EY’s attractiveness surveyAfrica 2015Making choices

7EY’s attractiveness surveysEY’s attractiveness surveys are widely recognized byour clients, the media and major public stakeholdersas a key source of insight on foreign direct investment(FDI). Examining the attractiveness of a particular regionor country as an investment destination, the surveysare designed to help businesses to make investmentdecisions, and governments to remove barriers to futuregrowth. A two-step methodology analyzes both the realityand perception of FDI in the respective country or region.Findings are based on the views of representativepanels of international and local opinion leaders anddecision-makers.Emerging Markets CenterThe Emerging Markets Center is an EY Center of Excellencethat quickly and effectively connects you to the world’sfastest-growing economies. Our continuous investment in themallows us to share the breadth of our knowledge through awide range of initiatives, tools and applications, thus offeringbusinesses in both mature and emerging markets an in-depthand cross-border approach, supported by our leading and highlyintegrated global structure.For more information, please visit:• emergingmarkets.ey.comFollow us on Twitter:• @EY_EmergingMktsContentsCover: Moses Mabhida Stadium, Durban, South Africa

Downtown Lagos, NigeriaAfrica Union Conference Center and Office Complex (AUCC), Addis Ababa, Ethiopia3824Nairobi Skyscraper, Kenya2Foreword7–23RealityFDI in Africa in 20148 — FDI: fewer projects, but surgingjobs and investment11 — Where investors go: North Africarebounds as southern inflowsfalter16 — Where they come from: diversesources ensure ongoing resilience21 — What they invest in:real estate, infrastructure andconsumer-facing sectors4–5Executive summary24–37PerceptionHow foreign investors see Africa25 — Why here? Natural resources,growth and markets are thebig draws28 — Why not? Africa’s attractivenessslips31 — What next? Overcomingroadblocks to doing businessin Africa38–55FutureAssuring Africa’s long-term growth39 — Dealing with deterioratingperceptions40 — Addressing the challenge ofstructural transformation42 — Looking ahead: toward inclusive,sustainable growth43 — EY’s view: five priorities foraction56Methodology58EY in Africa60Contacts61Publications

ForewordRajiv MemaniChairman, EY Global Emerging MarketsCommittee“We remain confidentthat, despite economicheadwinds, the ‘Africarising’ narrative remainsintact and sustainable.”Welcome to the fifth edition of our annual Africa attractivenesssurvey. This milestone is an opportunity to pause and reflect onhow Africa’s attractiveness has evolved. Our very first editionwas released after a decade of strong economic growth, at a timewhen South Africa had just successfully hosted the football WorldCup; a time of increasing optimism about Africa’s progress.Our mission, from the outset, has been to provide factualsubstance to the “Africa rising” narrative. Over the past fiveyears, we have helped tell new stories about Africa, stories ofeconomic growth and opportunity, democratic progress andhuman development. However, in telling these stories, we havealso not shied away from the challenges that remain if we aregoing to unlock Africa’s vast human and economic potential.So where is Africa in its journey? That is a question of perspective.In the past year, Africa has experienced stronger headwinds thanin recent times. Economic expansion this year is likely to be atits slowest in five years, dragged down by the impact of loweroil prices on the Nigerian and Angolan economies, as well asSouth Africa’s sluggish growth. Our survey reveals that investorsentiment has softened somewhat, and that FDI projects aredown for a second consecutive year.Yet economic growth across the continent remains resilient.Despite the headwinds, growth in Sub-Saharan Africa (SSA) willbeat the emerging markets average, and be outstripped only bydeveloping Asia. Ethiopia, Kenya, Tanzania, Mozambique, Zambiaand Cote d’Ivoire are among 22 economies in SSA that areexpected to grow by more than five percent this year.Ajen SitaChief Executive Officer, EY Africa2 EY’s attractiveness survey Africa 2015 Making choices

Our data also shows that, although the number of FDI projects fellthis year, the value of those projects increased sharply, as did thenumber of jobs they created. Indeed, the capital value of FDI was,by far, the highest we have seen over the past five years. We donot know yet whether this is sustainable, but it is certainly causefor celebration.This mixed picture is not surprising. It reflects the diversityand complexity of this great continent — there is never aone-size-fits-all answer. Perspective remains important. Ourshas been, and remains, a glass-half-full viewpoint. We remainconfident that, despite economic headwinds, the “Africa rising”narrative remains intact and sustainable.However, Africa’s future will not take care of itself. Our view is thatAfrica and its leaders have reached an inflection point: deliberateand urgent choices are required to raise levels of productivityand competitiveness, accelerate structural transformation andmake the shift toward an inclusive, sustainable growth path. Inthis context, we outline five priorities for action that we believeAfrica’s leaders — across business and government — shouldfocus on.In our first edition, we declared “it’s time for Africa!” Five yearson, we now assert “it’s time for Africa’s leaders!”By working together we have the opportunity to make a realdifference in realizing the dream of great African leaders likeNelson Mandela — to help build an Africa that is prosperous,where human potential has the opportunity to flourish, and wherenobody is left behind.We would like to extend our gratitude to the business leadersand EY professionals who have taken the time to share theirthoughts with us, for their significant contribution in this report.In our first edition,we declared “it’stime for Africa!”Five years on, ourview is that Africaand its leadershave reached aninflection point.EY’s attractiveness survey Africa 2015 Making choices3

Executive summaryFDI project numbers fall, but capital investment and jobs surgeGeopolitical tensions and weak economic growth ledto a 3.1% decline in greenfield FDI projects worldwidein 2014. FDI projects in Africa fell 8.4%, but remainedwell above pre-2008 levels. However, capital investmentinto the continent surged to US$128b, up 136%. AndFDI created 188,400 new African jobs, a 68% increase.Spurred by a handful of megadeals, the averageinvestment increased to US$174.5m per project, fromFDI projects by world region (% change, 2014 vs. 2013)Latin America and the CaribbeanSource: fDi Markets, January 2015.Asia-Pacific 17.3%North America 14.0%AfricaWestern EuropeMiddle EastRest of Europe-8.4%-14.8%-17.5%-17.7%-21.3%US$67.8m in 2013. Africa’s share of global capitalinvestment and job creation hit an all-time high in2014. Only Asia-Pacific attracted more FDI funds thanAfrica last year. Africa attracted more FDI funding thanNorth America, Latin America and the Caribbean, andWestern Europe, which historically draw significantlyhigher FDI flows than Africa.North Africa rebounds, but FDI in SSA shows contrasting trendsPolitical uncertainty following the Arab Spring in 2011is beginning to fade, and North Africa is becoming moreattractive as an investment destination. FDI investorsreturned enthusiastically to Egypt and Morocco.FDI by destination region (% change, 2014 vs. 2013)West AfricaFDI projects23% down15% YOY drop in FDI projects49% share of Africa’sFDI capital in 2014 —down from 81%Source: fDi Markets, February 2015.North AfricaSSA22% YOY rise in FDI projects51% share of Africa’sFDI capital in 2014East AfricaFDI projects12% downSouthern AfricaFDI projects11% downCapital136%YOY growthin FDI value in 2014Jobs68%YOY growthin jobs createdby FDI in 2014Project numbers in SSA reached their lowest pointsince 2010, however. Within SSA, some economies —including South Africa, Angola, Nigeria, Ghana andKenya — received fewer FDI projects. But Ethiopia andMozambique attracted growing inflows of projects.p.8p.11Note: The analysis of FDI data in this report includes a program of 13 construction projects in North Africa,worth a total of US$40b, announced in March 2014. However, as of May 2015, there is still someuncertainty regarding whether the program will go ahead.4 EY’s attractiveness survey Africa 2015 Making choices

GlossaryAfDB: African Development BankAGOA: African Growth and Opportunity ActCAGR: Compound annual growth rateCPR : Consumer products and retailDIP: Diversified industrial productsDRC: Democratic Republic of CongoEAC: East African CommunityECOWAS: Economic Community of West African StatesFDI: Foreign direct investmentFTA: Free-trade agreementsGCI: Global Competitiveness IndexICA: Infrastructure Consortium for AfricaIMF: International Monetary FundLNG: Liquefied natural gasM&A: Mergers and acquisitionsODA: Official development assistanceOECD: Organization for Economic Cooperationand DevelopmentNEPAD: New Partnership for Africa’s DevelopmentNFNV: New Faces, New VoicesPPP: Public-private partnershipsRHC: Real estate, hospitality and constructionSADC: Southern African Development CommunitySME: Small and medium-sized enterprisesSSA: Sub-Saharan AfricaTMT: Technology, media and telecommunicationsUNCTAD: United Nations Conference on Trade andDevelopmentUNDP: United Nations Development ProgramUNESCO: United Nations Educational, Scientific andCultural OrganizationVAT: Value-added taxWEF: World Economic Forum6 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessRealityFDI in Africain 2014US$128bFDI inflow in 2014, up 136% — Africabecomes the world’s second-largest FDIdestination188,400 jobscreated, up 68% on 20138.4%decline in FDI projects in 2014, thoughnumbers are well above pre-2008 levelsRe-emergence ofNorth Africawith FDI projects up 61% in Egypt and 52%in MoroccoMixed FDI activityacross Southern, West and East Africa,with fewer FDI projects in key economies:Angola, Ghana, Kenya, Nigeria andSouth AfricaMozambique and Ethiopiaemerge as popular investor destinationsin 2014Traditional investorsincluding the US and France refocuson AfricaReal estate, hospitalityand constructionbecomes the fourth most attractivesector by project numbers in Africa, aftertelecommunications, financial services, andconsumer products8FDI: fewer projects,but surging jobs andinvestment11Where investors go:North Africa rebounds assouthern inflows falter16Where they come from:diverse sources ensureongoing resilience21What they invest in: realestate, infrastructure andconsumer-facing sectors7

Reality FDI in Africa in 2014FDI: fewer projects, but surging jobs and investmentGlobal FDI stumbles — and African project inflows slideIn 2014, greenfield FDI projects in Africa were down 8.4%on 2013 levels. However, Africa was not alone. Worldwide,projects fell 3.1%, as the global economy slowed and regionalconflicts in Eastern Europe and the Middle East added togeopolitical uncertainty. As a result, in 2014 only North Americaand Asia-Pacific experienced growth in FDI levels. Despite thisdecline, Africa’s FDI project numbers remain substantially abovepre-2008 levels.Projects in Africa decline by 8.4% YOY in 2014, though remain well above pre-2008 levelsNumber of FDI projectsCAGR=8.7%878352747259680218895219800 800135185-8.4%733165409196 5264884626766156655682132007 2008 2009 2010 2011 2012 2013 2014All Africa SSA North AfricaSource: fDi Markets, February 2015.8 EY’s attractiveness survey Africa 2015 Making choices

Reality FDI in Africa in 2014Capital investment and job creation surgein AfricaCapital invested in FDI projects (US$b)9.0%8.4%74.3 73.1 48.0 54.2 127.9FDI capital into AfricaJobs created by FDI ('000)CAGR=14.5%7.7% 7.8%17.1%2010 2011 2012 2013 2014Africa's share of global FDI capitalCAGR=8.9%8.7%The continent more than doubled its share of global FDI flows,from 7.8% in 2013 to 17.1% in 2014. That made it the secondlargestrecipient of capital investment during the year, from sixthin 2013, and the fastest-growing destination for FDI funding.Africa’s relative share of FDI jobs also risesFDI projects announced in 2014 will create 188,400 jobs inAfrica — 76,200 more than in 2013. Africa’s share of the jobscreated globally by FDI rose from 5.9% in 2013 to 8.7% in 2014.However, from a job-creation perspective, African FDI remains apoor performer. Although Africa’s population is growing fast andunemployment is high, its FDI projects provide more capital thanemployment. In 2014, Africa attracted 17.1% of global FDI inflows(only Asia-Pacific performed better) but got only 8.7% of jobs. Itsincreased share of global FDI jobs in 2014 is an improvement, buta much bigger rebalancing is needed.5.6%6.9%6.3%5.9%134.0 170.4 120.5 112.2 188.42010 2011 2012 2013 2014Jobs created by FDI globallyAfrica's share of jobs created by FDISource: fDi Markets, February 2015.External financial flows to Africa to exceed US$190b in 2015External financial flows to Africa (US$b, % GDP)External financial flows (US$b)25020015010050020%16%12%48.7 53.8 65.5 81.9 109.2 139.7 150.6 135.0 147.9 167.3 187.9 192.0 181.1 191.5164.08%4%40.40%2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E* 2015P*% GDPExternal financial flows (US$b)% GDP*E=estimate, P=projectionSource: African Development Bank, OECD and UNDP.10 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessAfrican FDI inflows now exceed development aidAfrica has attracted substantial capital flows in the past decade,bolstered by strong growth prospects and better economicmanagement. A joint study by the African DevelopmentBank (AfDB), the Organization for Economic Cooperation andDevelopment (OECD) and the United Nations DevelopmentProgram (UNDP) estimates that external financial flows to Africahave quadrupled since 2000. 4External capital inflows are vital to the well-being of Africaneconomies. In 2015, they are forecast to equal 7.2% of thecontinent’s GDP. Not only have these flows grown rapidly overall,but their sources have changed fundamentally. FDI has grownalmost five-fold since 2000. It has overtaken officialdevelopment assistance (ODA), which more than tripled in thesame period to US$56.3b in 2014, but which is expected toslow sharply henceforth. Meanwhile, remittances from Africansworking abroad have become the biggest source of foreigninflows to African states. After a six-fold increase, they areexpected to have topped US$64b in 2015.While remittances help build homes, start businesses, andsupport consumption, FDI plays an equally vital role, helpingto build infrastructure, supply necessities, reduce poverty,develop skills, and more. FDI is helping diversify the continent’seconomies, many of which are overdependent on extracting andexporting natural resources.Foreign investments (both direct and portfolio) now largest source of capital flows to Africa (US$b)20002002200420062008201020122014E* 2015P*Foreign directinvestments12.523.320.023.425.433.835.452.866.455.146.049.849.754.249.455.2Portfolioinvestments1.5-3.6-0.4- developmentassistance15.516.821.427.430.035.844.639.545.247.948.051.751.355.856.354.9Remittances10.912.112.815.419.533.337.344. GDP6.8%8.4%9.3%9.3%9.7%11.0%12.3%11.4%8.7%10.0%9.6%8.6%8.3%8.2%7.3%7.2%Total40.448.753.865.581.9109.2139.7150.6135.0147.9167.3164.0187.9192.0181.1191.5*E=estimate, P=projectionSource: African Development Bank, OECD and UNDP.Where investors go: North Africa rebounds assouthern projects falterLast year, we highlighted an increase of FDI inflows in SSA, whilethose to North Africa declined. 2014 saw a strong resurgenceof FDI in North Africa, particularly in terms of capital inflows andjobs. Egypt and Morocco were the biggest winners. Meantime inSSA, where annual FDI project growth averaged 5.3% over thepast five years, project numbers fell 14.6% in 2014. Each of thethree key sub-regions (Southern, East and West Africa) attractedfewer projects, with declines in the hub economies of SouthAfrica, Nigeria, Ghana and Kenya. However, Mozambique andEthiopia attracted increased inward investment.North Africa recovers lost groundNorth Africa has regained traction after two sluggish years,attracting 22.2% more FDI projects than in 2013. It won ahigher share of African FDI projects, capital and jobs for thefirst time since 2007. And the capital inflows were big: NorthAfrica accounted for more than half of all African FDI inflows,against just 19.1% in 2013. And the number of jobs created,in a region where they are sorely needed, more than trebled toalmost 80,000, with North Africa’s share doubling to more than42% of the total. Though Libya remains unstable, investors have4 African Economic Outlook, African Development Bank, OECD and UNDP, 2015.EY’s attractiveness survey Africa 2015 Making choices11

