Africa on the brink of asset management, life insurance and pension products boom

The African financial sector is still dominated by banks. However, the stable development of the middle class is a strong indicator that the demand for asset management, insurance and retirement offerings will be growing. Together with an increased use of technology, rapid urbanisation and demographic changes, these are clear indicators for a rising demand for asset managers and fund advisors.

Traditional asset management, particularly the mutual fund industry, is expanding aggressively in many African countries. Assets under management (AuM) growth has already been considerable and PwC predicts that this will continue to 2020. The surge will be driven by a number of factors; economic growth and the subsequent rise in wealth will boost demand for pensions and life insurance products. 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.

Even though at present retail investors form a very small proportion of investors in asset management the number should increase through education about products and overall economic growth. To develop and boost a more personal finance-centred mind-set in the society, specific regulations are being implemented in many markets. This should bring about a savings and investment culture, particularly among the lower income population.

Traditional Asset Management in selected African countries

The change is already happening. Some of the continent's banks have set up their own asset management subsidiaries to push their own proprietary products, and platforms and direct sales channels are emerging. Many of these banks also seek cooperation with foreign asset managers to promote their African investment strategies in other parts of the world in exchange for promotion of other asset managers' investment strategies in Africa.

All components of the financial sector are expected to continue to expand to 2020 and beyond. Pension and insurance markets will mature as their products become more significant and as a savings culture is established. At present, the majority of asset management is controlled by African companies. Foreign players do exist but, due to a lack of local knowledge, they generally enter the market through acquisition of or via a partnership with a local player. This is bound to change, as Africa is offering incredible growth opportunities for international asset management, pension and life insurance companies.

Traditional Asset Management in selected African countries

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Dariush Yazdani

Grégory Weber

Xavier Domalain