India Investing in South Africa and Africa

7/30/2019 India Investing in South Africa and Africa

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Indiainvesting in

South Africaand Africa

kpmg.co.za


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ContentsForeword

Africa 2

Overview of the African economic environment 6

Africa: The opportunities 8

Africa: The key challenges 12

Considerations for investment in South Africa 14

Industry analysis 18

The Chindia Factor 28

Investments between India and Africa 30

KPMG in Africa 32

KPMGs India-Africa Corridor 34

KPMG Services 36


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ForewordA rica is a continent whose time has come and while the opportunities are almost sel -evident andtangible, they are there primarily or the bold, the agile and the swi t. At KPMG we understand this.We also understand that youre probably reading this because youre looking or a pro essionalservices provider to walk this road with you or audit, tax and advisory services who is where youare or where you want to be. Someone who you can work with, built on a relationship o trust andmutual respect, able to cut through the complexities to help you achieve your strategic objectives simply and decisively.

Our commitment to A rica speaks volumes. We began our journey several years ago and havecontinuously upped the ante to stay ahead o the game anticipating change, actively seeking torecruit and retain the best available talent, and consistently investing in our people, our in rastructureand our pro essional service o erings to better serve our clients in numerous respects.

Two years ago, we established or the rst time a singular Executive Committee or KPMGA rica, enabling responsibility with authority. What all o this means to you, our client, is that KPMG ispositioned to serve you across A rica, with the ull bene t o KPMGs global reach.

You can be assured o the same levels o pro essional service, practical understanding and relevantinsights rom us across the continent regardless o where your business operations are located.We know that you expect this o us and we are con dent o our delivery. This is good or our business,grows our people and allows us to extend our positive reach into the communities in which we co-exist. All o this osters an ethos o a long-term, sustainable, responsible business, which is what webelieve A rica needs.

Under the leadership o our A rica Board, we have a clearly articulated strategy that is ocused onseven key business priorities. These include delighting our clients, maintaining global consistency,

operating as one across A rica and inspiring our people, who are motivated and equipped to serve you.Looking very much at the world outside our own allows us to ocus on A rica as you see it and yourrelated needs, and not based on our own structures. This fexibility o ers urther advantages to ourclients in mobilising our teams and urther simpli es how we may help you.

Centred on the premise o consistent service delivery, I invite you to read in this brochure moreabout the context o A rica today, KPMGs extraordinary value proposition, our positioning in A ricaand something about what were doing to shape a positive uture or the continent and all its people.Importantly, weve included the details or our India-A rica Corridor, inviting you to contact any o ourpeople. I am excited about the many possibilities that A rica presents to all o us. I am even moreexcited about how KPMG can work with you, across A rica, in mutually rewarding engagementsthat add value, bringing to the ore the bene ts o the ull reach o KPMGs global network with localresources who understand you and the markets in which you operate.

Moses Kgosana

Chairman and Senior Partner, KPMG A rica LimitedChie Executive, KPMG in South A rica


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Africa


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Why invest in Africa? One o the key reasons A rica has been a ocus region or

investors is its current and potential economic growth.According to A rican Economic Outlook, the A rican economyis expected to grow at 5.8 percent in 2012. In the worlds ten

astest-growing economies (2001 - 2010) list published byThe Economist and the International Monetary Fund (IMF),six o these economies are A rican. More importantly, orthe period 2011 - 2015, seven o the ten astest growingeconomies will be in A rica. Such high growth has createdenormous business opportunities on the continent andthereby attracted investors.

Return on investment in A rica is higher than in developedcountries

The continent is rich in natural resources such as gold,platinum-group metals, copper etc

It is largely an untapped market, with low penetration and

less competitive markets The burgeoning size o the A rican market and urbanisation

mean 50% o A ricans will be living in cities by 2030 withincreased access to markets

High export volumes with signi cant growth orecast

In rastructure investment is hal to one- th o the BRICS,with much scope or improvement

Intra-A rican trade opportunity is immense. South-south tradecomprised 50% o total A rican trade only 11% o this wasintra-A rican

Stability: the number o hostile conficts in A rica declinedrom an average o around 4.8 per year in the 1990s to 2.6 inthe 2000s

Growth: six o the ten astest growing economies between2000 and 2010 were located in sub-Saharan A rica: Angola,Nigeria, Ethiopia, Chad, Mozambique and Rwanda

Capital markets: 18 stock exchanges in sub-Saharan A ricanalone. South A rica, Egypt and Nigeria account or around

75% o A ricas listings

Go south, young manWorlds ten astest-growing economies*Annual average GDP growth, %

2001 - 2010 2011 - 2015

Angola 11.1 China 9.5China 10.5 India 8.2Myanmar 10.3 Ethiopia 8.1Nigeria 8.9 Mozambique 7.7Ethiopia 8.4 Tanzania 7.2Kazakhstan 8.2 Vietnam 7.2Chad 7.9 Congo 7.0Mozambique 7.9 Ghana 7.0Cambodia 7.7 Zambia 6.9Rwanda 7.6 Nigeria 6.8

* Excluding countries with less than 10m populationand Iraq and A ghanistan

2010 estimate IMF orecast

Sources: The Economist, IMF

Africa today and tomorrow

CURRENT

$1.6 trillionA ricas collective GDP in 2008, roughly equal to Brazils or

Russias

$860 billionA ricas combined consumer spending in 2008

60%A ricas share o the Worlds total amount o uncultivated,

arable land

52The number o A rican cities with more than 1 million people

20The number o A rican companies with revenues o at least

$3 billion

FUTURE

$2.6 trillionA ricas collective GDP in 2020

$1.4 trillionA ricas consumer spending in 2020

$1.1 billionthe number o A ricans o working age in 2040

128 millionThe number o A rican households with discretionary income

in 2020

50%The number o A ricans living in cities in 2030


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Category Africa India China

Ease of doing business(ranking)

Top three: SA - 34

Botswana - 52Ghana - 67

134 79

Internet users(per 100 people) 6.5 4.5 22.5

Cell phone subscribers 442 million 670 million 747 million

Workforce population(% of total) 56.2 64.3 72.1

Workforce by 2040 Over 1.1 billion 1 billion 900 millionInternal freshwaterresources (per capita, m 3) 12 443 1 105 2 124

Source: Private equity in emerging markets: investing in Africa


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Why invest in South Africa? A member o BRICS

The gateway to the A rican continent and Indian Oceanmarkets

Greater industrial in rastructure than the rest o thecontinent

Ease o doing business ahead o Italy and France

Biggest producer o platinum, leading producer o gold,diamonds, base metals and coal

Stable political environment

Sound macro-economic policy

Large, growing domestic market

Modern transport and communication

Sel -su ciency in agriculture

Modern banking and nancial services

Liberal repatriation o unds

Excellent quality o li e.

South Africa Population 50.492 million

Land area 1.221 million km

Population density 41 pop/km

Source: African Economic Outlook

South A rica has one o the most attractive businessenvironments. The countrys business environment rankingis expected to remain unchanged in 2010 - 14, although itsglobal and regional rankings will slip. This will be the resulto a worsening macroeconomic environment, lower capitalinfows and weakening market opportunities.


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Overview of theAfrican economicenvironment


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Home to over 1 billion people, A rica has been re erredto as the continent whose time has come. Be ore theglobal economic downturn o 2009, the majority o A ricaneconomies had enjoyed notable economic growth. Averageannual growth in 2006 - 08 amounted to about six percent,while the Gross Domestic Product (GDP) per capita grew byalmost our percent.

