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Financing East Africa's Infrastructure Needs Theme

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Financing East Africa's Infrastructure Needs Theme Financing East Africa’s Infrastructure Needs Theme: Role of Stakeholders Presented by: Britam Asset Managers 28th June 2017 Presentation Outline Part One: Who We Are I. Overview of Britam Group II. Introduction to Britam Asset Managers Part Two: East African Trends & Opportunities 2017 I. Introduction a) Background to the EAC | Unit Trust Funds | Wealth Management | Pensions | Property b) Rationale| Discretionaryfor Integration Management | Offshore Investments | Alternative Investments II. Themes & Opportunities a) Focus on infrastructure b) Potential of PPP Models c) Sectoral opportunities III. Lessons from other integrated regions IV. Way forward 2 I. Who We Are I. Overview of Britam Group II. Introduction to Britam Asset Managers I. Britam Holdings Ltd Overview . Britam is a diversified financial services group, listed on the Nairobi Securities Exchange. The group has interests across the Eastern and Southern Africa region, with operations in Kenya, Uganda, Tanzania, Rwanda, South Sudan, Mozambique and Malawi. The group offers a wide range of financial products and services in Insurance, Asset management, Banking and Property. Our Footprint 1965 2017 | Unit Trust Funds | Wealth Management | Pensions | Property | Discretionary Management | Offshore Investments | Alternative Investments 5 Corporate & Business Leadership Benson I. Wairegi EBS Stephen O. Wandera Kenneth Kaniu •Group Managing Director| Unit Trust Funds | Wealth•Principal Management Exec, Director, | InsurancePensions | Property•CEO, Britam Asset Managers | Discretionary Management | Offshore Investments | Alternative Investments Gladys Karuri Muthoga Ngera Nancy K. Kiruki, • •Director, Marketing & Corporate Affairs Director, Group Finance and Strategy •Director, Legal& Company Secretary “ experienced, dynamic and cohesive leadership team and staff” 6 Britam Holdings 0 Insurance . Asset Property Banking Business 6 Management Business Business |1 Unit Trust Funds | Wealth Management | Pensions | Property 1. | Discretionary Management | Offshore Investments | Alternative • Life Insurance.0 • Unit Trust Funds • Britam Properties- • Equity Bank 0%Investments • General % • Discretionary 100% Stake – 10.1% Insurance Portfolio • Housing • Health Insurance Management Finance Stake – • Pension Business • Property 48.63% • Pensions • Wealth Management • Diaspora Services 7 II. Introduction to Britam Asset Managers Asset Management Executive Team Kenneth Kaniu John Etyang James Mose, CFA Charles Chirchir Chief Executive| Unit Trust FundsHead, | Wealth Business Management |Ag Pensions Chief Investment | Property Chief Operating Officer Officer | Discretionary ManagementDevelopment | Offshore InvestmentsOfficer | Alternative Investments Miriam Kahiro Dennis Katei Janet Waweru ACCA Eva Mbora Legal Manager Compliance Manager Chief Accountant Human Resources Manager 9 Our Business Is Categorized as follows: Asset Management Businesses | Unit Trust Funds | Wealth Management | Pensions | Property Real Estate Retail |Products Discretionary ManagementInstitutional | Offshore SolutionsInvestments | Alternative Investments Investments • Unit Trust Funds • Pension Schemes • Development Funds • Wealth Management • Income Funds • Diaspora Services • Discretionary Portfolio Management 10 Our Approach Is To Understand Client Needs And Apply Our Resources To Meeting Those Needs, through: Customized Investment Approach Diverse Product| Unit Set Trust Funds | Wealth Management | Pensions | Property | Discretionary Management | Offshore Investments | Alternative Investments Experienced & World Class Capabilities Strong Brand & Group Backing 11 Our Accolades Britam Asset Managers Clinched the Fund Manager of the Year Award in 2011, 2012 and 2013 and the Unit Trust of the Year Award in 2012, 2013, 2015 and 2016 Think Business Awards 2011-2016 • Unit Trust of the Year, Winner - 2012, 2013, 2015, 2016 • Best Performing Money Market Fund, Winner - 2014, 2016 • Best Performing Equity Fund, 2nd Runner up 2014, Winner, 2015, 2016 | Unit Trust Funds | Wealth Management | Pensions | Property | Discretionary Management | Offshore Investments | Alternative • Fund Manager of the Year: Alternative Investments and Investments Private Equity, Winner - 2014, 2015, 2016 • Fund Manager of the Year: Overall Winner – 2011, 2012, 2013, 2nd Runner up 2014, and 1st Runner up 2015, 2016 • Fund Manager of the Year: Pensions - 1st Runner-up, 2014, 2016 • Fund Manager of the Year: Equity- 1st Runner Up, 2014, “Our history of success provides 2016, Winner – 2015 • Fund Manager of the Year: Money Market - 1st Runner-up, financial security for our clients” 2014, 2016 12 II. East Africa’s Infrastructure Needs I. East Africa