3. Africa today
Slide adapted from October 2012 Vulnerability, Macro Overview, Portfolio, Risk and Profitability Analysis Presentation by IFC. December 3, 2012
6. Africa today - continued robust growth
• Africa GDP growth is estimated
at 4.6 % in 2012- excluding South
Africa, the growth in the region was
5.8%
• Increased number of MICs
Source: Africa Pulse, Africa Chief Economist Office
7. • Widespread GDP growth
• Large untapped agribusiness and mining potential
• Growth does not create enough productive jobs to absorb the 7-10 million young people
entering the labor force each year
• Lagging financial inclusion and limited term financing for growth
• Increased vulnerability to climate change
Widespread GDP growth Extractive Investment Potential
%
Guinea
8
Resource:
• $20 Billion in
7 investments in Iron Ore,
Bauxite, and related
6 infrastructure
5
4
Uganda
3
Ghana Resource:
2 Resource: • $8-10 billion in oil investment
• $8-10 billion in oil • $50 billion in total oil export
investment revenue
1
• $40 billion in export
revenue Tanzania
0
• Early stage but LNG potential $20+
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 billion investment with $2 billion
Cameroon
per year in Government revenue
Resource:
Sub Saharan Africa • $7 billion in Iron Ore and
Mozambique
Aluminum investment
• Mining and related infrastructure:
Sub Saharan Africa ex. South Africa $10 billion in Coal
• Gas: $70 billion in investment
Developing countries average ex. China
9. Reduced export diversification and
increased reliance on mining exports
SSA Exports to the World 1992-2008 (% of total
exports )
SSA depends heavily
on its mining industries
for export revenues
which have increased
due to high commodity
prices.
Manufacturing exports
have decreased, further
increasing reliance on
mining revenues.
Source: COMTRADE, 2009
11. In order to encourage growth and poverty reduction in the long
term, productivity issues must be addressed
12. High levels of Informality
• Bulk of non-agricultural
employment informal, and likely to Share of Employment by Sector
remain so. 5 5
• Private informal sector employment
accounts for 70% of the labor force.
• Industrial clusters of indigenous
20
micro and small enterprises in
Africa are a natural form of
agglomeration.
• Almost all of them are “survival-
level” -- growth based on expansion
of quantity of production rather 70
than improvement in quality.
Agriculture Private - informal
Private - formal Public
Source: Household Surveys. The World Bank, 2009
13. large gap in productivity between
domestic indigenous and foreign firms
• In Africa, domestic indigenous
enterprises fall behind foreign
firms in terms of productivity.
• Foreign firms are often more
productive in developing
economies.
• But productivity gap between
domestic and foreign-owned
firms is more pronounced in
Africa than in Asia.
Source: Feng, Mengistae, and Yoshino (2009): Foreign Premium on Productivity among Enterprises in Africa
14. Challenge: transforming mineral wealth into human
capital development and job creation
• Restrictive business environment
• Poor infrastructure (e.g. power)
• Skills shortages
• Difficulties accessing finance
• Trade & logistics costs
• Value chain gaps and weaknesses
• Limited public sector
organizational capacity
The World Bank - AFTFP 2010
15. Top Constraints faced by African private sector
Electricity 26%
Finance 20%
Informal Practices 10%
Tax Rates 9%
Political Stability 6.50%
Corruption 6%
Crime 6%
Access to Land 5%
Transport 5%
Customs 4%
0% 5% 10% 15% 20% 25% 30%
Source: World Bank Enterprise Surveys, 2010
Electricity and access to finance are the top constraints faced by
enterprises
16. CORE INFRASTRUCTURE GAP
• Core infrastructure gap (energy, telecommunications, transport and water)
– Infrastructure gap is estimated at $30 billion per annum, with a cost to
GDP growth of 2% per annum
• The highest return to growth comes from transport, telecom and
power investments
– The overall gap hides wide dispersion in performance from 17% of GDP
to less than 4%
• Economic development gap
– Africa has significant undeveloped resources in agriculture and mining
– The present state of infrastructure reduces firm-level productivity by at
least 40%
• Social services gap
– Africa has significant needs in the health, education and housing areas
• PPPs have the potential to fill these gaps and put Africa on par with its best
performers ( the 10% club)
17. Africa faces the highest trade
logistics costs
2.8
2.74 2.74
2.73
2.7
2.6
2.6
2.5 2.49
2.42
2.4
2.3
2.2
LAC ECA EAC MENA SA SSA
Source: World Bank Logistics Perception Index, 2010
Landlocked countries such as Zambia, Botswana face even higher trade
logistics costs
18. Access to Credit is low
Half the small enterprises in
the Enterprise Surveys identify
access to credit as a major
constraint, while 34% of large
firms voice the same concern.
