Africa Asset Management 2020
Africa presents an exciting opportunity: As wealth continues to increase, more domestic investors emerge, while improvements in regulatory frameworks are enticing foreign investment and distribution.
Africa currently represents 15% of the world’s population, but just 3% of the world’s GDP and less than 1% of the world’s stock market capitalisation. However, things are changing and we are observing an increase in demand for goods and services. Therefore, the need for financing in the real economy is becoming increasingly necessary. Although they are still in the early stages, sound financial sectors and fund industries are developing across the continent - a tangible sign of attempts to meet those needs.
Countries are also seeking to diversify away from commodity driven economies by expanding their financial sectors. The countries in our study range from those in the nascent group, in which the fund industry is only beginning to develop, to those in the advancing group, where the financial services industry is already quite well developed and investment funds are numerous and well regulated. Further development of the industry will clearly take place at very different paces depending on the current level of maturity.
The report includes a series of predictions to highlight potential opportunities and challenges that may lie ahead for investors and considers the industry from both an investment and distribution perspective.
Africa has some unique characteristics that will drive growth and we refer to these as game changers in our report.
- Demographic dividend
- Growing middle class
- Increased use of technology
- Urbanisation & infrastructure
- Development of the financial services Industry
- Traditional asset management, particularly the mutual fund industry, will grow at CAGR of 9.6% in the countries considered in our report.
- Growth in mutual funds has been rapid with Nigeria showing a CAGR of 34% from 2011 to 2014.
- Technology may leapfrog existing fund distribution channels in Africa.
- As governments remain in a net borrowing position, asset managers will fill the financing needs of the real economy.
- Pension funds will play an important part in the development of capital markets. In Nigeria, the pension fund industry grew at a CAGR of 21% from 2011 to 2014.
- Regulatory reforms in Africa are encouraging a savings culture and local investment.
- Banks will be the main fund distributors in Africa for the foreseeable future.