Reality FDI in Africa in 2014shrugged off concerns over insecurity and political uncertainty,which had earlier dampened interest in North Africa and ledinternational companies to postpone or scale down theirinvestments. Egypt and Morocco, the region’s dominant economies,are benefiting most from the rebound in investor appetite.• EgyptAided by a return to stable government, Egypt reclaimed itsranking as the second-most attractive FDI destination in Africaduring 2014, attracting 71 projects, an increase of 61.4% on2013. Securing inflows of US$57.9b that created 51,634 jobs,it was Africa’s champion for both investment and job creation.Investors from the UAE played a vital role, launching about twiceas many projects as in 2013, with a focus on RHC. Attracted bythe 90 million-strong population, food and beverage companies,including Nestlé and Almarai, also unveiled investment plansfor Egypt. 5After years of political turmoil, the Egyptian economy isrecovering. The Egyptian Government has enacted reforms,including slashing costly energy subsidies and introducing newtaxes, with value-added tax (VAT) due later in 2015. 6 Additionally,the Government’s focus on infrastructure should add to Egypt’sappeal for investors. Planned infrastructure projects includewidening the Suez Canal and building an industrial zone alongsideit, adding capacity to Cairo’s metro system, modernizing andexpanding the rail network and building new port facilities. 7• MoroccoMorocco became the third-largest recipient of foreign investmentin Africa in 2014, with 67 FDI projects, up 52.3%. Frenchcompanies outpaced Spanish rivals to become Morocco’s leadingexternal direct investors in 2014. Financial services and TMTwere the favorite sectors for investment. Morocco benefits fromits historic ties and proximity to Western Europe, a proactiveFDI policy, and availability of skilled workers at lower wage ratesthan those in most developed markets. 8 The country has escapedmuch of the political turmoil that has affected its North Africanneighbors, and also benefits from stable government. 9North Africa sees FDI value grow,while share in job creation also increasesFDI projects, 2004—14 (% share)61.2% 59.6% 59.9%38.8% 40.4% 40.1%Totals 100%FDI amount, 2004—14 (% share)83.5%57.3%42.7%48.9%(SSA)34.3%16.5%23.6% 29.5% 19.1%Totals 100%2004 2006 2008 2010 2012 2013 2014Job creation from FDI projects, 2004—14 (% share)79.0%72.7%67.9%66.1%52.1% 50.4%32.1%North Africa65.7%47.9% 49.6%SSASource: fDi Markets, February 2015.67.9%32.1%76.4% 70.5%33.9%76.9%23.1%27.3%83.1%16.9%80.9%21.0%77.5%22.5%2004 2006 2008 2010 2012 2013 2014(NorthAfrica)51.1%57.7%42.3%2004 2006 2008 2010 2012 2013 20145 “Nestle plans to invest $138 million in Egypt in next few years,” Reuters website, reuters.com,accessed 4 February 2015.6 “IMF sends ‘message of confidence’ for Egypt’s economic reforms,” Financial Times website,ft.com, accessed 10 February 2015.7 “Egypt’s new era attracts GCC investment,” HSBC website, globalconnections.hsbc.com,accessed 23 January 2015.8 “Morocco economy: Morocco leads North Africa in terms of FDI inflows,”EY Performance Portal website, performance.ey.com, accessed 3 February 2015.9 “Morocco’s economy on track for growth,” Financial Times website,ft.com, accessed 10 February 2015.12 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessMorocco is increasingly positioning itself as a gateway to the fastgrowingAfrican continent, particularly for investors from the USand Europe. These investors have the advantages of a relativelystable business environment and support services, combinedwith good air links to many other African countries. The nationalcarrier, Royal Air Maroc, flies to more than 30 African cities. 10SSA: more investment capital and jobs, fewerprojectsFDI capital inflows to SSA during 2014 reached their highest peaksince 2008. The average investment in the region almost doubledto US$110.1m and foreign investors created 108,688 new jobs,up 22.7%. However, the surge was partly driven by a handful ofvery large deals. Meantime, the number of incoming projectsdeclined 14.6% to 568. It is too early to discern any new trends;thanks to its extensive untapped natural resources and growinginterest in property and hotel development, SSA will continue toattract large projects.The underlying trend in SSA remains one of steady FDI progress.The International Monetary Fund (IMF) expects growth in theregion to remain relatively robust, at 4.5% in 2015 and more than5% in 2016 (making SSA the second fastest-growing region in theworld). 11 Attracted by these strong fundamentals, internationalinvestors have paid mounting attention to SSA. Since 2007, thenumber of FDI projects in the region has grown at a compoundannual rate of 15.0%, with growth in funding flows and jobcreation exceeding 10%.Further evidence of investor confidence is provided by thesuccess of sovereign eurobond issues by Cote d’Ivoire, Kenya andSenegal. In the long term, we believe that the SSA region, whichcontains the bulk of Africa’s population, will continue to act as thecontinent’s growth engine.Southern, West and East Africa: fewer projects, butmore capital investmentFor a second year, we have split investment in SSA into foursub-areas: Southern, West, East and Central Africa. In 2010,Southern Africa overtook North Africa as the leading sub-area forinvestment, and its investment attractiveness lead has continuedto widen. However, during 2014, North Africa outstripped bothWest and East Africa to once again become the second mostattractive sub-area on the continent after Southern Africa.North Africa regains momentum, while Southern, East and West Africa see slower FDIFDI projects by destination region66556820142013% change (2014 vs. 2013)273 242135 165190146181 16021 20North AfricaSSASouthern AfricaWest AfricaEast AfricaCentral Africa22.2%-14.6%-11.4%-23.2%-11.6%-4.8%Source: fDi Markets, February 2015.10 “Morocco looks south as Europe stagnates,” Financial Times website,ft.com, accessed 16 February 2015.11 World Economic Outlook, International Monetary Fund (IMF),April 2015.EY’s attractiveness survey Africa 2015 Making choices13

Reality FDI in Africa in 2014Three areas (Southern, East and West Africa) experiencedsubdued project inflows in 2014. That is because FDI in the keyhub countries of South Africa, Angola, Kenya, Nigeria and Ghanawas weaker than last year. But we believe these countries willremain important regional hubs for FDI in Africa, because thefactors drawing investors to them are stable and long-lasting.• Southern AfricaSouthern Africa attracts about one-third of FDI projects inAfrica, and their numbers have been growing at a compoundannual growth rate (CAGR) of 10.8% since 2007. This year,its inbound FDI projects fell 11.4%. Capital inflows more thandoubled to US$33.6b in 2014, thanks to a massive energy sectordeal, but there was a marked fall in FDI projects announced inSouth Africa. The region’s anchor economy netted 121 FDIprojects, down 17.7% on 2013. Although the country remainedAfrica’s FDI champion, the amount of investment and the numberof jobs created per project were more modest. South Africa’sproject lead narrowed for the first time since 2010. Companiesfrom both the US and the UK, South Africa’s largest investors,announced fewer projects in 2014, like those from Germany andSpain. Angola, another key Southern African FDI destination, alsoattracted fewer projects last year. FDI in the country has graduallytapered after peaking at 52 projects in 2009.• East AfricaSince 2007, FDI projects in East Africa have grown at a CAGRof 19.9%, the strongest in Africa. The region has also attractedgrowing FDI investment and jobs during this period, bolsteredby the success of regional integration. In 2014, the numberof jobs created by FDI in East Africa almost doubled, though itattracted 11.6% fewer projects. FDI into East Africa’s largesteconomy, Kenya, softened during 2014, after growing by morethan 30% a year (CAGR) since 2007. Though it captured 8.5% ofAfrican inflows in 2014, the average project was small, Kenya’sshare of investment was a mere 1.8% and of jobs created 2.4%.Investors from the UK and Japan, who were Kenya’s largestinvestors in 2013, started fewer projects in 2014. Other EastAfrican countries, including Uganda, Tanzania and Rwanda alsosecured fewer FDI projects. Ongoing security problems andconflicts in Kenya and South Sudan have proved to be a concern,but investors are likely to remain interested in the region. Marketopportunities, natural resources and accelerating regionalintegration will continue attracting FDI.• West AfricaWest Africa attracted 23.2% fewer FDI projects in 2014, thoughby capital, investment increased 21%. The shift to fewer, highervalue projects came after seven years during which projectnumbers rose at a CAGR of 19.5%, the second-highest growthrate in Africa. Capital investment increased by 14.3% during thesame period. However, investors were probably deterred fromlaunching projects in parts of West Africa by the outbreak of Ebolathat began in December 2013 in Guinea. According to the WorldBank, Ebola cost Guinea, Liberia and Sierra Leone US$500m in2014, and may cost an additional US$1.6b in 2015. 12Nigeria, now Africa’s largest economy after rebasing its GDPlast year, attracted 49 FDI projects in 2014, 10 fewer thanduring 2013. However, the average project involved more thantwice as much investment, though job creation continued tolag. Companies from South Africa, the US, the UAE and Japanall launched fewer projects. Investment targeting Nigerianconsumers slackened: investors announced only six projects inCPR, down from 23 in 2013.This widespread trend to fewer, but higher value projects was alsodisplayed last year in Ghana, the second-largest West Africaneconomy, where growth in project numbers has averaged 34.1%since 2007. In 2014, the number of inward investment projectsfell to 39, from 58 in 2013, even as capital investment rose61.3%. Ghana slipped to seventh position in our project ranking,from fourth in 2013. Consumer-facing investments (includingTMT, financial services as well as CPR) fell out of favor. SouthAfrican, UK and Nigerian investors all became more cautiousabout launching projects in Ghana.12 “Sierra Leone and Liberia fight with Ebola perceptions,” fDi Intelligence website, www.fdiintelligence.com, accessed 16 February 2015.14 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessTop 15 countries by FDI projects (2014)3.6%Morocco9.5%Algeria1.8% 0.4% 1.1%-18.8%Tunisia1.7%1.5% 4.0%-42.1%9.7%Egypt61.4%45.3%9.1%52.3%27.4%Ethiopia18.5%Ghana3.5% 5.0%5.3%2.2%4.4%88.2%Uganda0.3%3.1% 1.0%-32.8%Cote d'Ivoire(Ivory Coast)0.4% 0.5%2.0%Nigeria8.4% 4.0%6.7%Kenya1.8%8.5%2.4%-12.7%-11.5%-11.8%Rwanda1.5% 0.4% 0.7%-16.9%Zambia2.3%4.9%2.0%Tanzania0.4%2.7% 0.7%-20.0%-21.4%South Africa-40.0%3.0% 4.5%16.5%Mozambique6.9% 5.8%-17.7% 6.8%47.1%Bubble size indicatesshare of projects (%)Share of capital (%) % increase in FDI projects (2014 vs. 2013)Share of jobs created by FDI (%)% decrease in FDI projects (2014 vs. 2013)Source: fDi Markets, February 2015.EY’s attractiveness survey Africa 2015 Making choices15

Reality FDI in Africa in 2014Emerging FDI destinations2014 saw rising investment flows to Mozambique and Ethiopia,which both attracted more FDI projects in 2014 and moved upour ranking.• MozambiqueThe country garnered 50 FDI projects in 2014, moving up twoplaces to become the fifth-largest recipient of FDI projectsin Africa. The promise of large natural gas deposits has putMozambique on the investment map. Yet the country is one of thefew to win a balanced share of projects, funds and jobs. Financialservices attracted the most projects in 2014 as three foreignretail banks moved in, opening a total of 16 branches. 13 There wasalso a strong uptick in RHC and automotive projects. Profitingfrom historic links, Portuguese investors were particularly activeduring the year, as were Belgians.• EthiopiaIn 2014, Ethiopia emerged as the 8th-largest recipient ofFDI projects in Africa, up from 14th position in 2013. FDI inEthiopia is atypical: though the 32 projects launched there lastyear accounted for only 4.4% of the African total, and involvedrelatively small sums, they provided an astonishing 18.5% of FDIjobs in Africa. The inflow reflects the combined attractions ofAfrica’s second-largest population, numbering 94 million, andan affordable workforce. Of the 32 projects Ethiopia attractedduring the year, 14 involved CPR, targeting a population ofwhich nearly two-thirds are aged 25 or under. 14 Ethiopia, nowAfrica’s fastest-growing economy, has slowly been opening upto foreign investment in manufacturing and retail. However,telecommunications and financial services remain the preserve ofstate-owned enterprises. Ethiopia’s Government is seeking foreigninvestment to finance ambitious infrastructure projects, includingits planned Grand Ethiopian Renaissance Dam on the Nile. 15 In2014, the country raised US$1b through a debut sovereign dollarbond issue. 16Where they come from: diverse sources ensureongoing resilienceLast year, the EY attractiveness survey: Africa 2014, highlightedthe growing levels of intra-regional investment in Africa, spurredby optimism over growth prospects and African investors’ deepunderstanding of regional dynamics.This year, Western European and intra-African investors remainedthe top sources of FDI (measured by projects), while investorsfrom North America and the Middle East showed renewed interestin the continent.Western Europe maintains leading position; investments from North America and theMiddle East on the riseFDI projects by source regions (in %)39.0%36.8%Western Europe24.6%19.2%17.5% 15.7%14.7%8.8% 9.1%7.9%1.3%3.7%0.9% 0.7%2005200620072008200920102011201220132014AfricaAsia-PacificNorth AmericaMiddle EastRest of EuropeLatin Americaand the CaribbeanSource: fDi Markets, February 2015.13 “Mozambique becomes Africa’s preferred banking hub,” fDi Intelligence website,fdiintelligence.com, accessed 27 January 2015.14 “FDI rises strongly,” Economist Intelligence Unit website, country.eiu.com,accessed 12 February 2015.15 “ETHIOPIA OPENS UP FOR FOREIGN INVESTMENT,” CNBC Africa website, cnbcafrica.com,accessed 16 February 2015.16 “Ethiopia Starts Marketing Debut Eurobond for Projects,” Bloomberg website, bloomberg.com,accessed 11 February 2015.16 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessEuropean investors continue to dominate investment in Africa as American interest rebuildsCollectively, European investors,among the traditional investors inAfrican markets, continue to launch,by far, the largest number of directinvestment projects in Africa. A decadeago North Americans were theirstrongest challengers — and indeed,the US continues to top the table bynation, rather than region of origin.European nations, led by the UK, remainkeen investors overall, though Britishcompanies eased back last year. Despitemany claims to the contrary, datashows that the commitment to Africafrom Asia-Pacific, in terms of FDI, hasweakened over the past decade — thoughChinese investment soared last year.Reports of emerging opportunities inAfrica and competition for influencebetween investors from emerging anddeveloped countries have stirredgovernments and policy-makers to action.The European Union (EU) is seeking topromote growth in Africa by negotiatingeconomic partnership agreements (EPAs)with regional blocs in the continent.These EPAs are designed to deliver dutyfreeand quota-free access for Africangoods to the EU market. Three EPAshave been signed, with the EconomicCommunity of West African States(ECOWAS), the East African Community(EAC) and with the Southern AfricanDevelopment Community (SADC). 17In April 2014, the fourth EU — Africasummit was held to discuss bilateralbusiness relationships. 18Meantime, the US Strategy Toward SSA,unveiled in 2012, makes encouraginggrowth, trade and investment one offour strategic objectives for US policymakers.19It was followed by the launch of USgovernment programs to facilitatetrade and investment in Africa, mostnotable President Barack Obama’s 2013Trade Africa initiative, aimed at expandingUS — Africa trade and investment,beginning initially with the EAC. The US’Doing Business in Africa campaign isbacked by US$7b of funding. Anotherkey initiative is Power Africa, intendedto add more than 30,000 megawatts ofelectricity generating capacity acrossthe continent and double the number ofpeople in SSA who have access to power.However, the country’s strategy for Africahinges upon the renewal of its AfricanGrowth and Opportunity Act (AGOA),which is due to expire in September2015. The act grants qualifying Africancountries tariff-free access to the USmarket for some goods and services. 2017 “East African trade ministers reached consensus on EPA,bringing the process near close,” International Centre forTrade and Sustainable Development website, ictsd.org,accessed 12 January 2015.18 “EU- Africa summit, Brussels, 02-03/04/2014,”European Council website, consilium.europa.eu,accessed 6 February 2015.19 “Fact Sheet: The New Strategy Toward SSA,” The WhiteHouse website, whitehouse.gov, accessed 17 March 2015.20 “African Leaders Sit Down With American Investors,”The New York Times website, nytimes.com, accessed 10January 2015; “US government launches Africacampaign,” fDi Intelligence website, fdiintelligence.com,accessed 4 February 2015; “All Eyes on Africa,”YaleGlobal Online website, yaleglobal.yale.edu,accessed 8 February 2015.EY’s attractiveness survey Africa 2015 Making choices17