The region lags behind on
penetration of credit products
—21 loans per 1,000 adults
compared to 185 loans on
average in developing
countries.
Source: CGAP Financial Access, 2009
20. Example of the impact of market deregulation:
The case of Rwanda
350 900
Average transport prices (constant and current) from Mombasa to Kigali
Before liberalization After liberalization
800
300
700
250
600
200
US$/Ton
US$/Ton
500
150 400
300
100
200
50
100
0 0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Years
Current transport tariffs (left) Real transport tariffs - GDP deflator (right)
21. The Growing ICT Revolution
120
Mobile Penetration in Africa
(%) Use of IT
100
Impressive
80 growth in access
60 to voice. Adoption of ICT Applications in
65% of African
40
population covered! Government and Business, average by
20 region, 2007
0
South Nigeria Mali Kenya Rwanda High income countries
Africa
Europe & Central Asia
40.0
Low internet East Asia & Pacific
Data Service 15x more
penetration
internet Middle East
30.0 In SSA
users
Africa (including North Africa)
Mauritius/ South Africa
20.0
Gabon/ Ghana/ Kenya
CAR/ DRC/ Guinea-Bissau/…
10.0 0 2 4 6 8 10
ICT performance measure
0.0
Americas Europe LAC SSA (IDA)
Internet Users / 100 PCs / 100 Source: Global ICT Unit, The World Bank
22. M-PESA by Safaricom
M-Pesa is one of the most successful examples of mobile money service since its
launch in 2007. Has 8.8 million users in Kenya, many of them without access to a bank
account.
The Financial Sector Deepening Trust in Kenya (co-financed by DFID, World Bank
project funds, and Swedish SIDA) provided a matching grant subsidy of 1 million
pounds to Safaricom for product development.
The new product allows money transfers across a secure,
PIN protected system to those previously ‘unbanked’; a
majority of cash recipients are rural women.
On average US$1.96 million is transferred through M-PESA
per day, mostly in small amounts averaging US$20 per
transaction.
23. AfricA’s growing tourism sector
Tourism’s Contribution to GDP
Average contribution of tourism to
SSA GDP is 5.9%. In some countries
such as Seychelles, Mauritius and
Namibia this contribution is large.
Tourism constitutes over 10% of
total exports (direct & indirect) in
more than half of African countries.
In 2009, the sector contributed to
10.1 million direct and indirect jobs
throughout the region, representing
5.6% of total employment or 1 in
every 18 jobs.
Tourism: a potential source of job creation and increased earnings for SSA
25. Easing the business and regulatory
environment
• Increase provision of infrastructure and delivery of public services.
• Streamline cumbersome regulatory procedures to encourage new entrants,
operating in the formal sector.
• Set up transparent formal market institutions for better enforcement.
• Increase financial outreach to mobilize resources for business ventures and
risk taking.
• Harmonize legal and regulatory standards to enable rapid technological
change.
• Invest in increasing “business skills” and training for workers.
26. Using The ICT promise to scale up
Leverage ICT enabled solutions for underserved populations and SMEs –
e.g. mobile banking, reduced cost of remittances and financial literacy.
