The Current Situation and Issues of Japanese Companies regarding African Businesses

Japanese Companies’ Investment In Africa “Current Status and Issues Faced”

Presenter Deloitte Tohmatsu Consulting 20th May 2013

Agenda Why Africa Now ? Why Japanese Companies ?

How to win the sizeable African Market by Japanese businesses  Expanding Geographical Coverage  Expanding Value Chain Coverage

Voices from Japanese companies in Africa Current Situation of Economic Region Invest Promoting Activity Trends Findings

Key Message  African market will be expanding based on economic growth supported EU crisis by willstrong direct resources businesses’ industry attention andtoyoung African population market growth Why Africa Now?  African market will be expanding based on economic growth  Companies in sluggish European economy are seeking for supported by strong resource industry and young population growth opportunity in African market growth

 Japanese business models which realize country  EU crisis will direct businesses’ attention to African market development and business development at same time Why Japanese companies?

3

 African market will be expanding based on economic growth  Japanese companies’ technologies, qualities and supported by strong resource industry and young population experiences which allow them to meet Africa’s needs growth © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Key Message to Japanese companies: How to win in African market

M&A Geographical coverage

Capture sizeable markets

Service Networks (Automotive, Machinery) Value chain coverage

4

Power Retailers (Consumer Business)

Expand to upstream/downstream

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Key Message to African countries: How to Promote Investment from Japan

More Active Dissemination(Promotion) of Information about African Market

Promote Investment from Japan Enhancing Regional Integration within Africa

5

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Why Africa Now ?

Why Africa now? Strong economic growth led by Energy & Resources sector  Africa has benefited from Energy & Resources business and achieved dramatic economic growth GDP Growth rate in recent years Billion US$

GDP Growth rate of industrial sectors (2002～2009） GDP (Billion US$)

2,700

その他 Others

6%

2,423

CAGR：11.73% 2003～2014

2,200

2,218 2,027 2,028

1,912 1,851

電力 Power

2%

Tourism 観光関連

2%

Real Estate 不動産

5%

建設関連 Construction

5%

1,705 1,700

1,600 1,430

1,400 1,200

1,200

Public 公共部門 Sector

6%

金融 Financial

6%

1,000

Manufacturing 製造業

800 700

9%

物流/情報通信 ICT

640

10%

農業 Agriculture 200

2014(e)

2013(e)

2012(e)

2011(e)

2010

2009

2008

2007

2006

2005

2004

2003

Estimate

12%

流通関連 Logistics Energy & 資源関連 Resources

13% 24% 0%

5%

10%

15%

20%

25%

30%

Sources : Africa Development Bank, IMF, Deloitte Analysis 7

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Why Africa now? Population under 20 years old is increasing in Africa  Population of young people in Africa will be keep growing while in Asia, number will be keep on decreasing

million

Population under 20 years will increase sharply in the coming 40 years

Source:”World Population Prospects: The 2010 Revision” 8

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Why Africa now? Global business trend : From EU to Africa?  To many businesses, importance of African market in the EMEA(Europe, Middle East and Africa) region has increased on the expansion regional strategy

Economic crisis has led to increased investment in emerging market European market

North American market

European sovereign-debt crisis (2010~)

？

Lehman Shock (2008)

Asian countries being removed from GSP coverage by EU (2014~)

？

Companies moved to middle and south American market

Asian market

Next key market African market

“B”RICS Middle and South American market

Source: Created by Deloitte based on multiple resources 9

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Why Africa now? FDI from Europe to African region is in increase  FDI to African region is recovering and almost reached to pre Lehman Brothers Crisis level

Million USD

Lehman Shock

EU Crisis

FDI into African region had almost reached to pre 2009 crisis level in 2011

Sources: IMF, Deloitte Analysis 10

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Why Japanese companies ?

