tv Studio 1.0 Bloomberg March 13, 2016 9:00am-9:31am EDT
>> welcome to the africa opportunity. to give you a close look at the potential and challenges that this continent offers investors worldwide. we brought together the very best in corporate, official, and non-government leadership across the region and the globe to debate the future of africa. from infrastructure to technology, how will africa attract the capital it desperately needs and avoid the pitfalls of waste, corruption, and conflict that have left this promise unfulfilled. you will find out on "the africa
opportunity." ♪ in africa, the optimism is infectious. the population is young, growing, and increasingly educated. everywhere you look, there is promise to be made. commodity prices have plunged, budgets are squeezed. currencies are slumping and foreign investors are pulling back. is there still a full case to be made for africa? that is one of the questions we stopped to answer in cape town. >> africa has been there before.
from there today, africa economy -- 10 years of decline in the economy. today, the african economy is three times larger than we were at other times it sometimes five times. there have been a few countries, growing countries in africa. growing countries in africa. it depends on investment. if i give you an example, the fourth fastest-growing companies are not particularly dependent on commodities. two things, the number of countries who have to make major decisions on reform.
a bigger crisis. adjustment is in effect now. erik: why are they so confident they will make these adjustments? those opportunities have come and gone before. >> it is a good policy. it is like a triangle. it is not absolutely deliverable. we have the ability to do ever -- to deliver everywhere. erik: he is hardly alone. the bullish view in africa is shared by industry and government. as i found out in the business and economic summit in cape town.
>> what excites me today is the acknowledgment that we need to do things differently, move a lot faster. our populations are growing. we have a young population that is ambitious. the opportunity to grow that economy is here and that is what excites me about africa and in particular, our own governments are beginning to accept that we need to turn the corner. indeed, looking into the past and continue to blame and. as him and colonialism is old stuff. we want to see a growing economy. >> africa is increasingly stable, increasingly democratic. it is increasingly willing to work with the private sector and take on reforms that are necessary. africa is a continent, not a country. there are wide variations among what i just said. mcc is an agency that is focused on partnering with african
countries, and countries around the girl e globe, who are committed to governance, poor countries who are willing to undertake reforms. for example, we are working in ghana. the portfolio has been roughly interested in infrastructure. and increasingly working in energy under president obama's power africa initiative. with respect to our partners, we're seeing -- and mentioned tough reforms, i mentioned the idea that we need to have more transparency, independent regulators for example, and we are seeing movement on those. >> we are here to try to help, country by country, is to develop the data sets that they need. to help them create the capital market efficiencies and infrastructure and technology to grow their capital markets and basically facilitate greater visibility through our bloomberg news team, writing the kind of stories about leadership and
economic challenges and opportunities that exist on the african continent. we have been here for a relatively short period of time, 21 years but as we look at the , future, we look at africa as a very important long-term growth opportunity. we have about 400,000 users of our product every day and they want to know what is going on in africa the same way they want to know what is going on in lots of other places. we are the conduit and facility -- facilitator for people to get the kind of data they need to make for investment decisions. >> sub-saharan africa has grown the population, as you can see, at a dramatic faster rate than the world. look at that. pretty remarkable statistics. we have heard of these figures but here they are for everyone to see. patrick, you are the insurance guy.
for arguments sake you are the actuary on among us. give us the point of view. how important are demographics? patrick: urbanization is the key here. africa at a much slower pace than china of course, where it was driven from the center. the urbanization of africa, generally speaking, is a tremendous trend. you look at the doubling of the population between now and just short of 2050. this is a very exciting market. the average size of families, looking at it yesterday, 62 a irish -- this is what the were 50 years ago. excitinga, it is very
in the relevant markets. it is not true across all of africa. you have to be selective. for example, growth rates in 17 of the sub-saharan economies of 5% plus, you have to pick the ones you want to go after. urbanization -- you will see it. it is like a teaming anthill. people working, making money, but not living in the way we are used to seeing in the west. we have to understand how to tap into that. we have talked about what it will take for africa to meet the bull case, education, infrastructure, further diversification. your concern is implementation,
why? >> we take africa, literally, figuratively. we dig africa. the one thing i find it challenging is most of the african countries all have fantastic vision, very clearly articulated. they all have it. what my dad used to say is, if you want your dream to come true, make sure you do not oversleep. that is what i see in most of these places. we see the suffering, we know what we need to do, we do nothing about it. those countries we see getting up and doing it are succeeding. look at ethiopia, kenya, those are getting off of their but are
erik: africa rising remains a rallying cry for bulls. the commodity selloff, and slumping growth in china, a key trading partner for many african nations. at the bloomberg africa and economic summit. africa's challenges and potential solutions. >> we want to talk about the africa rising narrative. is it dead? is it forced? what is going on and what can we expect? >> i always said there were 4 drivers -- recycle, politics and policies, urbanization and
demographics, and entrepreneurship. i think the super cycle is on, you now need the policies to address that and that is probably what you are not getting it some places. this is the key thing going forward, the key policies governments will put in place. i think the entrepreneurship is still there and we have everything, still a very bright future in terms of development. >> you have done a lot of research on the relationship between china and africa? do you think the african economy has materialized in china? are they reaping the conferences are being far more did -- far too dependent on one country? >> it is something i have been looking at for a while has been how china has been research invested growth model. what you've seen since 2000