Source: ITU, Information Society Statistical Profile 2009, Africa, Asia
27. Public Private Partnerships for
development
PPPs potentially bring the efficiency of
business to public service.
Require effective legal, regulatory and
institutional frameworks (PPP units and
agencies to regulate public procurements), to
catalyze private participation.
Systematic cost benefit analyses of public
investment projects will be a pre-condition to
successful PPPs.
Major infrastructure gaps can be filled by
PPPs in infrastructure (e.g., Maputo port).
Greater need for financial solutions: establish
PPP finance facilities (e.g., Nigeria, UEMOA).
Other PPPs include SEZs, vocational training,
technology adoption (technoparks) and skills
development (training and incubators).
29. Implementing the Africa Region’s Strategy
A dynamic private sector that creates productive
employment and leads to inclusive growth
AFRICA FPD Priorities
Job creation & youth
employment through skills
development & innovation.
PPP infrastructure finance
Financial Inclusion
Agri-business
30. The World Bank - Africa Region
Number of Active Projects by
Sector
OS, 10
FPD, 39
HD, 96
SD, 280
PREM, 28
The World Bank: Africa Region
FY 13 Lending by Sector
OS FPD
1% 5%
HD
23%
SDN
55%
PREM
16%
31. •Implement business environment reforms
Assist client countries to: • Realize the potential of key industries (agribusiness, tourism, mining)
• Develop financial markets and inclusion (payment systems, competition,
financial literacy, IT based solutions, rural finance)
• Improve resilience (weather insurance and climate smart irrigation)
• Evaluate impact of interventions
Significant Volume of Lending Examples of recent projects
o OHADA (BEE reforms in 16 SSA countries)
o Budget Support Operations: Mauritius,
Uganda
o Growth poles and industry focused projects
(Burkina Faso, Niger, Mozambique,
Tanzania, Senegal , Guinea Bissau,
Ethiopia)
o Post conflict (South Sudan, Somaliland,
Guinea)
o PPP projects (Nigeria, Ghana and Kenya)
o Policy- based operations - DPOs (Tanzania,
Uganda, Mauritius)
Increasing domestic credit to the private sector Innovative products
o Crisis response: SME financing (SA,
Nigeria, Kenya) & banking supervision
o Growth poles and value chains
o Impact evaluation schemes (Guinea Bissau)
o Agribusiness incubators (Senegal)
o Housing finance (Tanzania, Nigeria)
o Disaster Risk Finance and Insurance
32. BUILDING BLOCKS FOR PPPS
(1) PPP enabling Laws and
Regulations, Procurement Guidelines,
(1) Legislative,
Institutional & Sector Legislation, Institutional setup,
Fiduciary Oversight body, Fiscal commitments
Framework and Contingent liability management
PPP Enabling
Environment
(3) Capacity of local (2) Commercially
financial and capital Viable, Government
market, Financial (3) PPP (2) PPP Project Support,
Financing Pipeline Infrastructure Plan,
instruments and vehicles,
Risk mitigation products Transaction Advisory
Support
33. THE WORLD BANK GROUP SUPPORT TO PPPS
STRATEGY INSTRUMENTS
Instruments
Partnerships Knowledge
• Public-Private • Technical Assistance
Dialogue • Capacity Building
• Partnership Platform • Project Pipeline
Preparation
• Guidelines, Standards
Finance
• Early Stage Financing
• Construction phase finance
• Risk management tools
• Environment for long term patient
capital
• Financial Engineering – customized
financial solutions for client needs
34. THE PPP DEVELOPMENT AGENDA
• Concerted efforts by all World Bank-IFC-MIGA units related PPP to develop
the enabling environment required to ensure the level of certainty and
predictability required for “serious” investors to make credible
commitments
• The WBG provides financial and technical support to nearly every
element of PPPs, including:
– strengthening of enabling legal, institutional and regulatory environments
– design of and support on specific transactions
– the provision of public sector financing at the sovereign and non-sovereign
level
– valuing of contingent liabilities
– private sector debt and equity
– key credit enhancements, such as Partial Risk and Credit Guarantees
Source: World Bank PPP Day Presentation, December 2010
35. THE WORLD BANK GROUP PPP EXPERIENCE IN SSA
As of 2011, the WBG has extended IFC
a total of around $3.8 billion to investments
in financing
support the financial close of 50 PPP projects
PPP transactions in energy, US$ 0.3bil
transport, and water, of which:
MIGA World Bank
•14 independent power plants guarantees loans
for more than US$1.3 billion of to private US$ 2.4bil
investors
financial support US$ 0.4bil
•10 rail concessions─ Partial Risk
Guarantees
approximately US$1.1billion US$ 0.8bil
36. EXAMPLES OF WBG SUPPORT TO PPPS IN SSA
• Power : Bujagali hydroelectric dam (Uganda) and IPPs in Cote d’Ivoire,
Kenya and Rwanda and West Africa Gas Pipeline between Nigeria and
Ghana.
