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 USD/ capita (constant 2010 ) USD Sub-Saharan Africa billions 1900 50 45 1700 40 1500 35 GDP/capita 30 1300 25 FDI 1100 Addis Ababa • Development not possible 20 «Billions to trillions» • Business often the problem 15 900 • Aid cannot create growth but alleviates suffering 10 700 5 500 0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: World Bank Development Indicators

The New Development Paradigm: From Public Sector Aid To Catalysing Private Investments “It is the absence of broad-based business activity, not its presence, that condemns much of Kofi Annan humanity to suffering.” Kofi Annan

How to go fr from Billions to Trillions? Foreign Direct Investments (FDI) Policy respons: 50 Current USD billions to Sub-Saharan Africa • Guarantee schemes 45 • First loss mechanisms 40 • Public-private- 35 partnerships 30 • Blending/subsidize 25 20 15 + China Addis Ababa 10 «Billions to trillions» 5 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: World Bank Development Indicators

The world is is rapidly becoming a a better place Broad based improvements Millions accross EM: Number of poor at $1.90 a day (2011 PPP) 2000 • Life expectancy 1800 China 1990-2015: • Child mortality 750 million out of poverty 1600 • School enrolement China 1400 Nuber of people, millions • Maternity health 1200 • ... 1000 800 Rest of world 600 400 Sub Sahara Africa 200 0 1990 1993 1996 1999 2002 2005 2008 2010 2011 2012 2013 2015 Source: PovcalNet, World Bank

The New World – Where the Rich live Getting the facts right: Growing no. of Chineses tourist in Rich Poor world. Or tourism in Africa Source: Factfulness (2018) by Hans Rosling

Global In Income Tipping Point: Middle Class Dominance By 2030 Millions World population by income group 6,000 2018 5,500 5,300 2030 5,000 4,500 Getting the facts right: 4,000 3,590 Market for 3,500 3,160 diapers in Europe 3,000 vs Nigeria 2,500 2,300 2,000 1,500 1,000 630 450 500 300 200 0 Poor Vulnerable Middle Class Rich Less than $1,9/day $11-110/day Source : Brookings, Projections by World Data Lab

Afr frica is is the New China The African growth story: • More stable, democratic and pro private sector governments, still 54 countries… • Lesson from China: infrastructure 2000 2011 • Regional integration 2016 2019 • Raising middle class and urbanization

In Investment Gap: Provide Access To Capital Where Capital Is Scarce OECD Emerging markets FDI in emerging • Low savings • High savings • High interest rates • Low interest rates markets … • High GDP growth • Low GDP growth • Illiquid markets (illiquid stock • Over liquid markets markets, low FDIs etc..) (overvalued stock markets, … provide access • Moderate to high debt high FDIs etc..) • Ample investment • High and rising debt to capital where • Lack of investment opportunities it is scarce opportunities GDP growth GDP growth Source: OECD, “Winter is coming” by Sony Kapoor

What works: FDI, PE, DFI, … China FDI flows to developing Private Equity in EUR, mill Portfolio European DFIs countries Emerging Markets 40.000 800 800 Billion USD (current) 35.000 700 700 30.000 600 600 500 25.000 500 400 $bn 20.000 400 300 15.000 300 200 10.000 200 100 5.000 100 0 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Uncommitted ($bn) Uncommitted ($bn) Sources: Preqin, World Bank Development Indicators, EDFI

In Investing directly in emerging markets - FDI Billion USD 12000 Lessons from China 25 years back: 10000 • If you want to be part of high growth parts of global economy – emerging markets is where you want to be 8000 • No size fits all – the Western way does not always work • Adapt to a different environment – culture, institutions, 6000 partners… • All business is local business 4000 • Communicate and hold on to high ethical standards 2000 GDP per capita in China 0 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

PE Fund: Attractive Option For r Fin inancial In Investors South Asia … and enables attractive financial 392 Fund Managers , 49 BLN USD under Management returns IRR to PE and VC Comparative End-to-End Returns by region Africa 10- year (as of Q1 2018) 16.3% 15.7% 13.7% 320 Fund Managers , 14 BLN USD Under Management South-East Asia 330 Fund Managers , 32 BLN USD under Management Emerging US Europe markets

Why invest in Emerging Markets WHY EMERGING Financial investors: Direct investors: WHY NOW? MARKETS? WHY PE? WHY NEW MARKETS • Fastest growing regions Timing Access to PE to achieve Opportunity to build in the world, market exposure long term growth Developed markets highly • Urbanization and stories priced and leveraged and The listed equity market is middle-class growth. at the end of a long small and geographically • High quality, high growth period. limited, whereas PE is a growth companies growing asset class Asset prices in EM exists and attractive • more need to be created . The opportunity to create positive impact in this part of the world is formidable

Possible partners: BIO and European DFIs Diversified in terms of size, EDFI - Association of European DFIs skills, geography founded and instruments 2,100 staff 43 overseas offices in 20+ developing countries