Why Japanese companies? Africa is estimated to have $48bn investment gap in infrastructure

$45.3bn Spent

$93.3bn Africa 7.1 % GDP $48bn Gap Source: Deloitte, World Bank Infrastructure Strategy Update 2012-2015 – Transformation through infrastructure report, Center for American Progress, Meeting the Infrastructure Imperative 2012, International Monetary Fund, Moody’s Investor Service. 2011. Europe 2020 Project Bond Initiative. European Commission 12

•Africa requires infrastructure investment of $93.3bn per annum •$60bn for new capex & $33bn maintenance

•Current spend is only $46bn •There is thus a shortfall of $48bn per annum •This represents a SIGNIFICANT opportunity for infrastructure developers and infrastructure funders to play in the African space.

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Why Japanese companies? Technologies & Qualities meeting Africa’s needs ICT

Electricity

 ISDB‐T （Digital terrestrial broadcasting ）  Submarine communications cable

 Environmentally friendly power plant  Power plant with efficiency in power generation

$9bn a year deficit

$41bn a year deficit

Transport  Traffic control system

$18.2bn a year deficit

Sources: African Development Bank, Public-Private Infrastructure Advisory Facility, World Bank, International Energy Agency, GSMA, World Bank, Africa’s infrastructure: A time for transformation 13

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Why Japanese Companies ? Not only Energy & Resources but also related infrastructure development

Coal

Rare Metal Oil Gas

Renewable Energy

Infrastructure Plant Infrastructure Chemical

Fertilizer

Metal

Foods

Retail

For Japanese companies, doing Developing related E&R business means・・・ infrastructures 14

Source: Created by Deloitte based on multiple resources

＆

Making contribution to development of local economy © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to win sizeable African market by Japanese businesses

How to win in African market

M&A Geographical coverage

Capture sizeable markets

Service Networks (Automotive, Machinery) Value chain coverage

16

Power Retailers (Consumer Business)

Expand to upstream/downstream

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Expanding Geographical Coverage

How to win in African market : Geographical coverage

M&A Geographical coverage

Capture sizeable markets

Service Networks (Automotive, Machinery) Value chain coverage

18

Power Retailers (Consumer Business)

Expand to upstream/downstream

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(1) M&A becomes a strategic option Japanese companies’ major cases of M&A in Africa

NTT Data ¥286 bn

Toyota Tsusho ¥24.9 bn

Dimension Data

Date：

12-Oct-2010

Base：

Johannesburg

Network： 20 countries 45 offices Target：

CFAO

Date：

25-Dec-2012

Base：

France

Network： 33 countries 45 offices Target：

Freeworld Coatings

Date：

18-Apr-2011

Base：

Johannesburg

¥18.4 bn Network： 6 countries(Export to 8countries)

JT

19

¥20 bn

Target：

Nakhla

Date：

4-Mar-2013

Base：

Egypt

Network： 5countries(Export to 7countries)

Base Networks

Kansai Paint

Target：

Network of acquired companies

Dimension Data CFAO（Automotive） Freeworld Coatings Export to Nakhla Export to ※Estimated

value appeared in press releases

Source: Created by Deloitte based on multiple resources © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(2) Competitors have conducted numbers of M&As Major M&As (Top 20 based on Equity Value, 2000-2012) Date Effective

Target Name

Target Nation

Acquiror Nation

Target Industry

3-Mar-08

Standard Bank Group Ltd

South Africa Financials S. Africa

3-Apr-12

Tonkolili Iron Ore Ltd

Sudan

18-May-09

Vodacom Group(Pty)Ltd

Acquiror Name

M&A Equity Value & No. of M&A in Africa (2008-2012) Million $,%

Equity Value($mil)

