Africa: Process Industries Can Unlock Resources and Build ...€¦ · Large-scale stores of...
Transcript of Africa: Process Industries Can Unlock Resources and Build ...€¦ · Large-scale stores of...
Melissa T. Cook, CFA
Founder & Managing Director
African Sunrise Partners LLC
+1 845 363-4622
www.AfrSun.comOctober 2015
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Africa: Process Industries Can Unlock Resources and Build Economies
Starting with the Basics:
Africa 101
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Reality Check: Scale of the Continent
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ASP HeatMap: 54 Separate Stories
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Source: African Sunrise Partners LLC
What is Changing?
1. Improving governance
2. Urbanization, rise of a middle class
3. Infrastructure upgrades
4. Industrialization and domestic manufacturing
5. Agriculture as a business
6. Technology leapfrog
7. Financial inclusion
8. Globalization: end of Africa’s isolation from world markets
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Why Are Things Changing Now?
Status quo is not an option:
Fear of another Arab Spring
Young people pushing for change
Governments focused on:
Putting people to work
Investment framework for private sector
China’s impact is a net positive:
Financing for infrastructure
Affordable consumer & capital goods
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Not Politics, Not Charity, Just Business
Political stability in a rising number of countries
Rule of law and anti-corruption measures increasingly effective
Privatization of key sectors
Talent: MBA grads and seasoned managers returning home to Africa
International Financial Agencies offer financing, knowledge, risk mitigation
Commercial counselors at embassies are very plugged in
Department of Commerce: White House policy-- pushing for more US corporate engagement in Africa
President’s Advisory Council on Doing Business in Africa: we’re the channel for private-sector input on policy and action
Power Africa, OPIC, IFC, Ex-Im, African Development Bank, USTDA, USDA, USAID
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Macro Tailwinds
IMF: >5% GDP growth/yr 2016-2020
Sound macro and fiscal policies
Improving infrastructure: China’s role
Agriculture and manufacturing productivity
Rising disposable household income
Technology-driven sector transformation
Innovative and profitable local companies
The biggest risk is in not being there!
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Africa Will Drive Global Growth for Decades
Young Population: Over 1 billion people and growing rapidly
40% under age 15
Rising education levels, tech savvy, leapfrog into a new century
Booming Economies: Sound macro and fiscal policies
Expanding infrastructure: China playing a huge role
Consumers have money to spend and they want brands
Information and communications technology-based transformation
Skilled and innovative local corporate sector
Mineral Wealth Can Fund Africa’s Future: Large-scale stores of diamonds, gold, cobalt, bauxite, copper, iron ore
China snapping up contracts: oil-for-infrastructure
Oil & gas: new discoveries continuing in East Africa
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Business Activity in Many Sectors Energy: oil & gas E&P, pipelines, services, refining & marketing, petrochem
Power: generation, transmission, distribution, meters, standby power
Machinery: power, construction, mining, electrical, agriculture
Process & Materials: cement, housing-related, chemicals, fertilizer
Transportation: Aircraft, shipping, rail, public transport
Consumer: private education, household goods, electronics, autos, transportation, hotels, leisure, food, soft drinks, beer
Communications: broadband, satellite, entertainment, data
Healthcare: hospital services, insurance, NCDs, generics, OTC, diagnostics
Financial services: mobile money, insurance, pensions, banking
Agribusiness: machinery, fertilizer, localized hybrid seeds, processing, storage, trade finance
Manufacturing: assembly, labor-intensive fabrication for domestic consumption or export
Property: hotels, commercial, retail, housing and related financing
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Rising Demand for End Products
Chemicals
Food & beverage
Personal care, cosmetics, household products, cleaners
Textiles, clothing & leather manufacturing
Plastics: consumer, industrial, commercial
Fertilizer: enormous push to boost yields and productivity
Food processing: packaged foods for urban consumers
Commercial: Autos, construction, housing, manufacturing
Healthcare and pharmaceuticals manufacturing
Refined petroleum products: from kerosene through jet fuel
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Africans Want You to Come
Why African countries want US firms and investors:
Known as ethical business operators
Willing to invest in long-term human capital development
Quality goods and services
So what’s holding US companies back?