Reality FDI in Africa in 2014The US becomes the largest investor, while the UAE, France, China and Portugal expand presenceTop 15 source countries by FDI projects (2014)USRank: 1GermanyRank: 6PortugalRank: 9SpainRank: 1029.5% 13.8% |||||||||||||||||||||||||||6.3% 7.2%4.8% |||||||||2.1% 2.3%125.0% 3.7% |||||||0.3% 0.9%-23.5% 3.5% |||||||0.7% 2.2%UKRank: 2-53.5%7.2% ||||||||||||||2.0% 3.3%ChinaRank: 7166.7% 4.4% ||||||||4.8% 5.8%FranceRank: 5South AfricaRank: 2IndiaRank: 8UAERank: 425.6% 6.7% |||||||||||||-18.5%7.2% ||||||||||||||-42.9% 3.8% |||||||22.0% 6.8% |||||||||||||14.8% 6.6%3.7% 4.3%0.9% 3.6%35.1% 23.7%Increase in FDI projects (2014 vs. 2013) Decrease in FDI projects (2014 vs. 2013)FDI projects in 2014 (share) FDI capital in 2014 (share) Jobs created by FDI in 2014 (share)Source: fDi Markets, February 2015.US investors lead the way in AfricaUS companies have traditionally been the largest group of foreigninvestors in Africa. Since 2007, they have launched 700 FDIprojects across the continent, pouring in US$52.7b and creatingnearly 98,000 jobs.After a slight dip in 2013, US companies became the largestinvestors in Africa again in 2014, overtaking those from the UK.Launching 101 FDI projects, up 29.5%, US investors accounted for13.8% of total FDI projects in Africa, an increase from a 9.8% sharein 2013. The number of US projects was almost double that fromthe next largest group of investors, coming from South Africa andthe UK, in joint second position. US investments in TMT surgedfrom 13 projects in 2013 to 28. US companies also initiated moreprojects in business services, cleantech and chemicals. SouthAfrica remained the favorite investment destination, chosen for23 projects, though they also invested more in the key hubs ofKenya, Morocco and Egypt. In August 2014, leading Americancompanies including Coca-Cola, Blackstone Group and CarlyleGroup announced more than US$14b investments in Africa at thefirst US-Africa Leaders’ Summit. 2121 “Coca-Cola Invests an Additional US$5 Billion for Long-Term Sustainable Growth in Africa,”The Coca-Cola Company website, coca-colacompany.com/press-center, 5 August 2014;“Blackstone, Carlyle Join Africa’s Dangote for Investment,” Bloomberg website, bloomberg.com,accessed 8 February 2015; “GE to invest $2 billion to boost African energy, infrastructure,”Reuters website, reuters.com, accessed 5 February 2015.18 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessCase studyGeneral Electric (GE)GE, a US-based multinational manufacturer withproducts ranging from pumps to medical scanners, hasbeen present in Africa since 1898. In 2013, it achievedsales of US$5.2b in Africa. Responding to rising Africandemand, in August 2014, the company announcedthat it would invest up to US$2b in Africa and doubleits workforce on the continent to 4,000 during the fiveyears to 2018. Its investments would be focused uponthree areas: developing facilities, improving its supplychain and training workers.GE is benefiting from the drive to improve Africa’sinfrastructure. It has won substantial contracts tosupply power generation equipment in Algeria, Nigeriaand Angola. It is supplying railway locomotives inAngola and South Africa. GE has been working withthe engineering arm of South Africa’s national railoperating company, Transnet, to assemble locomotivesin-country. It is also investing in health programsacross Africa.Sources: “GE Sees $2 Billion Africa Spending, Doubling of Workforce,”Bloomberg website, www.bloomberg.com, accessed 20 April 2015;“Building Africa’s Growth Engine: GE to Invest Billions in Continent’sPeople, Infrastructure, Manufacturing,” GE website, www.gereports.com, accessed 20 April 2015.Intra-African investment: fewer projects, more jobsIntra-African investment was again the second-largest sourceof FDI, though its share of projects eased from 24.5% in 2013to 19.2% in 2014. South African companies ranked as thecontinent’s second-biggest investor group, launching 53 projectsin 2014, down from 65 the previous year. Though they provided7.2% of projects during the year, they invested only 4% of thecontinent’s FDI capital inflow and provided relatively few jobs.Investors from Nigeria and Kenya, two other African FDI dynamos,were also less active in launching projects. Moroccans, on theother hand, became more prominent investors, initiating 13intra-African investments last year — the highest in over a decade.Moroccan companies are looking toward SSA as the countrybecomes a platform for exporting to African countries. Moroccanchampions, including Saham Insurance Company, AttijariwafaBank, Groupe BCP and Maroc Telecom, are meantime expandingin Africa, rather than slow-growth Europe. 22UK investors flag, while French and PortugueserecoverWhereas UK investors were at the forefront in 2013, they slippedto joint-second place in 2014, alongside those from South Africa.Projects from UK companies more than halved to just 53 in 2014.They made many fewer investments in consumer-facing sectors,particularly TMT, financial services and business services.But European investors, profiting from historic business, cultural,language and transport ties, continued to dominate the AfricanFDI scene. French investors were more active, initiating 49projects (+25.6%), creating 12,373 jobs and providing a chunky14.8% of African FDI capital inflows. Their projects were diverse,but centered upon TMT, transport and logistics and CPR. Eighteenof the French corporate projects were in Morocco, which remainsa near and popular destination (though South Africa and Nigeriawere their next favorite targets). French bank BNP Paribas set upcorporate and investment banking activities in Casablanca, whichis striving to develop as an African financial hub. 23Portuguese companies more than doubled the number of FDIprojects they launched in Africa to 27 in 2014. More than 70%of their investments were in financial services, with Mozambiquethe primary destination, aided by strong cultural and languageties. Other projects were in automotive and diversified industrialproducts (DIP).22 “Morocco looks south as Europe stagnates,” Financial Times website, www.ft.com, accessed 17February 2015.23 “Finance: Casablanca Finance City announces BNP Paribas Regional Investment Company CFCStatus,” Casablanca Finance City website, www.casablancafinancecity.com, accessed11 February 2015.EY’s attractiveness survey Africa 2015 Making choices19

Reality FDI in Africa in 2014Resurgence of investment from the Middle EastThe UAE became the fourth-largest source of FDI projects inAfrica in 2014, moving up a place. UAE companies now investmore money in Africa than those of any other nation, and createthe most jobs. Indicative of a major investment are the moves byUAE retailer Majid Al Futtaim to invest US$2.3b in Egypt over thenext four to five years. 24 Gulf investors played a key role in there-emergence of North Africa as a leading FDI destination in 2014.Companies from the Middle East have historically enjoyed closecultural and business ties with North Africa, particularly Egyptand Morocco. Companies from the oil-rich Gulf states increasedtheir share of African FDI projects to 9.1% in 2014. Saudi Arabiancompanies took on a bigger role, launching 11 FDI projects inAfrica last year, up from just 3 in 2013. Middle Eastern investorswere especially strong in RHC (26.9% of their projects), financialservices (20.9%) and CPR (19.4%).Chinese investment is modest, but spreadingIn 2014, Chinese companies announced 32 FDI projects acrossthe continent, just 4.4% of the total, entailing a total investmentof US$6.1b and creating 11,015 jobs, 5.8% of those createdacross Africa by FDI. By project numbers, Chinese companiesranked seventh among Africa’s foreign investors and haveovertaken those from India.South Africa was the favorite destination for Chinese projects,securing 34.4% of them. Tanzania, Ghana and Kenya were alsopopular, each taking a 9.4% share. Nearly a third of Chinese FDIprojects were in TMT, though Chinese companies also stepped upinvestment in coal, oil and natural gas, mining and metals, andaerospace and defense.China’s economic ties with Africa continue to strengthen. In 2009,China overtook the US to become Africa’s largest trading partner.Case studyGulf companies’ increasinginvestments in AfricaninfrastructureInvestors from the Middle East have been increasinglyactive in infrastructure projects in Africa, includingports and telecommunications, with a growing focuson power generation. According to the EconomistIntelligence Unit, Gulf companies have invested at leastUS$30b in African infrastructure over the past decade.Going forward, their investments are now expected toaverage US$5b a year.Saudi Arabia-based ACWA Power and its partners havewon contracts to build two concentrated solar powerplants in Morocco and are building a third in SouthAfrica. Meantime TAQA, an energy group based in Abu-Dhabi, is building the Takoradi 2 gas-fired power plantin Ghana.Sources: Risk and reward: The Gulf’s push into African infrastructure,Economist Intelligence Unit, September 2014; “Our Investments,”ACWA Power website, www.acwapower.com, accessed 20 April 2015.In recent decades, Africa has become a source of raw materials tofuel China’s economic growth, and a market for its manufacturedgoods. Now it is emerging as a low-cost manufacturing basefor some Chinese firms. Chinese companies and state-relatedentities have financed and built many infrastructure projects onthe continent, including ports, roads, railways, dams, telecomnetworks, power stations and airports. 25 In May 2014, ChinesePremier Li Keqiang made an eight-day tour of African nations,announcing several trade, investment, energy and developmentagreements.24 “UPDATE 1-Dubai retailer MAF to invest $2.3 bln in Egypt,” Reuters website, www.reuters.com,accessed 5 January 2015.25 Playing the Long Game: China’s Investment in Africa, Economist Intelligence Unit, October 2014.20 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessWhat they invest in: real estate, infrastructure andconsumer-facing sectorsIn 2014, the broadening-out of greenfield FDI projects in Africabeyond extractive industries continued apace. The needs of alarge middle class (expected to grow from 32 million in 2009 to57 million by 2020 and 107m by 2030) 26 and growing businessand leisure travel are turning investor attention toward servicingconsumers and filling the infrastructure deficit.This year, we are seeing a much sharper investor focus onopportunities in RHC. While only ranking as the fourth mostattractive sector in Africa by projects, it accounted for more than40% of FDI investment flows, and created a third of all FDI jobs.TMT, financial services, and CPR continued to dominate the rankingby project numbers, and to provide much new employment. Thesethree sectors have led investment activity into Africa since 2009,a trend that accelerated further in 2014. But coal, oil and naturalgas still accounts for a quarter of the funds poured into Africa byforeign direct investors.TMT, financial services and CPR together attracted 51.8% of FDI projects in 2014Top 10 sectors by FDI projects (2014)TMT27.8% Financial services10.4%19.6% 5.5%8.3%18.1% 1.2%6.4%2.0%17.3%10.5%9.8%MoroccoGhanaNigeriaEgyptEthiopiaKenyaCPR18.4%13.6%RHC32.2%14.1%10.7% 8.0%4.4%43.8%31.5% 33.6%6.8%16.9%South AfricaMozambiqueBusiness services25.5%Transport andlogistics7.5%14.5%12.7%6.3%0.5%2.2%21.7%8.7%8.7%DIP5.3%0.3%30.8%10.3%7.7%1.6% 3.1% 1.5%Automotive20.0%Coal, oil andnatural gas16.7%4.1% 3.5%13.3%0.9%25.4%19.2%15.4%7.7%Chemicals3.3%5.2%20.8%12.5%16.7%5.7%3.7% 2.4%Projects (share in %) FDI capital (share) Jobs created by FDI (share)Top two sectors by % share Top two sectors by % shareSource: fDi Markets, February 2015.26 Hitting the sweet spot: The growth of the middle class in emerging markets, EY, 2013.EY’s attractiveness survey Africa 2015 Making choices21

Reality FDI in Africa in 2014Africa’s real estate and hospitality boomentices investorsIn 2014, opportunities in RHC attracted 59 projects, up 11.3%.But the modest increase in project numbers masks the scale andimportance of these investments, which now account for 43.8%of capital investment inflows and generate 33.6% of FDI jobs inAfrica. The surge was especially evident in Egypt, which was thetarget of more than 30% of Africa’s RHC investments in 2014.Investors from the UAE launched 30.5% of these projects, withSouth African companies also active.Investment in the RHC sector is gaining traction. Demand forreal estate is growing as Africans become more numerous, increasetheir spending power, and move to cities. 27 Oxford Economicsprojects that Africa’s urban population will grow at least twiceas fast as those of any other continent until 2030. 28 Africa ishome to four of the world’s megacities: Cairo, Johannesburg,Kinshasa and Lagos. Many others are expanding rapidly, includingAbuja, Accra, Addis Ababa, Luanda, Lusaka, Maputo and Nairobi.Growing urban populations need homes and, as they travel more,hotels and restaurants also serve an influx of business travelersand tourists. As economies grow, and manufacturing and servicesexpand, demand for industrial, distribution, and retail real estateexpands, along with demand for modern offices.Fixing Africa’s infrastructure deficit and rising demand fromits growing population offers ample opportunities for foreigninvestors in infrastructure development. Poor roads, ports, raillinks and connections slows economic growth and hampersbusiness productivity. 29International hotel chains are also striving to meet burgeoningdemand in Africa, where supply of hotels in all categories isoften inadequate. With few properties or chains to buy, globalhotel groups have largely to rely upon organic growth. Accordingto the UN World Tourism Organization, international arrivalsin Africa exceeded 50 million in 2012 and are expected to top85 million by 2020. Increasing regional and international tradein Africa has buoyedCase studyMarriott InternationalAfter completing the acquisition of the South-Africanbased Protea Hospitality Group, Marriott Internationallast year became the largest hotel company in Africa.In October 2014, the company announced plansto expand its African presence further, from 120properties across 10 countries to 150 properties in17 national markets by 2020. It also intends to add10,000 more African associates to its workforce.These developments will involve an outlay of aboutUS$1.5b by Marriott and its real estate partners acrossthe continent.Sources: “Marriott International Completes Acquisition of ProteaHospitality Group; Becomes the Largest Hotel Company in Africa,”Marriott website, news.marriott.com, 1 April 2014; “MarriottInternational’s Commitment to Expansion Across Africa GathersMomentum,” Marriott website, news.marriott.com, 2 October 2014.the number of business travelers, prompting leading hoteliersto develop ambitious plans. 30 For example French hotel groupAccor has 20 projects totaling 3,600 rooms under developmentin SSA. 31Investors line up to service rising consumerdemand• Technology, media and telecommunicationsAlmost a fifth of African investment projects in 2014 were inTMT. South Africa was the top destination, followed by Nigeria,Morocco and Kenya. US companies more than doubled their FDIprojects in this sector during 2014. Business technology groupIBM announced in February 2014 that it will open innovationcenters in Morocco and Nigeria, working on big data, analytics27 “High stakes for high reward? Real estate funds come to Africa,” Reuters website, reuters.com,accessed 19 January 2015.28 Bright continent: The future of Africa’s opportunity cities, Oxford Economics, 2014.29 “African Leaders, Business Community Push for Financing of Priority Regional InfrastructureProjects,” World Bank website, worldbank.org, accessed 24 April 2015.30 “Africa is new battleground for global hotel industry,” Financial Times website, ft.com, accessed20 January 2015.31 “South Africa,” Accor website, accor.com, accessed 20 March 2015.22EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessand cloud computing. 32 Mobile subscriptions and data trafficare rising strongly in Africa, opening up opportunities to supplyeducation, banking and health care via the internet, adding to thesector’s appeal. 33• Financial servicesFinancial services is the second-largest sector by projectnumbers, and increasingly driven by intra-African investment.Last year, about 40% of cross-border financial services projectswere launched by African companies.Regional banks and financial services providers are increasinglyadopting a pan-African approach to capitalize on a veryunderdeveloped market: only 25% of adults in SSA have bankaccounts, against a global average of 51%. Among intra-regionalinvestors, South African firms led with 16 projects. The country’slargest banks, Barclays Africa, FirstRand, Nedbank and StandardBank have all pursued Africa-wide expansion strategies over thepast several years, 34 as have Ecobank, headquartered in Togo, andMorocco-based Attijariwafa bank.• Consumer products and retailForeign investors launched 103 CPR projects in 2014, making itthe third-favorite sector for FDI. These brought about nearly twiceas many jobs as those in 2013, with the average CPR projectnow creating 576 jobs, up from 237 in 2013. This year, WesternEuropean firms outpaced rivals from Asia-Pacific to becomethe leading initiators of CPR projects. Egypt was the leadingdestination, with 19 projects, but CPR projects in Kenya, Nigeriaand South Africa declined.32 “IBM Fuels Innovation and Entrepreneurship in Africa,” IBM website, www-03.ibm.com/press,7 February 2014.33 “Lower-cost handsets help drive internet revolution,” Financial Times website, 5 October 2014,ft.com, accessed 5 February 2015.34 “Expanding financial sector draws interest from investors,” Financial Times website, ft.com,5 October 2014, accessed 5 January 2015.EY’s attractiveness survey Africa 2015 Making choices 23

PerceptionHow foreigninvestors seeAfricaAgricultureis seen as a future growth sectorMarginal slipin Africa’s attractiveness in 2014,chiefly due to concerns about politicalinstabilityMost attractivedestination in the world for establishedinvestors50%+of respondents say an unstablepolitical environment is the maindeterrent to investing in AfricaMore than a quarterhighlight corruption as a key barrier27%of investors call for sustainablegovernance systems25Why here? Naturalresources, growth andmarkets are the big draws28Why not? Africa’sattractiveness slips31What next? Overcomingroadblocks to doingbusiness in Africa24

www.ey.com/attractivenessWhy here? Natural resources, growth and marketsare the big drawsThis year’s survey shows that Africa’s investment appeal isbuilt on a set of stable, fundamental factors. Natural resourcesremain a strong draw for foreign investors, despite the growingdiversification of FDI in Africa. This suggests that naturalresources in Africa, including agriculture, still have considerableinvestment potential. At the same time, the strengtheninginvestor focus on consumer-facing activities reflects strongeconomic and demographic growth.Please rate the following parameters for investment in Africa as very, fairly, not very or not at all attractiveNatural resources53.2%23.5%14.4%7.7%1.2%Economic growth30.5%36.6%24.0%8.2%0.6%Domestic markets24.6%36.2%26.8%9.9%2.5%Large, low-costlabor force27.5%32.1%28.0%10.7%1.8%Demographics22.1%35.1%27.0%12.5%3.3%Political and socialenvironment8.9%18.5%37.1%34.3%1.2%Very attractive Fairly attractive Not very attractive Not at all attractive Can’t saySources : EY's 2015 Africa attractiveness survey (total respondents: 501).Natural resources: digging and drillingAfrica is well endowed with natural resources and its mineralwealth has long made it a destination for resource-hungryinvestors. However, only a fraction of them are yet beingextracted. The continent has 8.6% of the world’s proven oilreserves and 7.2% of its natural gas. 35 Africa also has a heftyshare of the world’s minerals — including bauxite, copper,chromium, cobalt, gold, manganese, phosphate, titanium anddiamonds. 36 The African Development Bank forecasts that thecontinent’s natural resources will contribute more than US$30ba year to the revenues of its governments by 2033. 3735 Annual Statistical Bulletin 2014, OPEC, 2014.36 Minerals and Africa’s Development: The International Study Group Report on Africa’s MineralRegimes, United Nations Economic Commission for Africa (UNECA), November 2011.37 “Africa’s mineral wealth: A blessing or a curse?,” African Development Bank Group website,www.afdb.org, accessed 6 February 2015.EY’s attractiveness survey Africa 2015 Making choices25

