Africa growth search

Financial Mail - Investors Monthly - - Opinion - Du­tiro is CEO of MMI: Africa & Asia

The race for Africa’s in­sur­ance mar­ket de­pends on the abil­ity to in­te­grate in­sur­ance with mo­bile net­works

With pre­dicted growth rates of 4%-10% for many African economies, for­eign in­vestors are stream­ing into Africa, en­ticed by the prospect of an emerg­ing mid­dle class. Even though per capita GDP is low in many African coun­tries, the sheer vol­ume of un­der­ser­viced peo­ple is enor­mous. De­mo­graph­ics are also a huge driver. Europe’s pop­u­la­tion is skewed to older peo­ple; while Africa’s younger pop­u­la­tion of­fers a mar­ket that will re­quire ser­vic­ing for decades.

As in­vestors in Africa, SA com­pa­nies com­pete with those from all over the world. For large for­eign in­vestors, the small scale of po­ten­tial in­vest­ment in Africa is the big­gest chal­lenge, fol­lowed by an un­fa­mil­iar cul­ture. This gives SA a com­pet­i­tive ad­van­tage. With­out the ex­pense of es­tab­lish­ing head­quar­ters in Africa, lo­cal firms can sup­port smaller in­vest­ments and are also able to de­velop Afro­cen­tric teams that are more likely to un­der­stand lo­cal cul­tures.

For the SA in­sur­ance in­dus­try, di­ver­si­fi­ca­tion into Africa is an ob­vi­ous growth path, given that in­sur­ance pen­e­tra­tion in this coun­try and the de­vel­oped world is sat­u­rated and com­pet­i­tive. Con­versely, in­sur­ance pen­e­tra­tion in the rest of the con­ti­nent is low.

The African in­sur­ance mar­ket is es­ti­mated to be worth US$63bn — 80% of which comes from SA. Col­lec­tively, Kenya, Nige­ria, Ghana, Tan­za­nia, Uganda, Ethiopia, Rwanda and the South Su­dan in­sur­ance mar­kets make up $3.97bn, with the rest of Africa es­ti­mated to be worth about $15bn.

Cur­rently, in­sur­ance ser­vices amount to only 1% of Africa’s GDP, com­pared to 12%-14% of GDP in SA. Pro­jected profit be­fore tax in 2020 is es­ti­mated at about $900m — 70% of which will come from gen­eral in­sur­ance.

Africa’s in­sur­ance in­dus­try is still at an em­bry­onic stage with no es­tab­lished cul­ture of in­sur­ance out­side of South­ern Africa. Ed­u­ca­tion is key to at­tract­ing this mar­ket; each re­quires unique prod­ucts and ser­vices linked to its needs.

MMI’s African busi­nesses force it to be in­no­va­tive, es­pe­cially with re­gard to mo­bile tech­nol­ogy as a means of ed­u­ca­tion and dis­tri­bu­tion. The race for Africa’s in­sur­ance mar­ket will be won or lost on the abil­ity to in­te­grate in­sur­ance of­fer­ings with mo­bile net­works. We have many ini­tia­tives in place to pro­vide health and other in­sur­ance prod­ucts to our client base via mo­bile net­works.

MMI’s pres­ence in 11 African coun­tries over nearly four decades gives it a sound plat­form to tap into Africa’s in­creas­ingly for­mally em­ployed pop­u­la­tion. Ten years from now, MMI en­vis­ages 15%-20% of its earn­ings em­a­nat­ing from its Africa busi­nesses.

By do­ing busi­ness in Africa the MMI way, MMI hopes to es­tab­lish its cul­ture across Africa to make a real dif­fer­ence in the lives of its cus­tomers and em­ploy­ees. With the goal of fi­nan­cial well­ness for its clients, MMI aims to im­prove sav­ings rates and es­tab­lish a long-term sav­ings cul­ture in the coun­tries in which it op­er­ates.

We be­lieve in the ben­e­fits of em­ploy­ing lo­cal skills as these in­di­vid­u­als know the lo­cal dy­nam­ics, trends and lan­guages and can tap into lo­cal net­works. MMI also im­merses it­self in the coun­tries it in­vests in by be­com­ing in­volved in lo­cal in­dus­try bod­ies and lobby groups, con­sult­ing with gov­ern­ment and in­vest­ing in con­sumer ed­u­ca­tion.

SA re­mains MMI’s core fo­cus area. As its cap­i­tal to in­vest comes from SA, a healthy lo­cal busi­ness is im­per­a­tive to its African ex­pan­sion. Sim­i­larly, MMI can only reach its Africa ex­pan­sion tar­gets if SA’s econ­omy is sta­ble. A health­ier SA econ­omy, with in­cen­tives to en­cour­age in­vest­ment in SA as well as in­vest­ment from SA into Africa, will go a long way to grow­ing the in­sur­ance in­dus­try in Africa and strength­en­ing SA’s ex­ist­ing in­sur­ance in­dus­try.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.