Africa in Context: An Overview of Investing in Emerging Markets

Carlos Perry Chief Operating Officer Emerging Markets Private Equity Association (EMPEA)

1 AGENDA FOR TODAY’S DISCUSSION

• About EMPEA

• Why Emerging Markets?

• EM PE Overview: Fundraising, Investments, Performance

• Africa

2 EMPEA IS THE ONLY INDUSTRY ASSOCIATION REPRESENTING PRIVATE EQUITY INVESTORS ACROSS GLOBAL EMERGING MARKETS • Founded in 2004 Who We Are • Today representing nearly 300 leading fund managers, institutional investors and other industry stakeholders managing >US$900b AUM. • 13 full-time staff based in Washington, DC and Hong Kong

Our membership is diverse globally… …and by type of organization.

Global Emerging Markets 20% Fund Managers Service Providers + Limited Partners

15% CEE and CIS 12%

Asia MENA 10% 19%

Latin America / Africa 27% 58% Caribbean 15% 24%

EMPEA

3 EMPEA’S BOARD OF DIRECTORS CONSISTS OF MANY OF THE LEADING PLAYERS IN EMERGING MARKETS PRIVATE EQUITY

EMPEA

4 EMPEA = CONTENT + NETWORK + MISSION

A different kind of private equity and association.

What We Do • EMPEA supports a broad portfolio of exclusive members- only research, including published reports, proprietary data and other content.

• Through our membership and partner networks, EMPEA nurtures a large global community of EM PE investors, on display at our three major annual conferences.

• EMPEA’s advocacy initiatives serve as a credible voice for the industry to educate policy-makers and investors about the unique value and role of private equity investing in emerging markets.

EMPEA

5 EMPEA PUBLISHES MORE PROPRIETARY RESEARCH THAN ANY OTHER PRIVATE EQUITY/VENTURE CAPITAL ASSOCIATION Including a free weekly EM PE news digest, NewsWatch…register at www.empea.net

EMPEA

6 EMPEA’S MISSION IS TO PROMOTE THE ASSET CLASS BROADLY

• EM PE can provide superior returns for investors; What We Believe • EM PE represents value-added growth finance for companies; • EM PE contributes positively to a country’s economic growth; and, • EM PE enhances communities by improving environmental, social and governance standards.

RECENT ISSUES ON WHICH EMPEA HAS TAKEN A PUBLIC POSITION

• EU AIFM Legislation • U.S. Dodd Frank Legislation • The Future of CDC (UK House of Commons Parliamentary Subcommittee) • Investment Regulations in the United Arab Emirates and Impact on PE

EMPEA

7 25% OF EMPEA MEMBERS ARE EITHER EXCLUSIVELY BOLD = EMPEA Africa Council FOCUSED ON AFRICA OR HAVE A STRONG INTEREST Members w/Africa Interest Members Exclusively Focused on Africa BIO Absa Capital Private Equity Fanisi Venture Capital Management Abraaj Capital AFIG Fidelity Capital Partners Limited Actis African Capital Alliance Helios Investment Partners Altira Group African Development Bank Horizon Equity Partners Aureos Africapital Management I&P Management CDC Group Allan Gray Limited International Housing Solutions CVCI Assetswise Capital Investec Asset Management The Carlyle Group Beltone Private Equity Kaizen Venture Partners Cordiant Capital Blackthorn Capital Partners Kingdom Zephyr Africa Management DEG Brait Private Equity Kuramo Capital Management Denham Capital Management Capital Invest Lereko Metier Capital Growth Fund European Investment Bank Capitalworks Equity Partners Madagascar Development Partners Finnfund Catalyst Principal Partners Marlow Capital Global Environment Fund CICapital Private Equity Medu Capital FMO Citadel Capital Pan Africa Capital Group IFC CEDA RMA Capital IFC AMC Constant Capital Standard Bank Private Equity MVision DBSA SAVCA OPIC Development Partners International South Suez PROPARCO East Africa Capital Partners Swicorp SeedRock Capital EFG-Hermes Private Equity Tuninvest-Africinvest Group SEAF Emerging Capital Partners (ECP) Udo Udoma & Belo-Osagie Technoserve Ethos Private Equity Unique Venture Capital The Rohatyn Group Vantage Mezzanine II Wambia Capital Fund White & Case 8 EMPEA’S KEY PARTNERSHIPS FOR AFRICA ARE WORKING TO SIGNIFICANTLY RAISE THE PROFILE OF AFRICAN PRIVATE EQUITY WHY EMERGING MARKETS?