Perception How foreign investors see AfricaGrowing potential: investors believe in agriculture’s futureInvestors believe agriculture is the most promising growthopportunity in Africa, ahead of mining and metals. Almost athird of businees decision-makers identified agriculture as a vitaldriver of future growth.Investors recognize the importance of farming to Africa’seconomies. Today, agriculture generates a quarter of GDP in SSAas a whole, and significantly more in some countries. 38 Africaalready has extensive plantations producing palm oil, rubber,cocoa, coffee and other commodities. It exports bananas, beans,fruit and flowers to European tables. But much of its agricultureis still subsistence-based.Africa has nearly a quarter of the world’s arable land, butproduces only 10% of global agricultural output. 39 And itsdiverse climates can produce almost any conceivable crop. TheWorld Bank predicts that African agriculture and agribusinesswill generate sales of US$1t by 2030. A United Nations reportpredicts that FDI in African agriculture will grow more thanfourfold in the decade to 2020, to reach US$45b a year. 40 Thereis ample scope for improvement. Africa has considerable waterresources, but less than 5% of cultivated land is irrigated. 41Despite its potential, the continent is obliged to import food totop up inadequate local production. Yet, as African populationsgrow and become more prosperous, they will buy more protein,more processed foods and high-value commodities, and fewerstaples. The agricultural sector is ripe for development.Today, farmers in Africa are hampered by wretched transportlinks, inefficient markets, and inadequate facilities forpackaging and storing production. Wastage is high. Investingin the agricultural value chain, which employs over half of thepopulation, can solve a raft of problems: enhancing nutritionand health, providing the resources to improve rural education,slowing migration to cities, and aiding the development ofrural industry. Good examples of best practice in farming andfood-processing can be found across the continent. But scalingthem up across the full range of potential crops will take massiveinvestment spread across myriad projects.Which three sectors offer the highest growthpotential for Africa in the next two years?Sector 2015Agriculture 31.4%Mining and metals 28.0%Oil and gas 18.5%Hotels and tourism 16.7%Infrastructure (roads,highways and ports)Consumer products(food and beverages,textiles ...)Real estate andconstruction15.5%13.0%9.8%Telecommunications 8.4%Financial services 7.2%Informationtechnology7.0%Can't say 8.3%Source: EY's 2015 Africa attractiveness survey (total respondents: 501).38 Agricultural value chains in SSA: From a development challenge to a business opportunity,Deutsche Bank, April 2014.39 Agribusiness and Development: How investment in the African agri-food sector can helpsupport development, European Commission, 2013.40 “Denting youth unemployment through agriculture,” UN website, www.un.org, accessed20 March 2015.41 Agricultural value chains in SSA: From a development challenge to a business opportunity,Deutsche Bank, April 2014.26 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessCase studyGrow AfricaCo-founded by the African Union, the New Partnershipfor Africa’s Development (NEPAD) and the WorldEconomic Forum (WEF) in 2012, Grow Africaaims to transform African agriculture through theComprehensive African Agriculture DevelopmentProgramme (CAADP). The second Annual Report,released in May 2014, said that investmentcommitments by partner companies of the Grow Africaprogram more than doubled to US$7.2b in 2013,and US$970m of this had already been invested. Thishelped create 33,000 jobs and assisted 2.6 millionsmallholders across Africa.Source: “Grow Africa Partners Double Investment Plans for Agricultureto $7.2 billion,” World Economic Forum website, www.weforum.org/news, accessed 2 May 2014.Appealing economic growthIn 2014, Africa accounted for 9 of the 15 fastest-growingeconomies globally. 42 Today, 26 of Africa’s 54 countries haveachieved middle-income status. 43 The last decade saw sustainedgrowth across Africa, with GDP growth rates of 5% or more formost countries. These were achieved despite slow growth indeveloped economies and softer growth in demand for manycommodities, leading to weaker prices and hence export earnings.Increasingly, Africa’s development has been powered by rapidlyexpanding private consumption and a gradually improvingbusiness environment. In the past nine years, the costs of startinga business in Africa have typically reduced by more than twothirds,while delays in time taken to start a business have beenhalved. 44 Prospects for continued growth in Africa remain strong.Burgeoning domestic marketsAfrica’s population is expected to more than double from1.1 billion to 2.4 billion by 2050, the biggest increase of anycontinent. 45 Its people are the youngest in the world, with amedian age of just 19.4 years. And their youthful demographicprofile is expected to endure. By 2050, their median age will stillbe a mere 24.7 years, compared with 39.8 years for Asians and40.6 years for residents of Latin America and the Caribbean. 46The combination of economic and demographic growth is creatingan expanding consumer class with spending power. Accordingto the African Development Bank, the number of people inAfrica earning between US$2 and US$20 a day, in real terms, isexpected to triple from 313 million in 2010 to about 1 billion by2060. 47 Consumer spending in Africa reached US$600b in 2010,and is expected to hit almost US$1t by 2020. 48 The continent’sdomestic markets are among the most compelling attractionsfor foreign investors, compounded by rapid urbanization acrossAfrica. Domestic demand will drive private sector growth,especially in consumer-facing industries and business and healthcare services, accelerating diversification of FDI in Africa.42 Annual Development Effectiveness Review 2014: Towards Africa’s transformation, AfricanDevelopment Bank Group, 2014.43 The World Bank defines middle-income countries as those with GNI per capita of more thanUS$1,045 but less than US$12,746.44 Annual Development Effectiveness Review 2013: Towards sustainable growth for AfricaAfrican Development Bank Group, 2013.45 “World population projected to reach 9.6 billion by 2050 with most growth in developing regions,especially Africa — says UN,” United Nations website, esa.un.org/wpp/Documentation,13 June 2013.46 World Population Prospects: The 2012 Revision, United Nations, June 2013.47 The African Consumer Market,” African Development Bank Group website, www.afdb.org,accessed 12 February 2015.48 Annual Development Effectiveness Review 2013: Towards sustainable growth for Africa, AfricanDevelopment Bank Group, 2013.EY’s attractiveness survey Africa 2015 Making choices27

Perception How foreign investors see AfricaWhy not? Africa’s attractiveness slipsDespite Africa’s strong fundamentals, investors’ retrospectiveviews on how the region’s attractiveness has changed in oneyear, indicating an increase among those who believe that it hasremained constant, and a drop in those who saw an improvement.Even though optimism for the coming years has also falteredcompared with one year ago, the total percentage of positiveresponses remains high.A decline in Africa’s perceived attractivenessFifty-three percent of respondents to our survey say Africa’sattractiveness as a place to do business has improved over thepast year. Yet this result is down seven percentage points on thefindings of our last survey, published in 2014. By this measure,Africa’s attractiveness, though still strong, is at its lowest since ourAfrica’s past attractivenessdown by seven percentage pointsOver the past year, has your perceptionof Africa’s attractiveness as a place to do business …?survey began five years ago. Perceptions differ according towhere investors are based. This year, fewer decision-makers inAsia (49.6%) and Europe (54%) believe Africa’s attractiveness isimproving. But executives from North America (49.9%) were morepositive than last year — optimism reflected in the increase of FDIprojects launched by North American companies.Declining optimism about prospects for doing business in Africais also apparent when investors are asked about Africa’s futureattractiveness. Although a strong majority (69%) of respondentsremain positive about the continent’s investment appeal overthe next three years, the proportion of optimists has fallen fourpercentage points since our 2014 survey.Africa’s future attractivenessdeclines by four percentage pointsOver the next three years, do you think the attractivenessof Africa as a place for companies to establish or developactivities will …?7% 11%24%28%14% 17% 20%25% 19%26%5%19%4%21%7% 10% 14%16% 14%15%66%60% 56% 60%53%71% 73% 72% 73% 69%2011 2012 2013 2014 20152011 2012 2013 2014 2015Improved (includesresponses for significantlyand slightly improved)Deteriorated (includesresponses for significantlyand slightly deteriorated)Improve (includesresponses for significantlyand slightly improve)Deteriorate (includesresponses for significantlyand slightly deteriorate)Neither improved nordeterioratedCan’t sayNeither improve nordeteriorateCan’t saySource: EY’s 2015 Africa attractiveness survey (total respondents: 501).Source: EY’s 2015 Africa attractiveness survey (total respondents: 501).28 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessEven so, Africa remains one of the topinvestment regionsIn last year’s African attractiveness study, we highlighted strongprogress in Africa’s attractiveness relative to other regions. Thisyear, the continent has slipped from being joint second with Asiato fourth place in investors’ favor, behind Oceania, North Americaand Asia. Nonetheless, the continent is well up the ranking, andits perceived attractiveness remains ahead of levels recordedduring the years 2011–13.Africa’s relative attractivenessRelative to the following markets, is Africa more or less attractive as an investment destination?20112012 2013 201420151Asia (+31)1Asia (+26)1Asia (+16)1North America (+4)1Oceania (+3)2North America (+16)2North America (+13)2Oceania (+11)2Africa2North America (+1)34Western Europe (+15)Middle East (+8)34Oceania (+5)Western Europe (+5)34Latin America (+8)North America (+5)24AsiaOceania (-2)24Asia (+1)Africa5Oceania (+6)5Africa5Africa5Western Europe (-3)5Western Europe (-1)6Latin America (+2)6Middle East (-0.3)6Central America (-1)6Latin America (-14)6Latin America (-2)7Eastern Europe (0)7Latin America (-1)7Western Europe (-4)7Middle East (-15)7Central America (-8)8Africa8Eastern Europe (-3)8Middle East (-10)8CIS (-17)8Eastern Europe (-10)9Central America (-4)9Central America (-5)9Eastern Europe (-12)9Eastern Europe (-17)9Middle East (-15)10 CIS (-19) 10 CIS (-17)10CIS (-14)10 Central America (-19) 10 CIS (-16)Markets more attractive than Africa.Markets less attractive than Africa.Numbers in brackets indicate total "attractive" responses minus total "not attractive" responses.Source: EY’s 2015 Africa attractiveness survey (total respondents: 501).Present optimists, absent doubtersA wide perception gap remains between established andpotential investors.Investors who already have operations in Africa believe it isthe most attractive investment destination in the world, hasbecome more attractive in the past year, and that its appeal willstrengthen further in the next three years.Perception gap in Africa#1Africa is the mostattractive investmentdestination in the worldInvestors looking in from afar see Africa as the world’s secondworstinvestment destination. Only 30% of them reckon it hasbecome more appealing over the past year, though half believe itsattractiveness will improve in the coming three years. Doubts aremuch stronger in the minds of those who have yet to experiencethe realities of investing in Africa. This pattern is not surprising.Our European survey finds that investors present in Europe aremore optimistic about Europe’s prospects than those basedoverseas. These perception gaps demonstrate the need for bettercommunication to investors about the realities of investing inparticular regions.Respondents who arenot established in Africa66%believe attractiveness hasimproved over the past yearAfrica is the second leastattractive investmentdestination in the world81%believe attractivenesswill improve over thenext three years30%believe attractiveness hasimproved over the past yearRespondents who arealready established in Africa50%believe attractivenesswill improve over thenext three yearsSource: EY’s 2015 Africa attractiveness survey (total respondents: 501).EY’s attractiveness survey Africa 2015 Making choices29

ViewpointAfricangovernance isovercoming somebig challengesNick ThompsonChief Executive Officer, Tony Blair AfricaGovernance InitiativeNigeria hasachieveda smoothdemocraticchange ofpowerThis year’s Africa attractiveness survey picks up on a newmood among investors. There’s still strong consensus aroundthe potential in the markets emerging across Africa butoptimism is tempered by concerns over political stability,security and the outbreak of Ebola in West Africa.So are investors right to be more cautious over Africa’sprospects in 2015? I’m not so sure. There are challengesof course, but already this year, Nigeria, Africa’s biggesteconomy, has confounded the skeptics, holding a successfuland peaceful election leading to a smooth transition of power.With a number of other elections on the horizon, Nigeria’sexample of democracy at work should serve as an inspirationand confidence boost both within and beyond the continent.Ebola, meanwhile, has taken a serious toll on the countriesat the heart of the outbreak. But with the virus now comingunder control, attention will turn to rebuilding. My team haveworked alongside the governments of Liberia, Guinea andSierra Leone through the crisis, and we’ve seen a new senseof unity, purpose and leadership in the affected countriesas they set out on the road to recovery. Investors shouldremember that just 12 months ago, each of the affectedcountries was expected to record strong growth. The sameopportunities to invest in their economic development inareas like agriculture and infrastructure are still there today.The road to prosperity is never smooth. Many Africaneconomies still face major challenges but where committedlocal leadership meets smart, patient investment, realprogress can be made. The Africa Governance Initiative isworking with leaders across the continent who are committedto development and reform. We encourage you all to dothe same.30 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessWhat next? Overcoming roadblocks to doing businessin AfricaDespite the “Africa rising” narrative and steady growth in FDIinflows, there has been no quantum leap in FDI into Africa. Theglobal context is less supportive, as growth slows in emergingmarkets, commodity prices fall, debt levels rise, and unrest andinstability has become more commonplace. This year, we havealso seen investor optimism about Africa decline a little. This isperhaps an opportune time to pause and take stock of factorsthat have impeded Africa’s progress to date, and consider howthey can be addressed.Combating political uncertainty with better governanceWhich do you think are barriers for investing in Africa?54.6% 26.0% 21.9% 13.6% 12.8% 10.4% 7.3%UnstablepoliticalenvironmentCorruptionWeaksecurityPoor basic Lack ofinfrastructure highlyskilled laborInconsistencyand lack oftransparencyin regulatorypolicyUnattractivetax policiesand financialincentives0.8% 4.5%None Can't say (do not specify)Source: EY’s 2015 Africa attractiveness survey (total respondents: 501).Respondents to our survey have identified political instability asthe biggest obstacle for companies doing business in Africa. WhileAfrica’s political landscape has changed dramatically since the1960s, unpredictability still remains a challenge for the continent.A Democracy Index published by the Economist Intelligence Unit,designed to measure the “strength” of democracy in a region,shows a decline in SSA’s score during 2014. 49 Similarly, the2014 Ibrahim Index of African Governance, which measures thequality of governance in African countries, showed that whilegovernance improved between 2009 and 2013, the pace ofimprovement was slightly slower than during 2005–09. 50During 2014, a number of African countries — including theCentral African Republic, South Sudan, the Democratic Republicof Congo (DRC), Burkina Faso and the Gambia — experiencedpolitical and social unrest. Insurgency was a factor in Nigeria andparts of East Africa. Yet despite these setbacks, 12 elections wereheld across the continent last year, and 7 resulted in a changeof leadership. 51 This year’s elections in Nigeria, Africa’s mostpopulous country, notably achieved a peaceful transfer of power. 52Perceptions that political uncertainty has increased could beexacerbated by increased geopolitical tensions across the worldin 2014, including the Russia-Ukraine conflict, upheaval in theMiddle East and intensified territorial disputes between Chinaand its maritime neighbors, among others. With these tensionsaround the world and a still-fragile global economy, investorsare understandably cautious. It seems likely that these concernshave had a knock-on, cumulative impact on perceptions of Africa,encouraging investors not yet present in the continent to view itas “high risk.”49 Democracy Index 2014: Democracy and its discontents, Economist Intelligence Unit, 2014.50 2014 Ibrahim index of African governance summary report with key findings, Mo IbrahimFoundation, September 2014.51 “2015 a ‘complicated’ year for elections across Africa,” fDi Intelligence website,www.fdiintelligence.com, accessed 23 March 2015.52 “Nigeria elections: Muhammadu Buhari hails peaceful handover of power,” The Guardian website,theguardian.com, accessed 4 May 2015.EY’s attractiveness survey Africa 2015 Making choices31

ViewpointThe strongcase forAfro-realismMo IbrahimFounder and Chair of the Mo IbrahimFoundationThere is aninextricablelink betweengovernance anddoing businessCreating an environment conducive to sound investmentand sustainable business is a core governance issue. This iswhy it is one of the four pillars of the Ibrahim Index of AfricanGovernance (IIAG), produced by the Mo Ibrahim Foundation(MIF). Last year’s IIAG results, published in October,challenged perceptions about the state of African governance,specifically with regard to the prevalent “Africa rising”narrative. It stated that the conditions for pursuit of economicopportunity were stalling, in contrast to their previouslyimpressive positive trends. Specifically, the indicatorsmeasuring the environment for business in Africa showedrecent decline. The IIAG findings are reinforced by EY’s 2015Africa attractiveness survey.Respondents to the survey recognize the inextricable linkbetween governance and doing business. Only governanceprogress will further Africa’s prospects as an investment orbusiness destination. A data-driven approach to monitoringthis progress is vital, with the IIAG and the EY survey as twokey resources that are pivotal to decision-making.MIF has promoted the concept of Afro-realism in recentyears. Afro-realism means adopting an honest outlook onour continent, celebrating its achievements but also makingan informed assessment of the challenges that lie ahead.Neither Afro-optimism, a prevalent mind-set of recent years,nor Afro-pessimism, does justice to modern Africa. Enormouspotential exists, but a balanced appreciation of Africa’s manyassets in conjunction with its challenges is required, alongsidea more granular approach to analysis of the continent. Themost recent EY survey consolidates the growing importanceof an Afro-realist perspective.32 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessOn the whole, more inclusiveness is needed in Africa. Thisincludes not just maintaining political stability, but also improvingthe quality of government policies, enhancing the efficiency ofinstitutions, encouraging respect for the rule of law and citizens’political rights, and promoting rules to foster accountability andtransparency. Inclusiveness has to be built. And the processrequires concerted efforts by African countries themselves, andalso their partners. But, it is equally important to remind investorsnot to assume the entire continent is unstable. Business decisionmakersmust remember that Africa is made up of 54 nations withdiffering economic and political dynamics.Responding to investor appeals to reform Africa’s business environmentForeign investors continue to highlight Africa’s operatingenvironment as an ongoing challenge to doing business on thecontinent. African countries generally lag other emerging marketsin the World Bank’s Doing Business 2015 ranking. Only threecountries, Mauritius, Rwanda and South Africa, are among thetop 50. Business incorporation continues to be more costly andexpensive in Africa than in any other region. However,it is important to note progress by SSA countries in reducingburdensome business regulations. Since 2005, all SSA nations inthe rankings have implemented reforms to make it easier to dobusiness, led by Rwanda, and followed closely by Mauritius andSierra Leone. 53 These initiatives are continuing. However, someof SSA’s largest economies (including Nigeria and Angola) stillremain very complex environments for business.What do you think are the main measures that African governments can take to improve the region's business environmentand increase its attractiveness for investment?26.8% 16.8% 16.7% 16.6% 13.1%Build sustainablegovernance systemsStrengthen corporatetax reliefs and taxbreaks for investorsInvest in education andtraining programs fora qualified workforceEnforce effectiveanti-bribery andcorruption initiativesInvest in and encourageinfrastructuredevelopment10.3% 10.2% 8.5% 7.8%Focus on public-privatepartnershipsIncrease measuresaimed at fosteringinternational andbilateral tradeIncrease incentives forcompanies to invest in R&Dand innovative technologiesImprovesecurity7.4%Can't say(do not suggest)Source: EY’s 2015 Africa attractiveness survey (total respondents: 501).53 “SSA Implements the Most Business Regulatory Reforms Worldwide,” World Bank website,www.worldbank.org/en/news, accessed 29 October 2014.EY’s attractiveness survey Africa 2015 Making choices33