The growth can be ascribed to a combination o avourableactors, some o which include:

high commodity prices

growth in export volumes

generally sensible macro policies

debt relie

sustained aid

Foreign Direct Investment (FDI) infows.

Moves towards more market- riendly economic policieshave also aided growth. The world economic crisis broughtthis period o relatively high A rican growth to an abruptend. However, although the A rican economy has also beennegatively impacted by the global economic downturn, thecontinent has, on average, maintained positive economicgrowth.

Due to the relatively low degree o integration o A rican bankswith international nancial markets, the impact o the globaleconomic downturn on A rica has happened through othertransmission mechanisms. Some o these include:

the collapse o commodity prices, which impacted themining sector

the reduction in export volumes, impacting themanu acturing sector

the decline o workers remittances due to job losses orwage declines

the decline o FDI due to a reduction o the investments oglobal rms, in particular in the mining and tourism sectors.

On the positive side, donor countries have generallymaintained their aid commitments and disbursements toA rica, despite substantial scal pressures at home, and debtrelie has reduced debt service costs and helped A ricancountries to deal better with the crisis.

It appears that the A rican economy has been more resilient tothe global crisis than other emerging economies, except thosein Asia, notably China and India.

The e ect o the crisis, although less severe than on mostother continents, was nonetheless signi cant. The globalexpansion remains unbalanced during 2011. Growth in manyadvanced economies is still weak, with the growth in most

emerging and developing economies continuing to be strong.Overall, the global economy expanded at an annualised rate o4.3 percent in the rst quarter o 2011, and growth orecasts

or 2011 - 12 are broadly unchanged, with o setting changesacross various economies.

However, greater than anticipated weakness in US activity

and renewed nancial volatility rom concerns about the deptho scal challenges in the euro area periphery, pose greaterdownside risks. Market concerns about possible setbacks tothe US recovery have also sur aced. I these risks materialise,they will reverberate across the world, possibly seriouslyimpairing unding conditions or banks and corporationsin advanced economies and undercutting capital fows toemerging economies. Key among the negative surprises

or the world economy, was the devastating e ect o theearthquake and tsunami on the Japanese economy. Supplydisruptions weighed heavily on industrial production, andconsumer sentiment and spending.

A ricas economies are also recovering rom the slump causedby the global recession, and are mainly driven by highercommodity prices and export volumes. In 2010, A ricasaverage rate o growth amounted to 4.9 percent, up rom 3.1percent in 2009. The current economic recovery in A rica islikely to reduce the cyclical component o unemployment, butstructural unemployment remains high in many countries.

Driven by the expansion o global demand, commodity pricescontinued to increase in 2010, and in the rst months o 2011,some prices reached a historical peak. Changes in the priceo oil depend, however, on urther political developmentsin oil-producing countries, notably Libya, and on the supply

response to the recent hike in oil prices to between US$110and US$120. The political events in North A rica are likely todepress the continents growth to 3.7 percent in 2011 and toresult in sub-Saharan A rica growing aster than North A rica.

However, considerable uncertainty surrounds this orecast.With the assumption that economic normality returns tocountries such as Libya and Cte dIvoire, A ricas averagegrowth is expected to accelerate to 5.8 percent in 2012.

A rica is becoming more integrated with the world economyand its partnerships are diversi ying, revealing unprecedentedeconomic opportunities. In 2009, China surpassed the US to

become A ricas main trading partner, while the share o tradeconducted by A rica with emerging partners has grown romapproximately 23 percent to 39 percent in the last ten years.A ricas top ve emerging trade partners are now China (38percent), India (14 percent), Korea (7.2 percent), Brazil (7.1percent), and Turkey (6.5 percent).

[Sources: World Economic Outlook, Africa Economic Outlook, World Bank, KPMG research, African Development Bank]

The table below provides an overview o A ricas historical andexpected growth trends.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015GDP

growth(percent)

6.2 6.4 5.6 3.1 4.9 3.7 5.8 6.4 6.8 7.1

Source: Africa Economic Outlook


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Africa: Theopportunities


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Infrastructure development:physical and peopleIt is evident that the unique needs in A rica all presentopportunities in one way or another. Some o theseopportunities are more recognised than others, as seen in the

investment in the oil and gas sector in West A rica.Studies per ormed on the investment requirements orA rica as an emerging market provide interesting eedbackon A rican in rastructure needs: the three sectors with thebiggest needs are energy, water, waste and sewage (WWS)and irrigation.

Clearly, in rastructure development continues to be signi cantin A rica. However, it is important to ocus on the dual natureo in rastructure development namely development o thepeople (in areas such as health and education) as well asphysical development (such as roads and ports).

According to the United Nations Development Programme(UNDP) Regional Bureau or A rica, Prioritising health,education and basic services is key to ensuring that the mostvulnerable are not le t behind. Growth alone is not enough

or human development. Growth must be broad-based andbring down high levels o inequality.

At the Climate Investment Funds Partnership Forum recentlyheld in Cape Town, the A rican Development Bank (A DB)described the opportunities or A rica in developing a cleanenergy industry. The A DB indicated that this developmentcan create a whole industry, providing good quality jobs

or local populations and can ensure the sustainability orenewable energy in A rica.

Population and Growth A ricas population is vast and, when compared to the

developed world, relatively underserviced.

A rica is expected to grow more than seven percentannually in the next 20 years, due to an improvinginvestment environment, better economic managementand Chinas and Indias rising demand or A ricasresources.

More than 100 A rican companies have revenues in excess

o $1 billion.One priority or A rica is realising that it cannot just be asource o natural resources, that it has to start industrialising,producing agriculture services. Wages are rising in Asiaand people are asking, Where can we start producing in acompetitive way? A rica provides an example o one o theimportant areas.

Growing middle class Another side o A rica is gradually emerging with the

development o capital markets, consumerism andtechnology (ie opportunities created by the private sector).

The number o middle-class A ricans has tripled over thelast 30 years to 313 million people, or more than 34 percent

o the continents population, according to a new reportrom the A rican Development Bank (A DB) July 2011.

Increase in size and purchasing power o the A ricanmiddle class is due to strong economic growth, and amove towards a stable, salaried job culture and away romtraditional agricultural activities.

A ricas steadily growing per capita income drives theemergence o aspiring A rican consumer markets with asurprising level o sophistication and growing spendingpower. Yet these consumers are not yet being o eredproducts or services commensurate with their li estyle and

aspirations. There ore, there are signi cant opportunitiesacross many sectors.

Natural resources/mining As global demand or hard and so t commodities grows,

A rica is in an enviable position with its vast naturalresources.

A rica has impressive stores o resources, not only inminerals but also in ood 60 percent o the worldsuncultivated arable land is in A rica.

Substantial wealth in natural resources: gold, oil, platinum,iron ore, copper and large areas o arable land means A ricais well-placed to bene t rom increased growth and higherdemand in emerging markets such as China and India.

A rica holds signi cant reserves o the worlds metals andminerals and is there ore o key importance or mininggroups.

Other sectors: telco, retail, manufacturing,infrastructure, etc Natural resources generate only a third o A ricas GDP

growth.

The remainder comes rom other sectors: wholesaleand retail, transportation, telecommunications andmanu acturing.

Fast growing/ rapidly rising private investmentAs A ricas economic ortunes begin to turn, investor interesthas picked up.

A rica o ers unique opportunities to multi-national enterprises(MNEs) as part o their strategies or growth.