10 EM PE INVESTORS SEEK TO DIVERSIFY AND ACCESS THE HIGHEST GROWTH MARKETS (OFTEN INACCESSIBLE VIA PUBLIC EQUITIES) 1 Outperformance Why? Comparatively lower entry valuations, greater impact on potential multiple expansion from organic growth, value creation drivers, exit opportunities...

2 Access to Attractive economic and demographic fundamentals, including higher growth higher GDP growth per annum, younger populations and rising markets income levels.

3 Portfolio Exposure beyond developed markets beyond thin exposure offered diversification by EM equities positions (note…China listed vs unlisted).

4 Changing views Naked swimmers phenomenon (exposure tied to leverage, over- on developed levered economies, etc shows there’s no such thing as a “safe” asset market risk or market (i.e. EMs looking better because developed markets look worse)

WHY EM?

11 EMPEA SURVEYS SHOW ACCESSING HIGH-GROWTH MARKETS IS THE PRIMARY REASON WHY 3/4 OF LPs GROW THEIR EM PE EXPOSURE

LP Motivations for Accelerating New Commitments to EM PE for 2011/2012

Greater PE Exposure to High-Growth Markets 73%

Skills/Experience of EM GPs Improving 52%

EM Risk-Return Improved vs Developed Markets 51%

Portfolio Diversification 42%

*Excludes Development Finance Institutions and EM-dedicated Funds-of-Funds.

Source: EMPEA/Coller Capital Survey.

WHY EM?

12 EM ECONOMIES ARE GROWING 3X THE RATE OF DEVELOPED ECONOMIES, REACHING $9 TRILLION OR 23% OF GLOBAL GDP IN 2009 $38 % SHARE OF GLOBAL ECONOMY 35 36 37 39 39 38 Emerging Markets $9 100% Emerging Markets 18% 19% 20% 21% 22% 23%

OECD Countries 82% 81% 80% 79% …AND 60% 78% 77% OF THE WORLD’S 2004 2005 2006 2007 2008 2009 POPULA- TION! GDP CAGR, 2004-2009 +6% 8.5 8.6 8.0 7.3 0.5 0.5 OECD Countries $30 6.8 0.5 6.4 0.5 0.4 Africa 0.4 3.5 3.7 2.9 3.2 Asia 2.4 2.6 1.1 1.1 1.1 CEE/CIS 0.9 0.9 1.0 Latin America 2.2 2.3 2.5 2.6 2.7 2.7 MENA 0.5 0.5 0.6 0.6 0.6 0.6 2009 REAL GDP 2004 2005 2006 2007 2008 2009 (US$ trillions) WHY EM? ASIA, THE MIDDLE EAST AND AFRICA GDP GROWTH RATES ARE SIGNIFICANTLY OUTPERFORMING GLOBAL AVERAGES

Asia Latin America OECD Countries World CEE/CIS MENA Sub-Saharan Africa

12

10

8

6

4

2 Africa 0

GDP Growth (%) GDP Growth 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 -2

-4

-6

WHY EM?

14 Fundraising, Investments, Performance and Key Markets in EM PE

15 PE IN EMERGING MARKETS IS IN MANY WAYS VERY DIFFERENT TO PE IN DEVELOPED MARKETS.

1 There is little to no leverage available to finance transactions. Returns are therefore generated through value creation and the underlying EM macro growth story.

