

5,094 13 4,657

Other sectors Real estate 4,182 28% 30% 10 3,362

4 2,013 3 2 2 2 2 1,240 Textiles 1,165 774 609 667 458 8% 368 443 252 117 112 182 165 Food and 45 19 tobacco 16% India USA China UAEGermany UK Turkey Egypt Kenya Nigeria Communications 8% Coal, oil and Capital invested FDI (US$m) Jobs created by FDI New projects FDI natural gas 12% Source: All diagrams on this page have been sourced from fDi Markets and EY analysis.

Africa by numbers 2013–14 | 20 Ethiopia’s top investors by their top sector FDI investments since 2007 Investor countries are ranked by most new projects 2007–12. These top investors contribute to 71% of all project activity and 87% of capital invested into Ethiopia since 2007.

4 4 4 3,000

2 2 2 2,116 2 2 1,989

1 1 1 1 1 1 1 1 1 1 1 1,517 1,470 1,092 993 1,267 577 557 404 351 317 221 221 228 189 168 169 131 100 80 66 115 112 103 67 97 72 67 37 37 14 34 19 30 15 14 26 15 Metals Textiles Textiles Chemicals Beverages Real estate Transportation Communications Automotive OEM Automotive Automotive OEM Automotive Business services Business Food and tobacco Food Food and tobacco Food Food and tobacco Food Financial services Ceramics and glass Ceramics Coal, oil and natural gas oil and natural Coal, Software and IT services Software Alternative / renewable energy / renewable Alternative Non-automotive transport OEM transport Non-automotive

IndiaUnited States China UAE Germany

6% projects/ 23% projects/13% capital 19% projects/16% capital 14.5% projects/8% capital 9% projects/42% capital 9.5% capital

Capital invested FDI (US$m) Jobs created by FDI New projects FDI

Source: fDi Markets; EY analysis. Ethiopia’s FDI outlook

FDI outlook

2000 2013 2018 Comments

Gold reserves and the potential for commercial development in natural gas, iron ore and oil Natural resources reserves provide growing interest for investors.

Working population is growing rapidly and cost of labor remains low. Education and literacy Labor rates are relatively poor but are improving.

Still a small economy in absolute terms, but sustained and rapid growth, coupled with a Market size large population, makes this a market with signiﬁ cant potential.

Infrastructure Infrastructure levels are rapidly improving, with substantial investments being made.

Bureaucracy is a challenge to business, although improvements are being made (Ethiopia Bureaucracy ranks in the 3rd quartle in the World Bank's Doing Business Index, ahead of Brazil and India).

The handover of power following the passing of Meles Zenawi has been smooth, and the Political environment political environment remains stable. Ethiopia is a nominal democracy, although power has generally been concentrated in a dominant ruling party.

Natural resources, a large population and a rapidly growing economy, with particular Overall outlook for FDI emphasis on manufacturing capacity and agribusiness opportunities, will attract increasing levels of FDI.

Very unattractive Unattractive Average Attractive Very attractive for FDI

Source: Oxford Economics; EY analysis

21 | Africa by numbers 2013–14 Ethiopia’s infrastructure project breakdown

Ethiopia’s active* infrastructure projects up to July 2013 Ethiopia ranks 15th in Africa by number of projects and 17th by capital allocation.

Infrastructure’s % contribution by number of projects Infrastructure’s % contribution by capital value

Logistics sectors 38% Construction sectors 9% Power generation and transmission 29% Power generation and Logistics sectors 50% transmission 41%

6 Construction sectors 33%

4800 4,368 5 3,827

3600 4

2400

2 2 2

1200 751

147 133 194

Power plants Commercial Rail Airports Industrial Roads and and transmission construction construction bridges grids Capital value (US$m) Project number

Project name Capacity and time frame Company involvement Other details

Gibe III Hydropower Dam • 1,879 MW – a 243m-high The dam is owned and operated by the national The Gibe III dam is part of the Gibe-Omo Cascade 250Kms southwest of Addis roller-compacted concrete utility Ethiopian Electric Power Corporation project, which includes 184 MW Gilgel Gibe I (in Ababa on the Omo River. dam that, once completed, (EEPCo), which awarded the main EPC contract operation), 420 MW Gibe II (in operation), Gibe will be the largest of its kind to Salini Costruttori (Italy). 85% of the near III (under construction). At least 50% of power • In progress (greenfi eld); US$500mn cost is covered by a loan from generated will be utilized domestically, the rest currently about three- the Industrial and Commercial Bank of China exported. The 1870 MW of installed power will be quarters complete. (ICBC). China’s Dongfang Electric Corporation generated through 10 Francis turbines in an open-air (DEC) is contracted for the hydromechanical and power house and will provide 6500 GWh per year. electromechanical part of the project. Grand Ethiopian Renaissance • 6,000 MW – once Owned and operated by the Ethiopian Electric It is expected to consume 10 million metric tons Hydropower Dam completed, it will be the Power Corporation (EEPCo). The Salini of concrete, and the Government has pledged to 40km east of the border with largest hydroelectric power Construttori was awarded the main EPC contract use only domestically produced concrete. Diversion Sudan on the Blue Nile River. plant in Africa. It is 1,800m worth US$4.8b. The Metals & Engineering of the Blue Nile was completed on 28 May 2013 long and170m high, with Corporation (METEC), and Ethiopian company, is and marked by a ceremony the same day. Selling an overall volume of 10 responsible for the electromechanical works of the electricity from the dam would require the million cubic metres the hydropower project. Alstom (France) has the construction of massive transmission lines to major • Expected completion is contract to supply the turbines and generators regional urban centers such as Addis Ababa and 2017; reportedly near 20% for phase one. Costs of the turbines and Sudan’s capital Khartoum, both located more than complete as of April 2013 associated electrical equipment of the project is 400km away from the dam. reportedly fi nanced by the Chinese banks, with the remaining funds intended to come from the Ethiopian Government. Mieso to Djibouti Border • The entire 656km railway The Ethiopian Railways Corporation (ERC) has The project is part of Ethiopia's national Growth and Railway Line. network from Addis Ababa entered into a contract with the China Civil Transformation Plan (GTP). Ethiopia and Djibouti's to Djibouti will have about Engineering Construction Corporation (CCECC) economies are reliant on each other, with about 70% eight main routes that will and the China Railway Engineering Corporation of all trade through Djibouti's port coming from its connect to more than 49 (CREC) to construct sections of the railway. land-locked neighbor. Under the fi ve-year GTP, the urban centers by 2015 Finance is secured from the China Exim Bank Ethiopian Government aims to develop a 2,395kms • In progress (greenfi eld); and the Industrial and Commercial Bank of China railway network nationwide, out of which 1,808kms estimated completion by (ICBC). is planned to be completed by 2015. end-2015

Source: Africa Project Access, Business Monitor International; EY analysis.

Africa by numbers 2013–14 | 22 Tunisia o cc

Moro Algeria Ghana Libya Western Egypt Sahara Cape Verde Mauritania Mali Niger Chad Sudan Eritrea Senegal Burkina Faso Gambia Djibouti Nigeria Guinea South Ethiopia Bissau Benin Central African Sudan Ghana Republic Guinea Togo Cameroon Uganda Somalia Equatorial Guinea Democratic Kenya Sierra Leone Republic of Liberia Sao Tome Congo Seychelles Côte d’Ivoire Gabon Rwanda Congo Burundi Tanzania Comoros Angola Zambia Malawi r Mauritius Zimbabwe Namibia gasca Kumasi a

Botswana ad

M Reunion Accra Mozambique Sekondi-Takoradi Swaziland South Africa Lesotho Country overview

Opportunity indicators Risk indicators Ease of doing business overall rank out of 184 GDP (current) US$40.71b 64 countries (6th in Africa) Transparency International Corruption Perception Population growth (annual) 2.3% Index (0=highly corrupt, 100=very clean; ranked 7th 45 in Africa) Strength of investor protection index (0 =unfavorable, Population (m) 26.15 6 10=favorable; ranked 7th in Africa) Mobile penetration (% of population with mobile Logistics Performance Index overall rank out of 155 84.78% 108 access) countries (19th in Africa) Urban population (% of total) 51.87% Democracy score (0=lowest, 10=highest) 8 Real GDP growth (compound average growth rate): Mo Ibrahim Index of African Governance (rank out of 5.16% 7 5-year forecast (2018) 52 countries) Real GDP growth (compound average growth rate): Perceptions of governance – rule of law: percentile 7.28% 54.46 10-year historical (2003) rank (0=lowest, 100=highest) Perceptions of governance – regulatory quality: GDP per capita (US$): 5-year forecast (2018) US$2,224 55 percentile rank (0=lowest, 100=highest) Country wealth (1=low income, 2=lower middle, Quality of overall infrastructure (1=extremely 3=upper middle, 4=high income (non-OECD), 5=high 2 underdeveloped, 7=extensive and efﬁ cient by 3.9 income (OECD)) international standards) Literacy rate (total population %) 71.5% Corporate maximum tax rate (%) 25%

Ferdinand Gunn EY Country Leader

Tel: + 233 302 784259 Email: [email protected]

23 | Africa by numbers 2013–14 FDI trends in Ghana

Ghana’s infl ow of investment of FDI since 2003 Ghana received 3.8% of Africa’s total FDI for new projects and 3.5% of capital invested since 2007. Rapid new investments led to impressive compound annual growth in both capital and job creation since 2007, confi rming the strong confi dence in Ghana’s economy.