Global Competitiveness II. Infrastructure Needs III. Priority Areas IV. Traditional Sources of Financing The East African Community The EAC consists of 6 countries with a combined GDP of USD 157bn in 2016 and a population of 169 million people EAC Member States Uganda South Sudan GDP – USD 26.2bn GDP – USD 2.9bn Population – 41.1mn Population – 12.5mn | Unit Trust Funds | Wealth Management | Pensions | Property Rwanda| Discretionary Management | Offshore Investments | Alternative GDP – USD 8.4bn PopulationInvestments – 11.5mn Kenya GDP – USD 68.9bn Population – 45.5mn Burundi Tanzania GDP – USD 3.1bn GDP – USD 47.2bn Population – 9.7mn Population – 48.6mn Source: www.eac.int, BAM Research 14 EAC region remains uncompetitive despite strong economic growth Despite overall improvement in competitiveness, EAC remains in in the bottom half of global rankings Global Competitive Index Global Competitive Index Country Rank (2015) Rank (2010) Kenya 96 111 Tanzania 116 113 Rwanda 52 85 Uganda | Unit Trust Funds | Wealth Management113 | Pensions | Property 118 | Discretionary Management | Offshore Investments | Alternative Burundi Investments 135 137 Countries in Index 138 144 While East African countries have made significant improvements towards improved global competitiveness, a majority remain in the bottom half of global rankings Poor infrastructure, poor access to financing and unfavourable tax rates are some of the reasons why East African countries are ranked lowly in terms of global competitiveness According to AfDB, the poor state of infrastructure in Sub-Saharan Africa cuts national economic growth by two percentage points every year and reduces productivity by as much as 40 per cent. Source: World Economic Forum, BAM Research 15 Infrastructure Needs in East Africa EAC members are actively collaborating on infrastructure inter-connectivity EAC Vision 2050 Infrastructure Targets Indicators 2014 2030 2050 Quantity of Regional Railway Network (Km) 2254 2344 2438 Paved Road Networks (Km) 24,523 39,250 65,700 Regional inter-connectivity Marine-Port Services Network 4 6 12 Pipeline length (km) 2,074 3,150 5,600 ICT (internet penetration and mobile networks), % 65 80 95 | Unit Trust Funds | Wealth Management | Pensions | Property Energy Production (Megawatts) 3,965 70,570 122,569 Energy | Discretionary Management | Offshore Investments | Alternative InvestmentsElectrification rate (%) 19.1 58 74 Oil and Gas Regional refineries 1 5 12 Kenya, Tanzania, Uganda, Rwanda, South Sudan and Ethiopia are part of the East African Railway Master Plan to connect the cities of Mombasa, Nairobi, Kigali, Kampala & Juba by 2018 at a cost in excess of USD 30bn Plans are also underway to build 3 oil pipelines between Kenya, South Sudan, Ethiopia, Uganda & Tanzania to transport both crude and processed oil. Total costs are expected to exceed USD 8.0bn. Planned refineries in South Sudan and Uganda could cost up to USD 5.0Bn Source: EAC Vision 2050, Oxford Energy, LAPSSET Website, GOK, Railway-technology.com, BAM Research Need to prioritize key infrastructure projects: Change narratives EAC’s Savings/GDP and Investment/GDP remains below peer emerging and frontier economies EAC Savings and Investment as % of GDP 22.6% 20.9% 20.2% 19.4% 17.2% 14.0% 13.0% 10.2% | Unit Trust Funds | Wealth Management | Pensions | Property | Discretionary Management | Offshore Investments | Alternative 2000 2005 2010 2015 Investments EAC Avg. Investment/GDP EAC Avg. Savings/GDP East Africa’s savings level remains below peers in the developing world, resulting in over-reliance on government borrowing domestically and abroad to finance this level of investment Government’s cannot rely too much on public borrowing since debt levels are already around the EAC common targets of 50% Debt/GDP and budget deficits are above the 6% common target for East African governments East African governments must therefore prioritize the infrastructure investments that have the greatest economic value in the region and greatest multiplier effect to other sectors in the economy Source: IMF, BAM Research 17 Priority Areas: Rail & Energy Sectors Investment in Rail & Energy sectors have the greatest multiplier effect on EAC economies Rail Sector Energy Sector | Unit Trust Funds | Wealth Management | Pensions | Property | Discretionary Management | Offshore Investments | Alternative Investments Current rail stock underutilized EA access to electricity at 23% vs 43% Decongest ports in other low income African countries Open up regional trade Boost industrialization Railway transport could reduce product costs by 10% by easing decongestion EAC electricity costs average USD 18-22cts per kwh, much higher than Ethiopia (USD 5cts per kwh) EAC collaboration has the potential to reduce electricity costs by USD 2bn per year Source: BAM Research, AfDB Traditional
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