SIF IWG China In Africa Panel by Graham Sinclair/SinCo 20100518.ppt

Lee Stoetzel, Dictionary (2) 2007  mahogany and zebrawood  Artwork Number: LSTO.0032

SIF IWG 2010 18 May 2010

The Role of China in Africa
Snapshots from the Edge
Graham Sinclair
Principal
ESG Investment Architect
graham.sinclair@sinclairconsult.com

SinCo
sinclairconsult.com
REGULATORY INFORMATION
No part of this proposal suggests or should understood to suggest endorsement or advice on any investment approach, strategy or offering.
The rights and obligations of the investor are set out in the relevant policy contract. Market fluctuations and changes in rates of exchange or
taxation may have an effect on the value, price or income of investments. Since the performance of financial markets fluctuates, an investor
may not get back the full amount invested. Past performance is not necessarily a guide to future investment performance.

Sinclair & Company LLC The Leading ESG Investment Architect in Emerging Markets sinclairconsult.com ©2010

African opportunity

“Sustainable economic growth and development is an imperative, and …the creation of a
climate in which business, big and small, can thrive”. -address by Nelson Mandela, President of Republic of
South Africa to FICCI, CII and JBC, Delhi, India, 26 January1995

“Together, we can partner on behalf of our planet and prosperity and help
countries increase access to power while skipping - leapfrogging - the dirtier phase
of [invest]ment”. - Barack Obama, 44th president of USA address to parliament, Accra, Ghana, 11 July 2009

Challenges: Africa perceptions and challenges …

Negative perceptions of … • Trivia …
• Dictatorial regimes • 54 countries/territories
• Political instability • 2nd largest continent, 30m km2
• Civil strife • +/- 1 billion souls
• +/- 2,000 languages
• Absence of rule of law
• Business in: English, French,
• Economic mismanagement
Portuguese, Spanish
• Corruption
• Economic depression
• Starvation
• Deadly diseases

Nonetheless…
 Africa is not a country, but continent – a patchwork of risk
 South Africa is in Africa
 Over the past 15 years conflict has declined significantly
 Increasingly, African peace-keeping forces are playing a leading role in
maintaining peace
 Economic gains of the recent past are threatened by the global
economic meltdown:
 Commodity price boom since 2002
 Best in a generation economic growth and inflation rates
 High, but falling external debt burdens
 Booming FDI inflows
 Less volatile currency cross rates

Source: The IDC: Doing business on the continent, Thokoane Tsolo, Head: Africa Unit, presentation to Legae - African Markets Roundtable
Discussions, 5 November 2009
Sinclair & Company LLC The Leading ESG Investment Architect in Emerging Markets sinclairconsult.com ©2010 3

Challenges: doing business in Africa today

Source: Standard Bank Economics, Presentation to IDC/Legae African Investment Rountable, IDC Sandton, Standard
Bank Africa, Wilhelm Levin, 5 November 2009

Opportunities: globalization of investors

R
B

I

C

BRICs now rate as Africa’s top trading partner; ZAF ranks as 10th largest

Source: IMF, WTO cited in THE AFRICAN PRIVATE EQUITY LANDSCAPE Cape Town Masterclass 10th February 2010, Matthew Hunt, South Suez Capital Limited, Medine Mews,
Chaussee Street, Port Louis, MAURITIUS

Sinclair & Company LLC The Leading ESG Investment Architect in Emerging Markets sinclairconsult.com ©2010 5

Opportunities: new investors from emerging markets/South

BRIC trade with Africa; share of each country's GDP BRIC trade with Africa; share of each country's GDP
1980 2008

Poverty transforms a free man into a slave. - Oji, West Africa
Source: Standard Bank Economics, Presentation to IDC/Legae African Investment Rountable, IDC Sandton, Standard
Bank Africa, Wilhelm Levin, 5 November 2009

Opportunities: understanding Africa’s capital markets

• Africa has led other frontier and emerging markets in developing ESG indexes. The JSE SRIX
launched in 2004 as the first exchange-led SRI index and first in emerging markets. Egyptian SX
launched the first MENA ESG index in 2009 in partnership with CRISIL, S&P and Hawkamah Institute.
Source:African listed equities 2009, from mckinsey.com/mgi quoted in JSE Africa Board YOUR GATEWAY TO AFRICAN CAPITAL MARKETS presentation to CITI/Securities
Africa AFRICA INVESTMENT CONFERENCE LONDON – 16 MARCH 2010, Maureen Dlamini, Executive Head, Africa Board, Johannesburg Stock Exchange

Opportunities: new investment marketplaces

• Stock exchanges are a good proxy indicator of investment marketplaces. Sustainable development
in Africa needs more SMMEs [small, medium, micro enterprises] to grow and succeed. Local stock
exchanges can offer local businesses opportunities to raise the capital needed to grow. Stock
exchanges - like the AfricaSIF network - are necessary investment infrastructure in Africa.
Source: Investec Asset Management analysis, Bloomberg, April 2009