Several A rican countries compare very well to the amedBRICS economies on ease o doing business and political risk.

Since 2004, A rica has had the highest growth rate o privateForeign Direct Investment (FDI) into emerging markets, whichin 2010 increased by more than 20 percent. The rate o returnon FDI in A rica has averaged 29 percent since 1990, andsince 1991 it has been higher than in all other regions by ahigh margin in a number o years.


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Asias expanding footprint in Africa Asia has emerged as a key nancier and developer o

in rastructure projects in A rica.

1. Asian companies are o ten willing to undertake projectsthat many Western rms consider uneconomic.

2. Asian loans and technical assistance are disbursed veryquickly.

3. Asian companies are typically able to deliver projects at alower cost (in part because o their access to cheap loans

rom the government, which allows them to operate onpro t margins o less than 10 percent as against 15 - 20percent or most other rms).

Asias rising presence has been complemented by dramaticgrowth in private investment in in rastructure, albeit rom avery low base.

As larger emerging markets increasingly invest in A rica,

a lot o money is unnelled toward in rastructure projectssuch as roads, bridges, schools and hospitals, all o whichare likely to bene t A rican economies over the years tocome.

High commodity prices Improvements in in rastructure are also being acilitated by

buoyant commodity prices, which are contributing to strongrevenue collection in the resource-rich states.

Commodity prices are expected to stay high and willcontinue to support spending.

Stronger political will among governments There are moves a oot to co-operate on in rastructure

serving multiple countries.

A rican governments are more open to private participationin managing in rastructure and are doing more to attractprivate investment.

Cross-border co-operation is also vital or integratingA ricas many tiny markets 20 countries havepopulations o ewer than 5 million and economies worthless than US$5bn by attracting non-mining investmentand enabling local companies to harness economies o

scale.


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Africa: The keychallenges


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To capitalise on the diverse opportunities in A rica, it isnecessary to explore the challenges that exist rom both roma people and a business perspective.

FDI in A rica continues to be concentrated in a ewcountries and sectors, with 15 oil-exporting countriesreceiving 75 percent o FDI fows. As such, attracting FDI

into diversi ed and higher value-added sectors remains theongoing challenge or A ricas economies.

Reducing ine ciencies related to poor transportin rastructure, including maintenance o existingin rastructure and the provision o new in rastructure. Forinstance, only 30 percent o the A rican road network ispaved. The continents railway network is also very poor.

Accessing nance or in rastructure development is a majorchallenge. Recent estimates by the World Bank indicatethat the annual in rastructure investment requirement inA rica is about US$93 billion over the next decade, morethan double the previous estimate by the Commission orA rica.

Reducing political instability and the lack o security withinand among several regions.

Reducing intra-A rican trade barriers. A urther challenge isthe lack o a coherent regional approach to managing andharnessing partnership agreements, which could improvethe competitiveness o A rican countries, driving FDI. Onthe back o the need or combined and coherent strategies,it is crucial that there is a greater degree o co-operationbetween the private sector and government.

A rica needs a comprehensive approach to addressthe problem o unemployment in general and o youthunemployment in particular. In North A rica, where politicalupheavals disrupted economic activity, unemployment islikely to urther increase in 2011. Youth unemploymenthas long been a major problem in North A rica (but alsoin many other A rican countries) and contributed to thepolitical unrest which led to the overthrow o governmentsin Tunisia and Egypt.

The prevalence of HIV/AIDS, speci cally in the southernA rican regions, will continue to subdue growth in 2011.

The recently launched 2011 edition o the A rican EconomicOutlook emphasises that governments e orts need toinclude measures to create jobs, invest in basic socialservices, health and education, and promote genderequality.

Linked to this challenge, is the lack o bargaining power inmultilateral negotiations. Currently, the only agreement thatholds weight on the international scene is the Brazil-SouthA rica-India axis. It is critical that A rica, as one bargainingpower, promotes an agenda harnessing the capabilities andresources o the continent or the bene t o all A ricans.However, this is easier said than done, as each country hasunique political, humanitarian and economic requirements.

A rica o ers potential or great rewards, but there are alsosigni cant risks associated with an expansion strategy inA rica degree and nature o risk varies rom country tocountry.

Despite A ricas problems, the long term outlook or thecontinent is bright.


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Considerationsfor investment inSouth Africa


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Maximising the return on investment is the ultimate goalo all investors. One way to achieve this is to minimise theinvestment costs. Thus, new investors should obtain a airunderstanding o the legal requirements, tax regulations,

oreign exchange control and certain other statutoryregulations or obligations to be met in the investing country,in order to set up the investment in the most cost-e ectiveway. Such a set-up would help an investor avoid unnecessarypenalties and administration costs, and achieve tax savingsin the long term. As one o the largest pro essional servicesorganisations in the world, with a high quality o expertise,KPMG can help investors structure investments that are bestsuited to the client as well as cost-e ective. We have outlinedsome key considerations below or investors:

LegalSouth A ricas Companies Act sets out comprehensiveregulations and requirements or all entities that operate in

South A rica. Di erent entity structures encounter di erentlegal requirements. In general, an investor should considerthe ollowing key areas:

Legal status and limited liability the legal status o theentity determines the level o liability and associated risks

or the entity.

Registration requirement and penalties penalties areen orced on companies which ail to register with theCompanies and Intellectual Property Commission (CIPC).Investors should comply with applicable registrationrequirements within the speci ed time rames to avoidunnecessary penalties.

Financing alternatives di erent types o entity are alloweddi erent orms o nance (debt only or equity and debt).This has a massive impact on the fexibility o the undingand total o expenses (eg interest expense) or the entity.

Requirement o audit depending on the type o entity, theentity may have to be audited on an annual basis.

Annual returns depending on the type o entity, annualreturns may need to be submitted to the Companies andIntellectual Property Commission (CIPC). The annual eevaries or di erent types o entities.

TaxationThere are also speci c tax impacts on di erent entity set-ups.In order to establish an entity structure with long-term taxsavings, an investor should consider the ollowing:

General principles the general principles (such as whetheran entity is resident or non-resident, taxed on worldwideincome or A rican-sourced income only etc) provideguidance on the type o income to be taxed.

Rate o tax general rate o tax is 28 percent or SouthA rican companies. However, branches in South A rica are

taxed at 33 percent. More detailed tax rates are outlined inFiscal Guides.

Capital gains tax (CGT) the disposal o certain local assetsor worldwide assets (depending on the type o entity) couldattract CGT.

Tax deductions various tax deductions (such as interest,royalties, oreign exchange gains and losses etc) also vary,depending on the tax status o the entity.

Thin capitalisation rules when a oreign companyadvances nancial assistance to a connected party in SouthA rica and the resident companys interest-bearing oreign

debt is excessive in relation to its equity share capital, thincapitalisation rules may apply.

Exchange controlAn understanding o the South A rican Exchange Controlregulations and practices which may be relevant (including therules relating to the various methods or repatriating pro tsand the implications or providing equity and loan unding) isrequired. Income derived rom investments in South A rica isgenerally reely trans errable to oreign investors, subject tocertain restrictions.

Local borrowing restrictions while there are generally norestrictions on local borrowings, there are a ew instanceswhere restrictions will be applicable

Foreign loan to South A rican company this requiresapproval rom the Exchange Control Authorities be oreacceptance. Interest payment can be remitted abroad.However, this is also subject to the Exchange ControlAuthorities approval.