• Toll road: Dakar- Diamniadio Toll Road (Senegal)
• Ports concessions in Nigeria (of 24 container terminals), in Monrovia
(Freeport) and Sierra Leone (Freetown).
• Railways : WB support to PPP projects has been via technical
assistance, covering the social costs of labor retrenchment programs
and in financing railway infrastructure assets. (e.g. Camrail in
Cameroon).
• Joint teams are now working on a growing list of agribusiness
operations with the aim of attracting increased private investments in
agriculture. Such projects are being implemented in Burkina Faso,
Cameroon, the Democratic Republic of Congo, Ghana, Guinea Bissau,
Nigeria, and Zambia.
37. AGRIBUSINESS IN SSA
• Agriculture and agribusiness together are projected
to be a US$ 1 trillion industry in sub-Saharan Africa
(SSA) by 2030 (compared to US$ 313 billion in
2010), and they should be at the top of the agenda
for economic transformation and development
• The challenge is thus threefold:
– (1) develop downstream agribusiness activities
(such as processing) as well as upstream
activities (such as supplying inputs),
– (2) develop commercial agriculture, and
– (3) support and link smallholders and small
enterprises to productive value chains
38. 3 Stage Model to Agribusiness
1. Production
2. Transformation
3. Commercialization
Our Approach
• Attract anchor investors
• Build on existing situation/reality
• Promote aggregation beyond smallholder
(stakeholder organization/interventions
focusing on market development)
• Technology – tech requires upfront costs
and expertise, which we can provide,
improving viability
39. Overcoming Constraints
• Improving the performance of output
markets
• Facilitating access to inputs and
technology
• Enhancing access to land and tenure
security
• Upgrading infrastructure using public-
private partnership where possible
• Financing agribusiness
• Building skills and entrepreneurship
• Ensuring inclusive investments
40. INSTRUMENTS
1. Facilitate venture capital investments combined
with mentorship and technical assistance.
2. Use a targeted matching grant with agribusiness
startups and/or lines of credit accompanied by
technical assistance.
3. Tailor the PPP model to agribusiness.
41. Business Opportunities
During Project Preparation During Implementation
- the borrowing country, not the World
-Limited consulting services for Bank, is responsible for buying or
the World Bank to help design the “procuring” goods and civil works and
project– eg. Conduct feasibility selection consultants.
studies, analytical papers etc. - the Implementing Agency that was
established during project preparation is
-the opportunities vary in size but the main point of contact for companies
are usually below US$ 200,000. on procurement matters.
- there are generally contracts for
-there are generally no consulting services above US$ 200,000.
opportunities for suppliers of - equipment and civil works contracts can
goods and civil works when a be in the millions of dollars
project is in the Pipeline. - -all contracts require the publication of a
request for expression of interest in the
UN Development Business and dgMarket
websites.
43. Business Opportunities
Invitations to bid or express interest for contracts
under World Bank-financed projects
www.dgmarket.com www.devbusiness.com