47 13,754 New projects Capital invested Jobs created % CAGR (2007–12) 50.8% 59.1% 47.2% 39

27 26 9,797 9,934 20 17 16 17

4 5 7,059 6,428 5,815 5,281 4,940 4,918 4,032 3,679 3,621 3,141 2,661 2,460

1,240 1,319 763 361 129

2003 2004 2005 20062007 2008 2009 2010 2011 2012

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Ghana’s top 5 investors for FDI capital invested since 2007 (total = US$22,514m) Top sectors

70% of Ghana’s capital invested FDI ﬂ owed into Other investors (15%) resources since 2007, while over half of new United States (5%) South Africa (33%) projects are opened in ﬁ nancial, business and India (9%) communication services. UK (19%) China (19%)

Ghana’s investment into top sectors (2007–12) by most projects Ghana’s top 5 investors for FDI new projects since 2007 (total = 164)

(Total = 164) South Africa (15%) Other sectors Financial services Other investors (37%) UK (15%) 36% 22%

United States (14%) India (7%) Nigeria (12%)

Coal, oil and Communications Ghana’s top 10 project investors since 2007 natural gas 18% Countries are ranked by most new projects (2007–12). 6% Business services Metals South Africa stands out as the leading capital investor in Ghana, with over 80% allocation 11% 7% toward manufacturing activity – similar to China. The UK and US’s capital FDI favors extractive activity. Ghana’s investment into top sectors (2007–12) by

most capital invested 7,514 6,964 25 24 (Total = US$22,514m) 23

Other sectors 19 Coal, oil and 4,355 Financial 8% 4,222 natural gas services 3,472 46% 12 2% 2,997 2,848 2,509 Chemicals 2,016 1,920

8% 1,329 5 5 5 4 4 1,137 639 370 413 74 117 12 38 68 UK South Africa United States NigeriaIndia China Canada Finland Togo Australia

Communications Metals Capital invested FDI (US$m) Jobs created by FDI New project FDI 13% 23% Source: All diagrams on this page have been sourced from fDi Markets and EY analysis.

Africa by numbers 2013–14 | 24 Ghana’s top investors by their top sector FDI investments since 2007 Investor countries are ranked by most new projects 2007–12. These top investors contribute to nearly 70% of all project activity and 90% of capital invested in Ghana since 2007. 14 6,000

4,198 6 5 5 4 4 3,413 3 3 3 3 3 3,000 3,234 2 2 2 2 2 2 1 1 1 1 1 1 2,034 1,353 1,475 1,500 995 1,543 772 932 593 557 712 492 351 200 229 330 249 249 221 172 155 230 39 47 83 46 189 28 51 120 31 66 23 45 28 51 116 101 97 22 165 143 18 Metals Metals Metals Chemicals Chemicals Beverages Communications Communications Communications Automotive OEM Automotive Business services Business services Business Financial services Financial services Financial services Financial services Consumer products Consumer Coal, oil and natural gas oil and natural Coal, gas oil and natural Coal, gas oil and natural Coal, Coal, oil and natural gas oil and natural Coal, Software and IT systems Software Software and IT services Software Business machines and equipment machines Business

UK South Africa United States Nigeria India China

12% projects/ 3% projects/ 15% projects/19% capital 15% projects/33% capital 14% projects/5% capital 7% projects/8.5% capital 3% capital 19% capital

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Source: fDi Markets; EY analysis. Ghana’s FDI outlook

FDI outlook

2000 2013 2018 Comments

Gold and cocoa have historically been Ghana’s major exports, but oil reserves and domestic Natural resources production have further enhanced investment attractiveness of resources.

Labor A rapidly growing working population with improving levels of education.

A medium-sized, but rapidly growing economy, with relatively low, but improving, levels of Market size GDP per capita.

Some progress has been made over the past decade, but the current pipeline of Infrastructure infrastructure projects suggests there will be signiﬁ cant improvement in the next few years.

Levels of bureaucracy are relatively low, and the business environment is conducive to Bureaucracy investment.

Ghana has been one of the most stable democracies in Africa, and corruption levels are Political environment relatively low.

A stable and rapidly expanding economy, boosted by oil production, will be a strong pull Overall outlook for FDI factor as FDI levels continue to grow.

Very unattractive Unattractive Average Attractive Very attractive for FDI

Source: Oxford Economics; EY analysis

25 | Africa by numbers 2013–14 Ghana’s infrastructure project breakdown

Ghana’s active* infrastructure projects up to July 2013 Ghana ranks 15th in Africa by number of projects and 8th by capital allocation.

Infrastructure’s % contribution by number of projects Infrastructure’s % contribution by capital value

Oil and gas pipelines 4% Power generation Construction sectors 4% Construction sectors 17% and transmission 4% Power generation and Social and welfare 27% transmission 38% Logistics sectors 31% Social and welfare 48% Logistics sectors 27% 10,000 10

6 6,000

1,194 903 11111 700 250 165 0

Power plants WaterAirports Roads and bridges Housing Industrial Oil and gas Ports Rail and transmission construction pipelines grids Capital value (US$m) Project number

Project name Capacity and time frame Company involvement Other details

Early Phase Gas Infrastructure • 400 million cubic feet Sinopec International Petroleum Corporation Sinopec is also contracted for other infrastructure Project (EPGIP) • In progress (a third of the (China) (EPC contracted company). China projects as part of a series of bilaterally agreed A 120km pipeline that will move way completed) Development Bank Corp. Is this Financier. multibillion-dollar loan agreements with China. processed gas from Atuabo to Aboadze-based Takoradi Thermal Processing Plant (TTPP). Bui Hydropower Project • 400MW Sinohydro (EPC contracted company). China The Bui Hydroelectric Project also includes the The Bui Dam is a hydroelectric • In progress (fi rst generator Exim Bank (Financier). Financed by two credits development of an irrigation scheme for agricultural project under construction at the produced power for the from the China Exim Bank: a concessional loan development, which facilitates opportunities for Bui Gorge at the southern end of grid on 3 May 2013); of US$270m at 2% interest and a commercial enhanced ecotourism and fi sheries. Bui National Park in Ghana. project completion is loan (buyers credit) of US$292m. Remaining expected in 2014 (US$60m) fi nanced by the Government of Ghana. Nzema Solar Photovoltaic (PV) • 155MW Mere Power Nzema Ltd. (EPC contracted The 183-hectare site is said to have excellent solar Plant • Installation of more than company) – a subsidiary of Blue Energy (UK- radiation and good access to the major road systems, The giant 155 MW Nzema project 630,000 solar PV modules based). Blue Energy is majority owned and and is also importantly close to the deepwater port at will be one of the biggest in is expected to begin by the funded by members of the European-based Takoradi. The plant will be directly connected to the the world. Upon completion, it end of 2013 Stadium Group. 161kV West African Power Pool transmission line. is estimated to meet 20% of Ghana’s target of generating 10% of its electricity from renewable sources by 2020. Takoradi Port Infrastructure • Comprehensive upgrade The Ghana Ports and Harbours Authority The phase 1 expansion work by CHEC will entail Phase 1 Development Project and extension of handling (GPHA) signed an agreement with the China numerous construction and logistics facilities. Up to The Port of Takoradi is Ghana’s and logistics facilities Harbour Engineering Company (CHEC) in late 40% local content utilization is expected, according to second-largest and oldest • 36 months phase1 2012 as the EPC contractor to commence GPHA. seaport. construction duration expansion work.

