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tv   Studio 1.0  Bloomberg  March 12, 2016 10:00am-10:31am EST

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we came here to south africa to give you a close look at the thistial and challenges continent offers companies and investors worldwide. at the bloomberg africa business and economic summit, we have brought together the best of leadership from across the region and around the globe to discuss, debate, and in some cases decide the future of african business. from infrastructure to agriculture to technology, how will africa attract the capital it needs to avoid the pitfalls of waste, corruption and conflict that have for so long left this promise unfulfilled. over the next hour, you will
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find out on the africa opportunity. >> in africa, the optimism is infectious. the population is young, growing and in educated and everywhere you look there is progress to be made. the africa narrative is in doubt. commodity prices have plunged, budget squeeze. currencies are slumping and a foreign investors are pulling back. is there still a bold case to be made for africa? that is one of the questions we saw to answer here in cape town. he served for two terms as the president of the african development bank. think the people
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misunderstand what has been happening. with 10 years of decline. , this is three times larger. --.example, that depends on investment. things, not economic status.
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that adjustment is now. >> why be so confident that they will make these adjustments, because those opportunities to adjust have come and gone before. policy, it isd like a triangle. it has to be technically advanced, it has to be politically feasible. and it must be deliverable. we know what to do, we know what the solution is. .o deliver the capability he is hardly alone. bys view is widely shared industry and government, as i found out at the first panel of our business and economic panel in cape town. acknowledgment that we
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need to do things differently, that we need to move faster. that our populations are growing. ,ith a long -- young population the economy. the opportunity to grow that economy is here. that's what attracts me about africa. the government is beginning to accept that indeed we need to ton the corner, continuing , they want toist see and growing country. is increasingly stable and increasingly democratic and willing to work with the private -- africa is a continent, not a country. there are wide variations among what i just see. mcc is an agency that is focused on partnering with countries that ground the globe to they
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are committed to governance. they are poor countries, and are willing to undertake these reforms. we are working in ghana. the portfolio has been investing in infrastructure, roughly $6.5 million. working in energy under president obama's african initiative. for our partners, i mentioned the top reforms. i mentioned the idea that we need to have more transparency, independent regulators. we are seeing movement on those. >> we are here trying to help country by country is to develop the data says they need to make an argument for foreign direct investment, to help them create the capital market efficiencies and infrastructure and technology to grow the capital markets. and basically facilitate visibility through bloomberg news, writing the kind of
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stories about the leadership in the economic challenges and a -- opportunities that exist on the african continent. we have been here for a relatively short. africa, that we look at as a very important long-term growth opportunity. we also look at it from the perspective of your hundred thousand users of our product every day. they want to know what is going on in africa, the same way they want to know was going on in china and russia and brazil and lots of other places. we are the conduit for that information, and facilitator or people to get the kind of data they need to make important investment decisions going for. than half atly more century, sub-saharan africa has grown its population at a dramatically faster rate than the world. look at that. pretty remarkable. we have heard of these figures before, but here they are for everybody to see. patrick, you are the insurance guy, right.
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you are the actuary among us. give us the actuarial point of view. how importance our demographics? if you look at it, urbanization is the key here. at a much slower pace, then china, where it was driven from the center. the urbanization of africa is an enormous trend. you're looking at the doubling of the population between now and just short of 2050. an exciting market. 62 age size of families, family, still. for africa, it is an exciting,
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in the relevant market. it is not true throughout all of africa. you have to be selective. theth rates in 17 of sub-saharan african economies, 5% plus. you have to pick the ones you want to go after. the urbanization, you will see it. it is like a teeming anthill in many ways. people working and making money. but not living in the way that perhaps we are used to seeing in the west. we have to understand how to tap into that. it will be the traditional may means of french network store ifa's, direct sale torsos may be in some of those countries. >> we have talked about what it will take for africa to make the bull case, education, infrastructure for the diversification of economic base.
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a -- you and i have talked little bit about this. you are concerned with implementation. ande dig africa, literally figuratively. the one thing that i find challenging is most of the african countries, they all have fantastic visions. very clearly articulated. if you don't -- if you want your dream to come true, just make sure you do not oversleep. that is what i see. we sleep on our beds, we know we need to do. we do nothing about it. those countries we see getting up and doing it, are succeeding. look at rwanda, it is the ob and kenya.
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ethiopia.- it is possible. us in challenge all of our countries and our government is please get up and just do it. >> for every bull case, there's a bear case. that's next on the africa opportunity. ♪
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♪ africa rising remains a rallying cry for bowles. but the company is rising been selloff, the commodity the plunge in emerging market currencies and slumping growth in china. a key trading partner and source of capital for many african nations. at the business and economic a panelthere was discussion on challenges and potential solutions. wheel was talk about the africa rising narrative. we need to ask the question, is this dead, is it forced? what can we expect? >> there are for drivers for africa rising, commodities, quality control issues due to modernization and promotions.
