Exciting times for African asset managers
New research from PwC projects that traditional assets under management (AuM) in 12 markets across Africa and that includes Namibia will rise to around US$1,098 billion by 2020, from a 2008 total of $293 billion. This represents a compound annual growth rate of nearly 9.6%.
Traditional asset management, in particular the mutual fund industry, is expanding aggressively across Africa. This will largely be driven by a number of factors. Economic growth and the subsequent rise in wealth will boost the demand for pensions and life insurance products, the demand for retail investment funds will consequently increase, and the widespread adoption of technology will make delivery of new products cheaper, bringing more consumers into the formal financial sector.
The report, Africa Asset Management 2020, is an in-depth study which examines the asset management industry across 12 African countries which have financial markets at varying levels of development. The countries, which represent a sample from Northern, Eastern, Western and Southern Africa, were assessed by a range of relevant indicators in order to capture their true investment potential. The countries were categorised into three groups: advancing markets, promising markets, and nascent markets.
Ilse French, PwC Africa Asset Management Leader, said “As Africa has entered the 21st century, economic growth has surpassed expectations and stimulated investor interest across a broad range of asset classes. Although the fund industry in Africa is, in most countries, still developing and has much to prove, global and local asset managers are likely to become more active as the industry continues to flourish.” Although the GDP growth rate in Africa is on the rise, the savings and investment culture has not yet caught up and for the most part, capital markets remain small and illiquid. Regulations to boost the capital markets are under discussion in some countries, such as encouraging pension funds to invest in locally listed companies. After independence, Namibia introduced Regulations 15 and 28 to repatriate capital back into the country.
“As asset managers look for new investment channels and competition becomes increasingly intense, understanding the characteristics of the local markets will be crucial to grasp the potential of this final frontier,” concluded French.