Financial Intermediation

in
sub-Saharan Africa
An Investment Opportunity?

Presented
by
James Kwabena Addo

Abuja, December 2009

 Presentation Coverage

• Financial Intermediation Today

• Market Entry Challenges

• Opportunities

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 Finance Today

• Commercial Banking
– Deposit, Savings, Call Accounts
– Secured Credit Lines and Leasing

• Investment Banking
– Intermediation & Advisory
– Stock Broking

• Insurance
– Traditional Liability
– Limited Life and Health

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 Current Status of Industry

– Shallow and Poor Infrastructure

– Small relative to Economic Activity
– High Interest Spreads and Margins
– High Overhead Impact of Global Crisis
– Low Average Penetration (under 25%)
– Limited Financial Product Range
– 26 Capital Markets with 21 active
– Limited Underwriting Capability
– Limited Capital Markets
– Skills Deficit

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African Capital Markets
DAILY AVERAGE VOLUME
NUMBER OF LISTINGS
(in thousands USD)

 26 exchanges & more than 900 tradable equities 2008 2007 2006 2008 2007 2006

 African capital markets are complex & diverse Nigeria $81,384 $62,030 $24,682 212 207 288
 Highly fragmented national & regional exchanges Kenya $5,692 $5,064 $7,116 55 53 49
 Liquidity issues & constraints Ghana $1,447 $504 $190 36 34 32
 Transparency of pricing Mauritius $1,407 $1,495 $569 39 40 41
 Registration, licensing and other regulatory issues & BRVM $1,219 $664 $536 38 38 40
constraints
Zambia $671 $1,185 $399 20 17 16
 Slippage, cost & other execution inefficiencies
Botswana $576 $537 $344 31 31 29
 Importance of having multiple access points to each
individual exchange Uganda $315 - - 10 9 8

Tanzania $303 - - 13 10 10

Malawi $241 $149 $58 15 13 11

East Africa & Indian Ocean North & West Africa Southern Africa
 Dar es Salaam Stock Exchange (DSE)  Bolsa de Valores de Cabo Verde (BVC)  Angolan Stock Exchange (BVA)

 Bourse de Casablanca  Bolsa de Valores de Mozambique (BVM)

 Khartoum Stock Exchange (KSE)
 Bourse de Tunis (BVMT)  Bond Exchange of South Africa (BESA)
 Nairobi Stock Exchange (NSE)
 Bourse des Valeurs Mobilieres d’Alger  Botswana Stock Exchange (BSE)
 Rwanda Stock Exchange
 Bourse Regionale des Valeurs Mobilieres (BRVM)  Johannesburg Securities Exchange (JSE)
 Stock Exchange of Mauritius (SEM)
 Cairo & Alexandria Stock Exchange (CASE)  Lusaka Stock Exchange (LuSE)
 Uganda Securities Exchange (USE)  Malawi Stock Exchange (MSE)
 Douala Stock Exchange (DSX)
 Ghana Stock Exchange (GSE)  Namibian Stock Exchange (NSX)

 The Nigerian Stock Exchange (NSE)  South African Futures Exchange (SAFEX)
 Swaziland Stock Exchange (SSX)
 Zimbabwe Stock Exchange (ZSE)

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 Key Players – Banking/Insurance

Sub Saharan Africa

• South Africa – First Rand(20), Standard (17),
• Nigeria - UBA(13), Access(7), Guaranty(5),
Zenith(4)
• Togo – Ecobank (29)

Foreign Subsidiaries
• Barclays, Standard Chartered, SG,

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 Key Players – Insurance Only

• Pan African Insurance

• Nigeria, South Africa, Kenya, Ghana & Cote D’Ivoire boast

strong national brands

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 Buy Side Dynamics

• Insurance
• Short term
• Life
• Medical

• Banking
• Small Business loans
• Asset based finance
• Longer term lending
• M&A Financing
• Securities Underwriting

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 Buy Side Dynamics

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 Sell Side Issues

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 Margins are Higher than Most

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 Higher Returns
Returns on equity across regions

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 Positive Macro Trends

• Minimal Correlation to Europe & US markets

• Significant Progress in Regional Markets

• Consolidation into Regional Exchanges

• Increased South-South Interactions

• Financial Deepening and Broadening

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 Improving Market Signs

• Upturn in Commodities Cycle

• Injection of Liquidity in Key Markets

• Turnaround of Major Capital Markets

• Increase in Corporate Bond Issues

• Inflationary Cycle Stability

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 Benchmarking Advances

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 Securities Africa

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 Single-Point Access to African Capital Markets

 Extensive operating track record in Africa

 Experienced management team
 Strong working knowledge of African capital
markets
 Individually tailored, cost-competitive
solutions
London
 Client-focused, personal service
 Proprietary platform combines latest New York
communication and information technology Valletta
Hamilton
 Access to wide network of investment advisors,
financial managers, banking professionals &
tax experts
Nairobi*
Kigali
Lusaka Blantyre
Gaborone* Harare
Johannesburg

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Securities Africa - Overview
Corporate Finance & Investment Banking
 Origination / Coverage
 M&A Advisory
 Distribution – Primary Markets
 Syndicated Loans
 Leverage Finance
 Private Placement
 Structured Credit / Equity
 Industry Coverage – financial services,
hospitality, infrastructure, property,
resources & telecommunications
Index & Data Services
 Maintain proprietary database of market-
related and corporate actions data for
both listed & non-listed African securities
 Management & publication of sector,
country, regional & Pan-African equity
market indices
 Performance measurement & benchmark
analysis
 Real-time security pricing & dynamic
hedging programs
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Trade Execution & Brokerage
 Access to 26 individual African exchanges
 Licensed exchange member on multiple
African bourses
 Investor Coverage
 Mutual funds
 Commercial & investment banks
 Central banks & IFIs
 Pension funds
 Insurance companies
 Private equity & hedge funds
Trade & Project Finance
 Letters of credit, promissory notes, term
financing facilities, bank guarantees,
renewable energy certificates (RECs) &
export credit insurance
 Access to various hedge vehicles including
structured credit, equity FX & interest rate
derivatives
 Strong relationships with export credit
agencies, commercial banks & financial
institutions
Research
 Daily & Weekly Market Colour
 Industry Focus Reports – banks / financial
services, energy, food & beverage,
property & telecommunications
 Corporate Coverage – largest 40 listed
equities in Sub-Saharan Africa ex-SA
 Access to corporations, government
organizations & local industry experts via
conference calls, research trips & investor
road shows
Fund Administration & Custodial Services
 Accounting, reporting, valuation, custody
& corporate / secretarial services
 Fully-integrated fund administration
platform
 Powerful multi-currency general ledger
module
 Processing of corporate actions
 Straight-through processing & real-time
reconciliation of client funds
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 What has our Experience Been?

Zambia

Uganda

South Africa

Zimbabwe
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 Q&A

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