Source: Africa Project Access, Business Monitor International; EY analysis.

Africa by numbers 2013–14 | 26 Tunisia o cc

Moro Algeria Kenya Libya Western Egypt Sahara Cape Verde Mauritania Mali Niger Chad Sudan Eritrea Senegal Burkina Faso Gambia Djibouti Nigeria Guinea South Ethiopia Bissau Benin Central African Sudan Ghana Republic Guinea Togo Cameroon Uganda Somalia Equatorial Guinea Democratic Kenya Sierra Leone Republic of Liberia Sao Tome Congo Seychelles Côte d’Ivoire Gabon Rwanda Congo Burundi Tanzania Comoros Angola Kisumu Zambia Malawi r Mauritius Nairobi Zimbabwe Namibia gasca Lamu a

Botswana ad

M Reunion Mombasa Mozambique Swaziland South Africa Lesotho Country overview

Opportunity indicators Risk indicators Ease of doing business overall rank out of 184 GDP (current) US$37.34b 121 countries (13th in Africa) Transparency International Corruption Perceptions Population growth (annual) 2.72% Index (0=highly corrupt, 100=very clean; ranked 37th 27 in Africa) Strength of investor protection index (0 =unfavorable, Population (m) 44 5 10=favorable; ranked 19th in Africa) Mobile penetration (% of population with mobile Logistics Performance Index: overall rank out of 155 67.49% 122 access) countries (26th in Africa) Urban population (% of total) 23.98% Democracy score (0=lowest, 10=highest) 8 Real GDP growth (compound average growth rate): Mo Ibrahim Index of African Governance (rank out of 5.72% 25 5-year forecast (2018) 52 countries) Real GDP growth (compound average growth rate): Perceptions of governance – rule of law: percentile 4.91% 16.43 10-year historical (2003) rank (0=lowest, 100=highest) Perceptions of governance – regulatory quality: GDP per capita (US$): 5-year forecast (2018) US$1,209 47 percentile rank (0=lowest, 100=highest) Country wealth (1=low income, 2=lower middle, Quality of overall infrastructure (1=extremely 3=upper middle, 4=high income (non-OECD), 5=high 1 underdeveloped, 7=extensive and efﬁ cient by 4 income (OECD)) international standards) Literacy rate (total population %) 87.4% Corporate maximum tax rate (%) 30%

Gitahi Gachahi EY East Africa Regional Leader

Tel: + 254 20 271 5300 Email: [email protected]

27 | Africa by numbers 2013–14 FDI trends in Kenya

Kenya’s inﬂ ow of investment of FDI since 2003 Kenya received 5% of Africa’s total FDI for new projects and 1.5% of capital invested since 2007. As the hub of East Africa, Kenya has seen robust investment growth, especially into manufacturing-led and consumer-facing activity. Kenya also has as one of the fastest growth rates of all investors of outward investments into Africa. Active exploration and successful ﬁ nds have seen the resource sector attracting an increasing share of capital; 35% of the total since 2007.

58 54 7,391

New projects Capital invested Jobs created % CAGR (2007–12) 43.1 % 24.3% 26.2% 34 29

23 3,716 3,744 13 15 3,127 13 12 9 2,855 2,906 2,297 1,865 1,761 1,382 929 908 988 650 579 549 391 332 275 174

2003 2004 2005 20062007 2008 2009 2010 2011 2012

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Kenya’s top 5 investors for FDI capital invested since 2007 (total = US$22,514m) Top sectors

ICT, professional services, automotives and Other investors 30% transport logistics remain key, attracting a third of India 38% all projects and nearly two-thirds of capital invested. UK 7% Mauritius 6% Israel 11% United States 8% Kenya’s investments into sectors (2007–12) by most projects Kenya’s top 5 investors for FDI new projects since 2007 (total = 164)

(Total = 207) United States 14%

Other sectors Communications India 11% 42% 17% Other investors 52% UK 11% South Africa 7% China 5%

Financial Kenya’s top 10 project investors since 2007 Transportation services 17% 5% Countries are ranked by most new projects (2007–12). Business services Most of India and the US’s capital is directed toward manufacturing and electricity activity, Software and 10% IT services 9% while all the top investors have the majority of their project investments focused into marketing, support, ﬁ nancial and other professional services.

Kenya’s investments into sectors (2007–12) by 29 most capital invested

(Total = US$9,822m) 24 22

Coal, oil and 6,617 natural gas Other sectors 32% 25% 14

3,702 3,497 11

Transportation 9 2,175 4% 8 7 7 7 Financial 1,250 762 725 742 447 576 217 346 249 266 services 4% 106 167 162 75 135 42 United States India UK South AfricaChina Japan Togo France UAE South Korea Alternative/ Communications renewable energy Capital invested FDI (US$m) Jobs created by FDI New project FDI 19% 16% Source: All diagrams on this page have been sourced from fDi Markets and EY analysis.

Africa by numbers 2013–14 | 28 Kenya’s top investors by their top sector FDI investments since 2007 Investor countries are ranked by most new projects 2007–12. These top investors contribute to 47% of all project activity and 56% of capital invested into Kenya since 2007.

7 2,618

5 5 5 2,025

4 4 4 4

1,543 3 3 3 333 3 1,292 2 2 2 2 2

900 1 1 1 1 1

520 527 461 443 393 323 300 279 235 246 272 150 155 161 104 133 104 139 101 131 99 83 63 79 47 68 68 24 48 38 41 19 24 23 25 38 18 38 15 31 19 34 8 15 39 Metals Chemicals Beverages Health care Health Transportation Communications Communications Communications Automotive OEM Automotive Automotive OEM Automotive Business services Business services Business services Business services Business Financial services Financial services Financial services Consumer electronics Consumer Coal, oil and natural gas oil and natural Coal, Software and IT services Software Software and IT services Software and IT services Software Software and IT services Software Alternative / renewable energy / renewable Alternative Non-automotive transport OEM transport Non-automotive

United States India UK South Africa Japan

4% projects/ 14% projects/8% capital 12% projects/38% capital 11% projects/7% capital 7% projects/1% capital 2% capital

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Source: fDi Markets; EY analysis. Kenya’s FDI outlook

FDI outlook

2000 2013 2018 Comments

Kenya has historically lacked the natural resources that makes many other African Natural resources economies attractive. However, the recent discovery of oil in the northwestern Turkana region by Tullow may change that.

A rapidly growing working population, a good-quality system of education and a relatively Labor efﬁ cient labor market makes Kenya attractive from a labor perspective.

The absolute size of the economy is relatively small, but a large population and rising GDP Market size per capita levels offer growth potential.

Lack of investment funds has limited spending on infrastructure to date, but investment Infrastructure levels should rise over the next decade.

Signiﬁ cant levels still remain, which hinders business. Although Kenya is well positioned Bureaucracy compared with many other African countries, only modest improvements in recent years may be cause for concern.

Progress has been made in embedding democratic institutions and processes. The Political environment successful and peaceful presidential election provides cause for optimism.

Kenya is already established as a gateway to the East Africa region, and this status will be reinforced as the region continues to grow and as levels of infrastructure and the Overall outlook for FDI institutional environment continue to improve. Oil discoveries in Kenya and the region as a whole will provide an accelerator for growth.

Very unattractive Unattractive Average Attractive Very attractive for FDI

Source: Oxford Economics; EY analysis

29 | Africa by numbers 2013–14 Kenya’s infrastructure project breakdown

Kenya’s active* infrastructure projects up to July 2013 Kenya ranks 4th in Africa by number of projects and 6th by capital allocation.