Management ees payment o management ees abroadis subject to the approval o Authorised Dealer and certain

ees need to be supported by a trans er pricing analysis.

Dividends/pro ts dividends can be remitted abroad tonon-resident shareholders. Repatriation o pro ts is subjectto certain exchange control requirements.

Using South A rica as a head o ce or operationsthroughout A rica could result in numerous exchangecontrols being active within the groups business.

Exchange controls vary rom ownership requirements tobasic control o the money in and out o a country.

Exchange controls are detailed. The governments in A ricaare constantly changing these requirements in the hope o

oreign investors expanding operations into A rica.

VATSouth A rica has a standard VAT rate o 14 percent on taxablesupplies. However, VAT registration is only required i thetotal taxable supplies exceed R1 million in a period o 12months. Even though the standard rate is 14 percent, thereare some exempt supplies and zero-rated supplies outlined inthe VAT Act.


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Statutory obligations onemployers Employees tax a resident employer or representative

employer is required, in terms o the South A rican IncomeTax Act, to withhold employees tax and pay it over to the

South A rican Revenue Service (SARS) monthly. When an employer pays remuneration to employees, the

employer must also contribute towards: Skilled development levies monthly Compensation or occupational injuries Unemployment Insurance Fund.

This guidance is based on South A rican regulations.However, an investor should also consider it when planningto invest in other A rican countries. KPMG can provide urtherguidance and assistance through our expert advisors in otherA rican countries.

Transfer Pricing Many A rican countries do not have speci c trans er pricing

legislation in the various A rican countries. This in itselraises the risk. The lack o trans er pricing legislation leavesthis area o trans er pricing open to interpretation by thecompany operating in A rica, and by the tax authority.

A rican countries tax authorities look to the principle oarms length as the guiding principle.

Processes must be established to have appropriatelydetailed documentation that can support the arms lengthvalue.

The A rican continent, as an emerging market does notalways provide the backdrop to establish the arms lengthvalue. This di culty in establishing arms length values,may ocus tax authorities e orts on trans er pricing.

Regulatory Requirements Apart rom tax, investors bound or A rica need to care ully

to consider the impact o local regulatory restrictions.

The nature and extent o restrictions vary signi cantly romcountry to country.

Di erent regulatory and reporting requirements or eachregion, including reporting to central banks and reporting to

oreign shareholders

Requirements or oreign reporting. Understandingthe requirements at a local level requires training andimplementation o processes.

Public sector and governmentinteraction In many A rican countries there is a distinct lack o co-

operation between the private sector and government.

Corruption Corruption is a signi cant problem in A rica.

Current global interest in the A rican continent is making ita competitive market. A large percentage o businesses inA rica actor bribery into their operating costs.


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Financial Management Lack o technical accounting resources.

Lack o valuation, risk management knowledge andexperience.

Low level and knowledge o IFRS, particularly around IAS39 and nancial instruments. This is mainly due to limitedtrade o derivatives in many A rican countries.

Lack o ability to take on IFRS conversions on the A ricancontinent.

Most valuations o nancial instruments are denominatedin A rican currency because o a severe lack o tradeand inactive markets. There are no liquid exchange rateor interest rate markets, and very o ten currencies arejust pegged to the USD or re erence. This makes it verydi cult to establish any sort o air value.

Collaboration, particularly the nance departmentscollaboration with other internal departments, such as ITand human resources. As banks rely heavily on IT, anyIT or nance trans ormation initiatives will need to beclosely managed and monitored, to ensure collaborationbetween these two unctions, as well as collaboration andintegration with the rest o the business.

Systems Many A rican countries banking systems are considered

sub-standard.

Certain o these countries have a distinct lack o banking

in rastructure, ie ATMs and credit card acilities. Many A rican countries run their operations through

systems centralised in South A rica. The centralisationo systems creates a discord between ront o ce andback o ce operations. This can create issues aroundaccountability.

Centralisation o systems also requires large amounts odata trans er between countries on the continent. ManyA rican countries experience bandwidth constraints,resulting in data delays. Banks also run the risk otrans erred data being interrupted.

Certain countries in A rican have basic payment and

settlement systems. The maturity and automation onsettlement systems requires re nement.

Islamic Banking Most A rican countries do not have speci c tax legislation

related to Islamic banking products. Certain countries,eg South A rica and Nigeria, have recognised the need toplace Islamic banking on an equal ooting with conventionalbanks.

South A rica has dra ted legislation to treat certain Islamicbanking products on a similar basis to conventional

products. It is likely other A rican countries will ollow suit.

Product DifferentiationA rican countries require di erent products, depending on theculture and requirements o the various nationalities. Theseproducts need to be developed.


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Industry analysis


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Although A ricas growth prospects are bright, they di er notonly country by country but also sector by sector. Perhapsthe most undamental point is that A ricas growth story ishardly limited to the extractive industries. As many as 200million A ricans will enter the consumer goods market by2015. Banking and telecommunications are growing rapidlytoo, and in rastructure expenditures are rising signi cantly

aster in A rica than in the world as a whole. The continent hasmore than one-quarter o the worlds arable land. Eleven oits countries rank among the top ten sources or at least onemajor mineral. A rica will produce 13 percent o global oil by2015, up rom 9 percent in 1998. For many companies, this isa uture worth investing in.

InfrastructureAccording to the World Bank, A rica spends US$45 billion perannum on in rastructure, when it should be spending aboutUS$93 billion.

The population o A rica is set to rise rom about 1 billionpeople today to more than 2 billion in 2050. The urbanisationrate is expected to increase rom 40 percent in 2010 to 42percent in 2015. The GDP is expected to grow at 5.8 percentby 2012. Due to this rapid growth o the population, economyand urbanisation, the demand or e cient in rastructure ishigh. However, in large parts o A rica, in rastructure has beenneglected or decades, while in other parts it is non-existent.

Africas Infrastructure: A Time for Transformation, publishedby the World Bank, outlined the ollowing challenges in thein rastructure industry:

A ricas di cult geography and poor rail connectivitypresents a challenge or in rastructure development

A ricas in rastructure is twice as expensive as elsewhere,refecting diseconomies o scale in production and highpro t margins caused by lack o competition. For example,power costs are high due to the low megawatt thresholdprovided by national power systems. High road reighttari s are due to high pro t margins, caused by limitedcompetition and centralised queuing methods or crossingborders

Power is A ricas largest in rastructure challenge

In rastructure unding aces a gap o US$31 billion a year.The South A rican government estimates it will need to investapproximately R1 trillion (US$142bn) over the long term, withestimated expenditure o R850bn (US$121bn) between 2011and 2014 alone, which is to be largely driven by energy andtransport projects. In the South A rican in rastructure report

rom Business Monitor International, the in rastructure valueis expected to grow rom US$7.4 billion in 2010 to US$14.4billion in 2015, orecast as a 2 percent-share o GDP.

However, all these in rastructure developments are not to beundertaken by the government alone. South A rica enjoys theestablished concept o a public-private partnership (PPP). It isa contract between a public sector institution/municipality anda private party, in which the private party assumes substantial

nancial, technical and operational risk in the design,nancing, building and operation o a project. Two types o

PPPs are speci cally de ned:

where the private party performs an institutional/municipalunction

where the private party acquires the use of state/municipalproperty or its own commercial purposes. A PPP may alsobe a hybrid o these types.

Payment in any scenario involves one o three mechanisms:

the institution/municipality pays the private party for thedelivery o the service

the private party collects ees or charges users o theservice

a combination o these.