China

ICBC

28,083.35

China

Shandong Iron&Steel Group Co

17,921.49

South Africa Telecommunications S. Africa

EU

Vodafone Group PLC

16,085.85

01-May-05, IAM 20-Feb-01

Morocco Morocco Telecommunications

EU

Vivendi Universal SA

15,323.97

23-Jan-08

OCI Cement Group

Egypt Egypt

EU

Lafarge SA

12,956.42

17-Mar-09

AngloGold Ashanti Ltd

South Africa Materials S. Africa

United States Paulson & Co Inc

29-Mar-00

Dimension Data Holdings PLC

South Africa High Technology S. Africa

EU

Deutsche Bank AG

9,018.98



あ

22-Jul-05

Absa Group Ltd

South Africa Financials S. Africa

EU

Barclays PLC

8,982.33



い

29-Mar-04

Gold Fields Ltd

South Africa Materials S. Africa

EU

Norimet Ltd

6,024.03



う

19-Apr-06

NNPC-OML 130

Nigeria Nigeria

China

CNOOC Ltd

5,982.22



え

9-Feb-09

BMCE

Morocco Financials Morocco

EU

BFCM SA

5,427.72



お



か

Sierra Leone

Materials

Materials

Energy and Power

11,302.33

7-Sep-12

Richards Bay Minerals

South Africa Materials S. Africa

EU

Rio Tinto PLC

5,162.16

3-Jan-10

Egyptian Co for Mobile Svcs

Egypt Egypt

EU

Orange Participations SA

4,468.78

20-Jun-11

Massmart Holdings Ltd

South Africa Retail S. Africa

United States Wal-Mart Stores Inc

4,223.33

25-Mar-08

BMCE

Morocco Morocco Financials

EU

CIC SA

4,089.09

31-Jan-08

M Boundi Field

Rep of Congo Energy and Power

South Korea

KNOC

3,954.55

31-May-07

Edgars Consolidated Stores Ltd

South Africa Retail S. Africa

United States Bain Capital LLC

3,502.48

20-Apr-06

VenFin Ltd

South Africa Telecommunications S. Africa

EU

Vodafone Group PLC

3,201.11

30-Sep-04

Western,Eastern Platinum Ltd

South Africa Materials S. Africa

EU

Lonmin PLC

3,105.50

12-Mar-03

Greater Nile Petroleum

Sudan Sudan

India

ONGC

3,071.04

20

Telecommunications

REP. Congo

Energy and Power

Source: Thomson One=Reuters

Equity Value Numbers, %

M&A Number © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(3) Leveraging power retailers in Africa Major retail companies’ presense

1

Expansion to other countries

Origin of network(SA)

 Major retail companies expand their retail network throughout sub Saharan region with their origin based in South Africa  Japanese companies can leverage this retail infrastructure to build strong local presence

806 stores 339 stores 691 stores

2

2

5

2 Nigeria

Uganda

Ghana

1 3

Democratic Republic of Congo

Kenya

1

3 1

5

138 stores 85 stores 83 stores (Total 774)

Zambia

Angola

11

19

2 Malawi

1

2

4

Madagascar Mozambique Zimbabwe 64 48 2 7 2 Namibia Botswana 1 17

26

27

14

12 9

2

5

5

3

6 10

309 stores

Tanzania

115 stores

South Africa

806 309 339

3

8 Mauritius

1 Swaziland

2 1 4 Lesotho

Source: Created by Deloitte based on multiple resources 21

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(4) Formulate optimal strategy for Formal market and Informal market-(1) South African market case

 In South Africa, 85% of the entire market is formal market

Nigerian market case  In Nigerian, 80% of the entire market is informal market

Formal Market 85%

Market Structure is different even from city by city Sources: Deloitte Research 22

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(4) Formulate optimal strategy for Formal market and Informal market-(2) Formal market

Sources: Deloitte Research 23

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(4) Formulate optimal strategy for Formal market and Informal market-(3) Informal market

Sources: Deloitte Research 24

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(5) Country by Country approach-Agri Business  Different regulations (Land ownership, Environmental regulation)  Different climate and topological conditions  Different level of installed agriculture supporting infrastructure Local compliance needed in each country

The national

Sources:African Cultural Center

Different climate

Source: Created by Deloitte based on multiple resources 25

Different Infrastructure

constitution enshrines state ownership of the land Constitutional provision for the state or the president to administer the land on behalf of the people obtains Constitutions lack provisions regarding land ownership

