Sector needs to be in in the dri river se seat! Kje Kjell ll - - PowerPoint PPT Presentation

The new paradig igm: If If you want to fi fight poverty, Pri rivate Sector needs to be in in the dri river se seat!

Kje Kjell ll Rola land

28.03.2019

Present Aid Industry’s Mindset Formed During The Long Decline

5 10 15 20 25 30 35 40 45 50 500 700 900 1100 1300 1500 1700 1900 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Sub-Saharan Africa

USD/ capita (constant 2010)

GDP/capita

• Development not possible
• Business often the problem
• Aid cannot create growth but

alleviates suffering

USD billions

Source: World Bank Development Indicators

FDI

Addis Ababa «Billions to trillions»

The New Development Paradigm:

From Public Sector Aid To Catalysing Private Investments

Kofi Annan

“It is the absence of broad-based business activity, not its presence, that condemns much of humanity to suffering.”

Kofi Annan

How to go fr from Billions to Trillions?

5 10 15 20 25 30 35 40 45 50 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Current USD billions

Foreign Direct Investments (FDI) to Sub-Saharan Africa

Addis Ababa «Billions to trillions»

Policy respons:

• Guarantee schemes
• First loss mechanisms
• Public-private-

partnerships

• Blending/subsidize

+ China

Source: World Bank Development Indicators

The world is is rapidly becoming a a better place

1990 1993 1996 1999 2002 2005 2008 2010 2011 2012 2013 2015

200 400 600 800 1000 1200 1400 1600 1800 2000

Nuber of people, millions

Number of poor at $1.90 a day (2011 PPP)

Millions

China Rest of world Sub Sahara Africa China 1990-2015: 750 million out of poverty

Broad based improvements accross EM:

• Life expectancy
• Child mortality
• School enrolement
• Maternity health
• ...

Source: PovcalNet, World Bank

The New World – Where the Rich live

Source: Factfulness (2018) by Hans Rosling

Rich Poor

Getting the facts right: Growing no. of Chineses tourist in world. Or tourism in Africa

Global In Income Tipping Point: Middle Class Dominance By 2030

630 3,160 3,590 200 450 2,300 5,300 300 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 Rich

Poor

Vulnerable Middle Class

World population by income group

Source: Brookings, Projections by World Data Lab

2018 2030 Millions

Getting the facts right: Market for diapers in Europe vs Nigeria

$11-110/day Less than $1,9/day

Afr frica is is the New China

2000 2011 2016 The African growth story:

• More stable, democratic and pro private

sector governments, still 54 countries…

• Lesson from China: infrastructure
• Regional integration
• Raising middle class and urbanization

2019

In Investment Gap:

Provide Access To Capital Where Capital Is Scarce

• Low savings
• High interest rates
• High GDP growth
• Illiquid markets (illiquid stock

markets, low FDIs etc..)

• Moderate to high debt
• Ample investment
• pportunities
• High savings
• Low interest rates
• Low GDP growth
• Over liquid markets

(overvalued stock markets, high FDIs etc..)

• High and rising debt
• Lack of investment
• pportunities

GDP growth

OECD Emerging markets

GDP growth

FDI in emerging markets … … provide access to capital where it is scarce

Source: OECD, “Winter is coming” by Sony Kapoor

What works: FDI, PE, DFI, … China

100 200 300 400 500 600 700 800

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$bn

Private Equity in Emerging Markets

Uncommitted ($bn)

100 200 300 400 500 600 700 800 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Billion USD (current)

FDI flows to developing countries

Sources: Preqin, World Bank Development Indicators, EDFI

Uncommitted ($bn)

35.000 20.000 5.000 10.000 15.000 25.000 30.000 40.000

2009 2010 2016 2005 2006 2007 2008 2013 2011 2012 2014 2015 2017

EUR, mill

Portfolio European DFIs

In Investing directly in emerging markets - FDI

2000 4000 6000 8000 10000 12000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Lessons from China 25 years back:

• If you want to be part of high growth parts of global

economy – emerging markets is where you want to be

• No size fits all – the Western way does not always work
• Adapt to a different environment – culture, institutions,

partners…

• All business is local business
• Communicate and hold on to high ethical standards

GDP per capita in China

Billion USD

PE Fund:

Attractive Option For r Fin inancial In Investors

392 Fund Managers, 49 BLN USD under Management 320 Fund Managers, 14 BLN USD Under Management

South Asia

South-East Asia

330 Fund Managers, 32 BLN USD under Management

Africa … and enables attractive financial returns

Europe US Emerging markets

16.3% 13.7% 15.7%

IRR to PE and VC

Comparative End-to-End Returns by region 10- year (as of Q1 2018)

Why invest in Emerging Markets

The opportunity to create positive impact in this part of the world is formidable

Financial investors: WHY PE? WHY EMERGING MARKETS?

Access to PE to achieve market exposure

The listed equity market is small and geographically limited, whereas PE is a growing asset class

• Fastest growing regions

in the world,

• Urbanization and

middle-class growth.

• High quality, high

growth companies exists and

• more need to be created

.

WHY NOW?

Timing

Developed markets highly priced and leveraged and at the end of a long growth period. Asset prices in EM attractive Direct investors: WHY NEW MARKETS

Opportunity to build long term growth stories

Possible partners: BIO and European DFIs

EDFI - Association of European DFIs founded 2,100 staff 43 overseas offices in 20+ developing countries

Diversified in terms of size, skills, geography and instruments