This enormous investment in the in rastructure industryhas created opportunities or private investors, such as ingiving advice on technical matters and the developmento plans and projects, assistance in nancing the projects,regulatory services, developing tariff/pricing models, nancing

transmission and distribution lines and much more.With interconnection electricity projects in sub-Saharan A ricagaining some traction, electrical engineering companieswith the expertise to undertake more complex projects andto bene t rom engineering, procurement and constructioncontract awards.

A study conducted to determine the required capitalinvestment or regional transmission projects estimates theamount or transmission projects alone to be US$8.4bn.The study covered Burundi, Djibouti, DRC, Egypt, Ethiopia,Kenya, Rwanda, Sudan, Tanzania and Uganda all thecountries a liated with the EAPP. Accordingly, US$1.7bn willbe required until 2013, US$3.7bn between 2013 and 2018,US$2.5bn between 2019 and 2023 and US$500m between2024 and 2028.

Cross-border power trading is unlikely to take o over thenext decade despite its huge potential to improve supply.A ricas enormous, largely untapped hydropower potential isconcentrated in a ew countries. Cross-border power tradingcould allow electricity costs to all sharply in smaller countrieswith national grids below the 500 MW threshold. The stateswith the greatest hydropower potential lack the resources todevelop it. This creates the need or cross-border nancing,which requires a high level o mutual trust and collaboration.Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2008 Revisionand World Urbanization Prospects: The 2009 RevisionSource: Africa Economic Outlook Source: UN, Business monitor international and KPMG research


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Banking and ITThe International nance corporation (IFC) estimates thatthere are 4 billion people at the bottom o the economicpyramid in the world. Most are unbanked, meaning theydo not have bank accounts. The unbanked are the largestuntapped retail market in the world. Their primary needsare the ability to trans er money to amily and riends,

accessibility, availability and a ordability. IFCestimates that the unbanked represent a $5 trillion

market. Lowering transaction costs by one percentwould mean over $1 billion extra would directly

reach the poor each year, according to the WorldBank.

In A rica, 700 million people out o a population o 1billion are unbanked. This equates to 70 percent. It is

o ten not worthwhile or banks to target low-incomesegments, which are o ten in distant and rural areas

with limited in rastructure. Those living in poverty eithercannot a ord banking ees or are not able to go through thebureaucratic process o opening an account.

The evolution o payments is converging with the growth omobile. A rica has more mobile phone users than xed-linesubscribers. The continent has become the worlds astestgrowing mobile phone market, where mobile phone use hasincreased at an annual rate o 65 percent, twice the globalaverage, according to Wizzit.

This provides signi cant opportunities or mobile as atransactional channel.

The key challenges are: Reducing service costs to align with revenue generated.

Educating the unbanked about products (many do notbelieve they quali y or products).

Competition rom non banks

Reaching the unbanked in remote areas.

Mobile operators see opportunities in the unbanked marketor cost savings, new revenue streams, customer retention

and acquisition. Some 18 percent o South A ricans usemobile phones to trans er money. The 2011 World Wide

Worx research, which probed the use o mobile phonesor banking, showed that almost two out o every 10 SouthA ricans are now using their phones to trans er cash to amilyand riends. Mobile money is one o the astest growingsectors in the nancial services environment with manypeople opting or an electronic wallet instead o a leather one.

The number o eWallet holders has doubled within 6 months,rom 250 000 in October 2010 to over 500 000 in April 2011.

Figures show that the majority o its senders (79 percent)are younger than 40. This is not surprising, since most o thesenders are techno-savvy mobile phone banking users.Source: Economist, KPMG research, IMF


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HealthcareThe health status o A ricans remains ar worse than that opeople in many other developing regions. Although a lack oaccess to health care and serious health system de cienciesare important reasons or this phenomenon, other elementsaggravate it. One is insu cient research and developmentaimed at addressing A ricas unmet health needs.

A look at the relationship between GDP per capita and li eexpectancies, illustrates the magnitude o the problem. Whilethe GDP o A rica as a whole has grown by over 200 percentin the past 20 years, only two extra years o li e expectancywere added during that time. Asian countries with comparableGDPs per capita tend to have li e expectancies ve to 10 yearshigher than those o their A rican counterparts.

Undoubtedly, Africas weak health systems and HIV/AIDS

epidemic are contributing to the problem. Yet severalcountries elsewhere, such as Jamaica and Thailand, withsimilarly weak systems or similarly burdensome HIV/AIDSrates, still have li e expectancies that are 5 to 25 years longer.

A big part o the problem is a lack o tools to diagnoseand treat the diseases o A rica. Some available drugsaddressing diseases that a ect A rica disproportionatelyare not ully e ective and present high toxicity levels. Whileemerging public-private partnerships between internationalorganisations and pharmaceutical companies are makinginroads, these e orts are still ew and ar between.

Current R&D e orts aimed at treating A rican diseasesmostly depend on organisations outside A rica. They try to

nd solutions or its pressing health needs but not to create asustainable R&D structure on the A rican continent.

Sub-Saharan A rica carries 24 percent o the global burdeno disease, but receives less than three percent o the

worlds health workers and only a percent o world healthexpenditure. Almost hal the worlds deaths o children under

ve take place in A rica. The vast majority o the regions poor,both urban and rural, rely on private health care.

Public resources are limited: around 60 percent o healthnancing comes rom private sources, 10 percent rom donor

aid. O $16.7 billion (2005) o total health expenditure, 50percent was captured by private providers. The market orhealthcare is likely to more than double by 2016, going upto $35 billion. 550 000 to 650 000 additional hospital bedswill be needed. An additional 90 000 physicians, about 500000 nurses, and 300 000 community health workers will berequired over and above the numbers that will graduate romexisting medical colleges and training institutions.

Most health expenditure in A rica is rom out-o -pocketpayments around 60 percent. Risk pooling arrangements are

expected to present a $1.4 billion to $2.5 billion investmentopportunity in sub-Saharan A rica over the next ten years.$25 billion to $30 billion in new investments will be needed tomeet demand between now and 2016 o which $11 billionto $20 billion is likely to come rom the private sector.

A number o investment opportunities exist in A ricas healthcare sector.

Opportunities can be ound in inpatient and outpatient care,preventative care and diagnostic services. High-end clinicsthat target growing middle- and upper-income groups areespecially pro table, providing high quality care that attractspatients as well as experienced sta . High-volume, low-cost hospitals usually located in high-density areas targetinglow income earners, also o er high returns.

Development o distribution in rastructure (warehouses,trucks and supply chain management in ormation systems).The retail sector, though signi cantly smaller, is the most


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pro table segment within healthcare in sub-Saharan A rica,with net margins o up to 50 percent. Hospitals and clinicsheavily depend on their pharmacies to subsidise theirbusinesses.

Generics manu acturing involves ormulation o genericmedicines, both prescription and over the counter.

Medical supplies manu acturing provides supplies such aslong-lasting mosquito nets, medical gauzes, and medical

urniture.

South A rican li e sciences innovation nances thedevelopment and commercialisation o entrepreneurshipinnovation in South A ricas li e sciences sector.

Commercialisation o in ectious disease innovation.Financing phase three and production o products orin ectious diseases developed all around the world.

The unavailability o skilled human resources is a signi cantbarrier to the growth o health care provision in the region.The role o the private sector in the provision o medicaleducation has been hampered by challenges includinggovernment regulations which traditionally restrict privateinvestors in this sector, as well as the huge capital requiredto establish medical schools. However, evidence romdeveloping countries such as Egypt and India indicates thatprivate medical and nursing schools can be pro table.