Country by country approach would be applicable to agri-business

Different Regulations

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(6) Case Study Automotive sector in Africa Current situation of new car market

(million units) 1.8

Actual

Forecast

1.6 1.4

Morocco

1.2

Algeria

Possible Sizeable market

1.0

Used automotive markets will emerge in subSaharan Africa

Egypt

0.8

0.6 0.4

South Africa

0.2 0.0

Kenya Tunisia

Morocco Algeria

Egypt South Africa

(CY)

Major new Automotive Market (Total Volume)

Sources: FOURIN, IHS Automotive 26

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(6) Case Study Service Network as key success factor to win markets Presence of competitors’ Automotive companies  For Automotive market, service networks could be key success factor for making dominant position in sizeable markets  To establish effective service networks, companies should take most efficient manner to compete with competitor in network expansion Service Network for New

Automotove market Network： 48 countries

Toyota Tsusho’s existing network CFAO’s network mainly covering NW Africa 27

Source: Created by Deloitte based on Toyota Tsusho Corporation’s material

could be ・・・

needs ・・・

Critical factor to grasp sizeable markets

Huge time and effort to be fully established

Two possible approaches Leveraging existing brand power which have been established by used car business Acquiring other networks compensating own networks through M&A © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Expanding Value Chain Coverage

How to win in African market : Value chain coverage

M&A Geographical coverage

Capture sizeable markets

Service Network (Automotive, Machinery)

Value chain coverage

29

Power Retailers (Consumer Business)

Expand to upstream/downstream

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(7) Maximum utilization of the business Value-chain(1) For example, a Japanese automotive company has introduced automotive value chain to facilitate environment under which customers can have easier access to new and used cars, resulting in increased revenue. New Automotive Sales

Target Upper client so far Income Middle Income Lower Income

New Target expect to be reached

Used Automotive Sales

Retail Finance

Automotive Value Chain Automotive Parts

Body & Paint

Service

Source: Created by Deloitte based on interview with Toyota Tsusho Corporation 30

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(7) Maximum utilization of the business Value-chain(2)

Coal Rare Metal Oil Gas

Renewable Energy

Infrastructure Plant Infrastructure

Chemical

Fertilizer

Metal

Foods Retail

Capacity Building of local people(Education Business) Leads to building local HRs 31

Source: Created by Deloitte based on multiple resources

Leads to creating future market © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Example of Human Resources Development in Senegal by Japan

 Senegal-Japan Vocational and Technical Training Center (CFPT) in Dakar  Established in 1982 by Japanese government grant  2300 trainees have graduated from the center  Japan has supplied Technical Cooperation for the past 30yrs  Foreign students from 22 countries (French speaking Africa) have graduated from the center  Technical certification adopted. 90% of trainees attain the highest certification (BTS)  80% of Graduate Trainees attain Job locally, others proceed for higher training abroad

Sources: Deloitte Pictures 32

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(7) Maximum utilization of the business Value-chain(3)

Ripple Effects

Business Value Chain

 International Joint Venture “Clean Star” led by Danish Bio-business major Novozymes, is now engaging into broad businesses from sales of gas cooker to production of bioethanol in the value chain described below in Mozambique.  At same time, they can contribute to national development through environmental protection and improving revenue of contracted farmers.

33

Consumer Products ①Sales of less smoke exhausting Gas cooker using bioethanol as fuels instead of traditional cooker using charcoal as fuels

Environmental Protection A) Reduction of charcoal used for cooking B) Prevention of deforestation leading to reduction of greenhouse gas

Sales of Bioethanol ②Sales of low price bioethanol used as fuels of Gas cooker

Advantage for Business

Mutual revenue supplement among businesses and revenue diversification Advantage for Country Development

Contribution to development of the Country

Sources: Created by Deloitte based on multiple sources

Production of Bioethanol ③Purchase of cassava which is raw material of bioethanol ④Production of bioethanol using purchased surplus cassava

