2 3  J U N E   2 0 0 8

T R E N D S I N G L O B A L F I N A N C E A N D I N F R A S T R U C T U R E

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The credit crunch has triggered the worst banking crisis for decades with unprecedented write-downs and equity injections

Stock performance of major investment banksStock performance of major investment banks

Overview of selected announced capital injections Overview of selected announced capital injections

Source: FactSet, Bloomberg. Market data rebased to 100 as of June 6, 2008

Write-downs across major financials institutions ($bn)

Write-downs across major financials institutions ($bn)

020406080

100120140

J un-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 J un-08

J P M (20)% GS (23)% CS (43)% MS (52)%

ML (55)% LB (56)% C (62)%

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Credit crisis impact on sub-Saharan Africa

CausesCauses ConsequencesConsequences

Global SSA Comment

Credit shock in sub-prime

No mortgage market

Heavy balance sheet leverage

Could occur if sources of funding are limited

Short-dated funding

Most likely challenge current environment does not lend itself to LT funding

Impact on SSA Credit writedown by banks

Profit taking by financial investors especially HFs

Tightening of available credit to HF and more generally change in risk tolerance

Loss of confidence in global financial markets of Bears

Activity of types of some IBs will change re. more structured and toxic products

Heavier regulation

Key causes and consequences of recent credit crisisKey causes and consequences of recent credit crisis

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Sub-Saharan Africa is enjoying a growth spurt

Sub-Saharan Africa (SSA) has enjoyed strong growth for much of this decade, contributing to significant improvement in living standards in some countries.

Buoyant commodity prices, improved governance and rising investment have underpinned this acceleration in growth rates. There are still, however, important discrepancies between countries.

Oil exporters such as Nigeria and Angola have enjoyed the strongest growth rates, despite capacity constraints in some cases. Oil importers have been protected in many cases by high prices for non-oil commodities. The laggards are resource-poor and landlocked, which impedes their market access.

Growth has averaged around 6% per year since 2004Growth has averaged around 6% per year since 2004

4.8

7.7 7.3

8.89.9

3.6

6.1 5.6 6.1 5.8

3.85.2 5.3 5.8 5.6

4.1

7.36.5

7.7 7.3

1998-2004 2005 2006 2007 2008F

Net African Oil Exporters Net African Oil Importers The Big Four* Others

3.8

6.17.0

8.1 8.5 8.6

2.2

4.35.3 5.3

4.1 4.24.0

5.9 6.4 6.55.7 5.5

6.9 7.3 7.5

2.8 3.2 3.7 3.52.5 2.8

8.88.47.8

1998-2004 2005 2006 2007E 2008F 2009F

Sub-Saharan Africa Latin America Emerging Europe Emerging Asia Global

Source:AfDB, IMF, and JPMorgan estimates

*Big Four=South Africa, Algeria, Nigeria and Egypt

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Sub-Saharan Africa: Commodity price strength is a major positive

0

10

20

30

40

50

60

97-02 2003 2004 2005 2006 2007 2008F

SSA

Low income countries

Oil importers

Oil exporters

Fragile

Inflation in SSA (excluding Zimbabwe) has eased from over 16% in 2000 to 7.2% in 2007. Rising global food and energy prices are creating problems for net importers, but the inflationary impact has generally been contained by prudent macroeconomic policy.

The strength of commodity prices is a major positive for the resource-intensive region. Asia’s industrialisation and infrastructure development have been a key driver of demand for commodities, and should deliver continued price strength, reinforced by portfolio diversification by institutional investors.

Resources make Africa a key beneficiary of strong Asian demand

Resources make Africa a key beneficiary of strong Asian demand

Commodity prices remain elevated Commodity prices remain elevated

2005 2006 2007 2008f 2009f

Gold $/ oz 445 604 697 914 843

Platinum $/ oz 897 1,139 1,305 1,950

Aluminum $/ ton 1,895 2,593 2,664 2,494 2,389

Copper $/ ton 3,506 6,669 7,286 6,913 5,425

Silver $/ oz 7.30 11.50 13.40 16.20 15.20

Oil (WTI) $/ barrel 56.59 66.25 72.36 90.50 80.00

Wheat $/ bushel 3.18 4.02 6.40 8.31 Source: J PMorgan

Commodity prices to moderate in ’09 but hold well above ’05 levels

Commodity prices to moderate in ’09 but hold well above ’05 levels

Inflation, %oyaInflation, %oya

Source: IMF

Source: S&P GSCI spot indices

0

100

200

300

400

500

600

700

2002 2003 2004 2005 2006 2007 2008

Crude oil Precious metals Industrial metals

Cotton Cocoa

J an 2002 = 100

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Sub-Saharan Africa: External balances are looking healthier

0

1

2

3

4

5

6

7

8

9

10

1970 1975 1980 1985 1990 1995 2000 2005

Africa

Sub-Saharan Africa

Sub-Saharan Africa excluding South Africa

Rising commodity prices and comprehensive debt relief have ignited private interest in investing in SSA, after several decades of isolation. At about $22 billion, FDI continues to be the largest source of private capital inflows into SSA. While South Africa and the oil-exporters still attract about 80 percent of the inflows, direct investment in the rest of SSA has been steadily increasing; for 2006 it is estimated to have reached $4.1 billion, with $1.2 billion going to landlocked countries.

Capital inflows into SSA remain relatively small, however, because the costs of doing business there are still high by global standards. On the World Bank’s “ease of doing business” indicator, the average SSA country ranks more than 40 positions below that of the average East Asian and Pacific country, and nearly 30 positions below that of the average LatAm country.