Source: KPMG research and McKinsey

Education

According to a report released by the UN educational,scienti c and cultural organisation (Unesco), over thelast decade, public spending on education in A rica hasincreased by more than six percent each year. The increasein investment has been accompanied by some spectacularresults. Between 2000 and 2008, the number o children inprimary schooling increased by 48 percent rom 87 million to129 million. Enrolment in pre-primary, secondary and tertiaryeducation has also grown by more than 60 percent during thesame period.

Some key ndings o the report are:

In Burundi and Mozambique, education spending rose byan average o 12 percent annually over the last decade.

Out o the 26 countries with comprehensive data, onlyone the Central A rican Republic reduced educationspending since 2000.

Overall, sub-Saharan A rica spends ve percent o its GrossDomestic Product on education, which is second only toNorth America and Europe at 5.3 percent. However, in one-third o the regions countries, hal o all children still do notcomplete primary education.

A total o 32 million children remain out o school.

In some countries, such as Guinea, Mali, Rwanda andZambia, development aid accounts or about 50 percento government education budgets, yet in the region asa whole, aid accounts or a much smaller raction o 5.6percent.

Wedged between the recent economic crises and loomingpopulation growth, most A rican governments will need tomake strategic decisions on how to budget or education,says Unesco. The population o sub-Saharan A ricas ve- to14-year-olds is expected to grow by more than 34 percentover the next 20 years, and the region will need to respond tothe demands o 77 million new students. As neither domesticresources nor donor unding are likely to increase enoughover the coming years, governments will need to makedi cult decisions.

Most countries in sub-Saharan A rica spend at least 10 timesmore on a university student than on a primary school pupil,says the report. On average, eight out o every $10 spenton university education in A rica is subsidised by countrygovernments.

Within South A rica, the greatest challenge lies in poorer,rural provinces, eg Eastern Cape, KwaZulu-Natal, Limpopo,Mpumalanga and North West. Challenges include:

Low literacy rate

Quality o teaching teachers are poorly quali ed andtrained

Low availability o learner and teacher support material.


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Other priorities not addressed enough:

Curriculum changes

Early childhood development

Adult basic education and training

HIV/AIDS awareness programmes.

Source: KPMG research

Mining in AfricaA ricas mining potential is un olding as a number oeconomies are increasingly becoming more important interms o global mineral production. The DRC or example,has enormous high-value reserves o copper, cobalt, gold anddiamonds and o ers an opportunity or mineral exploitationactivities. The IMF recently praised the DRCs economicprogress and approved the release o US$77 million aspart o an existing loan acility. Generally, the West A ricangreenstone belts have seen strong investment which hastrans ormed countries like Mali, Burkina Faso and has thepotential or so doing in Cte dIvoire, Sngal and SierraLeone.

Other emerging mining economies include leading goldproducers Ghana and Tanzania. In addition, Namibia maybecome a leading resource economy due to its enormousuranium potential. Zambia on the other hand is experiencinga revival o its major copper industry with new mines beingdeveloped. Copper production in Zambia, A ricas largestproducer o the metal, is likely to rise to 850 000 tonnes in2011 rom just below 750 000 tonnes in 2010. Zambiascopper output may continue increasing, with production

expected to reach 2 million tonnes in the next ve to sevenyears.

South A rica holds the worlds largest natural reserves ogold, platinum-group metals, chrome ore and manganeseore, and the second-largest reserves o zirconium, vanadiumand titanium. The country is the worlds largest producer o

platinum, and among the leading producers o gold, diamonds,base metals and coal. Clearly, mining, as one o the mainindustries in South A rica, makes a signi cant contributionto the overall economy. A Business Monitor International

orecast expects the value o the South A rican mining sectorto grow rom US$27.5 billion in 2010 to US$53.2 billion by2015, an annual average growth rate o 4.6 percent.

The mining sectors share o overall South A rican GDPis orecast at 7.7 percent. In comparison to other A ricancountries, South A rica has a well-established regulatoryenvironment and in rastructure or mining, which limits theobstacles con ronting oreign investments and reduces

risks. This is urther shown through the survey o the A ricanmining business environment conducted by Business MonitorInternational, where South A rica achieved an overall rankingo second place or ease o doing business in mining.

The ollowing are some o the discussions and potentialchanges that could a ect the South A rican mining industry:

Nationalisation o mines

Tax increase on mining entities rom three percent to vepercent

Implementation o the Electronic Mineral ManagementSystem.


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African Mining IndabaEvery year, Cape Town, South A rica hosts the A ricanMining Indaba con erence. The con erence attracts theworlds largest gathering o the most infuential stakeholdersin A rican mining, including nanciers, investors, miningpro essionals, etc. During the 2011 con erence, the ollowingkey areas were outlined:

The need or e ective partnership among shareholders.This group should create enabling plat orms andarrangements or success ul mining activity to bene tall stakeholders, and enhance the responsibilities andaccountabilities o each member

Announcement o introduction o Electronic MineralManagement System, which requires greatertransparency and accountability

Rea rmation o mining sectors commitment to

sustainability Communities wel are

Political circumstances.



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Consumer goodsBy 2015, 221 million additional basic-needs consumers willenter the market in A rica.

Resources are not A ricas only driver o growth. Underlyingit, the A rican consumer is on the rise. In last ew years,

consumer spending across the continent increased at acompound annual rate o 16 percent, more than twice theGDP growth rate. Many consumers have moved rom thedestitute level o income (less than $1 000 a year) to the basic-needs ($1 000 to $5 000) or middle-income (up to $25 000)levels. In Nigeria, or example, the collective buying powero households earning $1 000 to $5 000 a year doubled rom2000 to 2007, reaching $20 billion.

Nearly seven million additional households have enoughdiscretionary income to take their place as consumers.This evolution is critically important to consumer-

acing businesses, rom ast-moving consumer goodsmanu acturers to banks to telecommunications companies:when people begin earning money at the basic-needs level,they start buying and consuming goods and services.

While the exact infection point di ers among categories,many o them are just entering this phase o acceleratedgrowth. The enormous expansion o mobile telephony inA rica provides clear evidence o this phenomenon.

Despite the recent slowdown in economic expansion, GDPper capita should continue on its positive trajectory o a 4.5percent compound annual growth rate (CAGR) until 2015.That would mean an increase in spending power o more than

35 percent. Combined with strong population growth (twopercent) and continued urbanisation (3 percent), this increaseleads us to estimate that 221 million basic-needs consumerswill enter the market by 2015. As a result, the number oattractive or highly attractive national markets with morethan ten million consumers and gross national incomeexceeding $10 billion a year will increase to 26 in 2014,

rom 19 in 2008. Many local and multinational consumercompanies are already thriving in A rica and deliveringhandsome returns to their shareholders. To succeed,consumer companies must address ve major challenges,some amiliar to businesses operating in other emergingmarkets.

Heterogeneous market structure. A rica has more than 50countries, with large di erences in spending power andconsumer behaviour, so a one-size- ts-all approach will notwork.

Underdeveloped distribution and route to market. Moderntrade is still nascent in most o A rica. The traditional mom-and-pop shops, open markets, umbrella vendors, and thelike, dominate the retail scene, making up more than 85percent o the trade volumes. Poor roads and in rastructurecan make delivering products to consumers a dauntingtask, so companies must build strong sales and distribution

networks by leveraging a mix o third party, wholesale, anddirect-distribution models.