Perception How foreign investors see AfricaA quarter of respondents to our survey highlighted corruptionas a big barrier to investment in Africa. Many Africancountries perform badly in Transparency International’sCorruption Perceptions Index 2014. This highlights the needto enforce stringent anti-bribery and corruption initiatives inAfrica. Likewise, companies need to establish robust monitoringof processes and decisions to identify and manage potentiallycorrupt practices.Tax administration also needs to be simplified, with a focuson harmonizing procedures across the continent as much aspossible. An average company in Africa has a total tax rate of46.6%, considerably higher than the global average. Tax-filingtypically takes 317 hours per year, the second-highest of anyregion and, again, well above the global average. To complywith tax obligations, an average company makes 36.2 paymentsin Africa, compared with 25.9 globally. While the taxationenvironment has improved over the last 10 years, with the totaltax rate declining by 22.5% and average time-to-comply down byalmost 30 hours, there is still scope for improvement. Only 9%of African economies already have electronic systems for filingand paying taxes. 54 Many governments in Africa are consideringstrengthening corporate tax relief and incentives to woo investors.Finally, Africa’s employers and employees need more flexibleemployment rules. Labor laws in many African countries arerestrictive in comparison with other regions. According to theWEF’s African Competitiveness Report 2013, the SSA regionscores 4.26 indicating that laws are more restrictive than inSoutheast Asia, which scores 4.61. Labor regulations areparticularly rigid in North African countries, with labor marketsin Egypt (146th) and Algeria (147th) ranking among the leastefficient in the world. 55Investing in education and training to enhanceworkforce skillsBy 2040, Africa is expected to have the world’s largest laborforce, ahead of both India and China. However today, companiesoperating in Africa still find it difficult to find suitable workers.Education levels remain relatively low: in SSA, the secondaryschool enrollment rate is only 40%. 56 The United NationsEducational, Scientific and Cultural Organization (UNESCO)forecasts that Africa will be home to half of the world’s illiteratein the years ahead, and that resulting constraints on skilldevelopment will harm business and wealth creation. 57 There isalso a large mismatch in skills that job seekers offer and thosesought by employers.54 Paying Taxes 2014: The Global Picture — Africa, World Bank, November 2014.55 The Global Competitiveness Report 2013–14, World Economic Forum, October 2013.56 “Global Agenda Council on Education 2014–2016,” World Economic Forum website,www.weforum.org, accessed 17 March 2015.57 “Education and skills development challenges to hurt Africa’s business and wealth creation,”CNBC website, www.cnbcafrica.com, accessed 18 March 2015.African governments need to reshape curricula at secondaryand tertiary institutions to ensure they meet the needs of thelabor market. More technical and vocational training programsare required to equip African workers with high-quality skills thatbusiness needs.In turn, firms will need to take responsibility for skills developmentby investing in workforce training. To reduce overdependenceon expatriate workers, companies must foster skills transferfrom expatriates to local staff. Sourcing employees strategically,managing a diverse talent pool spread across a large area, andbeing able to move talent efficiently across the continent will becritical for success.Learning to manage peopleA growing war for talent is emergingin Africa. Some 70% of African firmssurveyed by EY are recruiting to supporttheir growth ambitions on the continent,yet vacancies are taking longer to fill andemployee turnover is high. These areamong the key findings of the secondedition of EY’s Sub-Saharan Talent Trends andPractices Survey.The survey found that technical and professional skills areespecially in demand. Over a third of companies said theirneed for technical and professional skills was likely to growover the next 12 months.Over 300 companies across 23 African countries, togetheremploying more than 400,000 workers, participated in thesurvey — giving a unique and comprehensive view of humanresource trends across the subcontinent.Even as competition for talent intensifies in Africa, labormarkets are expected to become more rigid. Three-quartersof companies expect labor market regulation to increase, yetonly a third of organizations find labor market institutionseffective. Nearly two-thirds of respondents believe that tradeunion activity or collective employee action is increasing intheir country.Clearly, organizations need to become more deliberate in howthey plan for, attract and retain staff. To secure the talent theyseek, they will need to make training and career developmentpart of their brand, developing processes to monitor and rewardemployee performance and ensure management continuity.34 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessViewpointDespitesetbacks, Africais still risingAubrey HrubyVisiting Fellow, Africa Center atThe Atlantic Council.Aubrey Hruby is a long-time advisor tocompanies and funds investing in Africanmarkets, co-author of the forthcomingThe Next Africa (Macmillan, June 2015),and Visiting Fellow at the Africa Center atthe Atlantic Council.Rapid economicgrowth is neitherlinear nor smooth,and there will bemany detoursand bumps on thecontinent’s roadto prosperityDespite all the excitement about the Africa Leaders Summithosted by President Obama last summer, 2014 ended ina smattering of negative headlines for Africa. Plummetingcommodity prices, increasing insecurity in regional hubs(Nigeria and Kenya) and a popular uprising in Burkina Fasoall significantly dampened the exuberance of the “Africarising” narrative. In addition, the humanitarian crisis of theEbola outbreak also affected investors’ confidence. The fallin the perceived attractiveness of Africa in 2015 reported inthis survey reflects these setbacks, in addition to concernsabout political uncertainty, given the elections this year in 10African countries.Companies already working in the continent, as well as thoselooking to explore African opportunities for the first time,should resist the swing of the pundit’s pendulum between“Afro-optimism” and “Afro-apocalypse.” Instead they shouldtake a realistic, medium-term view. Rapid economic growth isneither linear nor smooth, and there will be many detours andbumps on the continent’s road to prosperity.In making business decisions in African markets, it is best togain a deep understanding of the broad trends — demographic,socioeconomic, technological and political — shaping specificsubregions, and combine that with access to the best realtime,on-the-ground data available. Thankfully, there are nowfar more resources available for companies looking to dosmart business in the region than there were a decade ago.Also critical for success is an appreciation of the “soft” alongwith the more traditional “hard” skills required for doingdeals in Africa. Complex financial models will rarely comeclose to assessing the real cost of regulatory uncertaintyand underdeveloped governance systems. Companies willgain competitive advantage in Africa by integrating directlyinto commercial and deal teams, people with the ability tomanage stakeholders, engage government officials, developpartnerships, and navigate emerging market realities.EY’s attractiveness survey Africa 2015 Making choices35

ViewpointUnderlying politicalinstability anduncertainty aredecliningAmadou SyDirector, Africa Growth Initiative SeniorFellow, Global Economy and Development,Africa Growth Initiative at BrookingsInstitutionIt is not difficult toimagine the collectivesigh of relief from bothAfrican and foreigninvestors on seeing theongoing peaceful powertransition in NigeriaThe 2015 survey results indicate that perceptions ofpolitical instability or uncertainty are a major barrier toinvestment and doing business in Africa. Surprisingly, suchperceptions are stronger for respondents already doingbusiness in Africa than for those that do not. Two possiblescenarios can help explain the results:The “Nigerian Effect”: The number of scheduled electionsin 2015 in SSA is more than twice the number in 2014and includes the Nigerian elections, creating politicaluncertainty.According to the National Democratic Institute at least23 elections, including some constitutional referenda, arescheduled to take place in SSA in 2015, compared with 10in 2014. More importantly, Nigeria, the continent’s largesteconomy, most populous country, and one of its largestrecipients of FDI, held legislative and presidential electionsin early 2015. It is not difficult to imagine the collective sighof relief from both African and foreign investors on seeingthe ongoing peaceful power transition in Nigeria, thoughother major countries still have elections this year. Whilethe other African economic powerhouse, South Africa, heldelections in 2014, expectations of post-election violenceand increased political policy uncertainty were much lowerthan prior to the Nigerian elections, creating less worry forinvestors.The Fragile State Effect: Investors perceive a broad set ofrisks as “political risks” in SSA.Not surprisingly, geopolitical risks — such as failure ofnational governance (shown by corruption, impunity, andpolitical deadlock), interstate conflict, state collapse andterrorist attacks are high in fragile states that are alreadypoor, vulnerable to shocks, prone to violence, and lackeffective, accountable and inclusive institutions.36 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessThe still-volatile situation in the Sahel andthe current crisis in the Central AfricanRepublic are stark reminders that SSA isstill home to a number of fragile countries.In addition, non-state actors (such asBoko Haram and al-Shabab) can easilycross borders, creating fragility withinmore robust countries too. The spread ofinfectious disease (e.g., Ebola) and socialinstability compound these risks. In thisway, increased fragility in SSA may beincreasing investors’ perception of risk.As far as foreign investors are concerned,however, the long-term trend shows thatSSA has democratized progressively andthat political and economic governancehas improved. For instance, our AfricanLeadership Transitions Tracker shows thatthe number of multiparty elections hasbeen increasing consistently. In the shortterm, however, elections in the regionare likely to be associated with higherpolitical risk. However, different Africancountries have different risks associatedwith elections. In some, unfortunately, therisk of post-electoral violence and the riskof policy reversal will be significant, butin others, it will be lower. In sum, when itcomes to political risk analysis, it shouldpay to discriminate among countries. Butthat would be just the first step. The threetenets of risk management: identifying,measuring, and managing risk would payeven more.Real risks mustbe identified,measured andmanagedPresidential and legislative elections inAfrica in 2015GuineaTBDMauritiusMayCote d’IvoireOctober TogoMarchBurkina fasoNovemberGeneralParliamentaryPresidentialTBD: To be declaredNigerTBDNigeriaFebruaryLibyaTBDChadTBDNote: Tanzania will also holda constitutional referendum inApril 2015 and Burundi was dueto hold its parliamentary elections inMay, and presidential elections in June.SouthSudanEgyptMarchSudanAprilJulyEthiopiaMayZambiaJanuaryBurundiMid-2015TanzaniaOctoberSource: Foresight Africa, Top Priorities for the Continent in 2015,Africa Growth Initiative, Brooking Institution, January 2015.EY’s attractiveness survey Africa 2015 Making choices37

FutureAssuringAfrica’slong-termgrowthAfrica isprogressing ...... But focus needs to be on inclusive,sustainable growthThis will require structural transformation5 prioritiesfor actionShared valueEntrepreneurship39Dealing with deterioratingperceptions40Addressing thechallenge of structuraltransformation42Looking ahead:toward inclusive,sustainable growth43EY’s view: fivepriorities for actionRegional integrationInfrastructurePartnerships38

www.ey.com/attractivenessDealing with deteriorating perceptionsSince we initiated our flagship attractiveness program forAfrica in 2010, EY has energetically communicated the story ofAfrica’s growth and been an advocate for increased investment.We have developed a robust data and knowledge base to providequantitative substance to the broader “Africa rising” narrativeand the business case for investing in Africa.Over this period, our surveys have shown perceptions of Africa’srelative attractiveness as an investment destination improvingsteadily; fairly robust and sustained levels of FDI, with SSAperforming particularly well.This year, however, our findings show something of a shift.Perhaps most worrying is that perceptions of Africa’sattractiveness have deteriorated over the past year, and arearguably at their lowest since we began our surveys fiveyears ago.It is important not to overstate this deterioration. Overall, themajority of respondents were positive about the progress madein Africa over the past year, and they believe the continent’sattractiveness as a business destination will improve over the nextthree. Africa continues to rank favorably compared with otherregions, particularly among respondents who know Africawell. But compared with past years, when we have seen steadyprogress, this year’s results are a small step backward. Partlywe can put this down to an uptick in political and economicuncertainty across Africa: the Ebola crisis, falling commodityprices, terrorism in West and East Africa, political conflict inplaces like Burkina Faso, South Sudan, the Central AfricanRepublic and now Burundi, and labor unrest in South Africa — allof which have been contributing factors.Strong fundamentals remain intactAfter several years of growing optimism about Africa’s progress andpotential, are we seeing the start of a sustained decline in investorsentiment? We doubt that is the case. On the whole, Africaneconomies remain robust and their economic prospects stronglypositive. The IMF has predicted growth in excess of 5% across SSAfor 2015, “driven by sustained infrastructure investment, buoyantservices sectors, and strong agricultural production, even as oilrelatedactivities provide less support.” 58 Looking further ahead, andconsidering the projections illustrated below, we anticipate that 24countries in SSA will experience a compound annual growth rateof more than 5% through 2030. EY’s report Africa 2030: Realizingthe possibilities sets out the key drivers of what we believe is asustainable economic growth path for Africa.The African growth story is real1988–2000 2001–12 2013–30GDP growth (CAGR)Above 5%Between 0% and 5%Less than 0% (negative)Number of economies growing faster than 5% a year2124634811 117631Asia-Pacific1988–2000 2001–12CIS2013–3021 1Central and SoutheastEurope (CSE)Middle EastSSASources: Oxford Economics database estimates, accessed in August 2014; EY analysis.58 Regional Economic Outlook SSA: Staying the Course, IMF, October 2014.EY’s attractiveness survey Africa 2015 Making choices39

Future Assuring Africa’s long-term growthSo there is good reason to celebrate the progress of a region thatonly 15 years ago was dismissed by The Economist magazineas “the hopeless continent.” That said, it is important to seeAfrica’s progress in context. Given the continent’s history ofunderdevelopment and persistent structural inequalities in theglobal economy, there is still a long way to go before Africaemerges as an economic powerhouse. In many respects, Africais today at a point where many East Asian economies were in the1970s, and where India, Mexico and Turkey were in the 1980s.In other words, Africa has made significant progress (from arelatively low base) over the last 15 years, but there is still along way to go before we can consider a critical mass of Africaneconomies to be included among the leading emerging markets.Africa’s continued rapid growth is not inevitable, and will notsimply take care of itself. At the very least, the unsettling resultsof our perception survey this year remind us that we should nottake belief in Africa’s rise for granted.Addressing the challenge of structural transformationThe apparent softening of investor confidence echoes a shiftin mood that we noted last year at the Strategic Growth ForumAfrica — an annual event hosted by EY. The tone of previousevents in recent years had been more celebratory. While thechallenges of doing business in Africa were acknowledged andanalyzed, there was previously a distinct sense of optimism bornof the clear progress that Africa had made over several years.At our most recent event, while the sense of optimism was stillstrong, it was tempered by the reality of how much still needs tobe achieved to realize a future in which, as Graça Machel, NelsonMandela’s widow and founder of New Faces, New Voices (NFNV),put it, “we build an inclusive Africa, while leaving nobody behind.”Although Africa’s economic growth has been impressive over thepast 15 years, poverty and inequality remain intractable realities.With the fastest-growing population in the world, we face a verytough challenge to create the jobs and economic opportunitiesthat will lift ever greater numbers of Africans out of poverty.SSA is lagging other developing regions, where populations aregrowing more slowly, in raising levels of GDP per capita — a broadindicator of rising income levels and better living standards.GDP per capita growthLiving standards in SSA have not yet accelerated in the sameway as in some other emerging market regions.GDP purchasing power parity percapita, US$ at current prices15,00012,0009,0006,0003,000019901992199419961998SSA Developing Asia Latin America and the CaribbeanSource: IMF; Africa Competitiveness Report 2015, World Economic Forum, 2015.We should not overstate the implications of the widening gap inGDP per capita, particularly between developing Asia and SSA.Growth in developing Asian economies started in the early 1980s,and in a global economic context that was more conducive to theexport-driven growth that has characterized Asia’s rise. It wasanother 15 years before GDP per capita in Asia began to risesubstantially, in the mid-1990s. Assuming a similar lag in SSA, wecould expect that GDP per capita levels will begin rising markedlyover the next 10–15 years.200020022004200620082010201240 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessBy 2030, in terms of per capita income, SSA should reach the level where emerging Asia is today6,0005,000Forecast5,1454,7064,0003,9033,0003,0352,0001,878 BRICSoutheast Asia1,000Emerging AsiaEastern Europe0SSA2003 05 07 09 11 13 15 17 19 21 23 25 27 29Source: Oxford Economics database, accessed in August 2014.Yet looking forward, nothing is certain. Many challenges lieahead, not least the robust structural transformation that isrequired by many economies. Although the commodities boomhas not been the only engine of Africa’s economic growth, manycountries remain heavily dependent on revenues from naturalresources and are vulnerable to external upsets. So they need todevelop other strategic sectors urgently, such as manufacturing,construction and agriculture. This will not only lessen theirdependence on commodities, but expand the private sector,increase productivity and, most importantly, create jobs andbroader economic opportunities.The WEF’s Global Competitiveness Index (GCI) highlights the sizeof the task. In many respects, the GCI provides a yardstick forprogress on structural transformation. It defines competitivenessas “the set of institutions, policies and factors that determine thelevel of productivity of a country, and identify as well as measurethe sources of productivity gains needed to ensure rapid andlasting improvement in living standards.” 59As the graphic shows, African countries typically underperformother emerging market regions across most of the 12 GCI pillars.Of most concern is Africa’s poor performance on some “basicrequirements” including infrastructure, health and education. Tobuild the solid foundation they need to improve productivity andcompetitiveness, and accelerate their structural transformation,most African countries need to resolve this underperformance,while maintaining a stable macroeconomic environment.Africa’s competitiveness performancerelative to other regionsBusinesssophisticationMarket sizeTechnologicalreadinessFinancial marketdevelopmentAfricaInnovationSoutheast AsiaInstitutionsLabor marketefficiencyInfrastructureMacroeconomicenvironmentHealth andprimaryeducationHighereducationand trainingGoods marketefficiencyLatin America and the CaribbeanSource: Africa Competitiveness Report 2013, World Economic Forum, 2013.59 Africa Competitiveness Report 2013, World Economic Forum, 2013; Global CompetitivenessReport 2014–2015. World Economic Forum, 2014.EY’s attractiveness survey Africa 2015 Making choices41

