Experts: Stakeholders Needs To Understand Business Realities In Africa

Sotunde Oluwabusayo

Despite the prediction that several African countries will experience positive turns in their Gross Domestic Product (GDP), experts assert that realities of doing business in Africa is now at a critical point with the need for support to boost continuous development.

Experts at the sixth KPMG’s Africa Conversations Series on transacting in Africa, were of the opinion that considerable focus on infrastructure upgrade, increase in Foreign Direct Investments (FDIs), improved banking supervision and more insurance policy uptakes; may increase  Nigeria, South Africa and other African countries GDP to $2.6 trillion by 2020. While noting that, historically, multi-nationals and larger listed African companies have conducted investment into and across Africa, especially from the South; Head of Transactions and Restructuring at KPMG, John Geel said, “We are now witnessing an increasing number of smaller companies undertaking investments due to improved growth opportunities and regulatory tax regimes. This means that companies are now seeking out the right entity to transact with, negotiate details of collaboration and sign legal contracts.”

He stated that the economic analysis group had noticed improvement on the continent’s banking sector with continued consolidation and expansion appetite.
Noting reports on a survey carried out by KPMG Africa in May 2012, Geel stated that of the fourteen countries surveyed in the report, life and short-term insurance markets were relatively mature in the southern region, with few obvious merger and acquisition opportunities.
He said that it is ultra competitive, well regulated and, in all likelihood, facing ongoing challenges regarding regulation such as IFRS Phase II, Treating Customers Fairly and others.

With this development, Partner and National Head of Insurance, Gerdus Dixon, posits that other African countries are presented with new untapped markets, massive potential customer populations and burgeoning economic growth.

He stated that “While Nigeria, Ghana and Angola’s growth rates are all in excess of this. In many ways, describing these African countries as the “new frontier” is also no longer accurate, as most of the big players are already out of the blocks, so to speak, and actively positioning themselves for an African play.”

Dixon however emphasised that individual African countries should be understood and assessed each on their own merits. The incredible diversity and subtle nuances are critical in unlocking the secrets to business success.

He asserted that “Africa’s gross domestic product is expected to reach $2.6 trillion by 2020, but expanding into African countries is not a short-term growth fix, it will take deep pockets and committed sustainable long-term business plans to develop the insurance market in these African countries – particularly the much vaunted retail or individual life insurance markets.”

He believes it is important for shareholders to understand the return profile of expanding into Africa.

“The underdeveloped formal economy and infrastructure will demand that innovative solutions need to be found with regard to strategy, product design and distribution. The barriers to entry are high, but Africa is simply too big and growing too fast for insurers to ignore,” Dixon said.


Story posted from Ventures Africa