2 Majority control/ deals are the exception, not the rule.

Most PE investments in EMs involve acquisition of minority/non-controlling stakes, so GPs can only influence change/improved corporate performance in more subtle/cooperative ways.

3 Market inefficiencies mean limited transparency, sub-optimal governance standards, inconsistent protection of minority shareholders and fewer exit routes. Fund manager differentiation to a great deal lies in their local knowledge and networks, and their ability to skillfully navigate EM business cultures.

EM PE

16 MANY OF THE TOP EMERGING MARKETS GPs ARE SPECIALISTS WHILE OTHERS ARE LARGE BRANDS THAT ARE ACTIVE GLOBALLY BOLDED firms are both global and emerging markets leaders

Top 15 Global PE Firms Top 15 Emerging Markets PE Firms (by US$ ) (by US$ Assets Under Management)

Goldman Sachs Macquarie Blackstone Group Citi Venture Capital International Carlyle Group Abraaj Capital TPG Warburg Pincus Kohlberg Kravis Roberts Kohlberg Kravis & Roberts Oaktree Capital Management Actis Bain Capital TPG CVC Capital Partners The Carlyle Group Warburg Pincus Baring Private Equity Asia Apax Partners Citadel Capital GP Investments Macquarie CVC Capital Partners Advent International IFC AMC Permira Capital International First Reserve Corporation Advent International

EM PE

17 EM PE FUNDRAISING IS GROWING AGAIN AFTER THE GLOBAL FINANCIAL CRISIS AND COULD REACH $40 BILLION IN 2011 US$ billions -40% EM PE Funds Raised EM PE Capital Invested -66% 67 59 53 48 40?

33 35 29 2011 Est. Rest of Year 30 23 22 23

Q1 2011 10

2006 2007 2008 2009 2010 2011 E Source: EMPEA

EM PE FUNDRAISING EM PE FUNDRAISING IN 2010 REACHED 13% OF GLOBAL TOTALS FROM ONLY 4% IN 2004.

EM PE Funds Raised 559 550 Developed Market Funds Raised 466

309 220 187 155 59 67 33 7 27 23 23 2004 2005 2006 2007 2008 2009 2010

EM PE as % of Global PE Fundraising 11% 11% 10% 9% 8% 7% 4%

2004 2005 2006 2007 2008 2009 2010

EM PE FUNDRAISING

19 THIS TREND SHOULD CONTINUE, WITH A MAJORITY OF LPs SAYING THEIR EM PE COMMITMENTS WILL INCREASE TO 16-20% OF TOTAL PE EXPOSURE BY 2013. (median proportion) Now In 2013

31%

27% 26% 22% 23% 19% 19% 18%

10%

5%

1-5% 6-10% 11-15% 16-30% >30% % of total PE exposure allocated to EM PE

Source: EMPEA/Coller Capital Survey *Excludes DFIs and EM-dedicated Fund-of-Funds.

EM PE FUNDRAISING

20 TOTAL EM PE INVESTMENTS ARE GROWING AGAIN, WITH MUCH OF THE CAPITAL GOING TO THE MAJOR (“BRIC”) ECONOMIES US$ Billions

48 48

-23%

BRICs 22 Asia 28 29 29

22 22 18 22 CEE/CIS 6 14 12 Other 26 Latin America 7 2 MENA 3 11 3 1 7 7 Sub-Saharan Africa 2 3 1 1 1 2008 2009 2010 2008 2009 2010 Source: EMPEA