until now, a paralleled trajectory of paralleled growth between sub-saharan africa and china. clearly, there is correlation and causation. beyond china, about a year ago, looking at when things were good, there were very strong similarities, parallels between the status of sub-saharan africa and south east asia. now we are seeing a divergence on the economic side, the on our side of the world, policy reform, structural reform, in certain economies of to -- in certain economies to
reposition back toward the asian growth trajectory trend. >> do you see a lot of potential for stronger relations between the u.s. trade and africa? there are opportunities elsewhere. >> only about 1% of u.s. exports actually find a destination in sub-saharan africa. it is about 6% of the export of -- export-import bank portfolio. that is not surprising that the capital markets are not as deep. i think there are a lot more opportunities here then u.s. companies have taken advantage of. we have been active in power, transportation infrastructure. it is still a lot more opportunities in every one of those areas. one of our goals for this trip is to encourage more u.s. companies to participate and cap -- and tap into it. i think the policy change is what is going to be needed to
really attract companies here. it is not easy place to build -- to do business and companies have a lot of other options. i think the change in the commodity prices is a unique opportunity because it will encourage and hasten to move to some of these reforms and policy changes that have been needed for quite some time. >> we were talking earlier about youra, and you said organization would be involved in that. slower than anticipated because of permitting and credit hurdles, is that what you are talking about? >> power africa is a powerful initiative that president obama launched here in 2013, committing $7 billion in capital for power projects here that has been slower than we would like. we have just not seem the deals come through. i think part of that issue comes back to what miguel said.
it has not been as easy to put in place in a number of countries. i think that has impeded some of the power generation. >> do you deal with a lot who are trying to invest in africa? >> our government is starting to see it on some of the bureaucracy. there are some challenges. i still really think it is bureaucracy which is holding things off. i think it is really, at the end of the day, two things. the lack of progression on the infrastructure side and this is the serious one, the long-term one. and the short-term one, you have some very wrong policies which add dramatic effects. if you do not have some certainty on the effects, even
if it is a progressive devaluation, that goes nowhere. that affects the ability to invest. i think investors still want to come and let me just use. there are three types of investors i see. on one hand you have strategic investors, multinationals. they are still very keen on africa because they see the demographics. they see that affects issue as a minor problem. some of them can live with that. then, on the opposite side you have institutionally invested by stocks, those are off africa. the worst thing you could do is buy one in today and the following day have 20% devaluation.
those are out of africa and they actually look at africa as one, which is very sad and very wrong. that is how it works. in the middle, you have financial investors. they can deal with this, they will adjust their valuations and machinations, but they can deal with the uncertainty. over the short-term, some uncertainty but still very positive that there are projects and opportunities and capital willing to come. erik: much more coming up from the bloomberg africa business and economic summit. plus, a conversation with one of the rising tech opportunities -- entrepreneurs. ♪
erik: africa is the world's second-largest landmass next to asia. africans may celebrate their differences but the investors do not. the collapsing commodity prices is driving away dollars. foreign investment plunged in africa. africa is a continent, not a single country. look at the economies of sub-saharan africa and that is clear.
nigeria's gdp has soared. so has ethiopia is. sedan's has not done much better. companies quickly learn no two countries are alike. the richer you on the red sea, is dead last. progress is crucial. eight alien there developed an index to track leadership and development in africa. he says they lie at the heart of any tangible shared improvement in the quality of life in citizens. after years of gains, the index has stalled since 2011. it is clear that enthusiasm for the africa opportunity has not stalled.
over and over on stage and in conversation, business leaders at the bloomberg africa and business economic summit explain why. >> this is a time where we would like to accelerate our investing, not pull back. >> do you have the capital to do a? >> we are in seven countries today, ideally we would be in 10-15 different countries. one of the countries nigeria, we , are not at majority yet. we think this time is very good. >> i think the change in commodity prices is an enormous opportunity. this economy has to diversify, whether it is south africa, sub-saharan africa. the economy is only resource-based. ultimately will not be sustainable economy. in many ways, i think this is good news. sooner is better than later and i think diversification, at the
manufacturing, textiles, many other things, make it far more sustainable. >> when you think about africa, you have to look at it from a long-range view. we go through these cycles. the key is how people react number one, number two is 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 returns we can get on something like a wind power investment, wind farm. i was there yesterday at hope field. there we are looking at a gross return of over 20%, even if you adjust down for a depreciation in currency. you have to say that that net, after all expenses, a return that is well into double digits.
we sat down with a panel of economic experts to talk about south africa 's finances and the elephant in the room, the country's credit rating. >> obviously difficult times. china's growth is slowing. we have seen a plunge in the last couple of years. we also have a threat of a possible downgrade, perhaps i will just kickoff and asked the representative, conrad. what do you make of the budget? does it leave africa in a better or worse position? 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 -- would like to do is look at what our concerns are and contrast it with the budget we have seen today. when you look at the negative outlook we put on our industry last year, it was a negative.