Opportunities: attractiveness of market to foreign investors

LPs’ Planned Changes to EM PE Investment Strategy Over the Next 2 Years
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Respondents (%)

9AP.-08,-Q7=6:7-6 17;,-8,-Q7=6,-; R7?27.=78H28=6HP8,-Q7=6,-;
Source: EMPEA/Coller Capital Emerging Markets Private Equity Survey

Marketplace: materiality of ESG issues – S.African pension funds, 2007

Q: Please indicate the extent to which you feel the following ESG issues are important in
evaluating the likely performance of investments:
75% 25%
Corporate Governance 69% 6% 25%

S us tainability 56% 16% 28%

Infras tructure Development 50% 25% 25%

HIV/Aids 50% 22% 28%

BE E and Gender E mpowerment Is s ues 47% 28% 25%

E mployee Relations 44% 22% 34%

E nvironmental Management 34% 31% 34%

Human Rights 31% 28% 41%

Health Is s ues 25% 31% 44%

Climate Change 22% 44% 34%

Very Important S omewhat Important Not Important

NOTES: telephone interview with pension fund trustees and principal officers H1 2007; n = 32.
SOURCE State of responsible investment1 in South Africa in 2007? UNISA/UNEP Fi/NOAH Financial, Oct 2007.

Opportunities: investment in Africa today
• Investors in private, public and philanthropy sectors have roles to play in applying ESG
factors to investment across private equity, listed equity, debt and all assets classes.
• Sustainable investment better matches the need for longer term investment approaches
building businesses capacity to compete locally and regionally.

Opportunities often arise from the structural characteristics

+ Micro Economic + Stock Market + Investment =
Macro Economic Growth Returns
Environment Characteristics Approach

• African markets are:
– under-penetrated & under-leveraged (on country, company and
consumer level)
– have a fast growing demand for goods and services • African businesses benefit from long term
• There are high barriers to entry for operators (for the time professional and value adding investors
being) • African Markets are attractive to private equity
– limited competition among leading corporate suppliers
investors
– yielding both pricing power and volume growth
– thus faster than average profit growth and high return on equity • Economic growth and barriers to entry
• And also high barriers to entry for investors (for the time • Restricted access to capital
being)
• Current market conditions allow for disciplined
– Information, travel
– Accommodation, visas investment strategy by long term private equity
investors

SOURCES: Chris Dirksen, Investec Private Equity Africa presentation to PE Congress Masterclass 10 Feb 2010, Cape Town, S.Africa

Lee Stoetzel, Dictionary (2) 2007  mahogany and zebrawood  Artwork Number: LSTO.0032

Thank you

Graham Sinclair
SinCo
graham.sinclair@sinclairconsult.com

CONFIDENTIAL AND PROPRIETARY
Any use of this material without specific permission is strictly prohibited.


Project team: about Graham Sinclair
• Graham Sinclair is a sustainable investment strategist, ESG architect and global project
leader at Sinclair & Company [SinCo]. Graham has eight years specialist experience in
sustainable investment globally after six years in pensions consulting and investment
banking in Africa. Recent consulting engagements in sustainable investment include:
– Leading IFC-funded research into private equity and liquid equity ESG strategies in sub-Saharan
Africa in South Africa, Kenya and Nigeria to be published in Q2 2010.
– Developing innovative financing mechanisms strategy and ESG index architecture for
developed, emerging and frontier markets for a Swiss-based international organization.
– For a global institutional investment firm in New York with a USD 1 trillion AUM portfolio, designing
ESG architecture across private equity, liquid and global real estate portfolios covering
philosophy and process innovations and investment strategies.
– As consultant to the UN, developed strategy for 25 emerging markets and launched PRI in
Emerging Markets project in Q3 2007, creating a network infrastructure, building relationships
with 108 investor stakeholders including in Africa through 2008.
– Lecturing on ESG in investment strategies at investment practitioner symposia and leading
business schools in Europe, Africa and the US. Currently developing case studies on ESG
investment in emerging markets for his forthcoming book.

• Before starting his eponymous investment advisory boutique SinCo in 2006, he was
Product Manager at KLD Research & Analytics, Inc, based in Boston. He is a former
contributor to the CSR Initiative at Harvard Kennedy School, Distinguished Member of
Net Impact, alum of WWF One Planet Leaders programme and the Tallberg Forum
New Leaders Program. He holds diplomas in retirement funds and insurance law, and
in 1998 he was one of the youngest ever dual-FILPAs. He currently leads the AfricaSIF
Project building a not-for-profit Africa Sustainable Investment Forum network.