Infrastructure’s % contribution by number of projects Infrastructure’s % contribution by capital value

Social and welfare 7% Construction sectors Social and welfare 4% Construction sectors 4% 6% Power generation and Logistics sectors 76% Power generation transmission 16% Logistics sectors 42% and transmission 45%

31 17,590

5,431 4,991 8 6 2,714 4 3 1,303 2 2 745 1 341 440 100

Power Roads and Airports Rail Water Ports Commercial Industrial Health care plants and bridges construction construction transmission grids Capital value (US$m) Project number

Project name Capacity and time frame Company involvement Other details

Olkaria IV Geothermal Power • 280 MW – upon completion, Owner of the project is the national utility The existing Olkaria I power station will be extended Project national geothermal operator the Kenya Electricity Generating by constructing two additional units, which will be 120km northwest from Nairobi. capacity would have Company (KenGen), who has raised US$920m built at Olkaria IV. Kenya is the fi rst African country tripled from the current in syndicated loans from: the World Bank, to drill geothermal power, tapping vast steam energy 150 megawatts to 430 Germany’s Development Bank (KfW), the in the country's Great Rift Valley. Four 70 MW megawatts European Investment Bank, the Japan power-generating plants, steam-gathering systems, • In progress (brownfi eld); International Corporation Agency (JICA) and substations, transmission lines and other infrastructure expected completion by the French Development Agency (AFD). The will be installed. Kenya is targeting at least 5,000 MW 2014 remaining fi nance comes from the Kenyan (70% of its potential) from geothermal power by 2030. Government. The plant commissioned as a turnkey from the main EPC consortium of Toyota Tsusho Corp. (Japan) and Hyundai Engineering & Construction (Korea). Heavy Fuel Oil (HFO) Thermal • 80 MW – including a 66kv Wärtsilä (Finland) was awarded the operation The plant is developed on a 20-year build-own-operate Power Plant interconnector and backup and maintenance (O&M) contract by leading (BOO) basis, and will be powered by 10 turbocharged In the Athi River area of Mavoko metering equipment local Kenyan energy company Gulf Power Ltd medium speed diesel (MSD) Wärtsilä engines. When Municipality. • In progress (brownfi eld); (GPL) as the holder of the project contract. The the plant comes on stream, Wärtsilä's total installed expected completion by Project will have a 20-year power purchase thermal generating capacity in Kenya would represent late 2013 agreement (PPA) with the Kenya Power and roughly 60% of the country's total thermal capacity. Lighting Company (KPLC) – the national transmission and distribution company. Garissa Solar Plant • 50 MW – it will produce Chinese PV manufacturer JinkoSolar Holdings The project will sit on a 81Ha site, making it one of the In the northwestern arid city of about 76,473 MWh (NYSE listed) has joined with the China Jiangxi largest grid-connected solar power plants in Africa. Garissa. annually Corporation for International Economic & Kenya receives an estimated 4Kwh–6KWh per square • Still in pre-implementation Technical Co, Ltd. (CJIC) as a consortium meter per day of solar energy, all year round – an phase holder of the EPC contract to build the solar annual equivalent solar power potential of roughly 70 power plant. million tons of oil.

Source: Africa Project Access, Business Monitor International; EY analysis.

Africa by numbers 2013–14 | 30 Tunisia o cc

Moro Algeria Mozambique Libya Western Egypt Sahara Cape Verde Mauritania Mali Niger Chad Sudan Eritrea Senegal Burkina Faso Gambia Djibouti Nigeria Guinea South Ethiopia Bissau Benin Central African Sudan Ghana Republic Guinea Togo Cameroon Uganda Somalia Equatorial Guinea Democratic Kenya Sierra Leone Republic of Liberia Sao Tome Congo Seychelles Nacala Côte d’Ivoire Gabon Rwanda Congo Burundi Tanzania Tete Comoros Angola Zambia Malawi Beira r Mauritius Zimbabwe Namibia gasca a

Botswana ad

M Reunion Mozambique Maputo Swaziland South Africa Lesotho Country overview

Opportunity indicators Risk indicators Ease of doing business overall rank out of 184 GDP (current) US$14.59b 146 countries (23rd in Africa) Transparency International Corruption Perceptions Population growth (annual) 2.26% Index (0=highly corrupt, 100=very clean); ranked 31st 31 in Africa) Strength of investor protection index (0 =unfavorable, Population (m) 25.05 6 10=favorable; ranked 8th in Africa) Mobile penetration (% of population with mobile Logistics Performance Index: overall rank out of 155 32.83% na access) countries (na) Urban population (% of total) 31.22% Democracy score (0=lowest, 10=highest) 5 Real GDP growth (compound average growth rate): Mo Ibrahim Index of African Governance (rank out of 7.46% 21 5-year forecast (2018) 52 countries) Real GDP growth (compound average growth rate): Perceptions of governance – rule of law: percentile 7.46% 4.23 10-year historical (2003) rank (0=lowest, 100=highest) Perceptions of governance – regulatory quality: GDP per capita (US$): 5-year forecast (2018) US$969 1 percentile rank (0=lowest, 100=highest) Country wealth (1=low income, 2=lower middle, Quality of overall infrastructure (1=extremely 3=upper middle, 4=high income (non-OECD), 5=high 1 underdeveloped, 7=extensive and efﬁ cient by 3 income (OECD)) international standards) Literacy rate (total population %) 56.1% Corporate maximum tax rate (%) 32%

Ismael Faquir EY Country Leader

Tel: + 258 21 353 300 Email: [email protected]

31 | Africa by numbers 2013–14 FDI trends in Mozambique

Mozambique’s inﬂ ow of investments of FDI since 2003 12,100 Mozambique received 2.4% of Africa’s total FDI for new projects and 5% of capital invested since 2007. Huge mining and natural gas opportunities, as well as logistics 9,971 infrastructure, have attracted strong investments and boosted overall economic activity, as is evident in 33% compound growth 8,672 in projects since 2007. Nearly 75% of the capital invested and 26 25 one-third of projects are resource based. 24

New projects Capital invested Jobs created 15 % CAGR (2007–12) 33.0 % 10.5% 17.5% 5,399

4,751 4,905 10

6 6 5 3,456 4 3,278 2,831

2,099 2,173 1,875 1,608 1,539 1,396 1,080 580 637

2003 2004 2005 20062007 2008 2009 2010 2011 2012

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Mozambique’s top 5 investors for FDI capital invested since 2007 (total = US$32,444m) Top sectors

Nearly half of project investments ﬂ ow toward Other investors 28% India 27% non-resource sectors of food and tobacco, beverages, professional services, industrial and construction equipment, transport and South Africa 9% United States 17% communication. Portugal 9% Brazil 10%

Mozambique’s investment into top sectors (2007–12) by most projects Mozambique’s top 5 investors for FDI new projects since 2007 (total = 106)

(Total = 106) South Africa 14%

Other sectors Coal, oil and UK 13% 42% natural gas 22% Other investors 52% Portugal 8% India 7% Brazil 6%

Food and Mozambique’s top 10 project investors since 2007 Beverages 7% tobacco 11% Countries are ranked by most new projects (2007–12). Metals 10% Financial The major investors have directed the bulk of capital investments into the coal, oil and services 8% gas space, apart from Portugal, whose capital ﬂ ows are allocated toward non-resource manufacturing activity. Mozambique’s investment into top sectors (2007–12) by most capital invested

15 (Total = US$32,444m) 14 8,836

Other sectors 10% Coal, oil and natural gas 9 5,636 Communications 70% 7 3% 4,273 6 6 3,966 2 3,497 3,270 3,200 5 5 Metals 4% 2,890 2,733 2,737 4 4 2,212 Chemicals 6% 1,869

1,169 1,053 716 751 768 574 107 268 South Africa UK Portugal IndiaBrazil Italy United States Switzerland UAE China

Paper, printing and Capital invested FDI (US$m) Jobs created by FDI New project FDI packaging 7% Source: All diagrams on this page have been sourced from fDi Markets and EY analysis.

Africa by numbers 2013–14 | 32 Mozambique’s top investors by their top sector FDI investments since 2007 Investor countries are ranked by most new projects 2007–12. These top investors contribute to 59% of all project activity and 84% of capital invested into Mozambique since 2007.