Poverty alleviation C) Contracted farmers transfer to sustainable multiple cropping D) Stabilization of contracted farmers’ revenue and improvement of stability of food supply © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(8) Multipurpose infrastructure development(1)  In Mozambique, infrastructures needed for coal mining form one kind of value chain  Japanese companies should leverage other companies competencies to win comprehensive infrastructure business opportunities

Infrastructure Value Chain

Road Thermoelectric Power Plant Coal Mining

Civil Engineering Angola

Zambia

Malawi

Zimbabwe

Namibia

Botswana

Swaziland

South Africa Lesotho

Mozambique

Coal Processing Plant Railway

Port

 Brazilian Vale’s Infrastructure works at the Moatize coal mine comprising roadways, civil engineering services and construction of a mineral coal processing plant.  The project also calls for the rehabilitation of rail lines running near the mine, expansion of the Beira Port and construction of a thermoelectric power plant.  Odebrecht of Brazil is the comprehensive constructor.

Sources: Image is created by DTC based on multiple documents 34

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

How to capture sizeable markets in Africa-(8) Transnational infrastructure development(2)  LAPSSET project in East Africa is an example of transnational infrastructure being developed now in Africa to open up trade inlands Lamu Port and Lamu Southern Sudan-Ethiopia Transport Corridor (LAPSSET)

 Countries currently Mombasa port is serving  Countries expected to be served by Mombasa/LAMU Ports in future

South Sudan

GDP per capita (current US$)  4,000  3,000  2,000  1,000

Somalia

Ethiopia Pipeline

Rails

Rwanda Uganda

Burundi

Kenya Mombasa Port/ LAMU Port

DRC Tanzania

35

Sources: Image is created by DTC based on multiple documents

Northern Corridor Mombasa port and Mombasa - Uganda transport corridor

In 2010

In 2018 © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Voices from Japanese companies in Africa – DTC on-site interview conducted on 29th April 2013~15th May 2013

Key message from Japanese companies : They are looking at Africa market in regions and not in country by country base  We have been doing business in South Africa so far. However, in near future, we believe that we have to advance into regions where future market growth is expected.  When we look at Africa market through regional trading zones it is possible to make judgments about investments towards addressing regional demands such as ones coming from Southern Africa Power Pool.  We prefer to choose company as a M&A target, which is doing business in regional basis not in country basis.  We totally agree with that it is reasonable to see African market from the regional point of view, however, there are issues regarding smooth movement of products within the African trading zones .  If we try to transport some stocks from costal regions to inland countries, it is very expensive and takes a lot of time. For example, depending on destinations stocks are going to, cost could be double or triple normal prices. 37

Sources: Interviews done by Deloitte

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Key message from Japanese companies : They intend to contribute to country development and talent development  In our business(Energy business), we are trying to do resource development in this country from the point of view of future development of the country. This is distinctive aspect of Japanese business model.  Japanese businesses’ basic stance in African market is “Cooperating with countries to develop the country through businesses”.  In this aspect, developing road and rail infrastructures within the resource business framework would be possible.

 We believe that local subsidiaries in Africa should be managed by local people well developed by our company.

38

Sources: Interviews done by Deloitte

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Useful information from Japanese companies : Administrative procedures take too much time and they are complicated

 I can say that, in Africa, I feel custom clearance takes too much time and it influences our business  The documents required to obtain certificates of origin are very complicated and procedures themselves are very troublesome

 There is the case that it took more than 6 months to obtain working VISA. During this period, because they were holding our passports we cannot go to business trip even if we seriously need to.  Also there is even the case that residence period had expired while waiting for the working VISA. 39

Sources: Interviews done by Deloitte

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Key message from Japanese companies : There is a lack of information about investment opportunities  Most critical issue for Japanese companies thinking investment into African market, is bias of information about African market  I feel there are too much negative information such as risks in Africa, and there is little information about business opportunities  More aggressive dissemination of market information is needed.  We are ready to build strategic partner relationships with local investment promotion authorities in Africa.  However, in terms of building relations with local authorities, it is very difficult to do it with 54 countries  It must be noted that, countries in Africa should provide information about regional investment promotion policies and business environment in regional level  It would be very helpful if African countries establish regional integrated service center which will be in charge of regional investment matters as a one-stop service 40

