Africa: A Continent of Diversity and Opportunity

“In africa today, we recognise that trade and investment, and not aid, are pillars of development.” Paul Kagame. One of the West’s favourite African sons, hailed as the man who stopped genocide in Rwanda, Paul Kagame, has become a tarnished Africa hero – but his words still ring true.

Africa: the new frontier

Many JSE companies are seeing Africa as the new frontier and an important source of long-term growth, especially those companies doing business in mature markets. The International Monetary Fund forecast the region to grow at 5.5% both this year and next. By comparison, South Africa’s economic growth rate is forecast at just 2.7%. The predicted economic growth rates in Nigeria, Ghana and Angola are also in excess of this. Africa’s gross domestic product is expected to reach US$2.6 trillion by 2020. The continent has the fastest-expanding workforce in the world. Presently there are more than 500 million people of working age (15-64) and the expectation is that by 2040, this number will exceed the working forces of China and India.

Africa opportunity

The African Development Bank, International Monetary Fund and other multilateral institutions have made a significant, positive contribution by working with investors and recipient governments to improve the business climate in Africa. To demonstrate that successful projects can be undertaken in African countries, the African Development Bank has raised its capacity to finance private and public-private partnerships.

Energy, natural resources, agriculture and health care are recognised as some of the continent’s key growth engines. Insurance, as an ancillary industry, could experience exponential growth if the right investment decisions are taken.

The insurance industry in Africa

The larger portion of the continent’s 1 billion people does not have insurance. Although Africans comprise a vast market of low-income people, they are however, willing to pay for affordable insurance. Due to the higher-than-average economic growth and expanding middle class, KPMG expects that the demand for health insurance products will increase as the population seeks to improve access to modern healthcare facilities.

In a recent article published in the Financial Mail, leapfrog announced that they had concluded their fourth investment in an African insurer. They acquired the majority stake in Express Life in Ghana, for Us$5.5 million. They stated that the growth in the GDP of Ghana was 13.5% and that the life insurance market had grown by 40% annually, over the last five years. Sanlam Developing Markets also acquired a 49% stake in Enterprise Life, a Ghanaian insurance company. This is in addition to their joint ventures in Botswana, Kenya, Tanzania, Nigeria, Malawi, Uganda and Zambia. Old Mutual announced in February 2012 their intention of buying a small life insurer in Nigeria, Oceanic Life.

The challenges facing insurance industry expansion and ventures in Africa:

  • The short-term insurance market is spread across 55 countries and large-scale business is not present in many of them
  • Due to a surfeit of industry players in some countries, premium is fragmented. This is especially the case in Nigeria and Kenya
  • Distribution channels – insurers will have to embrace modern and alternative distribution models that are able to connect products with insurers in a reliable, cost-efficient manner.

In this article, we document a high-level review of some of the key economies in the African continent, principally from an insurance perspective. We have used the latest available information in our analyses. for each of the countries featured, we have touched on the status of the insurance industry, regulatory and macroeconomic environments, foreign direct investment and exchange control conditions.

africa opportunity

David Okwara

, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

No comments yet.

Leave a Reply

LEGAL PRIVACY POLICY
Twitter Linkedin Facebook YouTube RSS