• Graham earned his MBA on scholarship at Villanova University USA where he co-
managed the Arnone-Lerer SRI Fund equity portfolio in 2004. He holds a B.Com from
the University of Natal and LL.B from its Howard College School of Law as well as
numerous industry specialist certifications.


Credentials: what people are saying about SinCo/Graham Sinclair
• “Graham is an exceptional professional in all that he does. His work is at the crossroads of
business intelligence, finance and investments and sustainability. His ability to clarify
objectives and execute on solutions has demonstrated the fruitful success of the business
case for sustainability.”
– Director and Senior Investment Analyst, global institutional asset manager, New York City.

• Graham served as a strategic adviser to a large US Asset manager as we worked
together on developing their sustainable investment strategy. He provided on-going
support to their internal team and served as a knowledgeable and helpful sounding
board as their staff tried to move sustainability forward
– - Senior Client Relationship Manager, Global ESG ratings and research provider, London

• Graham is a very focused, passionate and results driven promoter and believer in the
change role that a shift to of Responsible Investments can and will effect in our
globalising world. He is comfortable with holding a strong opinion yet cable of being a
consensus builder
– - Portfolio Manager, Responsible Investment equity portfolio, Cape Town.

• "For many investors, getting to grips with ESG issues in emerging markets is a top priority.
[He] was crucial in encouraging new partnerships in diverse markets..."
– Clean tech private equity fund manager and former Executive Director, ASRIA, Hong Kong.

• Graham has shown a fantastic drive and commitment to the PRI initiative. He clearly
helped promote the ESG thematic to the top of our priorities.
– - Chief Risk Officer, hedge fund-of-funds investment house, Zurich.

• “Graham is a hard-working, dedicated investment professional. He approaches his work
with a creative pragmatism and is committed to promoting the importance of
Responsible Investment thoughout the value chain.
– - Project team member, Principles for Responsible Investment, Geneva.

Credentials: what people are saying about SinCo/Graham Sinclair

• “Graham was instrumental in the planning, kick-off and growth stages of AIG Investments'
multi-phased strategy of factoring ESG analysis into the investment decision process. His
deep knowledge of sustainability issues, business strategy, risk assessment, and
stakeholder engagement helped to form the basis for a highly successful integration of
robust environmental, social and governance analysis. Graham quickly mastered our
internal needs and requirements, understood our culture, and made broad contributions
in equities, fixed income, real estate and alternatives. He was generous in sharing his
ideas and stepping up when we needed his expertise, which was transferable across
sectors and asset classes.”
– Vice President, Asset Management for major global institutional investor, New York.

• “Graham has one of the most fantastic international networks that I've ever encountered.
His understanding of, and passion for, responsible investment makes him one of the most
knowledgeable in the field. I've always been impressed with his delivery and focus.”
– - Head of Governance and Sustainability, pan-African banking group & UNEP FI member, Sandton.

• "Graham was extremely helpful in helping get up the curve on our sustainability initiative.
Graham was very knowledgeable and insightful and allowed us to quickly get up the
curve on Sustainability."
– Chief Administrative Officer, Global Real Estate, trillion-dollar global institutional investor, New York.

• "Graham is one of our leading thinkers on SRI. The work that Graham is doing will transform
SRI and take it to the next level."
– Managing Director, equity investment manager, Boston.

• "Graham Sinclair's work is excellent."
– Executive Diretor, billion-dollar global foundation, Philadelphia.


SinCo helps: leading clients tackle some of the toughest challenges
• Developed strategy for assessing innovative financing mechanisms to attract
new capital in new ways. Designed global ESG index architecture for
developed, emerging and frontier markets covering nutrition sector.

• Prepared strategy and lead the Africa Sustainable Investment Forum (AfricaSIF)
project team developing pan-African network for investment stakeholders.
AfricaSIF

• Supported stakeholder engagement connecting investors, analysts and
companies assessing practice of investment valuation globally.

• Lead responsible investment prescribed assets working group exploring positive
role for economic development regulations for investment industry in S.Africa.

• Designed sustainable investment ESG architecture across trillion-dollar AUM, 200
analyst private equity, equity, fixed income and global real estate asset classes.
• Provided peer benchmarking for ESG strategy and developed change
management program for multi-office, multi-region ESG roll-out.
• Developed sustainable investment masterclass for seminar at leading MBA
programs from 2006; currently teaching in US and Europe.

• Developed strategy for 25 emerging markets in 2007 and launched EM project
for sustainable investment by institutional investors. Created network
infrastructure, stakeholder relationships and built PRI in EM through 2008.

• Conducted seminal study of sustainable investment in sub-Saharan Africa
[S.Africa, Nigeria, Kenya] across PE and listed equities in 2010 in partnership with
RisCura; conducting primary research interviewing over 50 investors.


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