5 6,780

3 3 3 3 3 5,500

2 2 2 2 2 2

1 1 1 1 1 1 3,198 3,000 3,000

2,376 2,300 2,376 2,000 1,543 1,352 1,051 908 693 679 687 559 518 382 364 382 240 220 118 272 172 151 187 226 204 22 127 90 49 Metals Chemicals Beverages Beverages Food and tobacco Food Food and tobacco Food and tobacco Food Coal, oil and natural gas oil and natural Coal, gas oil and natural Coal, Coal, oil and natural gas oil and natural Coal, gas oil and natural Coal, gas oil and natural Coal, gas oil and natural Coal, Paper, printing and packaging Paper, Alternative / renewable energy / renewable Alternative Building and construction materials and construction Building Industrial machinery, equipment and tools machinery, Industrial

South AfricaUK Portugal IndiaBrazil Italy United States

6% 7% projects/ 6% projects/ 5% projects/ 14% projects/8% capital 13% projects/4% capital 8.5% projects/9% capital projects/ 27% capital 8% capital 17% capital 10% capital Capital invested FDI (US$m) Jobs created by FDI New project FDI

Source: fDi Markets; EY analysis. Mozambique’s FDI outlook

FDI outlook

2000 2013 2018 Comments

An abundance of natural resources, including coal, iron ore, and, in particular, natural gas – Natural resources still relatively untapped – provides bright prospects for FDI.

Labor Relatively small working population. Literacy levels are low but expected to rise.

Market size A still small economy, but one experiencing sustained and rapid (near double-digit) growth.

The outlook for infrastructure is improving, with transport, power and communications Infrastructure infrastructure expected to expand signiﬁ cantly.

Bureaucratic procedures still hinder business, but this trend is changing, with Mozambique Bureaucracy among the world's 50 fastest-reforming economies since 2005.

There has been relative political stability since the end of the civil war in 1992. Although Political environment democratic elections were held in 2009, Mozambique remains a de facto one-party state. Presidential succession is an issue.

Natural resources will attract increasing levels of FDI, and the overall environment for doing Overall outlook for FDI business will continue to improve.

Very unattractive Unattractive Average Attractive Very attractive for FDI

Source: Oxford Economics; EY analysis

33 | Africa by numbers 2013–14 Mozambique’s infrastructure project breakdown

Mozambique’s active* infrastructure projects up to July 2013 Mozambique ranks 7th in Africa by number of projects and 5th by capital allocation.

Infrastructure’s % contribution by number of projects Infrastructure’s % contribution by capital value

Power generation and Social and welfare 3% transmission 35% Logistics sectors 52%

Logistics sectors 62% Power generation and transmission 48%

18,884

8 9,847

6 8,285

1,803 1 446 3

Power plants Ports Rail Roads and bridgesAirports Water and transmission grids Capital value (US$m) Project number

Project name Capacity and time frame Company involvement Other details

Nacala Logistics Corridor • The railway and deepwater Brazilian major mining conglomerate Vale. Vale announced an investment of US$4.5b to invest Railway linking the Moatize port at Nacala will have Local subsidiary Vale Mozambique is in a in this project, and upgrade the railway line and build mining project (Tete) to the port an estimated capacity to majority-owned JV called Corredor Logistico a new coal terminal at the natural deepwater port of Nacala. handle 18Mtpa, with the Integrado de Nacala (CLIN) with local partner, of Nacala. Work has already begun on the Malawian potential to reach up to the national port and railways authority, Portos portion of the railway line. Vale Mozambique’s Moatize 30Mtpa with additional e Caminhos de Ferro de Moçambique (CFM) phase one currently has capacity to produce 11Mtpa expansions who, is fi nancier and owner of the project. The (70:30 ratio of coking and thermal) and, within eight • In progress (brownfi eld); CLIN consortium also secured agreement from years output, is expected to rise to 22Mtpa under expected fully completed by Malawi for the construction and operation of phase two, in line with the commissioning of the new 2015 the 137km railway link through its borders. rail route. Maputo Ring Road & Maputo- • The 74km ring road will Financed by the China Exim Bank, with the With a budget of US$1.04b, US$300m for the ring Katembe Bridge have six dual carriageway China Road and Bridge Corporation (CRBC) road will be funded by a credit line from the China Linking the Mozambican capital sections; of this 52kms will awarded the main EPC contract to both Export Import Bank and the remaining US$15m will to the Marracuene district, and be built from scratch, and projects. be paid for from Mozambican state budget. The same to Katembe over the Bay of the remaining 22kms will arrangement is in place for the Maputo-Katembe Maputo. consist of rehabilitating and Bridge Project, with 95% of the US$681.6m fi nanced upgrading existing roads by the China Exim Bank. It is estimated that up to • In progress (greenfi eld); the 2,000 jobs will be created in the construction of the ring road is scheduled to ring road, and 3,000 from the bridge, the vast majority take 30 months and fi nish for local citizens. in 2014

Source: Africa Project Access, Business Monitor International; EY analysis.

Africa by numbers 2013–14 | 34 Tunisia o cc

Moro Algeria Nigeria Libya Western Egypt Sahara Cape Verde Mauritania Mali Niger Chad Sudan Eritrea Senegal Burkina Faso Gambia Djibouti Nigeria Guinea South Ethiopia Bissau Benin Central African Sudan Ghana Republic Guinea Togo Cameroon Uganda Somalia Equatorial Guinea Democratic Kenya Sierra Leone Republic of Liberia Sao Tome Congo Seychelles Côte d’Ivoire Gabon Rwanda Congo Burundi Tanzania Comoros Angola Malawi Abuja Zambia r Mauritius Ibadan Zimbabwe Namibia gasca Lagos a Botswana ad Port Harcourt M Reunion Mozambique Swaziland South Africa Lesotho Country overview

Opportunity indicators Risk indicators Ease of doing business overall rank out of 184 GDP (current) US$262.61b 131 countries (17th in Africa) Transparency International Corruption Perceptions Population growth (annual) 2.56% Index (0=highly corrupt, 100=very clean; ranked 38th 27 in Africa) Strength of investor protection index (0 =unfavorable, Population (m) 171.3 5.7 10=favorable; ranked 12th in Africa) Mobile penetration (% of population with mobile Logistics Performance Index: overall rank out of 155 58.58 % 121 access) countries (25th in Africa) Urban population (% of total) 49.62 % Democracy score (0=lowest, 10=highest) 4 Real GDP growth (compound average growth rate): Mo Ibrahim Index of African Governance (rank out of 5.38 % 43 5-year forecast (2018) 52 countries) Real GDP growth (compound average growth rate): Perceptions of governance – rule of law: percentile 6.62 % 25.82 10-year historical (2003) rank (0=lowest, 100=highest) Perceptions of governance – regulatory quality: GDP per capita (US$): 5-year forecast (2018) US$2,652 20 percentile rank (0=lowest, 100=highest) Country wealth (1=low income, 2=lower middle, Quality of overall infrastructure (1=extremely 3=upper middle, 4=high income (non-OECD), 5=high 2 underdeveloped, 7=extensive and efﬁ cient by 3.2 income (OECD)) international standards) Literacy rate (total population %) 61.3 % Corporate maximum tax rate (%) 30%

Henry Egbiki EY West Africa Regional Leader

Tel: + 234 1 46 304 80 Email: [email protected]

35 | Africa by numbers 2013–14 FDI trends in Nigeria

Nigeria’s inﬂ ow of investment of FDI since 2003 Nigeria received 6% of Africa’s total FDI for new projects and 11% of capital invested since 2007. Nigeria has seen strong compound growth of 23% since 2007. Even as capital declined over threefold since 2010, project growth almost doubled. The large bulk (72%) of all capital invested is allocated toward resources, which also attracts 15% of all projects.

36,134 60 50 New projects Capital invested Jobs created 46 % CAGR (2007–12) 23.4% -0.3% -9.2% 43

37 37

27 19,005 25

15,864 19 14,080 21 12,952 12,698 11,074 10,877 9,202 8,165 8,174 7,433 7,978 7,411 7,834 4,735 4,451 4,214 4,543 4,142

2003 2004 2005 20062007 2008 2009 2010 2011 2012

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Nigeria’s top 5 investors for FDI capital invested since 2007 (total = US$71,090m) Top sectors

Non-resource project investments are diverse, a Other investors (40%) Canada (24%) quarter of which focus on infrastructure build, as well as manufacturing activity of consumer goods. UK (6%) Communications and professional services sectors China (13%) alone attracted one-third of project investment United States (9%) since 2007. France (8%)

Nigeria’s top 5 investors for FDI new projects since 2007 (total = 257) Nigeria’s investment into top sectors (2007–12) by most projects United States (14%) (Total = 257) Communications Other investors (48%) UK (12%) 16% South Africa (11%) Coal, oil and natural gas Other sectors India (10%) 13% France (5%) 47%

Nigeria’s top 10 project investors since 2007 Business Countries are ranked by most new projects (2007–12). services 8% Most of the top investors have directed the bulk of their capital into petroleum – of which half Financial has been allocated toward electricity generation, and the balance split between manufacturing Food and tobacco 7% services 9% and extraction. South Africa and India, however, are not resource-heavy investors, instead shifting their capital into communications infrastructure and manufacturing. Nigeria’s investment into top sectors (2007–12) by most capital invested

37 16,939 (Total = US$71,090m) 32 29

Other sectors 47% 25 Building and Coal, oil and 9,325 construction 7,873 12 natural gas 72% 11 materials 2% 10 6,472 8 5,662 5,642 5,569 6 5 Chemicals 4,657 4,948 2% 2,805 3,062 2,061 2,100 1,680 1,240 455 630 771 Hotels and 319 33 tourism 2% United States UK South Africa IndiaFrance Germany China Finland South Korea Canada

Communications Capital invested FDI (US$m) Jobs created by FDI New project FDI 12% Source: All diagrams on this page have been sourced from fDi Markets and EY analysis.