Nascent categories. In A rica, many categories still arenot ully developed; or example, usage per capita otoothpaste is lower here than it is in comparable Asiancountries. Data about consumers needs and behaviourare scarce, making it harder to develop speci c consumerinsights. In addition, the state o the communicationsmedia and education levels make it challenging to reachconsumers with speci c product messages. Competingin A rica there ore is not a share game. Rather, companiesneed to bring a market-development mind-set, investingin consumer education and non-traditional marketingtechniques.

Talent shortages. Despite the abundant work opportunities,talent remains scarce across A rica. Truly competing andwinning in the long term, however, will require local know-how and talent. At rst, companies will need to bridge thegap by using a mix o local and international employees. Inparallel, investments in developing and retaining local talentare required. Local capability-building programs, attractivecareer paths and apprenticeship opportunities will becritical to achieving long-term success.


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Seychelles

+82 million$497.8 billion

5.1%

+10.4 million

$90.67 billion

4.2%

36 million

$26.1 billion

3.3%32 million

$161.4 billion

3.2%

+24 million

$61.97 billion

5.7%

+155 million

$377.9 billion

8.4%

+19 million

$44.33 billion

3%

+21.4 million

$37.2 billion2.6%

+10.4 million

$100 billion

3.7%

+13 million

$107.3 billion

1.6%

+2 million

$28.49 billion

8.6%

+13 million

$20.04 billion

7.6%

+39 million

$66.03 billion

5%

+42 million

$58.44 billion

6.6%

+34 million

$42.16 billion

5.2%

+71 million

$23.12 billion

7.2%

+49 million

$524 billion

2.8%

+15 million

$12.98 billion

6.6%

+22 million

$21.81 billion

7%

+2 million

$14.6 billion

4.4%

+12 million

$23.88 billion

4.2%

+12 million

$5.457 billion

9%

Africa will be home tothe worlds 6th largestnation in 2050: NigeriaSource: UN, KPMG research, Mckinsey


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The ChindiaFactor


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A rica, India and China are three transitionaleconomies in di erent stages o development andgrowing at di erent rates on di erent developmentmodels. They will shape the global economy and shi tits global power base as they evolve.

This development cannot take place in isolation

and trade between these countries and the rest othe world will be the medium through which theirevolution will take place.

While China has taken the clear lead, and India ispowering on strongly in pursuit, A rica has onlyrecently entered the growth phase, mainly driven bythe global demand or resources but not uniquely.

Category Africa India China

GDP US$million 1 184 891 1 235 975 4 908 982

GDP % share 2.0% 2.2% 8.4%GDP growth 1.7% 5.7% 8.7%GDP percapita 1 185 1 041 3 665

Land surfacearea 30 221 535 km

2 9 640 011 km 2 3 287 263 km 2

1 000 010 000 1 187 640 000 1 339 490 000Populationdensity 33 123 407

An estimated $2.6 trillion business opportunity perannum is expected in A rica rom our sectors by 2020:

Consumer industries $ 1,380bn

Resources $540bn

Agriculture $500bn

In rastructure $200bn.

66.0%

13.7%

5.5%

2.4%2.3%

Ores, slag and ash

Edible fruit, nuts, peelof citrus fruit, melons

Inorganic chemicals,precious metalcompound, isotopes

Pearls, preciousstones, metals, coins,etc.

Minerals fuels, oils,distillation products,ect

19.5%

11.1%

7.5%

9.4%

1,7.4%

Machinery, nuclearreactors & boilers

Vehicles other thanrailway

Pharmaceuticalproducts

Electrical & electronicequipment

Mineral fuels & oils

64.4%

14.1%

3.8%

4.1%

2.4%

Iron and steel

Copper and articlesthereof

Pearls, preciousstones, metals, coins,etc

Ores, slag and ash

Mineral fuels, oils,distillation products, etc

16.3%

13.5%

7.2%

7.9%

Articles of apparel,accessories, knit orcrochet

Articles of iron or steel

Vehicles other thanrailway

Machinery, nuclearreactors & boilers

Electrical & electronicequipment

Top Exports to India Top Imports from India Top Exports to China Top Imports from China

?%

13.5%

7.9%

3.8%6

2

2

5

5

6

6

9

1

1

1

2

0 5 1 1 2 2

Other services

Utilities

Tourism

Real estate and business services

Construction

Public administration

Financial intermediation

Manufacturing

Transport and ICT

Agriculture

Wholesale and retail

Resource

Africas share of change in economic growth,2000 - 07 ($235bn)


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Investmentsbetween Indiaand Africa


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India-AfricaThe India-A rica relationship is not new. It draws on a long,shared history o struggle against European colonialism, anda determination to ensure equality in the post-colonial worldorder. India is the third-biggest contributor o UN peacekeepersto the continent, helping clamp down on civil wars in Sudanand Congo. Indias navy tracks Somali pirates and Indiasrecord o speaking out against apartheid in South A rica was anhonourable one.

Growing trade relations between India and A rica haveachieved thriving business partnerships across key A ricaneconomies. Various Indian companies are now increasing theirbusiness reach within the A rican region through adoptingorganic growth measures.

It is evident that economic optimisation, increased governmentsupport, a strong pipeline or new products launches andresource abundance, are the key enablers which will drive theinvestments to A rica.Fundamental di erences in the resources, labour, and capitalendowments o A rica and India make them complementarybusiness partners meaning that the trend will likely besustained.

Annual trade between India and A rica increased 15- old withina decade to US$46 billion in 2010 rom $3 billion in 2000. TheIndian government is determined to achieve a target o $70billion in trade well be ore 2014. India has become one o theleading investors in A rican countries, with investments injoint ventures and wholly owned subsidiaries touching the

$33 billion mark. The investment covers sectors such as oiland gas, pharmaceuticals, petrochemicals, IT, ertilisers andin rastructure.

Indias investments in agriculture and telecommunicationsmay also have more o a direct economic impact on the liveso ordinary A ricans, 70 percent o whom are engaged in some

orm o agriculture, and at least 30 percent o whom haveaccess to a mobile phone.

Last year, the Indian telecoms giant Bharti Airtel announceda $9 billion deal to purchase the A rican operations o ZainTelecommunications.


India-South AfricaCommercial relations between these two countries havefourished since the establishment o diplomatic relations in1993. On the trade ront, the value o bilateral trade has trebled

rom US$2.5 billion in 2003 - 04 to US$7.5 billion in 2008 - 09.During the visit o President Zuma to India, both sides agreedto work towards a target o US$ 10 billion in bilateral trade by2012. The trade target was revised to US$ 15 billion by 2014during the visit o the Commerce and Industry Minister inJanuary, 2011 to South A rica, as it was estimated that thebilateral trade target o US$ 12 billion would be achieved in FY2010-11. Recent bilateral trade gures are as ollows:

There is substantial potential or trade growth between thetwo countries. Exports rom India to South A rica includevehicles and components thereo , transport equipment, drugsand pharmaceuticals, computer so tware, engineering goods,

ootwear, dyes and intermediates, chemicals, textiles, rice,

and gems and jewellery, etc. Imports o South A rica intoIndia include rock phosphates, precious stones and minerals,ertilizers, steel, coal, transport equipment, pulp and pulp

manu acturing, etc.