Future Assuring Africa’s long-term growthLooking ahead: toward inclusive, sustainable growthLooking to the next decade and beyond, EY’s best-case scenarioanalysis suggests that Africa will be working toward inclusive andsustainable growth. This path must combine robust economicprogress with a far greater emphasis on enterprise development,job creation and human welfare.Charting a path to inclusive growthConnectivityTo enable lasting growth, African economies must close thecompetitiveness gap, get more people working, develop economicresilience, create more consumers and increase domesticdemand. This “high road” scenario will build on the foundationof 15 years of economic, political and social progress, withAfrica emerging as a significant global economic power withmore diverse, sustainable economies and growing prosperityfor its people.TimelineSuboptimalgrowthInclusive,sustainablegrowthOutcomeInclusive,sustainable growthCooperationBackslidingUneven andisolated15 years12 yearsInter- andintra-regionalintegrationJobcreation inprivate sectorMore effectivegovernmentIntra-Africantrade growsMiddle classexpands9 yearsPowerdeficit metGreaterfood securityFTAsstrengthenSkilleddiasporareturn6 yearsEnergyPPPsSA*growing3%+LAPSSET**semioperationalNigeriafiscallydiverseChinesedemandholds*South Africa**Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET)The “low road” is a scenario in which the economic successwe have experienced over the last 15 years fails to deliverfundamentally improved lives for most Africans, and inequalitycontinues to widen. This scenario would likely lead to political andsocial instability, and African economies might begin to stagnateor even backslide.Based on our analysis, vital to Africa’s success will be connectingand integrating markets across the continent, and nurturing the(related) cooperation between the public, private and social sectors.These twin vectors are necessary to encourage inclusive growth,and create the social, market and political conditions and institutionsnecessary to harness the potential demographic dividend.By combining high levels of connectivity and public-privatecollaboration, we will start to assemble essential “buildingblocks” that will enable Africa to achieve inclusive, sustainablegrowth. In the near term, gains will be exemplified by Nigeria’songoing economic diversification, South Africa’s return tohigher growth levels, and the proliferation of effective publicprivatepartnerships (PPPs), notably in energy provision. Animproving global economy and ongoing Chinese demand forAfrica’s resources have laid foundations for more progress in themedium term.42 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessThese positive developments will include strengthening regionalfree-trade agreements (FTAs), led by the implementation of theTripartite FTA stretching from Egypt to South Africa. Improvedtrade relationships will combine with new technologies to boostfarm productivity, strengthening food security and creatingnew jobs. Public-private cooperation in energy supply willreduce the electricity deficit, lower costs and power the growthin manufacturing that will support structural transformation.Together, economic development and well-planned governmentincentive schemes will draw back increasing numbers of the manyskilled Africans scattered throughout the world, who now seebrighter prospects at home.Longer term, these developments and factors will combine tostimulate the private sector, which will then create jobs, economicopportunities and higher tax receipts. Intra-African tradecontinues to expand, as does Africa’s middle class, thus driving updomestic demand and producing a growth-multiplier effect acrossAfrican economies. These factors will, in turn, enable greaterlevels of regional integration and more effective government, andunderpin and sustain Africa’s success.EY’s point of view: five priorities for actionClearly, Africa has the potential to achieve a future that wouldhave been unimaginable a generation ago. But the best-casescenario for Africa will not happen by itself, nor without strenuouseffort by many stakeholders. What will it take to achieve inclusive,sustainable growth, and how will leaders in the public, private andsocial sectors realize Africa’s potential?There are many challenges and opportunities for Africa that wecould focus on. We have chosen five priorities for action that webelieve will be most critical to a successful African future.Realizing the possibilities: 5 priorities for actionShared valueEntrepreneurshipRegionalintegrationInfrastructuredevelopmentPartnershipsAfricaPursue profitwith the purposeto achieveshared valueCreate enablingconditions forentrepreneursand activelysupport SMEdevelopmentAccelerate theprocess ofdevelopingregional marketswith critical massImplementenablinginfrastructurefor growthPromotecollaborativepartnershipsacross business,government andsocial sectorsEY’s attractiveness survey Africa 2015 Making choices43

Future Assuring Africa’s long-term growthPrioritiesShared valueViewpointEmbracingshared valueKuseni Andrey Dlamini TomyshevChair, Head of Massmart the Automotive Group in the CISThe central premise behind creating shared valueis that the competitiveness of a company and thehealth of the communities and economy aroundit are mutually dependent. It is a fundamentalbusiness philosophy that recognizes that profit andpurpose can coexist and be mutually reinforcing. Wehave noted that the most successful organizationsin Africa are taking a long-term view. They realizethat there are no shortcuts and, more importantly,they understand that for their businesses to achievecontinuing longer-term growth, the economiesand communities in which they operate also needto grow sustainably. The bigger the skills pool, themore jobs and economic opportunities are created;the larger the spending power of consumersand government, the more the opportunities forbusiness growth. A philosophy of shared value isfundamental to this win-win growth equation. For usto accelerate Africa’s progress, it is critical that thepublic, private and social sectors embrace and actupon this philosophy.Shared value has always been an indispensable partof my beliefs and my business philosophy. Massmartoperates in 12 African countries and, wherever wego, we believe that the only way of sustaining ourbusiness is to make sure that we build and maintainpartnerships that are mutually beneficial.In South Africa, for example, Massmart hasestablished a fund to provide capital and technicalexpertise for developing local suppliers. We havesupported 193 of these entrepreneurs to becomepart of our supply chain, and an increasing numberof locally manufactured products are now listed onWalmart’s global supply list.It is because of this kind of long-term commitmentthat when we face challenges in, for instance,Northern Nigeria, we will not pull out. We are focusedon building sustainable local sources of supply closeto the market. This not only makes economic sensefor us, but also ensures that we are helping to createeconomic opportunities down the supply chain as wellas greater numbers of economically active citizens,who will ultimately become our customers.A philosophy of sharedvalue is fundamentalto this win-wingrowth equation44 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessCoca-Cola and NestléThe concept of shared value is more for usthan a nice-sounding buzzword: it is a strategicbusiness imperative. We believe that it isimportant for the countries and communitieswhere we operate to be economically viable andsustainable in order for our businesses in turnto be commercially viable and sustainable. Thenotion of pursuing profit with purpose is verymuch inherent to our business.When Sam Walton founded Walmart over50 years ago, he was driven by the purposeof helping people to save money so that theycould live better lives. As we open more storesaround Africa, we are really going there withthe purpose of helping people to save money.We believe that if you have a purpose thatresonates well with your customers you willbe rewarded with loyalty. And our customers,are showing us loyalty. We are now the largestwholesaler in Africa and hence a trustedand committed partner to thousands of smalland medium enterprises throughout SSA.Massmart hasestablished a fund toprovide capital andtechnical expertisefor developing localsuppliersCase studyExamples of shared value in action come in many shapes andforms. Initiatives designed to address some of the intractablechallenges companies face in doing business in Africa, whilecreating economic opportunities in local communities, offervaluable lessons. For consumer products companies in Africagetting goods to the consumer can be far from easy. Whatmakes the “route to consumer” so difficult to manage is thattraditional trade (small dispersed outlets, open air markets,informal vendors, etc.) still dominates retailing across thecontinent. The dispersed and fragmented nature of manyAfrican consumer markets, combined with weak logisticsinfrastructure, requires innovative approaches.A model that has worked well for bottling company Coca-ColaSabco in parts of East Africa is the Official Coca- ColaDistributor (OCCD) approach, whereby the local bottlingfactory partners with a number of “micro-distributors” —local entrepreneurs, each of which is given responsibilityfor a particular territory (generally a 1km radius in anurban environment, servicing at least 500 outlets). TheseOCCDs have become a central element in Coca- Cola Sabco’sdistribution strategy in several countries, and are responsiblefor 70% or more of sales volumes in Ethiopia, Kenya, Ugandaand Tanzania. In this way, Coca-Cola Sabco has found aneffective route to consumers, while simultaneously creatingbusiness opportunities for local entrepreneurs and theiremployees.Nestlé, the foods group, has also tackled the route-to-consumerchallenge by creating opportunities for micro-entrepreneursin African countries. As part of its My Own Business initiative,Nestlé provides vendors with a Nescafé coffee dispenser theycan strap on their back, enabling them to sell coffee by the cupin markets, at events and at the roadside. Launched in Nigeriain 2012, this initiative is now operational in Burkina Faso, Côted’Ivoire, Cameroon, Ghana, Senegal and Kenya, and is beingextended to the DRC, Ethiopia, Angola and Mozambique.This case study is based on a compilation of publicly available information drawnfrom a variety of sources, including annual reports, investor presentations andreports, and other media releases.EY’s attractiveness survey Africa 2015 Making choices45

Future Assuring Africa’s long-term growthPrioritiesEntrepreneurshipEY ViewpointFosteringentrepreneurshipJon ShepardDirector, EY Enterprise Growth ServicesA key element of the win-win growth equationwill be the promotion of entrepreneurship acrossAfrica. Entrepreneurs form one of the mainengines of growth in any healthy economy. Theyact as vital agents of change by developingnew products and services, implementing moreefficient production methods, and creating newbusiness models and industries. Small and growingbusinesses (SGBs) create the jobs that sustainfamilies across the continent, and will be essentialif Africa’s burgeoning population is to be a sourceof economic growth rather than social unrest. Astechnology and innovation accelerate, a new breedof “social entrepreneurs” are creating low-cost,highly scalable businesses that tackle previouslyintractable problems such as lack of sanitation,clean water or affordable health care and education.For organizations genuinely committed to sharedvalue, the promotion of local content and enterprisedevelopment should therefore clearly be a keybusiness priority.Enterprise Growth Services (EGS) is a “shared value”adaptation of EY’s core business model: a corporatesocial enterprise charging low fees to operatesustainably on a not-for-profit, not-for-loss basis.We work with impact investors, foundations, nongovernmentalorganizations (NGOs) and multinationalcorporations to find high-potential SGBs and socialentrepreneurs who are changing lives in low-incomecommunities. EY teams work hands-on for three to sixmonths on projects designed to help these new clientsovercome obstacles to growth. We help them improvecash flows, enter markets, retain and develop staff;whatever’s needed to accelerate our clients into thenext stage of growth.Some examples of EGS in action:• Invest in Africa’s African Partner Pool (APP)initiative, accredits and connects local smallbusinesses as suppliers for multinational companies.An EGS team drawn from Ghana, the UK andSweden worked with a local management team todesign, set up and launch the operation. Growingquickly, the APP is helping local entrepreneursexpand their businesses, and multinationalcorporations invest in local economies.We help themimprove cash flows46 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessAnglo American and Tullow Oil• Every minute, a child dies somewhere inthe world from the effects of drinking dirtywater. Jibu works with local entrepreneursin Rwanda and Uganda to set up profitablefranchises that solar-sterilize water and thensell it to low-income customers at a fraction ofnormal prices. An EGS team from Switzerlandand Uganda is helping Jibu develop thefinancial and operational infrastructure itneeds to grow quickly and sustainably acrossthe region.• Stamp Out Sleeping Sickness is a publicprivateconsortium that has built a networkof veterinary businesses across Uganda.Lacking business skills, several were failing.An EGS team spent seven months turningthese businesses around. They now createjobs, help subsistence farmers improve theirlivelihoods, and provide an essential part ofthe solution to a tropical disease that causesimmense social and economic damage.The entrepreneurs we support through EGShave incredible vision and work immensely hard.They are the lifeblood of Africa’s economies andit is a privilege for us to help them.A key element of thewin-win growth equationwill be the promotionof entrepreneurshipacross AfricaCase studyMultinational companies are playing an increasingly importantrole in helping develop local enterprises. Anglo American, oneof the world’s largest mining companies, has been doing thisfor more than 25 years. Anglo established Zimele, an offshootdedicated to enterprise development, back in 1989. Zimele’saim is to help create and develop commercially viable andsustainable black-owned South African small and medium-sizedenterprises (SMEs) by providing early-stage funding (equityfinance or subsidized loans), as well as mentoring and hands-onsupport via a network of small business hubs throughout SouthAfrica. Zimele initially focused on developing suppliers withinits own supply chain, but has since broadened-out. Today ithas six funds that provide support to diverse kinds of miningrelatedand non-mining entrepreneurial ventures. Over the pastseven years, Zimele has supported 1,885 local entrepreneurialcompanies, employing over 38,000 people and, in 2014alone, it provided over R1.3b (US$110m) in funding for thesebusinesses.Tullow Oil, an oil and gas explorer active elsewhere in Africa,also has a strong focus on local enterprise development. Tullowuses the term “shared prosperity” to describe its commitmentto aiding long-term social and economic development inthe countries where it operates. Departing from the moretraditional corporate social investment approach, it focuseson the developmental impact of Tullow Oil’s core business. Ithelps develop local suppliers through capacity building andtechnical skills transfer. For example, Tullow’s Closing theGap program, together with initiatives such as Traidlinks andInvest in Africa, focuses on equipping local suppliers to providegoods and services to international standards. Tullow has alsocreated an online supplier center, a hub aimed at supportingand developing local suppliers. Tullow is not only directing anincreasing proportion of its procurement spend toward localsuppliers — US$225m across Ghana, Uganda and Kenya in2014 — but also requiring international suppliers that want towork with it in African countries to detail in tender documentstheir commitment to developing local companies.This case study is based on a compilation of publicly available information drawnfrom a variety of sources, including annual reports, investor presentations andreports, and other media releases.EY’s attractiveness survey Africa 2015 Making choices47

