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BRICS & the Emerging Markets Context: We’re getting there Glenn Silverman February 2015 South Africa Venture Capital Association (SAVCA) Investment Solutions: Key part of world’s population, land mass, global growth, etc To better understand the world Geo-politically important countries Key dynamic ito global investment flows Assess lessons for SA General: • +40% of global population • +20% of global GDP • +50% of MSCI EM Ultimately: To enhance the investment outcome 2 • Is the BRICs group sustainable / does it have longevity? • What do they have in common, and what sets them apart? • Are their goals aligned? • What, ultimately, is their destination? • What are the lessons for SA and Africa? CHALLENGES North/South divide; Continents apart Commodity producers/consumers Border rivalries/aspirant OPPORTUNITIES Counter-balance to the Western view Knowledge sharing; Business & trade New Development Bank superpowers ‘Higher purpose’ Ideological & other differences Forthcoming book Key Stats: • 2½ years; 5 trips • 50 contributors • +90,000 km • 14 major cities • 81 meetings • 33 tours • 13 chapters Glenn Silverman & Chris Hart 2014 • All proceeds to charity PART Countries PART PART The 5 ‘IS Lenses’ • Brazil – Samba no more? 1. National Scars • Comparisons & contrasts • India – A crouching tiger 2. National Transitions • Geopolitics • China –The dragon leading the BRICS dance 3. Economic Value Chains 4. Capital Allocation 5. The Political Economy • Russia – The return of the Tsar • SA – Just a briquette? • Conclusions, key lessons & epilogue Insights Cities Visited B R I C S Rio de Janeiro Sao Paulo Moscow St. Petersburg Mumbai Delhi Agra Bangalore Hong Kong Shanghai (Singapore) Beijing Johannesburg Cape Town • Infrastructure • Congestion • Sustainability • Growth • Scale Meetings B R I C S 18 15 • Corporates (57) • Asset managers (9) • Academics (6) 21 15 12 • Politicians (6) • Stock Exchanges (3) Insights • Diverse range of industries • Complexity • Ambiguity • Impressive • Culture • Learnings & the IS ‘lenses’ # B R I C S 5 8 Insights Examples • Itaipu • Favelas • Kremlin • Peterhof Palace 7 • Dharavi • Taj Mahal • Bollywood 7 • Great Wall • Forbidden city 6 • District 6 museum • Townships • Long history • Deep Culture • Resource abundance • Fear of foreigners • Highlighted the scars Examples B R I C S • • Very foreign Resource-rich • • Huge & important country Oil & gas are key • • Largely untapped potential Extremely diverse/complex • • World’s second largest economy Only communist country in the BRICS • • Still impacted by apartheid “Punches above its weight” 10 B R I C S • Budget cuts • Tax hikes / monetary tightening • Ex-growth; No reform impetus • Sanctions imposed • Depressed oil price; crisis • New president; Improved sentiment • Growth unlock through infrastructure • Debt bubble starting to deflate • Marked slowdown in growth vs stimulus • Multiple concerns: • Stagnation, fiscal, policy… Conclusion • BRICS: Still primarily a (disparate) political alliance • The countries, and the bloc, are still evolving • Each have reached another key inflection point • The outcome lies in their hands Thus, they are only ‘Half Way There’… Emerging economies as % of total world Source: BofA Merill Lynch, BP, CIA World Factbook. IMF World Economic Outlook, MCSI, March 2010 Additional food for thought 1. 2. GDP (PPP) ‘92 ‘15 G7 77% 56% BRICS 23% 44% 100% 100% Capital Formation (savings) ‘92 ‘15 G7 90% 50% BRICS 10% 50% 100% 100% Additional food for thought Beware the US/USD ! US Dollar Index 130 120 110 100 90 80 70 Source: I-net US$ Index 2015 2014 2013 2012 2011 2010 2009 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 60 2008 Flat Thank you