Africa by numbers 2013–14 | 36 Nigeria’s top investors by their top sector FDI investments since 2007 Investor countries are ranked by most new projects 2007–12. These top investors contribute to 56% of all project activity and 44% of capital invested into Nigeria since 2007. 8,140 5,093 5,047

8 6 55 55 4 44 4 44 4 4 3 3 33 33 2 2 22 2 1 1 2,592 2,198 1,884 1,612 1,155 1,082 1,007 778 764 730 724 737 691 678 615 642 635 496 485 456 410 399 383 325 314 249 194 133 165 141 78 99 82 67 90 99 78 131 75 36 11 78 18 37 20 50 38 20 37 33 Beverages Real estate Health care Health Pharmaceuticals Communications Communications Communications Communications Automotive OEM Automotive Business services Business Business services Business services Business services Business Food and tobacco Food and tobacco Food Financial services Financial services Financial services Coal, oil and natural gas oil and natural Coal, Coal, oil and natural gas oil and natural Coal, Coal, oil and natural gas oil and natural Coal, gas oil and natural Coal, Software and IT services Software Software and IT services Software Non-automotive transport OEM transport Non-automotive Building and construction materials and construction Building materials and construction Building

United StatesUK South Africa India France China

14% projects/9% capital 12.5% projects/7% capital 11% projects/4% capital 10% projects/3% capital 5% projects/8% capital 4% projects/13% capital

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Source: fDi Markets; EY analysis. Nigeria’s FDI outlook

FDI outlook

2000 2013 2018 Comments

Nigeria's oil and gas sector attracts a large proportion of total FDI, and its oil reserves will Natural resources continue to attract substantial capital.

A rapidly growing working population, but relatively low levels of education remains a Labor hindrance.

Largest population and second-largest economy in the region, with rising GDP per capita Market size levels, makes this an increasingly attractive consumer market.

Remains a challenge, but improvements have been made over previous decade, and there Infrastructure is a substantial number of currently active infrastructure projects.

Signiﬁ cant levels still remain, which hinders economic activity. However, Government is Bureaucracy increasingly open for business.

Democratic institutions and processes have improved substantially, but social tensions Political environment remain a concern.

Natural resources and a growing consumer market are strong pull factors for FDI. Overall outlook for FDI Investment in infrastructure and improvements in the overall business environment will boost FDI levels going forward.

Very unattractive Unattractive Average Attractive Very attractive for FDI

Source: Oxford Economics; EY analysis

37 | Africa by numbers 2013–14 Nigeria’s infrastructure project breakdown

Nigeria’s active* infrastructure projects up to July 2013 Nigeria ranks 2nd in Africa by number of projects and 2nd by capital allocation.

Infrastructure’s % contribution by number of projects Infrastructure’s % contribution by capital value

Social and welfare 4% Social and welfare 2% Construction sectors 7% Power generation and transmission 22% Power generation and Logistics sectors 66% transmission 23% Construction sectors 25% Logistics sectors 51%

46 16,475

13,782

12,600

10,500

7,015

5,288

11 2,848 7 2,470 5 4 3 22 103

Roads and Power plants Airports RailIndustrial Ports Oil and gas Commercial Water bridges and transmission construction pipelines construction grids Capital value (US$m) Project number

*Active projects are categorized into three phases: 1. Conceptual to feasibility; 2. Financial closure to early implementation; 3. In progress and near completion. Source: Africa Project Access, Business Monitor International; EY analysis.

Examples of some active infrastructure projects in Nigeria

Project name Capacity and time frame Company involvement Other details

Lagos Rail Mass Transit (PPP) • Phase one: the 27.5km The China Civil Engineering Construction Corp. This modern rail-based public transport system is the Project Blue Line from Marina to (CCECC) is the main EPC contractor on phase fi rst of its kind in SSA outside of RSA. The railway Sponsored by the Lagos Okokomaiko; LAMATA's one. The project is sponsored by the Lagos equipment, including signaling, rolling stock and fare Metropolitan Area Transport has envisioned a long-term State Government (LSG) and will be developed collection equipment, will be provided by the private Authority (LAMATA). plan of seven lines by LAMATA on behalf of LSG. sector. The project is also responsible for generating its • Completion of phase one is own electricity. Detailed design and surveying for the pushed out to end-2015 entire project has been completed. Abuja-Kaduna Rail • 186km rail modernization China Exim Bank is providing a US$500m Track laying for the single standard gauge line Modernisation (PPP) Project network will result in a concessionary loan, the remaining US$374m was offi cially launched in July 2013. The railway Upgrading to standard gauge. track with 36 bridges and 9 comes from the Federal Government of modernization initiative in Nigeria aims at replacing fully developed stations Nigeria. China Civil Engineering Construction the existing narrow gauge system with the wider • In progress (brownfi eld); Corporation (CCECC) was awarded the main standard gauge system, while allowing high-speed train completion expected in EPC contract. operations on the railway network. 2014 Geregu II Gas-Turbine Power • 434 MW Siemens won the turnkey EPC contract to build The project was commissioned under the National Plant • The plant was turned over the power station for the Nigerian utility Niger Integrated Power Project (NIPP) plan. Geregu II is now Located in Ajaokuta, Kogi State. on schedule in mid-2013 Delta Power Holding Company (NDPHC). the third gas-turbine power plant to be constructed by Siemens in Nigeria as a turnkey project. By 2020, Nigeria plans to increase the country's generation capacity by fi ve to eightfold from its current level of approximately 5 gigawatts (GW).

Source: Africa Project Access, Business Monitor International; EY analysis.

Africa by numbers 2013–14 | 38 Tunisia o cc

Moro Algeria South Africa Libya Western Egypt Sahara Cape Verde Mauritania Mali Niger Chad Sudan Eritrea Senegal Burkina Faso Gambia Djibouti Nigeria Guinea South Ethiopia Bissau Benin Central African Sudan Ghana Republic Guinea Togo Cameroon Uganda Somalia Equatorial Guinea Democratic Kenya Sierra Leone Republic of Liberia Sao Tome Congo Seychelles Côte d’Ivoire Gabon Rwanda Congo Burundi Tanzania Pretoria Comoros Johannesburg Angola Zambia Malawi Bloemfontein r Mauritius Durban Zimbabwe Namibia gasca a

Botswana ad Cape Town M Reunion Port Elizabeth Mozambique Swaziland South Africa Lesotho Country overview

Opportunity indicators Risk indicators Ease of doing business overall rank out of 184 GDP (current) US$384.31b 39 countries (2nd in Africa) Transparency International Corruption Perceptions Population growth (annual) 0.47% Index (0=highly corrupt, 100=very clean; ranked 9th 43 in Africa) Strength of investor protection index (0 =unfavorable, Population (m) 51 8 10=favorable; ranked 1st in Africa) Mobile penetration (% of population with mobile Logistics Performance Index: overall rank out of 155 126.83% 23 access) countries (1st in Africa) Urban population (% of total) 61.99% Democracy score (0=lowest, 10=highest) 9 Real GDP growth (compound average growth rate): Mo Ibrahim Index of African Governance (rank out of 4.12% 5 5-year forecast (2018) 52 countries) Real GDP growth (compound average growth rate): Perceptions of governance – rule of law: percentile 3.4% 80.75 10-year historical (2003) rank (0=lowest, 100=highest) Perceptions of governance – regulatory quality: GDP per capita (US$): 5-year forecast (2018) US$11,461 79 percentile rank (0=lowest, 100=highest) Country wealth (1=low income, 2=lower middle, Quality of overall infrastructure (1=extremely 3=upper middle, 4=high income (non-OECD), 5=high 3 underdeveloped, 7=extensive and efﬁ cient by 4.5 income (OECD)) international standards) Literacy rate (total population %) 86.4% Corporate maximum tax rate (%) 28%

Ajen Sita EY Country Leader and Africa Chief Executive Ofﬁ cer

Tel: + 27 11 772 3003 Email: [email protected]

39 | Africa by numbers 2013–14 FDI trends in South Africa

South Africa’s inﬂ ow of investments of FDI since 2003 South Africa received 16.4% of Africa’s total FDI for new projects and 8% of capital invested since 2007. As Africa’s leading investment destination by project activity, South Africa has seen robust compound growth of 22% in projects since 2007. The resource sector remains important, attracting 40% of all capital investments and 11% of projects. Customer-facing service sectors, however, attract the most signiﬁ cant levels of inbound FDI. South Africa is also one of the leading sources of FDI into other parts of Africa.