Investment rom South A rica to India rom April 2000to December 2010 was estimated at US$109.88 million[Source: DIPP]. Further, cumulative investment rom Indiainto South A rica rom January 1994 to January 2011 wasestimated at US$212 million. Major investors include Tata(automobiles, IT, hospitality, and errochrome plant), UB Group(breweries, hotels), Mahindra (automobiles) and a number opharmaceutical companies, including Ranbaxy, CIPLA, etc

as well as IT companies and some investments in the miningsector. There is also growing South A rican investmentsin India led by SABMiller (breweries), ACSA (upgradationo Mumbai airport), SANLAM and Old Mutual (insurance),ALTECH (set-top boxes), Adcock Ingram (pharmaceuticals) andRand Merchant Bank (banking).

The presence o Indian banks in South A rica (State Bank oIndia, Bank o Baroda, Bank o India, EXIM Bank and ICICIBank) has also promoted economic interaction.

India-South A rica relations today are warm, co-operative andmulti-dimensional. Rooted deeply in history, they now covervirtually all elds o human endeavor and enjoy regional andinternational signi cance. Sustained e orts are underway tostrengthen, deepen and diversi y them in uture.

Source: High Commission of India in SA


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KPMG in Africa


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KPMG in Africa

KPMG is well represented across the A rican continent.Our o ces in A rica are o cially integrated, and are managedas one practice across the continent. Individual countriesretain their legal independence and local Director ownership.This aligns with KPMGs objective to provide consistent,high-quality services to multi-national, regional and localclients and to enhance the product o ering in certainpreviously under-serviced markets. Our extensive networko practices allows KPMG clients access to a blend opro essionals who are well versed with local conditions,

o ering clients skilled resources, no matter where they arein A rica.

Currently KPMG A rica Limited practices are situated in theollowing countries:

Global consistency, local delivery

A rica is showing extraordinary potential andKPMG is operational right around the continent.KPMG is there ore well positioned to serve our

clients needs across A rica.

Botswana

Ghana

Kenya

Lesotho

Malawi

Mauritius

Mozambique

Rwanda

Namibia

Sierra Leone

South A rica

Swaziland

Tanzania

Uganda

Zambia

Zimbabwe.

What makes KPMG Africa different Comprehensive A rican ootprint ensuring we can be

where our clients are and that we know each other, with ablend o local knowledge and skills

A rica-wide consistency through the implementation,support and monitoring o key audit and other initiatives

rom a single point

Leaders in the key markets o Central, East, West andsouthern A rica

High quality, maintained through KPMGs rigorous qualityper ormance procedures.

Mauritius

Niger

Cameroon

Gabon Congo

Libya

Chad

Egypt

Sudan

Eritrea

Somalia

Ethiopia

KenyaUganda

Rwanda

Burundi

Tanzania

Angola

ZambiaMalawi

Zimbabwe

Mozambique

Seychelles

DemocraticRepublic of

Congo

Central African Republic

Djibouti

Madagascar

Equatorial Guinea

SngalCape Verde

The Gambia

Mauritania

Morocco

Algeria

Nigeria

Namibia

Swaziland

Botswana

Guinea Bissau

Cote DIvoire(Ivory Coast)

Sierra Leone

Burkina FasoGuinea

Ghana

Togo

Benin

Mali

Liberia

Tunisia

WesternSahara

KPMG in East A rica

KPMG in Southern A rica

KPMG in Central A rica

KPMG in Lusophone A rica

KPMG in West A rica

KPMG in Francophone A rica

KPMG in North A rica

Mauritius

Regions and sub-regions


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KPMGs India -Africa Corridor


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KPMGs dedicated India-AfricaCorridorIn view o the signi cant growth in trade and investmentbetween India and A rica, KPMG has set up a dedicated teamo experienced pro essionals to support clients operating in theIndia-A rica corridor.

Our ocus is to develop, support and acilitate A rica-Indiabilateral business opportunities both or Indian businessesentering the A rican market as well as A rican businessessetting up in India. In addition, our team has deep insightand up-to-the minute experience o the opportunities andchallenges that businesses ace in Indo-A rican cross-borderactivities.

Our network o speci cally identi ed KPMG pro essionals inboth A rica and India work seamlessly together to ensure ourclients are best equipped to operate e ectively and optimallyin this Corridor. The team also regularly produces throughleadership articles and newsletters in the marketplace in whichthe latest relevant insights and experiences are shared.


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KPMG Services


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KPMG Services

KPMGs network o rms has long been a leader in servingthe various industries and is actively engaged with clientsaround the world, combining global consistency with servicethat is attuned to the local marketplace. Clients can expectto work with honed pro essionals experienced in the issues,challenges and risks unique to particular industries and sectors.

Our practitioners use methodologies and toolkits that enablestandardised working practices while allowing them theopportunity to learn rom others, regardless o their location.Our approach is commercial, practical and e cient; workingwith our clients to solve the most complex o issues.

High-performing professionals cuttingthrough complexity

Our people are specialists and the best at whatthey do. We apply deep market knowledgeand expertise in Audit, Tax and Advisory todistinguish the relevant and important rom thecomplex and the unnecessary.

KPMGs Advisory practices:

Take an objective, long-term view

KPMG pro essionals bring local knowledge tolocal issues

Have an integrated approach to client service,elding teams o experienced pro essionals with

a breadth o speci c Advisory, technical andindustry sector skills

KPMG rms provide advice and assistance tocompanies, intermediaries and public sectorbodies. Our Advisory Services can help yourespond to immediate needs as well as put inplace the strategies or the longer term.

Our Advisory practice works with our clients to addresschallenges in:

Growth(creatingvalue)

working closely with our clients as theyexpand and restructure, either throughacquisitions or organically.

Governance(preservingvalue)

providing support to our clients as theyadapt to new regulatory environmentsand assisting in all areas o riskgovernance.

Performance(maximisingvalue)

assisting with improving e ciency andcapacity or growth.

KPMGs Advisory practice impartiality and a value-adding, progressive spiritKPMGs Advisory team works with clients to tackle their mostcomplex challenges. Combining our wide range o specialistskills, we provide objective advice and assist clients with theexecution o their agreed strategies to help address theirissues and realise their opportunities.

In todays business environment, businesses arecontinuously expanding, restructuring and re ningthemselves. Making the right decisions at the right time isessential to achieving optimal bene ts while mitigating risks.At KPMG, we aim to understand our clients broader needs,deliver exceptional, well-in ormed advice and integrate ourexpertise into viable, relevant, practical end-to-end solutions

or implementation.

AUDIT

Our Audit pro essionalsseek to drive e ciency ande ectiveness, and enhancethe audit experience or theclient.

TAX

Our Tax pro essionalsrecognise that theglobalisation o businessand capital fows will leadto greater transparenciesand cooperation among taxauthorities, and a greaterneed or tax planning andstrategy.

ADVISORY

Our Advisory pro essionalsare at the ore ront o riskand capital fows, and seekto provide strategies andtools to help member rmclients mitigate risk, reducecosts and sustain value.

KPMG o ers our clientsunrivalled experience andexpert skills through theintegration o a sharedvision, local knowledge andglobal best practice.

Our services are tailored,our advice is speci c and ourcommitment to excellenceis absolute.

We are organised around our Audit, Tax and Advisory practices:


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Contact usNeeraj ShahHead: India-Africa Corridor

+27 (0)11 647 [email protected]

Manish BhatiaSenior Manager: India-Africa Corridor+27 (0)11 647 [email protected]

kpmg.co.za

India Investing in South Africa and Africa

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