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Financial Services sector a key enabler in African investment – KPMG

By on September 28, 2012

The financial services sector in Africa is playing a critical supportive role in the continent’s development as a result of increased consumer spend, public and private sector investment in infrastructure, advances in technology leading to greater connectivity and increasing demand for natural resources by the developing BRIC bloc of countries. These factors were identified as key drivers of growth at the seventh KPMG Africa Conversation convened today.

Other factors playing a role include increasing urbanisation across the continent, a greater number of enabling frameworks such as the continued increasing acceptance of the rule of law and the harmonisation of regulatory requirements at national and regional levels.

 

“In Nigeria, for example, regulatory reform led by the Central Bank has led to consolidation in the banking sector,” said Bisi Lamikanra, Head of Management Consulting at KPMG Nigeria. “This has led to more focus on retail banking. Further developments have substantially ‘de-risked’ several factors for local and foreign investors entering African markets,” she added.

 

Different models are also being developed for different financial services being offered in different regions. Globally, there has been a move from de-regulation to greater regulation. Junior Ngulube, CEO of Munich Re Africa, added that “The South African banking and insurance sectors have been very well-regulated and we didn’t see any of the turmoil that is still playing out globally. The rest of the continent is also very similar to South Africa in that respect. In Francophone countries, for example, there is just one [insurance] code and one currency. That makes it easy to transact business.”

 

Although investors should guard against assuming that all markets on the continent are the same, further risk for investors can be reduced through combined expertise. Nicholas Young, Africa COO at Citibank, suggested that “Because Africa is an enigma for many investors, a tailored approach should be developed for each market. Combined global and local partnerships work well to unpack different markets.” Such an approach can act as a key differentiator for investors entering Africa.

 

Increased connectivity, in Citibank’s experience, has illustrated that national Central Bank debates around policy issues have started to converge around common policy concerns across the continent, said Young.

 

“Foreign investors should invest now in learning how to operate in Africa,” urged Lamikanra. “They also need to recognise the importance of continuing to refine their understanding of how to operate in African markets and the role of financial services in the development of Africa.”