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you now need the politics to address it. you are notably why getting at some of the places. this is a keeping going forward, the policies that government will put an place. i think the entrepreneurship is still there, and we have everything to have a bright future in terms of development. >> you have done a lot of research with the relationship between china and africa. do you think the african economy , are they doing anything to find markets? we talk about headwinds, china in the last decade there is a gale force headwinds. something i have been looking at is how china's resources growth model. it's unprecedented is
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underpinning african go through -- african growth. parallelectory of growth between subprime africa and china. correlationre is and causation in it. think of what they are experiencing beyond china. about a year ago when things were good, there were very strong similarities between the status of sub-saharan key countries and southeast asia. now we are seeing a diversions on the economic side, southeast asia. policy reform, structural reform , in certain economies to reach back to -- for the ages and
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growth -- asian growth. >> do you see potential for stronger relations between the u.s. in terms of trade and africa? only about 1% of u.s. exports find their destination to sub-saharan africa. it is about 6% of the portfolio. that is not surprising that the capital markets are in his deep, less options. are a lot more opportunities here than u.s. companies have taken advantage of. we have been active in power, transportation, infrastructure. there are a lot more opportunities and every one of those areas. one of our goals for this trip is to encourage more u.s. companies to participate here and tap into it. i think the policy changes are what will be needed to attract
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companies here. it is not an easy place to do business. companies have a lot of other options. inhink that the change commodity prices is a unique opportunity, because it encourages the move to some of these reforms and policy changes. >> we were talking earlier about , the anticipated implementation, is that way your talking about? an initiativea is started,ident obama then has been slower than we would like to we have not see the deals come through. part of that issue goes back to -- in terms of the licensing the easysing have not been as
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to put in place for the number of countries. you could speak to that. you deal with a lot of businessmen who are trying to invest in africa. are they frustrated? >> yes. there are some challenges. bureaucracys the which is holding things off. , the -- a of the day progression -- this is a serious one to me, the long-term one. on the short term one, you have some very wrong policies that have dramatic effects on the -- rate. -- even if it is a
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progressive devaluation. the official rate trading at nearly out of the -- that goes nowhere. that effects confidence and the ability to invest. i think they do still want to come. the free part of the investors coming into africa. one hand, you have strategic investments, multinationals. they see the demographics. they see the issue as a minor problem. come -- some of them can live with it. a transaction where the buyer says that is not a problem. , -- thepposite side worst thing you can do is buy one stock today the following day have a 20% devaluation.
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they are out of africa. africa asat it -- very sad and wrong. but that's how it works. they can deal of this, they will adjust the devaluations and mechanisms. they can deal with some uncertainty and they are present. over the short term, there is some uncertainty. there are projects and opportunities and capital willing. much more coming up on the bloomberg africa business and economic side. plus a conversation with one rising entrepreneur as the afriy continues.
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♪ africa is the world's second largest landmass after asia and home to more than one billion people in 54 countries, they speak more than 3000 languages. africans may celebrate their differences. investors don't. the collapse in commodity prices and the deteriorating economic outlook is running way dollars. foreign direct investment in africa plunged by 31% in 2015. africa is a constant, not -- continent, not a single country.
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nigeria's gdp has surged since the financial crisis, so has ethiopia's. sudan's has stagnated. the graham company learn no countries is like. lack -- is in the top third, just behind luxembourg. progress is crucial. after years of gains, the index has stalled since 2011. enthusiasmear that hasn't stalled. over and over onstage in a conversation, business leaders at the business and economics solomon have expressed
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confidence. >> this is a time where we would like to accelerate are investing in africa. >> do you have the capital? countriesin seven today. ideally, we would be in 10 or 15 key countries. --eria, we are not at my majority yet. we have more investing to do. i think that the change in commodity prices is an enormous opportunity. this economy had to diversify. whether in south africa or sub-saharan africa. it is the resource base. not be ay it will sustainable economy. in many ways, i think this is good news. sooner is better than later. they are looking to diversify to manufacturing and textiles, it would make it more sustainable. you think about africa,
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you have to look at it from the long range view. we go through these cycles, whether commodity cycle up or down, the key is how people react. and how you are able to continue investing for the long haul. i think that is the key. >> this is a great story about africa. if you look at the kinds of on wind power get investment, a windfall. yesterday i was at --. we are looking at over 20%. depreciation, we have done a pretty big step down last year. that still, net after all expenses and return
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that is well into the double digits. you are still looking at healthy double-digit returns. you cannot come in for sure. of time. experts talk about the immediate fiscal challenges facing the south africa.
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erik: nowhere does "the africa opportunity" seem real other than here in south africa. from everything from a thriving wine economy -- industry, the government is in shambles. sat down with a panel of economic experts to talk about south africa 's finances and the elephant in the room, the
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country's credit rating. >> obviously difficult times. commodity prices have fallen. we have seen a plunge in the last couple of years. we have also seen a possible downgrade, perhaps i will just kickoff and asked the representative, conrad. what do you make of the budget? conrad: if i could get everybody not to use the term downgrade, we call it noninvestment grade. what i would look at is what our concerns are and contrast it with the budget we have seen today.


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