26,990 159 154

22,883 New projects Capital invested Jobs created 125 22,634 % CAGR (2007–12) 22.4% -2.7% 11.2% 116 106 90 16,462 16,265 17,701 14,808 13,533 61 59 15,365 12,413 51 56 8,728 8,373 7,695 6,819 5,085 5,247 4,452 4,259 4,571 3,658

2003 2004 2005 20062007 2008 2009 2010 2011 2012

Capital invested FDI (US$m) Jobs created by FDI New project FDI

South Africa’s top 5 investors for FDI capital invested since 2007 (total = US$50,278m) Top sectors Software and IT, communications and professional United States (17%) services account for 78% of all projects and 17% of capital. As non-resource sectors, renewable energy, UK (15%) communications infrastructure, and automotives Other investors (40%) (manufacturing mostly) all attract large physical Australia (15%) investments and contribute to 16% of projects. The Germany (5%) India (8%) resource sector’s activity is mostly extractive based, both by capital and projects. South Africa’s top 5 investors for FDI new projects since 2007 (total = 716)

South Africa’s investment into sectors (2007–12) by most projects United States (22%)

(total =716) Software and Other investors (42%) UK (17%) IT services 13% China (5%) Germany (8%) Business India (6%) Other sectors services 56% 11% South Africa’s top 10 project investors since 2007 Financial Countries are ranked by most new projects (2007–12). services 7% The US and UK together contribute to 40% of all project investments and 32% of capital. In all, the top 5 investors collectively make up 58% of all projects. A wide and diverse spread of Industrial machinery, Communications equipment and tools 7% sectors attracts investments led mainly by marketing, support and professional services, as 6% well as manufacturing activity.

South Africa’s investment into sectors (2007–12) 159 by most capital invested 19,530

17,915 (total = US$50,278m) 125

Other sectors Coal, oil and 29% natural gas 25% 10,840 10,405

8,501 7,833 7,583 7,521 7,447 6,734 55 41 35 29 28 27 26 24 Automotive 3,867 3,445 Metals 14% 2,580 2,572 OEM 8% 1,832 2,084 1,820 2,005 1,376 719 Alternative/ United States UK Germany IndiaChina Australia Japan France Switzerland Netherlands Communications renewable energy 11% 13% Capital invested FDI (US$m) Jobs created by FDI New project FDI Source: All diagrams on this page have been sourced from fDi Markets and EY analysis.

Africa by numbers 2013–14 | 40 South Africa’s top investors by their top sector FDI investments 2007–12 Investor countries are ranked by most new projects. These top investors contribute to 62% of all project activity and 63% of capital invested into South Africa since 2007.

43 8,801

22 5,270 5,130 12 12 12 12 11 10 4,484 13 9 8 8 9 7 77 6 77 7 6 5 5 6 5 4 3 4 3 2 33 32 22 2 4,112 3,173 1 2 2,506 2,096 1,998 2,668 1,684 1,629 1,642 1,597 1,509 1,435 1,337 1,105 1,082 856 811 4,121 792 800 822 749 692 668 671 676 659 582 608 549 325 513 426 3,234 359 388 393 382 323 299 361 333 270 249 236 232 254 209 188 201 77 177 131 25 95 55 97 97 123 136 120 106 119 118 75 40 54 99 61 84 27 23 42 14 16 16 Metals Metals Metals Rubber Chemicals Chemicals Transportation Transportation Communications Communications Communications Communications Automotive OEM Automotive Automotive OEM Automotive Automotive OEM Automotive Automotive OEM Automotive Business services Business services Business Business services Business Business services Business Food and tobacco Food Food and tobacco Food Financial services Financial services Consumer products Consumer Coal, oil and natural gas oil and natural Coal, Coal, oil and natural gas oil and natural Coal, Coal, oil and natural gas oil and natural Coal, Coal, oil and natural gas oil and natural Coal, Software and IT services Software and IT services Software and IT services Software Software and IT services Software Automotive components Automotive Alternative/ renewable energy renewable Alternative/ Alternative/ renewable energy renewable Alternative/ Industrial machinery, equipment and tools machinery, Industrial Industrial machinery, equipment and tools machinery, Industrial equipment and tools machinery, Industrial Industrial machinery, equipment and tools machinery, Industrial

United StatesUK Germany India China Australia

22% projects/17% capital 17.5% projects/15% capital 8% projects/5% capital 6% projects/8% capital 5% projects/3.5% capital 4% projects/15% capital

Capital invested FDI (US$m) Jobs created by FDI New project FDI

Source: fDi Markets; EY analysis. South Africa’s FDI outlook

FDI outlook

2000 2013 2018 Comments

Natural resources Minerals and fossil fuel reserves will continue to attract investors.

Relatively high skills levels make the SA market attractive, but the rigidity of the labor Labor market is a deterrent.

The largest economy in the region with a relatively big population that has comparatively Market size high spending power (per capita GDP is substantially higher than China or India).

Very good logisitics infrastructure and a substantial portfolio of active infrastructure Infrastructure projects. However, challenges do remain, particularly in the power sector.

The business regulatory environment is fairly positive, with SA ranking 39th in the World Bureaucracy Bank's Doing Business Index (the highest ranked of the BRICS).

SA has a relatively positive ranking across most democracy and governance indices, Political environment and the political situation is stable. There is a risk of growing social unrest if the rate of unemployment is not tackled more successfully.

SA’s diverse economy, market size and stability will continue to attract FDI. Outward FDI Overall outlook for FDI ﬂ ows into the rest of the region will also continue to grow, helping stimulate development beyond SA.

Very unattractive Unattractive Average Attractive Very attractive for FDI

Source: Oxford Economics; EY analysis

41 | Africa by numbers 2013–14 South Africa’s infrastructure project breakdown

South Africa’s active* infrastructure projects up to July 2013 South Africa ranks 1st in Africa by number of projects and 1st by capital allocation.

Infrastructure’s % contribution by number of projects Infrastructure’s % contribution by capital value

Construction sectors 4% Oil and gas 1% Oil and gas 3% Construction sectors 2% Social and welfare 11% Power generation Social and welfare 4% Logistics sectors 33% and transmission 51% Logistics sectors 52% Power generation and transmission 39%

70 50,299

42,691

16,301

15 15 12 6,892 5,354 8 7 3,039 3,726 1,503 333 2 293 33 Power plants Rail Roads and WaterPorts Airports Commercial Housing Industrial Oil and gas and transmission bridges construction construction piplines grids Capital value (US$m) Project number