… and debt relief has also attracted private capital… and debt relief has also attracted private capital

SSA is benefiting from a favourable external environment. Import demand from advanced economies has strengthened steadily in recent years, and China’s hunger for commodities has driven higher prices as well as inward FDI. With the continued rise in oil and other commodity prices, exporters of both oil and non-fuel commodities have experienced an aggregate improvement in their terms of trade.

However, a number of SSA textile exporters have come under pressure as the United States and the European Union (EU) have phased out textile quotas.

Terms of trade have improved …Terms of trade have improved …

Africa’s share of global FDI is finally rising againAfrica’s share of global FDI is finally rising againTerms of trade (Index, 2000 = 100)Terms of trade (Index, 2000 = 100)

Source: IMF Source: UNCTAD

0

50

100

150

200

250

97-02 2003 2004 2005 2006 2007F 2008F

SSA

Low income countries

Oil importers

Oil exporters

Fragile countries

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Sub-Saharan Africa: Reserves high and debt now low

Foreign reserves for all of SSA are estimated to have reached an all-time high of US$137 billion in 2007, raising import coverage to 5.7 months. While this is not a high level of coverage by global standards, it comes from a low base. The improvement reflects positive terms of trade effects and the policy decision to build precautionary levels of FX reserves to guard against balance of payments risks, as well as limit the negative impact of currency appreciation on competitiveness outside the resource sector.

Oil exporters and South Africa have led the way in building up reserve levels. Other SSA countries have kept reserves roughly stable as a share of imports.

Record reserve levels reflect improved BOP balancesRecord reserve levels reflect improved BOP balances

Sub-Saharan Africa’s external debt is estimated to have fallen to just 11% of GDP in 2007. This represents a 30-year low, and is the result of rapid growth, comprehensive debt relief, and debt repayment by Nigeria, Angola, Malawi and others. Debt relief has been delivered through the enhanced HIPC initiative and MDRI, as well as bilateral deals in countries such as Nigeria.

17 countries have so far benefited from MDRI, and eight more could qualify once they reach the HIPC completion point. This latter group includes many of the most fragile economies, where debt ratios remain uncomfortably high.

Government debt has fallenGovernment debt has fallen

FX reserves by region, US$ bnFX reserves by region, US$ bnExternal debt to official creditors (% of GDP)External debt to official creditors (% of GDP)

75 160 209 254 310

40 83 110 137 167

786

1,604

1,974

2,556

2,874

Avg 1999-2004 2005 2006 2007E 2008F

AfricaSub-Saharan AfricaSub-Saharan Africa excluding Nigeria and South AfricaLatin AmericaEmerging EuropeEmerging Asia

Source: IMF Source: JPMorgan

0

50

100

150

97-02 2003 2004 2005 2006 2007F 2008F

SSA

Low income countries

Oil importers

Oil exportersFragile countries

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Sub-Saharan Africa: Investor interest is climbing rapidly

79%

61%

31%

11%

20%

89% 87%

64%

35%

48%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Emerging Asia CEE/ Russia LatAm &

Caribbean

Middle East Africa

2007 2012

% of respondents

Source: EMPEA, 2007 Surv ey

Funds raised for EM private equity continue to climb

US$m

Emerging

Asia

CEE/

Russia

LatAm &

Caribbean

Sub-

Saharan

Africa MENA

Africa/

ME

Multi-

region

EM Total

2003 2,200 406 417 350 116 3,489

2004 2,800 1,777 714 545 618 6,454

2005 15,446 2,711 1,272 791 1,915 3,630 25,765

2006 19,386 3,272 2,656 2,353 2,946 2,580 33,193

H1 2007 11,549 3,611 1,354 592 1,816 2,127 21,049

Source: EMPEA. Africa/ ME reported together in 2003-04.

SSA has led outperformance in frontier equity marketsSSA has led outperformance in frontier equity marketsEMTA trading volumes in frontier markets are climbingEMTA trading volumes in frontier markets are climbing

Private equity activity in EM - 2007 vs plans for 2012Private equity activity in EM - 2007 vs plans for 2012The region has shared in private equity’s enthusiasm for EM

The region has shared in private equity’s enthusiasm for EM

EMPEA reports US$592m raised for SSA in H1 2007, but another two large closes for pan-African funds in July totalling over US$1.8bn. 2007 as a whole looks to have set new highs, and flows have continued in Q1 08.

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006 2007

Sub-Saharan Africa Eastern Europe

MENA Latam & Caribbean

Asia

US$bn, 4-q sum

0

100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004 2005 2006 2007 2008

Nigeria

Kenya

S&P/IFCG Frontier Markets

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Significant infrastructure gap across sectors

Significant infrastructure gap – Ideal funding profile Significant infrastructure gap – Ideal funding profile

Strategic Countries (e.g. China/ Russia)

DFIs (e.g. World Bank, IMF, AfDB)

Local Financial institutions

Foreign Direct Investments

Government

Foreign Financial Institutions

15%

10%

5%

25% - 35%

25% - 35%

10%

The total infrastructure spend over the next 10 years in sub-Saharan Africa is estimated at approximately US$1 tn. Key areas of deficiency include power, energy and transportation (especially roads and rails)

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Challenges/Opportunities

Capital Markets

PPP Environment

BusinessEnvironment

Development of capital

Key Reference points required including - Risk free rates, yield curves etc

Liquidity

Depth of products

Necessary to create a highly attractive environment for PPP Legal framework Regulatory framework Government support – for top priority projects only

— Subsidy/tariffs/tax breaks— Co-investment 5—10%— Guarantees— Incentives to local banks – including tax breaks and lower liquidity limits.

Ease of doing business must improve

Transparency index must improve

Anti-corruption

Reality check on cost benefit for genuine investors