Skewed perception of risk/reward
Lack of understanding of scale & immediacy of local opportunities
Management or balance sheet constraints
Too far outside their comfort zone
Misperception that Africa is a place for charity, not viable business
Too much emphasis on published statistics, poor knowledge of real
scope of local market opportunities
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Chinese Companies Already Everywhere
China is just getting started but they are already very dominant
China started by seeking resources– now developing new end markets
Strategic and coordinated push across sectors: power, transportation,
rail, electrical, machinery
OE sales: dealers are all there for XCMG, Sany, Liugong, Shanghai
Electric, Dongfang, China South Rail, solar providers
Ex-Im financing from China: different rules, very aggressive
Boots on the ground even in the most challenging of circumstances
Decision-making process quick and without strings attached
Reputation for lack of follow-through on service: starting to change
Most government procurement focuses only on price– this benefits
the low-priced competitor
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Ideas and Opportunities:
For the GTC Audience
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Plenty of Activity Already In the Works
Oil, gas, coal discoveries: update your maps
Governments want to add value to raw materials:
Refineries: import substitution, new industries
Processing: minerals, agricultural commodities
South Africa: clean coal IPPs
Botswana: Carbon capture & storage, coalbed methane
Nigeria: major refinery/fertilizer complex under way
Consumer products: vertical integration
Major consumption growth potential
Financing is increasingly available–locally and globally
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Why Import PET Preforms?
Better to Make Them At Home
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Source: African Sunrise Partners LLC
Africa is Industrializing Rapidly
Infrastructure being built right now:
Power, rail, roads, ports, airports
Communications
Water, urban infrastructure
Manufacturing and industry:
Refineries: Replace imported refined products
Process: chemicals, plastics, pharmaceuticals
Start with assembly, move to manufacturing
Well-established local companies want to partner with you
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Infrastructure Is Getting Built
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Kenya’s Thika Highway… …Is Now Open and Easy
Source: African Sunrise Partners LLC
Massive Power Shortfalls:
As Much Power as Spain
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Source: Kenya Ministry of Power
Diesel as Primary Power in Lagos:
Generators Take all the Parking Spots!
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Source: African Sunrise Partners LLC
Power: Major Investment Programs
Opportunity cost: The economic cost of inaction is severe: high cost of
diesel and generators, lost productivity
Privatization: Nigeria privatized its power sector: investment coming in
Regional coordination:
Kenya has a roadmap including geothermal, imports from Ethiopia.
Southern Africa Power Pool: South Africa, Malawi, DRC,
Mozambique
Not just grid-based: Off-grid or distributed power will play a major role
Renewables: Lower cost of solar and wind– now viable options
PAC-DBIA has new recommendations on how to boost US involvement
in this sector– stay tuned!
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Green is the Name of the Game
Leapfrog to newest technology:
Power, manufacturing, process
Carbon emissions
Waste management
Renewable energy
Smart grid, IT-enabled processes
Imperative to create jobs:
Surging number of young workers
Labor intensity is a good model
Africa didn’t create climate change, but the continent is very much affected by it
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Charcoal? There Has to Be a Better Way
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Source: African Sunrise Partners LLC
50MW of Waste-to-Power in Ethiopia…
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Source: African Sunrise Partners LLC
…Built By a Chinese EPC…
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Source: African Sunrise Partners LLC
…Drew Lots of Interest During a Tour
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Source: African Sunrise Partners LLC
Coal Conversion Opportunities in Africa
Source: Andrew Minchener, IEACCC 2014
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Commercial Scale Operations in S. Africa
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Source: Andrew Minchener, IEACCC 2014
South African IPP Africary: Going
Underground for 50MW of Power
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Source: Africa Carbon Eenrgy
Challenges & Opportunities:
Mozambique
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Source: Andrew Minchener, IEACCC 2014
Where In The World?
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Source: African Sunrise Partners LLC
African Sunrise Partners:
Our Business Is To Make Your Job Easier
What we do:
Business intelligence for smarter decision-making
We visit the continent 5-6x per year– well over 35 trips since 2007
We know the trends, opportunities risks, and local players in key countries--14 so far, and adding new countries each year
Our reports and advisory services make your life much easier
Melissa Cook
Founder & Managing Director, African Sunrise Partners LLC
Member, President Obama’s Advisory Council on Doing Business in Africa
25+ years Wall Street research experience
Global traveler– connecting the dots to help your business
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www.AfrSun.comOctober 2015