Examples of some active infrastructure projects in South Africa

Project name Capacity and time frame Company involvement Other details

Ingula Dam Pumped-Storage • 1,332 MW Eskom (South Africa's national utility) has Ingula will be the largest scheme of its kind in Africa scheme • In progress; the project is awarded its dam contract to the joint venture and the 19th largest in the world. There is currently On the border between the Free scheduled to come on line of Concor-WBHO-Edwin-Silver Rock, trading as about 4,500 people working on site during the State and Kwa-Zulu-Natal. during 2013–14 Braamhoek Dams (South Africa). construction phase, which will drop down to 150 when the dam becomes fully operational. South Africa-Swaziland Rail • 146km railway line with Transnet (South Africa) and Swazi Rail (SR) The existing links of 108kms from Davel to Lothair Line an initial yearly capacity of (Swaziland) will both provide guarantees for the in South Africa, and the 345kms Sidvokodvo in From Lothair in South Africa to 15 million tons of general Lothair-Sidvokodvo link; with support funding Swaziland to Richards Bay line, as well as the 154kms Sidvokodvo in Swaziland. freight most likely to come from local and international Phuzumoya in Swaziland to Maputo line will also • The rail is scheduled to be commercial banks and development fi nance require upgrading. The link will divert general freight commissioned in 2016 institutions. A total cost of the project, with currently being moved on the Ermelo–Richards Bay associated feeder links to be upgraded, is line through Swaziland and, in doing so, increase estimated at US$1.7b, with a 70:30 split in the capacity of South Africa’s coal channel from funding contributions from Transnet and Swazi Mpumalanga out to the Richards Bay Coal Terminal Rail. (RBCT) to an estimated 91 million tons. MetroWind Van Stadens Wind • 27 MW – this project is Owned by MetroWind (Pty) Ltd. (South African MetroWind (Pty) Limited is a special purpose vehicle Farm expected to provide 80 company with 35% BEE ownership and 5% by (SPV) company formed for the express purpose of Nelson Mandela Bay Municipality million KWh/year the local community trust) secured private developing the Van Stadens Wind Farm project, as in the Eastern Cape Province. • In progress (greenfi eld) sector funding of about US$66m. Clients are: well as for preparation and submission of the bid in since June 2012, expected the Nelson Mandela Bay Municipality, National response to the Department of Energy’s (DOE) request to be operational by year Energy Regulator of South Africa and the for proposals for its Renewable Energy Independent end 2013 national utility Eskom. The main EPC contract Power Producer (REIPP) procurement program. was awarded to local fi rm Basil Read Matomo. The DOEs Integrated Resources Plan (IRP) seeks to Turbines were supplied by Sinovel Wind Group increase overall contribution of new renewable energy (China). generation to 17,800 MW by 2030 – some 42% of all new generation.

Source: Africa Project Access, Business Monitor International; EY analysis.

Africa by numbers 2013–14 | 42 EY in Africa

43 | Africa by numbers 2013–14 Africa Business CenterTM

We help companies navigate the opportunities and challenges of Our Africa integration beneﬁ ts our clients through: doing business across the African continent. Although the risks in • A network of people across Africa and the rest of the world, investing in Africa may appear high, risk can be managed, and the enabling us to coordinate our resources to provide clients with a rewards can be great. That is why we are investing in growing our single point of contact integrated Africa presence and capacity to serve our clients who are also investing in and across the continent. • Pre-eminent thought leadership and events such as the Africa Attractiveness Survey and the Strategic Growth Forum Africa We now enjoy an integrated representation in 33 countries across Africa, described in the media as “one of the biggest changes in the • The unique Growing Beyond BordersTM software — an interactive accounting profession in more than 100 years.” map-based tool that visually maps data through the lens of the continent’s geography Today, we are able to navigate successfully through the complexity that our clients are experiencing across the geographies, and the • A proven methodology for supporting the development of diversity of market sizes and sophistication. We do this through growth strategies for Africa our Africa Business CenterTM: its sole purpose is to assist clients in making their investment and expansion decisions in Africa.

Our integrated African footprint

Tunisia o cc

Moro Algeria Libya Egypt

Cape Verde Mauritania Mali Niger Chad Sudan Eritrea Senegal Burkina Faso Gambia Djibouti Nigeria Guinea South Ethiopia Bissau Benin Central African Sudan Ghana Republic Guinea Togo Cameroon Uganda Somalia Equatorial Guinea Democratic Kenya Sierra Leone Republic of Liberia Sao Tome Congo Seychelles Côte d’Ivoire Gabon Rwanda Congo Burundi Tanzania Comoros Angola Zambia Malawi r Mauritius Zimbabwe asca Namibia g a

Botswana ad

M Reunion =Qg^Õ[] Mozambique Fg=Qg^Õ[]$Zml Swaziland support available South Africa Lesotho

Africa by numbers 2013–14 | 44 Contacts

Country leaders Country Name Email Algeria Philippe Mongin [email protected] Angola Luis Marques [email protected] Botswana Bakani Ndwapi [email protected] Cameroon Joseph Pagop [email protected] Chad Joseph Pagop [email protected] Congo Ludovic Ngatse [email protected] Cote d'Ivoire Jean-Francois Albrecht [email protected] DRC Lindsey Domingo [email protected] Egypt Emad Ragheb [email protected] Equatorial Guinea Erik Watremez [email protected] Ethiopia Zemedeneh Negatu [email protected] Gabon Erik Watremez [email protected] Ghana Ferdinand [email protected] Guinea Conakry Rene-Marie Kadouno [email protected] Kenya Gitahi Gachahi [email protected] Libya Waddah Barkawi [email protected] Madagascar Gerald Lincoln [email protected] Malawi Shiraz Yusuf [email protected] Morocco El Bachir Tazi [email protected] Mauritius Gerald Lincoln [email protected] Mozambique Ismael Faquir [email protected] Namibia Gerhard Fourie [email protected]

Nigeria Henry Egbiki [email protected]

Rwanda Allan Gichuhi [email protected]

Senegal Makha Sy [email protected]

Seychelles Gerald Lincoln [email protected]

South Africa Ajen Sita [email protected]

South Sudan Patrick Kamau [email protected]

Tanzania Joseph Sheffu [email protected]

Tunisia Noureddine Hajji [email protected]

Uganda Muhammed Ssempijja [email protected]

Zambia Tim Rutherford [email protected]

Zimbabwe Walter Mupanguri [email protected]

Industry leaders Industry Name Email Banking and capital markets Emilio Pera [email protected] Insurance Malcolm Rapson [email protected] Asset management Chris Sickle [email protected] Public sector Yunus Naidoo [email protected] Public sector Kuben Moodley [email protected] Government and Joe Cosma [email protected] infrastructure Mining and metals Wickus Botha [email protected] Oil and gas Elias Pungong [email protected] Power and utilities Norman B. Ndaba [email protected] Retail and consumer Derek Engelbrecht [email protected] products Telecommunications Serge Thiemele [email protected]

45 | Africa by numbers 2013–14 Invest in Africa: a better way of working in Africa

Invest in Africa is a growing group of international companies Launched in 2012 by Tullow Oil Plc, Invest in Africa has since working together to address the cross-sector challenges of doing partnered with EY, Lonrho Plc and Ecobank, and continues to business in Africa and promoting sustainable investment into the develop its membership base with companies who share the vision continent. of responsible investment and building partnerships with local fi rms to help improve the wider business environment. These cross-sector challenges include access and visibility of credible local suppliers and partners, free trade and movement of Our united approach means that companies working in Africa can goods through ports and access to permits, licenses and talent. overcome the business challenges they face and drive cross-sector Creating solutions through one ‘Invest in Africa’ voice ensures that growth for the benefi t of all. we prevent repetition of effort and make our work more impactful. www.investinafrica.com At present, Invest in Africa is focused on supporting local businesses by providing greater access to fi nance, skills and @investin_africa@ markets; making it easier for international companies working in Africa to source locally and at scale.

We are working together to strengthen the supplier market by collating information and contacts to create a new resource for investors, helping them choose the best businesses to partner with and the best local suppliers to do the job. Our immediate focus is on businesses in the infrastructure, telecommunications, extractives, agribusiness and ﬁ nancial services sectors, with Ghana as our initial priority market.

About EY Contacts EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and Michael Lalor confidence in the capital markets and in economies the world over. We Lead Partner Africa Business Center develop outstanding leaders who team to deliver on our promises to all Tel: + 27 83 611 5700 of our stakeholders. In so doing, we play a critical role in building a better Email: [email protected] working world for our people, for our clients and for our communities. Sylvester Taku Africa Business Center EY refers to the global organization and may refer to one or more of the Tel: + 27 83 411 0005 member firms of Ernst & Young Global Limited, each of which is a separate Email: [email protected] legal entity. Ernst & Young Global Limited, a UK company limited by Sarah Custers guarantee, does not provide services to clients. For more information about Africa Marketing our organization, please visit ey.com. Tel: + 27 11 772 3300 Email: [email protected] © 2013 EYGM Limited. All Rights Reserved.

ED None

EYG no. AU1972

In line with EY’s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

ey.com

@ EY_Africa