EM PE INVESTMENTS

21 TOTAL EM PE INVESTMENTS ARE FAR BELOW US TOTALS BUT NOT FAR BEHIND WESTERN EUROPE

US$ billions 595 EM PE Investments US PE Investments W. Europe PE Investments

301

215

132 109 94 74 61 53 48 45 35 22 32 29

2006 2007 2008 2009 2010 Source: EMPEA

EM PE INVESTMENTS

22 AVERAGE DEAL SIZE IN EMERGING MARKETS AT TIMEES COMPARES SIMILARLY TO DEALS IN DEVELOPED MARKETS Average deal size, US$M 2008 2009 2010

156 159 148

92 96 97 88 86 88 77 68 63 62 49 49 44 45 46 46 45 37 40 36 19

Asia CEE/CIS Latin America MENA Sub-Saharan EM Overall UK US Source: EMPEA Africa

EM PE INVESTMENTS

23 AMONG THE BIG EMERGING MARKETS, AVERAGE DEALS ARE LARGEST IN BRAZIL (2011’s “MOST ATTRACTIVE” FOR LPs) Average deal size, US$M

-30% 174 2008 2009 2010

121

99 -29% 79 -6% 56 -24% 47 44 34 38 27 29 17

Brazil China India Russia Source: EMPEA

EM PE INVESTMENTS

24 EMERGING MARKETS OFFER THE POTENTIAL FOR SUPERIOR RETURNS FOR BOTH LISTED AND UNLISTED ASSETS

Comparative End-to-End Returns (as of 30 September 2010) 30,00

25,00

20,00

15,00 1-year % IRR, net IRR, % 10,00 5-year 5,00

0,00 S&P 500 MSCI Emerging Western U.S. Private Emerging Markets PE Europe PE & Equity Index Markets &VC VC Index (US$) Source: Cambridge Associates, LLC.

EM PE PERFORMANCE

25 OVER HALF OF LPS EXPECT 16%+ NET IRRS FROM THEIR EM PE PORTFOLIOS OVER THE NEXT 3-5 YEARS

100% 90% 80% 46% 70% 67% 60% 50%

40% Respondents (%) 30% 54% 20% 33% 10% 0% 29% Global PE portfolio* EM PE portfolio**

Annual net returns of 16%+ Annual net returns of less than 16%

*Coller Capital’s Global PE Barometer. **EMPEA/Coller Capital Survey.

EM PE PERFORMANCE

26 HOW AFRICA IS BEING SEEN BY GLOBAL PE INVESTORS

27 HOW THE AFRICA PE OPPORTUNITY IS STARTING TO BE SEEN High Economic Growth Potential: • 5-6% GDP growth estimates for 2011 • Home to some of the fastest-growing economies in the world (Ghana, Angola, DRC) • Improving political stability (N Africa excepted for now)

Strong Demographics: • Population of 1 billion • Rise of the middle class consumer – by 2020, more than half of Africa’s households will have discretionary spending power (McKinsey Global Institute)

Opportunities in Many Sectors: • Infrastructure: World Bank estimates that US$93 billion required over next 10 years to meet region’s infrastructure gap • Telecoms: Current mobile voice market penetration only 50% • Energy: Region’s vast mining and energy resources are underdeveloped

AFRICA

28 28 AFRICA HAS REACHED 6% OF TOTAL EMERGING MARKETS PRIVATE EQUITY FUNDS RAISED AND CONTINUES TO GROW

EM PE Fundraising Totals by Region (%) 100 100 100 100 100 100%

48% Asia 58% 60% 61% 71%

25% CEE/CIS 10% 8% 5% Latin America 8% 7% 7% 7% 10% 24% MENA 10% 10% 9% 3% Sub-Saharan Africa 6% 4% 5% 2% 12% Multi-Regional 8% 4% 6% 7% 3% 2% 2006 2007 2008 2009 2010 AFRICA