Future Assuring Africa’s long-term growthPrioritiesRegionalintegrationViewpointAcceleratingregionalintegrationAided by shifting dynamics in the global economy,Africans have a unique opportunity to break thestructural constraints that have long marginalizedtheir continent. However, this will only be achievedby greater regional coherence among Africa’sfifty-four states. Regional integration and strongerregional institutions (such as the African Union andregional economic communities) are essential ifregional investment and trade are to prosper. Theyare needed to remove obstacles to cross-borderbusiness and create markets with greater criticalmass, coherence and concentrated economicactivity. Progress is being made, perhaps mostpromisingly with the Tripartite Free Trade Area. Butthere is still a long way to go: we need much moreregional integration, more quickly.Xolelwa Mlumbi-PeterChief Director, Africa MultilateralEconomic Relations, Department ofTrade & Industry, South AfricaAchieving greater regional integration is an importantobjective for the South African Government, but it isa complex undertaking. We have realized that a linearintegration model — where we look at establishingfree trade areas, then move to customs unions andcommon markets — does not address the fundamentalconstraints that affect why we are unable to tradewith each other or build the necessary economies ofscale. These constraints have more to do with a lackof productive capacity and supply-side constraints.As a result, we have adopted a developmentintegration approach that is based on three pillars:1. Market integration: addressing trade barriers aswell as non-tariff barriers.2. Industrial development: looking at how we candevelop regional economic value chains, sothat we can promote higher-value addition anddiversification that will enable African countriesto move up the global value chain, as well aspromoting intra-regional sourcing that will increaseintra-African trade.3. Infrastructure development: focused onconnecting Africa with itself.A critical issue is how we work together as Africangovernments on the three pillars of developmentalintegration. There is widespread appreciation of theneed to accelerate this process through effectivecooperation at a regional level. It also requires thedevelopment of capacity-building programs in viewof the differences in the levels of development ofmember states to, among others, improve quality andstandards of products.48 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessWe can promotehigher valueaddition anddiversificationSIRESSThe work program also aims to foster economictransformation of member states to ensure thatAfrica is able to move away from exports ofprimary commodities. More than 60% of worldtrade is in intermediate products. Industrialdevelopment is therefore key to the growth anddiversification efforts of member states. Thisis the trajectory that is required to address thekey socio-economic challenges facing Africaneconomies. In addition, intra-Africa trade and realintegration can only take place through improvedinterconnectivity between member states, andthis necessitates a targeted effort to address theinfrastructure bottlenecks and reduce the costsof trade.Progress is being made on the ground. Morespecifically, good progress is being made withthe Tripartite Free Trade Agreement (TFTA). Thenegotiations are already well advanced and weexpect to launch the legal framework for the freetrade area in June 2015. This will be followedby finalization of the tariff and rules of originnegotiations as part of the built-in agenda. TheTFTA will combine a market of 26 countries with apopulation of over 600 million and GDP of US$1t.Building on the progress achieved at regionallevels and the TFTA, we are also scheduled tolaunch the Continental Free Trade Area (CFTA)negotiations in 2015, which will create a marketof one billion people and approximately US$2.6tGDP. These efforts are aimed at expandingmarket access and creating economies of scalenecessary to attract investment. On industrialdevelopment, we welcome the development ofthe SADC regional industrial strategy. The keyobjective of the industrial strategy is to promotethe development of value chains and productionnetwork linkages across borders. It recognizesthat an integrated regional market is criticalin generating economies of scale necessaryto unlock the region’s industrial potential andenhancing the competitiveness of domestic firms.Case studyIt is generally accepted that expanding intra-African tradeis a critical factor in driving more sustainable and inclusivegrowth on the continent. There are several challenges thatneed to be addressed in this regard, not least of which are theinfrastructure deficit, multiple overlapping trade agreementsand various structural constraints. One of the less talkedabout challenges is the absence of a viable regional paymentssystem. Without this, cross-border payments are risky,expensive and slow — and a real barrier to fostering intraregionaltrade.In practical terms, what this has meant is that if, for example,a company imports goods from a neighboring country, thetransaction is generally settled in US dollars, with the paymentbeing routed via a clearing bank in the US. Besides anyother constraints to trade, this makes the process of simplytransacting across borders more cumbersome, risky andexpensive than it needs to be.To help address this constraint, the Southern AfricanDevelopment Community (SADC) Banking Association wasmandated to promote the development of interoperablesystems, including an electronic payments platform. Namedthe SADC Integrated Regional Electronic Settlement System(SIRESS), this will standardize and simplify the way in whichbanks in different SADC countries are able to exchangefinancial transactions. It is designed to allow transactionsamong banks in member countries to be settled in real timeand without the need for the funds to flow through third-partyclearing banks. Among other things, this means that, whereastransactions could previously take days to settle, they will nowbe settled in real time. The system, which was launched in2013, is now live in 9 of the 15 SADC countries, with over 60banks participating.The bottom line is that as this system is rolled out, cross-borderpayments in Southern Africa will become easier, less risky,more efficient and cost-effective, and be a key enabler ofgreater levels of intra-regional trade.This case study is based on a compilation of publicly available information drawnfrom a variety of sources, including annual reports, investor presentations andreports, and other media releases.EY’s attractiveness survey Africa 2015 Making choices49

Future Assuring Africa’s long-term growthPrioritiesInfrastructuredevelopmentViewpointBridging theinfrastructure gapAnne KabagambeChief of Staff & Director of Cabinet,African Development BankUltimately, the success of regional integration willhinge upon the quality of Africa’s infrastructure.Good transport, power and communicationnetworks are essential to link markets, reducethe cost of delivering goods, help people movearound, remove productivity constraints, generateenough electricity to support the development ofmanufacturing and other industrial sectors, andenhance overall competitiveness of the region. TheAfrica Infrastructure Country Diagnostic, releasedin 2009, confirmed that Africa has the weakestinfrastructure in the world and needs investment ofUS$93b a year for a decade to close the gap withother developing regions. A more recent analysisby EY and the Infrastructure Consortium for Africa(ICA) showed that, with funds now available andprojects under way, the gap is being closed. 60 But wefound that work had yet to begin on implementingtwo-thirds of the projects. Africa needs to removebarriers to project completion, fast.At the African Development Bank, we believe thatwe have a US$50b annual infrastructure deficit. Thefinancial resources needed are well above what canbe financed from Oversea Development Aid flowsand other current development financial flows. Itrequires innovative financing instruments to channelthe required additional resources. It is also clearthat we cannot wait for somebody else to solvethis problem for us: we need African initiatives andAfrican solutions.The AfDB has deployed a variety of targetedapproaches to address specific investment gaps,as illustrated by various initiatives including theAfrica50 Fund, risk mitigation instruments and cofinancingfacilities. The AfDB also amended its creditpolicy, creating opportunities to increase accessof African Development Fund (ADF)-only countriesto the bank’s non-concessional resources, sinceits lending and risk-bearing capacity for sovereignoperations remains strong, where it is underexposed.Recognizing project preparation, prioritization anddesign as some of the main impediments to Africa’stransformation, a notable initiative by the AfDBhas been the establishment of the Africa50 Fund tofinance transformational infrastructure projects inAfrica, including a project preparation and projectfinance facility.60 EY’s 2013 Africa attractiveness survey: Getting down to business, EY, 2013. Bridging the Gap:Ensuring Execution on Large Infrastructure Projects in Africa, EY, 2014.Note: ICA members include the G8 countries, the World Bank Group, the African DevelopmentBank Group, the European Commission, the European Investment Bank and the DevelopmentBank of Southern Africa. Their reports are available at: www.icafrica.org.The key objective is tocreate viable, bankableprojects50EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessRenewable Energy Independent Power ProducerProcurement ProgramAfrica50 aims to mobilize privatefinancing in order to acceleratethe speed of infrastructuredelivery in Africa. It will focuson transformational nationaland regional projects in energy,transport, ICT, and water. It iscomplementary to, but legallyindependent from, the bank.It is not business as usual. Thekey objective is to create viable,bankable projects (shortening thetime between project idea andfinancial close) from a currentaverage of seven years, to lessthan three years. This will delivera critical mass of infrastructure inAfrica in the short to medium term.Among other things, this entailssubstantially increased funding ofearly-stage project developmentactivities and making skilled legal,technical and financial expertsavailable to projects from an earlystage of development.Although these initiatives do notprovide all the answers, it will makea real difference in addressing theinfrastructure deficit, and is oneway that we can make sure ourchildren and grandchildren do notinherit our burden.Case studyIn recent years, South Africa has become a global leader in facilitatingsustainable private investment in the renewable energy sector. After almosta decade of deliberating on renewable energy policy, the South AfricanGovernment made a decisive move in May 2011, initiating a process to procurea total of almost 7,000MW of renewable energy projects from the private sectorvia competitive bidding over multiple bid windows. There was initially muchskepticism as to whether South Africa could deliver on the ambitious time linesand targets that were set.In fact, the Renewable Energy Independent Power Producer ProcurementProgram (REIPPPP) has exceeded expectations, and become a model forsuccessful partnership between the public and private sectors. To date, 79projects have been awarded to the private sector, with the first projects alreadyon line. Private sector investment, totaling approximately US$16b, has beencommitted so far to projects that will generate about 5,240MW (which equalsapproximately 12% of the current installed capacity of Eskom, South Africa’sgovernment-owned power utility.) This includes investment in grid-connectedonshore wind, photovoltaic and concentrated solar power, as well as small hydro,landfill gas and biomass generating plants.Besides the obvious contribution to an energy-constrained economy, theREIPPPP has helped create approximately 27,000 person-years of constructionwork and about 55,000 person-years of operations work, over the 20-yearlife of the projects, in a country where jobs are badly needed. Additionally,significant reductions in tariffs were achieved: the average fully indexed pricefor photovoltaic solar power for preferred bidders in the fourth bid round inApril 2014 terms is R7.86/kWh, 76% lower than the inflation adjusted averagetariff for preferred bidders in the first bid round in November 2011. Similarly,the average fully indexed price for onshore wind-generated electricity in April2014 terms for preferred bidders in the fourth bid round is R6.19/kWh, whichis 55% lower than the inflation-adjusted tariff achieved in the first bid round inNovember 2011.Given the broader power deficit across Africa, the REIPPPP is an importantexample of what is possible if we harness our natural resources via effectivecollaboration between the public and private sectors. According to theInternational Energy Agency’s latest Africa Energy Outlook report, Africancountries are endowed with such abundant renewable energy potential thatrenewables could make up more than 40% of SSA’s power generation capacityby 2040.This case study is based on a compilation of publicly available information, written by BrunhildeBarnard, Africa Advisory Infrastructure Leader, EY Africa.EY’s attractiveness survey Africa 2015 Making choices51

Future Assuring Africa’s long-term growthPrioritiesPartnershipsViewpointPromotingpartnershipsMawuena TrebarhCEO, Ghana Investment Promotion CentreAn African proverb says, “If you want to gofast, then travel alone; if you want to go far,then travel together.” Partnerships are goingto be essential if we are to drive the inclusive,sustainable growth that is so critical to Africa’sfuture. Unfortunately, the relationship betweengovernments and businesses across many partsof the continent is not always as engaged andproductive as it could and should be. Too often,businesses are viewed as part of the problem.Rather, governments and businesses (both local andinternational) need to become partners, embracinga philosophy of shared value and driving a commonagenda of inclusive, sustainable growth. Andpartnerships need to extend beyond businessesand governments. To drive growth, we need to bemuch more proactive in forging multilateral (ratherthan bilateral) partnerships — across business,government, development finance institutions,donor agencies, and so on — particularly to addressthe interdependent priorities of entrepreneurialdevelopment, regional integration and infrastructuredevelopment.Productive partnerships between business,government and the community are a cornerstone ofour approach to investment promotion in Ghana. Keyto this is getting the right balance between prosperityfor both the business community and the nation. Wedo not think that the two are mutually exclusive; wefirmly believe that they should go hand in hand.As an Investment Promotion Agency, we havepositioned ourselves, especially for the year 2015,as “The Prosperity Partner” for investment inGhana. This placed in context means that we areencouraging and promoting a partnership withinvestors, both Ghanaian and foreign, to ease theminto the Ghanaian business environment, to fulfilltheir objectives and, in the long run, achieve theprosperity they require.Our current approach toward investment promotionhas moved on from a broad-based strategy to ahighly targeted one. This enables us to attract andidentify the required and necessary partnershipsthat are a perfect fit and serve the needs ofthe country. The kind of partnerships promotedis not limited and is dependent on the projectspecifications. We are particularly excited aboutpartnerships between local and foreign businesseswhere the Ghanaian partner initiates the processto expand their business and possibly works towardhaving an international identity.52 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessThe Foreign InvestmentAdvisory CouncilWe know that profitability is very important for theinvestor thus we work to ensure that the alliancearms him with what is required to encouragesuccess. This success must generate benefits forboth the investor and the nation. For Ghana, thatmeans facilitation toward development, creationof the right kind of jobs as well as transfer of thenecessary skill sets to local workers.We are also very particular about the message wecirculate to the investing public, as this is importantfor the right partnerships to be created.It is always important to ask whether an investmentis going to create jobs, generate new skillsets orfulfill a business need within the Ghanaian businessenvironment. It is at this point that we considerwhether it is the right kind of investment toencourage a certain kind of partnership.As a result of this, the SME business communityis experiencing a greater appreciation of theopportunities presented to engage and collaboratein order to help build domestic business capacity.We recognize that development of entrepreneurialskills is a key component for SME growth as well astheir ability to partner with foreign investors, and sowe develop programs to support this.We will continue to provide an enabling institutionaland regulatory environment, as well as handsonsupport to investors. The Ghana InvestmentPromotion Centre (GIPC) remains committed tofulfilling our mandate and serving the needs ofinvestors toward prosperity.The ProsperityPartner forinvestment in GhanaCase studyRussia’s Foreign Investment Advisory Council (FIAC)provides a valuable example of productive partnershipbetween business and government. FIAC was setup in 1994 by the Russian Government and foreignbusinesses to improve the investment climate inRussia. For the first 14 years of its existence, FIACwas probably little more than a “talking shop” — alabel often applied to similar initiatives in Africa.But in 2008, the Russian Government proposeda reorganization and obliged relevant ministriesto participate in FIAC working sessions. In return,FIAC’s members — comprising over 50 of the largestforeign investors in Russia ( including ABB, Coca-Cola,EY, Cargill, Renault, BP, Mitsubishi, BAT, Unilever,Ford, Royal Dutch Shell and Nestlé) — were asked toguarantee that their global CEO would attend FIAC’sannual plenary sessions, which were to be chaired bythe Russian Prime Minister.The participation of senior ministers and global CEOsimmediately raised the status of FIAC, and ensured thatit was taken a lot more seriously by all involved. At thesame time, FIAC was reorganized toward a more actionorientedapproach. Members of FIAC agree on keypriorities and then review ways to improve the businessand investment climate in Russia during the plenarysessions. The focus is on solving practical problemsto make it easier for foreign investors to do business.After plenary sessions, working groups explore anddevelop solutions for the issues that emerge. Thisactive partnership between the Russian Governmentand foreign investors has led to numerous legislativechanges to improve the business environment. Partlyas a result of these improvements, Russia was amongthe world’s top three recipients of FDI capital in 2013,according to UNCTAD data.This case study is based on a compilation of publicly availableinformation drawn from a variety of sources, including annual reports,investor presentations and reports, and other media releases.EY’s attractiveness survey Africa 2015 Making choices53

Future Assuring Africa’s long-term growthWhat does all this mean …?PriorityEmbracingshared valuePursuing profit with a clear purpose to achieveshared valueFosteringentrepreneurshipCreating enabling conditions for entrepreneursand actively supporting development of SMEsFor businessThe health and competitiveness of a business areintimately intertwined with the well-being of thecommunities and economy in which it operates.So profit and purpose can be mutually reinforcing.Company executives need to take a long-term viewand work out the concrete steps they can taketo assist economic growth and development inneighborhoods and countries where they operate.Africans are among the most entrepreneurial peopleon the planet. Yet they lack finance, infrastructureand technical skills. Companies can aid thedevelopment of entrepreneurship by seeking localsuppliers and by helping them achieve the qualitystandards required. Many leading companies inAfrica have developed entrepreneurship promotionschemes: best practice models abound.How can corporate procurement assistentrepreneurship? How can corporate skillsbe shared to upgrade the labor pool? How canmanagerial knowledge be deployed to helpstrengthen local communities and institutions? Cancorporate infrastructure, from power supplies andinternet connections to transport links, be sharedwith local businesses and people?For governmentsLocal, regional and national governments need tosee companies as a vehicle to help create collectiveprosperity, not a cow to be milked. That begins withidentifying shared objectives, and a sincere search forareas where collaboration might help achieve them.What do companies need to thrive, and how cangovernment facilitate their development? Do theyneed clearer rules, or simpler, more transparentadministrative procedures? What can be done toattract companies and help them find the sites andskills they need?Developing entrepreneurship and local supplychains have wide-ranging benefits for governments:these include generating tax revenues, increasingcompetition, cutting costs, reducing procurementdelays, and helping to balance the national accounts.Working with business and expert NGOs, policymakerscan stimulate entrepreneurial growth andaddress the key policy objective of job creation.Governments must seek the win-win collaborationopportunities.54 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessAcceleratingregional integrationAiding the development of regionalmarkets with critical massBridging theinfrastructure gapBuilding the infrastructure neededto enable growthPromotingpartnershipsDeveloping collaborative partnershipsacross the business, government andsocial sectorsFragmented markets and poorconnections between neighboringcountries have long hamperedinvestment in Africa. Now strenuousefforts to achieve better regionalintegration, especially in East andSouthern Africa, are beginning to reducebarriers between markets and increasethe scale of commercial opportunities.As markets grow, economies of scaleincrease, prices fall, and investing in localproduction becomes more attractive.Corporate executives need to followintegration developments and seizethe opportunities (and respond to thecompetitive threats) that are beginningto emerge.Regional integration involvescompromising on national authority, butthe economic benefits from developingcommon markets are increasinglyevident. As barriers decline, it is criticalfor policy-makers to create a competitiveand dynamically improving environmentfor business. They can also fostercompetitiveness clusters, for example inthe automotive or garment industry.Historically, many African infrastructurenetworks have favored trade withoverseas markets, rather thanneighboring communities or countries.Refocusing upon regional trade willconnect previously neglected capacitywith nearby markets, lowering cost andimproving supply of anything from fruitand fish to school notebooks and autoparts. Power supplies and water andwaste systems are often inadequate.Financing and building the infrastructureAfrica needs will require massiveinvestment and create vast businessopportunities.Tearing down market barriers andplanning and overseeing development ofnew infrastructure links requires highlytechnical skills that are often scarceamong African administrations. The taskis big, and complex. Policy-makers needto create new, transparent and effectiveinstitutions and staff them with ableand well-motivated people to achievetop results. To get value for money andachieve a lasting, long-term capacityupgrade, they must take the quality ofAfrican administration and governance toa new level.Companies need to understand thesocieties in which they operate, andthe best way to acquire and developunderstanding is through partnerships.The need is especially acute in Africa,where institutions are sometimes weak.Partnering with civil society can helpidentify opportunities, implement bestpractice and contain risk. Companiesseeking to develop sustainable, longtermoperations will want to implementbest-practice labor, health and safety andenvironmental practices, but also want toensure procurement and other practicesare benefiting the communities wherethey operate. Fostering good, properrelationships with NGOs and governmentcan ensure good words becomegood deeds.Policy-makers must recognize thelimits of corporate competence andhelp educate firms about local needsand characteristics. They should seekcommon ground and explore ways inwhich companies can be recruited to helpachieve legitimate policy objectives suchas widespread high workplace healthand safety standards and developmentof sustainable local supply chains thatprotect the natural environment andensure the long-term well-being ofcommunities.EY’s attractiveness survey Africa 2015 Making choices55