Sources: Interviews done by Deloitte

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Current Situation of Economic Region

Current Situation of Economic Region-(1) Africa Regional Economic Zones AMU : Arab Maghreb Union: Morocco, Algeria, Tunisia, Libya, Mauritania Morocco

ECOWAS: Economic Community of West African States : Benin, Burkina Faso, Cape Verde, Gambia, Ghana ,Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, Togo

Western Africa

EU: FTA with European Union :Egypt, South Africa, Nigeria, Kenya, Algeria, Morocco, Tunisia 42

Source: GTZ , Africa Development Bank , Deloitte Analysis

Kenya Eastern Africa

Central Africa

COMESA: Common Market for Eastern and Southern Africa: Angola, Congo(DRC), Eritrea, Madagascar, Namibia, Sudan , Uganda, Burundi, Djibouti, Ethiopia, Malawi, Rwanda, Swaziland, Zambia, Comoros, Egypt, Kenya, Mauritius, Seychelles, Tanzania, Zimbabwe

UEMOA: West African Economic and Monetary Union： Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal, Togo, Guinea-Bissau

Egypt

Nigeria

SADC: Southern African Development Community: Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia , Zimbabwe

SACU: South Africa, Botswana, Lesotho, Swaziland, Namibia

North Africa

Algeri a

EAC: The East African Community : Kenya, Uganda, Tanzania, Burundi, Rwanda

ECCAS: Economic Community of Central African States: Angola, Burundi, Cameroon ,Central African Republic, Chad, Congo (Brazzaville),Democratic Republic of Congo, Equatorial Guinea, Gabon, Rwanda, Sao Tome et Principe

Tunisia

Southern Africa

South

Africa

Main Trade Zones Trade Zone

Population (1 million)

GDP (PPP) / Capita $USD

Countries

Main Market

COMESA

406

1811

20

Egypt

SADC

233

3153

15

South Africa

AMU

88

6833

5

Algeria

ECOWAS

251

2500

15

Nigeria

EAC

140

1350

5

Kenya

UEMOA

114

1300 8 Ivory Coast © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Current Situation of Economic Region-(2) Intra-Africa Trade Flows between Economic Regions ECCAS

1.2%

0.6%

0.6% 8.9%

4.8% COMESA 5.4%

1.7%

3.7%

2.4%

6.0%

1.6%

13.1% 10.8%

SADC

3.6% 7.6%

0.5% ECOWAS

9.2%

16.1% 1.1% 5.3%

Sources： Mihalakas, N, “Intra-African Trade’ – A Renewed Urgency for Further Regional Integration by the AU” 2011. 43

○○% ○○%

Intra-Trade percentage within the Economic zones to total amount of trade of individual economic zones Percentage of trade to other Economic zones or to other African countries against total amount of trade of individual economic zones © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Current Situation of Economic Region-(3) Connectivity is not fully established in Africa

Problem about actual road conditions and some parts remain disconnected Africa looks connected on paper. But ・・・

Being planned and existing Corridors

Non-physical issues such as different regulation between neighboring countries

Sources: Image is created by DTC based on multiple documents 44

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Current Situation of Economic Region-(4) Current status of each economic region in Africa Member Countries

Elimination of Tariffs

Non-tariff Barrier abolition

Introduction of Common External Tariff

Mutual recognition of standards

Service Trade Liberalization

Investment Liberalization

Smooth Immigration

Protection of IPR

Open Public Procurement

Introduction of Competition Policy

Regional Harmonization of Infrastructures

Introduction of Common Currency

EU

（27 Countries）

○

○

○

○

○

○

○

○

○

○

○

○

ASEAN

（10Countries）

○

○

×

△

○

○

△

○

×

△

○

×

Economic Regions

EAC

Kenya, Uganda, Tanzania, Burundi, Rwanda

○

○

○

△

○

○

○

△

△

△

△

×

SADC

Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia , Zimbabwe

△

△

△

×

×

×

×

×

×

×

×

×

SACU

South Africa, Botswana, Lesotho, Swaziland, Namibia

○

○

○

△

○

○

○

△

△

△

△

△

COMESA

Angola, Congo(DRC), Eritrea, Madagascar, Namibia, Sudan , Uganda, Burundi, Djibouti, Ethiopia, Malawi, Rwanda, Swaziland, Zambia, Comoros, Egypt, Kenya, Mauritius, Seychelles, Tanzania, Zimbabwe