EM PE Fundraising Totals by Region, 2006–FY 2010* (US$m) Emerging LatAm & Sub-Saharan China India CEE & CIS Russia Brazil MENA Multi-region Asia Caribbean Africa 2006 19,386 4,279 2,884 3,272 222 2,656 2,098 3,207 2,092 2,580 2007 28,668 3,890 4,569 14,629 1,790 4,419 2,510 5,333 2,034 4,077 2008 39,660 14,461 7,710 5,559 880 4,461 3,589 6,875 2,241 7,721 2009 15,938 6,617 3,999 1,586 455 2,248 401 1,070 964 801 FY 2010* 14,206 7,509 3,268 1,192 75 5,608 1,078 448 1,499 524 INVESTORS ARE NOTING AFRICA’S ATTRACTIVE FUNDAMENTALS AND ARE BEGINNING TO INCREASE THEIR EXPOSURE TO THE REGION

LPs Viewing Africa as “Attractive” LPs Planning to “Begin” or “Expand” or “Very Attractive” (%) Africa Commitments (%)

42 2009 16

37 2010 15

67 2011 38

Source: EMPEA/Coller Capital Survey

AFRICA THE PACE OF AFRICA PE INVESTMENTS IS ACCELERATING. STRONG BRANDS ARE GETTING STRONGER WITH HELP FROM PE MANAGERS. Sampling of Africa PE Investment 2008–2010

25 investments US$3.6B

13 investments US$721m

19 investments US$405m

59 investments US$2.8B

AFRICA SOUTH AFRICAN INSTITUTIONAL INVESTORS ARE THE MOST ACTIVE AFRICAN INVESTORS IN THEIR DOMESTIC PE INDUSTRY • US$256 billion in assets under management • Fastest compound annual growth in pension assets in 2010, rate of 28% per annum (Towers Watson; USD terms) • Current average pension fund exposure to private equity in South Africa is less than 1% --> recently released draft regulations allow pension funds to allocate up to 10% to the asset class • South Africa’s endowment funds, foundations, insurance companies and banks are also active investors in PE South Africa LPs Active in South African PE Funds Where are South Africa-focused fund managers looking to raise capital in the next 12 months - Geography? • Eskom Pension and Provident Fund • Public Investment Corporation (GEPF) • FNB Pension Fund • Mittal Steel South Africa Pension and Provident Funds South Africa • Exxaro Pension and Provident Fund • Kumba Iron Ore Selector Pension and Provident Fund Europe • ABSA Group Pension Fund Limited • Anglo American Corporation Pension Fund U.S. • Engineering Industries Pension Fund • Iscor Pension Fund Other • Metal Industries Pension Fund • Transnet Retirement Fund • Transport Pension Fund • Sentinel Mining Industry Retirement Fund Source: Deloitte/SAVCA : The South African Private Equity Confidence Survey, 2009. • Mines Employees Pension Fund GEPF (SA Government Employees Pension Fund), AFRICA’S LARGEST PENSION FUND, CAN INVEST 3-9% OF ITS PORTFOLIO IN PE.

• Africa’s largest pension fund • 1.2 million active members, 318,000 pensioners and beneficiaries • Assets totaling R790 billion (US$115B) • The assets of GEPF are primarily managed by the Public Investment Corporation (PIC), wholly owned by the South African government (and EMPEA member)

• Private equity allocation: • Lower limit 3% (~US$4 billion) • Strategic 6-8% • Upper limit 9% (~US$12 billion) • Private equity investments are aimed at infrastructure, socially desirable investments and BEE financing • Isibaya Fund, Pan African Infrastructure Development Fund, etc.

AFRICA IN 2010, EVEN AS WE CONTINUED TO RECOVER FROM THE DOWNTURN, AFRICA GPs RAISED IMPRESSIVE PE FUNDS INCREMENTAL AND FINAL FUND CLOSES

US$m ECP 613

K.Zephyr 492

ABSA 457

Aureos 381

Helios 286

ACA 238

Tuninvest-AfricInvest 207

Investec 155

Phatisa 135

Sanlam 109

GEF 84

AFRICA TO LEARN MORE, PLEASE VISIT US AT…

www.empea.net