Together we can make dreams come true. UBS Optimus Foundation. © UBS 2010. All rights reserved. Wealth Management Research April 2010 UBS investor’s guide Special edition 2010 World Cup in South Africa “I dream of becoming a doctor and helping sick children. Surprising Africa The host’s economy How to invest in Africa For my dream to come true, I have • to be able to go to school.” And the World Champion is… Money can buy you a Ronaldo, but not a World Cup • Alem Zelleke, 14 Muscle drain or muscle gain? Ab www.ubs.com/optimus 806-Ad_Optimus_Foundation_148x210-en-2010-04-16-3.indd 1 16.04.10 14:53 Contents Editorial Editorial 3 You will find a comprehensive Dear readers, glossary of technical terms In only a couple of weeks, the 19th Football World Cup will finally on the internet site Focus on Africa 4 www.ubs.com/glossaire kick off. Lionel Messi, Cristiano Ronaldo, Wayne Rooney and their If you require further information on colleagues will dazzle fans with their magic. Or, in some cases (let’s South Africa Economy 10 the instruments or issuers mentioned in hope not too many), they may fail to live up to the hopes built up this publication, or you require general since the last contest in Germany four years ago. Whatever hap- Invest in Africa information on UBS Wealth Manage- pens, for a full month, millions of fans around the world will put ment Research including research po- everything else on hold as they watch a new volume of sports leg- – Overview 14 licies and statistics regarding past rec- ommendations, please contact either ends written on the pitch. – Socially responsible investing (SRI) 17 your Client Advisor or the mailbox <[email protected]> giving your Although we are all serious analysts, economists and strategists, most of my colleagues at – Philanthropy 20 country of residence. UBS Wealth Management Research and I are nevertheless addicted to football. The chatter Please see important disclaimer Focus on World Cup 2010 26 and disclosures in the “Important around the coffee machine is slowly but surely drifting away from the fumes of Eyjafjalla- Disclosures” section. jökull, the new SEC investigations, and Chinese monetary tightening. Instead, the talk is Football pundit interview 32 UBS Financial Services Inc. analysts becoming increasingly dominated by debates about whether the Spanish team is stronger did not provide any content relating than the Argentinean, whether the English team can reach the final or whether the most Economics of Football 36 to equity or debt securities, or issuers obvious contender, Brazil, will win its sixth title. of equity or debt securities, contained in this report. Outlook on Brazil 2014 40 One of the aims of this UBS investor’s guide is to share our enthusiasm for the event. Once This report has been prepared by UBS again, we have applied our usually quite dull analytical toolbox to deciphering the beauti- Appendix 42 AG and UBS Financial Services Inc. UBS ful game's most coveted championship. However, this latest investor's guide is based on Financial Services Inc. is a subsidiary of more than just football frenzy. UBS AG. · “UBS investor’s guide”, a UBS Wealth Management Research publi - cation for private clients, is published As this is the first World Cup to be held in Africa, we thought it would be useful to take a monthly, on Fridays, in German, French, closer look at a continent that is too often forgotten when it comes to searching for invest- Italian and English. · The publication is ment opportunities or, even more simply, when assessing the state of the world economy. available by e-mail and in some in- stances as a printed edition. If you wish Bear in mind that Africa accounts for 15% of the global population and, owing to its strong to subscribe, please contact your UBS demographic trends, is likely to accounts for 20% in just a couple of years. client advisor. · Details regarding the in- formation contained in this publication, restrictions on distribution and other We hope you enjoy the entertainment section of this issue, but we also urge you to study legal considerations are given on pages the information and analysis we present on Africa. 