△

△

△

×

×

×

×

×

×

×

×

×

ECOWAS

Benin, Burkina Faso, Cape Verde, Gambia, Ghana ,Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, Togo

△

△

△

×

×

×

×

×

×

×

×

×

UEMOA

Benin, Burkina Faso, Ivory Coast, Mali, Niger, Senegal, Togo, Guinea-Bissau

○

○

○

△

○

○

○

△

△

△

△

○

Sources: Image is created by DTC based on multiple documents 45

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

HQ of Central Bank of West African States

 Central Bank of West African States  CFA franc is common currency introduced in UEMOA region

Dakar

UEMOA member countries Sources: Deloitte Pictures 46

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Invest Promoting Activity Trends

Comparison of Investment Promotion Authorities activities in Japan Region Country

Asia Asia

Board of Investment Ministry of Vietnam Planning and Investment

Thailand

Asia Indonesia

Asia

BKPM

Malaysian Investment Malaysia Development Authority

Middle East

Saudi Arabia

Africa

South Africa

Africa

Nigeria

48

Agency

SAGIA Trade and Investment of South Africa Nigerian Investment Promotion Commission

Japan Office

Seminars Corroboration with Japanese targeting Japanese companies, HP Japanese banks or agencies companies

Tokyo, Osaka

○

○

△

×

○

○ （JBIC、Mega Banks、 Regional Banks）

Tokyo

○

○

Tokyo, Osaka

△

○

Tokyo

○

○

△

Tokyo

×

△（○）

○ （Mega Bank）

×

×

△

×

Sources: Created by Deloitte based on multiple sources

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Findings

Key Message  African market will be expanding based on economic growth supported EU crisis by willstrong direct resources businesses’ industry attention andtoyoung African population market growth Why Africa Now?  African market will be expanding based on economic growth  Companies in sluggish European economy are seeking for supported by strong resource industry and young population growth opportunity in African market growth

 Japanese business models which realize country  EU crisis will direct businesses’ attention to African market development and business development at same time Why Japanese companies?

50

 African market will be expanding based on economic growth  Japanese companies’ technologies, qualities and supported by strong resource industry and young population experiences which allow them to meet Africa’s needs growth © 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Key Message to Japanese companies: How to win in African market M&A Geographical coverage

Capture sizeable markets

Power Retailers (Consumer Business) Service Networks (Automotive, Machinery)

Value chain coverage

Expand to upstream/downstream

City by City Approach Other cases Country by Country Approach 51

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Key Message to African countries: How to Promote Investment from Japan

More Active Dissemination of Information about African Market

Promote Investment from Japan Enhancing Regional Integration within Africa

52

© 2013 Deloitte Tohmatsu Consulting Co., Ltd.

Deloitte Tohmatsu Consulting (DTC) is a Japan-based member firm of Deloitte -a worldwide network providing professional services and advice. As an entity in the Deloitte Touche Tohmatsu Limited providing four professional service areas: audit, tax, consulting, and financial advisory services, DTC provides consulting services in Japan and to Japanese companies worldwide. DTC’s integrated services cover strategy through implementation to solve wide-ranging management challenges. DTC works closely with other Deloitte member firms both in Japan and overseas by leveraging the deep intellectual capital of approximately 200,000 professionals worldwide. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see http://www.deloitte.com/jp/en/about/ for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication. © 2013. For information, contact Deloitte Tohmatsu Consulting Co., Ltd.

Member of Deloitte Touche Tohmatsu Limited