Methodology Assuring Africa’s long-term growthMethodologyEY’s 2015 Africa attractiveness survey is based on a twofold, original methodology that reflects:The real attractiveness of Africa forforeign investorsOur evaluation of the reality of FDI in Africa is basedon data provided by fDi Markets, a service from TheFinancial Times Limited (2015). The fDi Marketsdatabase tracks new greenfield and expansion FDIprojects. Joint ventures are only included where theylead to a new physical (greenfield) operation. M&A andother equity investments are not tracked. There is nominimum size for a project to be included. However,every project has to create new jobs directly.Data on FDI project creation and the number of jobscreated is widely available. However, many analystsare more interested in quantifying projects in termsof physical assets, such as plant and equipment, ina foreign country. These figures, rarely recorded byinstitutional sources, provide invaluable insights asto how inward investment projects are undertaken,in which activities, by whom and, of course, where.To map these real investments carried out in Africa,The analysis of FDI data in this report includesa program of 13 construction projects in NorthAfrica, worth a total of US$40b, announced inMarch 2014. However, as of May 2015, thereis still some uncertainty regarding whether theprogram will go ahead.EY used data from fDi Markets. This is the only onlinedatabase tracking cross-border greenfield investmentscovering all sectors and countries worldwide. It providesreal-time monitoring of investment projects and jobcreation, with powerful tools to track and profilecompanies investing overseas.The perceived attractiveness of Africa andits competitors among foreign investorsWe define the attractiveness of a location as acombination of image, investors’ confidence andthe perception of the ability of a country or areato provide the most competitive benefits for FDI.Field research was conducted by the CSA Institute inJanuary and February 2015, via telephone interviewswith a representative sample of 501 internationaldecision-makers. Business leaders were identifiedand interviewed in 30 countries. Globally, of the 501business leaders interviewed, 63% work for companiesthat operate in Africa.56 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessProfile of companies surveyedGeographySize17% more than US$2b7.9%NorthAmericaSouth andEast CentralEurope 0.7%24.2%Europe23% 5.3%North AfricaMiddle East11.1%Asia21%between US$501mand US$2b1%West Africa1.6%East Africa24.3%Southern Africa0.9%Oceania22%between US$201mand US$500m40% less than US$200mJob titleSector of activity49.1%Financial director33.4%16.0% 12.7%9.6%14%Managing director, SeniorVice President or COO12%Commercial director, Salesand marketing manager8%Director of development5%Director of strategy3%Chairman, President or CEO2%Director of investments6.8%OtherPrivate andbusiness services6.8%Real estate andconstruction2.7%Industry andAutomotiveHigh tech andtelecommunicationConsumer productsand retailEnergy andcleantechMining and metals Private equity Aerospace anddefenseLife sciences6.7% 5.9% 3.2%1.1% 1%AgricultureFDI data has been classified on the following basis:Sub-region classificationNorth Africa: Algeria, Egypt, Morocco,Tunisia, LibyaEast Africa: Kenya, Uganda, Rwanda, Tanzania,Sudan, South Sudan, Ethiopia, Eritrea, Burundi,Comoros, DjiboutiSouthern Africa: Angola, Botswana, Lesotho,Malawi, Mozambique, Namibia, South Africa,Swaziland, Zambia, Zimbabwe, Madagascar,Mauritius, Reunion, SeychellesWestern Africa: Nigeria, Niger, Mali, Benin,Togo, Senegal, Sierra Leone, Mauritania,Liberia, Guinea, Guinea-Bissau, Ghana,Gambia, Gabon, Cote D’Ivoire, Burkina Faso,Cape Verde, Cameroon, Equatorial Guinea,Sao Tome and PrincipeCentral Africa: Central African Republic,Chad, Democratic Republic of Congo,Republic of the Congo,Sector classificationAerospace and defense: aerospace, space anddefenseAgri-products: rubber, wood productsAutomotive: automotive components,automotive original equipment manufacturers(OEM)Business services: business servicesChemicals: chemicals, plasticsCleantech: alternative and renewable energyCoal, oil and natural gas: coal, oil andnatural gasDiversified industrial products: businessmachines and equipment, engines and turbines,industrial machinery, equipment and tools,paper, printing and packagingFinancial services: financial servicesHealth care: health careTMT: software & IT services, communications,electronic components, semiconductors, leisureand entertainmentLife sciences: biotechnology, medical devices,pharmaceuticalsMetals and mining: metals, mineralsCPR : beverages, consumer electronics,consumer products, food and tobacco, textilesReal estate, hospitality and construction:hotels and tourism, building and constructionmaterials, real estate, ceramics and glassTransport and logistics: non-automotivetransport OEM, transportation, warehousingand storageEY’s attractiveness survey Africa 2015 Making choices57

EY in Africa Assuring Africa’s long-term growthEY in AfricaEY is a global professional services organization,with 190,000 people in over 140 countries aroundthe world. EY currently has physical operationsin 33 African countries, including 28 in SSA. Theorganization has been operating in South Africa for165 years and in other countries such as Nigeria,Kenya and Angola for more than 50 years.EY has had a presence in many African countriesfor decades. However, like all the large professionalservices organizations, the model was traditionallyone of loose affiliation under a global brand. This oftenmeant that individual country (and even city) practicesran independently. They were often disconnected andhad different capabilities and service quality levels.EY is the first of the large global organizations tobreak definitively with this model. Five years ago, weembarked on a structured process of integrating all ofour SSA practices into a single operating model.We now operate as a single organization across SSA —a practice combining offices in 28 different countries.With ever-increasing numbers of clients looking toexpand or enter into African markets, our singleintegrated operating model helps us to respond toclients’ needs in a consistent and coordinated manneracross different countries.Africa Business CenterToday, we are able to navigate through thecomplexity that our clients are experiencingacross the geographies. We do this through ourAfrica Business Center.Its sole purpose is to help clients make theirinvestment and expansion decisions in Africa.Our African integration benefits our clients through:• A network of people across Africa and the rest ofthe world, helping us to coordinate our resources toprovide clients with a single point of contact• Pre-eminent thought leadership and events suchas the Africa attractiveness survey, the StrategicGrowth Forum Africa and the Africa Tax Conference• The unique Growing Beyond Borders software — aninteractive map-based tool that visually maps datathrough the lens of the continent’s geography• A proven methodology for supporting thedevelopment of growth strategies for Africa58 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessOneAfrican executive teamOneintegrated operating model across SSASSA footprintMoroccoAlgeriaCapeVerde Mauritania Mali NigerSenegalBurkina FasoGambiaGuineaNigeriaBissauBeninGuineaTogoEquatorial GuineaSierra LeoneLiberia Sao TomeCôte d’Ivoire GabonCongoGhanaEY officeSupport availableTunisiaLibyaCentral AfricanRepublicCameroonEgyptChad Sudan EritreaAngolaDemocraticRepublic ofCongoBurundiZambiaZimbabweNamibiaBotswanaSouth AfricaSouthSudanEthiopiaUgandaKenyaRwandaTanzaniaMalawiMozambiqueSwazilandLesothoDjiboutiSomaliaSeychellesComorosMadagascarMauritiusReunionincludes 28 countries282 partners and employsover 5,700 peopleExceptionalclientservice165 years in AfricaEY Strategic Growth Forum Africa 20153–4 November 2015, Johannesburg, South AfricaEY hosts the Strategic Growth Forum (SGF) in several locationsaround the world, including the US, Brazil, Mexico, China, Italyand India. These events are part conference, part workshop andpart networking opportunity, with the objective of identifying andconnecting to new opportunities for growth.This will be the fourth SGF hosted on African soil. The focusof our event is exclusively on Africa: on the strategic growthopportunities that the continent offers and the challenges thatneed to be addressed to realize these opportunities. Through thesuccess of the three previous events, SGF Africa has established areputation as an unparalleled opportunity to network, share ideasand challenges, and learn from those who are doing business andimplementing government policies across Africa.An exciting new part of SGF Africa this year is the EY WorldEntrepreneur Award — Southern Africa, which will take placeat a gala dinner on 3 November 2015. This unique award makes adifference through the way it encourages entrepreneurial activityamong those with potential, and recognizes the contributionof people who inspire others with their vision, leadership andachievement. We celebrate these unique individuals throughregional, national and global awards programs in more than140 cities in over 50 countries. In Africa, the award was launchedin Southern Africa in 1998, East and West Africa in 2011 andwill launch in Francophone SSA (FSSA) in 2015.The agenda and logistics will be announced soon. This will includemore information on the venue, accommodation, registration feesand travel information.For more information, please email: Sarah Custers(sarah.custers@za.ey.com) or visit www.ey.com/sgfafrica 2015for more updates.EY’s attractiveness survey Africa 2015 Making choices59

Contacts Assuring Africa’s long-term growthContactsAfrica country leadersCountry Name EmailAlgeria Philippe Mongin philippe.mongin@fr.ey.comAngola Luis Marques luis.marques@pt.ey.comBotswana Bakani Ndwapi bakani.ndwapi@za.ey.comCameroon Joseph Pagop joseph.pagop.noupoue@cm.ey.comChad Joseph Pagop joseph.pagop.noupoue@cm.ey.comCongo Ludovic Ngatse ludovic.ngatse@cg.ey.comCote d'Ivoire Jean-Francois jean-francois.albrecht@ci.ey.comAlbrechtDRC Lindsey Domingo lindsey.domingo@cd.ey.comEgypt Emad Ragheb emad.ragheb@eg.ey.comEquatorial Erik Watremez erik.watremez@ga.ey.comGuineaEthiopia Zemedeneh Negatu zemedeneh.negatu@et.ey.comGabon Erik Watremez erik.watremez@ga.ey.comGhana Ferdinand Gunn ferdinand.gunn@gh.ey.comGuinea Rene-Marie Kadouno rene-marie.kadouno@gn.ey.comConakryKenya Gitahi Gachahi gitahi.gachahi@ke.ey.comLibya Waddah Barkawi waddah.barkawi@jo.ey.comMadagascar Gerald Lincoln gerald.lincoln@mu.ey.comMalawi Shiraz Yusuf shiraz.yusuf@mw.ey.comMorocco El Bachir Tazi bachir.tazi@ma.ey.comMauritius Gerald Lincoln gerald.lincoln@mu.ey.comMozambique Ismael Faquir ismael.faquir@mz.ey.comNamibia Cameron Kotze cameron.kotze@za.ey.comNigeria Henry Egbiki henry.egbiki@ng.ey.comRwanda Allan Gichuhi allan.gichuhi@rw.ey.comSenegal Makha Sy makha.sy@sn.ey.comSeychelles Gerald Lincoln gerald.lincoln@mu.ey.comSouth Africa Ajen Sita ajen.sita@za.ey.comSouth Sudan Patrick Kamau patrick.kamau@ss.ey.comwTanzania Joseph Sheffu joseph.sheffu@tz.ey.comTunisia Noureddine Hajji noureddine.hajji@tn.ey.comUganda Muhammed Ssempijja muhammed.ssempijja@ug.ey.comZambia Tim Rutherford tim.rutherford@za.ey.comZimbabwe Walter Mupanguri walter.mupanguri@zw.ey.comAfrica industry leadersIndustry Name EmailFinancial services Emilio Pera emilio.pera@za.ey.comGovernment and Joe Cosma joe.cosma@za.ey.cominfrastructureGovernment and Sugan Palanee sugan.palanee@za.ey.compublic sectorMining and metals Wickus Botha wickus.botha@za.ey.comEnergy Claire Lawrie claire.lawrie@ng.ey.comConsumer productsand retailTechnology,media andtelecommunicationsDerek EngelbrechtMyhan Naidooderek.engelbrecht@za.ey.commyhan.naidoo@za.ey.comAfrica service line and markets leadersService line or role NameEmailAssurance Lance Tomlinson lance.tomlinson@za.ey.comAdvisoryRoderick Wolfenden roderick.wolfenden@za.ey.comTax Jim Deiotte jim.deiotte@za.ey.comTransactionAdvisory ServicesAfrica MarketsLeaderAfrica BusinessCenter LeaderAmericas-AfricaBusiness CenterSugan PalaneeSugan PalaneeMichael LalorJames Newlandssugan.palanee@za.ey.comsugan.palanee@za.ey.commichael.lalor@za.ey.comjames.newlands@ey.comInvest in AfricaInvest in Africa (IIA) is a cross-sector partnership of companiesworking together to drive sustainable growth by creatingsolutions to the shared challenges of doing business in Africa.Challenges such as accessing new markets, sourcing locally andbuilding capacity are too important to ignore, yet often too bigto address alone.Launched in 2012 by Tullow Oil, IIA has since partnered with ahost of international and local businesses, including EY, to buildthe African Partner Pool (APP), Africa’s first online cross-sectorbusiness community. Launched in Ghana in 2014, the APP drivestrade and investment into Ghanaian SMEs by connecting themto the supply chains and tenders of international companies.IIA continues to develop the quality of SMEs in the APP byproviding business skills training and guides to best practice.The organization is also proud to have secured US$1m fundingfrom the African Development Bank to continue this workthrough a three-year training and mentoring program.To date, over 400 SMEs from across 18 differentcountries have registered with APP, and over 10large corporations are using it to source locally.60 EY’s attractiveness survey Africa 2015 Making choices

www.ey.com/attractivenessPublicationsMegatrends 2015: makingsense of a world in motionWe describe megatrends as large,transformative global forces that definethe future by having a far-reachingimpact on business, economies,industries, societies and individuals. EYhas identified six megatrends with thecurrent and future capacity to disruptand reshape the world in surprisingways. Visit ey.com/megatrends toconsider how these individual yetinterconnected megatrends mightimpact your business.Africa 2030: realizing thepossibilitiesThis publication marks a subtlechange in emphasis for EY Africa.Since we initiated our flagship Africaattractiveness program in 2010, wehave been among those at the forefrontof promoting the African growthstory and advocating greater levelsof investment into Africa. We havedeveloped a robust data and knowledgebase to help provide quantitativesubstance to support the “businesscase” for Africa. Visit the EY AfricaBusiness Center to read further anddiscover more at ey.com/za.BaroMed 2015: the nextopportunityEY’s BaroMed attractiveness surveyuncovers the remarkable potentialof the Mediterranean region. Bigtransitions and disruptions in countriesaround the Mediterranean Sea andArabian Gulf have, in recent decades,made life complicated for investorsand disrupted economies in a regionwith a formidable trading tradition. Asinvestors regain interest in developingintegrated manufacturing and serviceshere, visit ey.com/attractiveness todiscover where the best opportunitiesmay lie.EY’s 2015 Europeanattractiveness survey —Comeback timeAfter several false dawns, investorsseem convinced that Europe has at lastbroken free from recession and is findinga path to sustainable growth. Investorsreckon Europe has so improved itscapacity to create and innovate that itcould plausibly harbor the next Google,and has pulled further ahead of China asthe world’s most attractive investmentdestination. To find out the implicationsfor your business and its development,visit ey.com/attractiveness.Partnering for performance —Emerging markets perspectivePart 1: the CFO and the CIOThis report is the first in a series of reportstailored for the emerging markets thatform part of the EY global CFO program,Partnering for performance. The reportexplores the contribution that CFOs canmake by partnering with other executivesto grow, protect and transform theirorganizations. This first piece of thoughtleadership demonstrates the need for astrong, collaborative relationship betweenthe CFO and the CIO. It also explores thebusiness benefits of a “digital CFO” whoplays a key role in driving value frominvestments in IT and the technologiesthat enable digital. Download the report atemergingmarkets.ey.com.EY’s attractiveness survey Africa 2015 Making choices61

EY | Assurance | Tax | Transactions | AdvisoryAbout EYEY is a global leader in assurance, tax, transaction and advisoryservices. The insights and quality services we deliver help build trustand confidence in the capital markets and in economies the worldover. We develop outstanding leaders who team to deliver on ourpromises to all of our stakeholders. In so doing, we play a critical rolein building a better working world for our people, for our clients and forour communities.EY refers to the global organization, and may refer to one or more, ofthe member firms of Ernst & Young Global Limited, each of which isa separate legal entity. Ernst & Young Global Limited, a UK companylimited by guarantee, does not provide services to clients. For moreinformation about our organization, please visit ey.com.© 2015 EYGM Limited.All Rights Reserved.EYG no. AU3208BMC AgencyGA 0321_01482ED NoneIn line with EY’s commitment to minimize its impact on the environment, thisdocument has been printed on paper with a high recycled content.This material has been prepared for general informational purposes only and is not intended tobe relied upon as accounting, tax, or other professional advice. Please refer to your advisorsfor specific advice.The views of third parties set out in this publication are not necessarily the views of the globalEY organization or its member firms. Moreover, they should be seen in the context of the timethey were made.ey.comContactsMichael LalorLead Partner Africa Business CenterTel: +27 83 611 5700Email: michael.lalor@za.ey.comSarah CustersAfrica Brand, Marketing and CommunicationsTel: +27 11 772 3300Email: sarah.custers@za.ey.comFathima NaidooAfrica Press RelationsTel: +27 11 772 3151Email: fathima.naidoo@za.ey.comIlse BlankGlobal Economic Programs LeaderTel: +27 11 772 5063Email: ilse.blank@za.ey.comRaffaella SantarsiereGlobal Press RelationsTel: +39 027 221 2944Email: raffaella.santarsiere@it.ey.comFollow us on Twitter:@EY_EmergingMkts@EY_Africa

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