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.
Africa presents an exciting investment opportunity: as wealth continues to increase, more domestic investors emerge and improvements in national regulatory frameworks entice foreign investment and distribution. Growth rates are staggering: Ghana is projected to have a GDP growth rate of 9.2% in 2017, while Angola showed a compound annual growth rate of 21.7% for the period 2002 to 2014. Growth in mutual funds has also been rapid with Nigeria showing an incredible Compound Annual Growth Rate (CAGR) of mutual funds of 33.8% in just four years between 2011 and 2014.
Source: PwC Market Research Centre analysis with IMF data
"Investors, in order to leverage the opportunities of this vast and growing continent, must remember that Africa is a collection of different markets, each with its own characteristics. Economic performance and growth opportunities vary widely from one country to another", notes Ilse French, PwC Africa Asset Management Leader.
As any region in the world, also Africa faces some challenges that should be taken into consideration when analysing investment opportunities. Many African countries rely heavily on commodities, hence shocks in market demand resonate strongly in their economies; others are dependable on tourism, and international travel safety issues related to terrorism can hamper its growth and negatively impact a country's GDP.
Despite this, sound financial sectors and fund industries are developing across the continent (although they are still in the early stages). Countries are seeking to diversify away from commodity driven economies by expanding their financial sectors. Africa currently represents 15 percent of the world's population, but just 3 percent of the world's GDP and less than 1 percent of the world's stock market capitalisation. However, things are changing while you read.
The outlook for the continent is more than positive. "We expect political dynamics and transitions to democracy to be significant determining factors in the region's economic and financial development, especially in North Africa", adds French. This will not only lead to yet more positive changes in regulation, but will also act as a moderating factor for foreign direct investment and portfolio investment in the region. "Political stability and investor protection are crucial to maintain investor confidence and to entice new investors", she concludes.
Source: PwC Market Research Centre