42 and 43. · In all cases we advise any- one interested in selling or buying a product or financial market instrument mentioned in this publication to consult their client advisor first. · Price informa- tion for more than 600,000 financial market instruments is available at www. [email protected] Football a male sport? This has not been the ubs.com/quotes. · Past performance case for a long time now. And women are is no indication of future perform- Chief Economist also playing an increasingly important role ance. The market prices provided in African politics and business. The women (and men) in the UBS investor's guide edito- are closing prices on the respective rial team are looking forward to the World principle exchange. This applies to Cup and hope you enjoy this special edition. all performance charts and tables in Source: www.gettyimages.com this publication. UBS investor’s guide special edition April 2010 3 Africa · Focus Focus · Africa Surprising Africa: Know the score and 2008, which compares with 13.5% for Aside from some well-worn clichés, exports to the United States. At the same relatively little is known in the rest of time, China is engaging increasingly in for- the world about the continent that eign direct investments in Africa, but com- will host the World Cup in 2010. In pared with developed countries, the involve- ment is still at a relatively low level. While a this article, we highlight 10 surprising large part of China’s imports from Africa and things you may not know about foreign direct investments in the continent Africa. are attributable to the Asian giant’s large commodity hunger, this relationship is not limited to commodities. China is also invest- Source: www.masterfile.com ing in African infrastructure and uses its own China is South Africa’s most experience to help develop and run special densely populated, telecommunication phones for every 100 people in a typical 1 important trading partner economic zones designed to attract invest- infrastructure is in big demand. Whereas developing country boosts GDP per person ment. With its energy hunger, China will developed nations often use the internet, by 0.8 percentage points. This makes the China has overtaken such heavyweights as continue to support African commodity retail and service networks, or marketplaces, mobile phone one of the most important the US, Japan, Germany and the UK to exporters and, in the longer term, will likely mobile phone systems in Africa are now drivers of living standards in Africa. become the country’s largest trading partner help the continent grow richer. making many such services available for the (in terms of total trade). China’s leading role first time: weather forecasts, health advice, Africa: more diverse than you comes just 10 years after establishing diplo- Highest mobile phone and even mobile money – a virtual bank 3 think matic and trade relations with South Africa. 2 subscription growth account that enables payments for many In 2009, China provided 16% of South goods and services, including electricity and The African Union is made up of 53 diverse Africa’s imports and bought 11% of the Some 40% of Africans already own a mobile school bills, directly from a handset. These countries whose inhabitants speak more than country’s exports. Taking a look at Africa as phone – no other continent has higher sub- services are often cheaper, faster and more 2,000 languages. Per-capita GDP in 2009, for a whole, Africa’s exports to China increased scriber growth. In a continent three times as reliable than the erstwhile alternatives. example, was 51 times higher in Equatorial by a yearly average of 31% between 2000 large as the United States, but only a third as According to a recent study, adding 10 extra Guinea (USD 8,760) than in the Democratic Figure 1 Figure 2 China has become South Africa’s largest trading partner GDP per capita in selected African countries 15 10000 Eq. Guinea 8000 a 12 c Exports GDP per capita in USD, Imports 6000 2009 estimates 9 South Afri 4000 6 Tunisia 2000 Egypt The African Union is made up of 53 diverse Switzerland 3 Netherlands India countries whose inhabitants speak more than 1000 Mozambique South Africa’s total trade Kenya Nigeria 2,000 languages. Also GDP per capita varies Ghana Ethiopia Uganda Zimbabwe UK Japan Germany USA China (exports plus imports in bn USD). Dem. Rep. of Congo 0 0 considerably. Source: UBS WMR Source: IMF, UBS WMR 4 UBS investor’s guide special edition April 2010 UBS investor’s guide special edition April 2010 5 Africa · Focus Focus · Africa Republic of Congo (USD 170), and the aver- currency, coupled with lower incomes owing might be a first step toward a less commod- renewed increase in accident rates in 2009, age GDP growth over the last three years in to the recent global economic and financial ity-dependent region. To make the USD 80 and there is still a lot of catching up to do: Angola (11.3%) was 17 percentage points crisis severely squeezed African households billion project feasible, the Congo has part- The accident rates in Europe were still 22 higher than in Zimbabwe (–5.7%). The num- budgets. The UN estimates that in 2009 the nered with Angola, Botswana, Namibia, and times lower than in Africa last year. At the ber of coups and plots in Africa has been number of hungry people in the world rose South Africa to share the resulting costs as same time, however, African air traffic is also trending lower in recent years, but the conti- to more than one billion, of which around well as the generated power.