Financial services sector a key enabler in African investment, says KPMG

KPMG Africa ConversationsThe financial services sector in Africa was identified as playing a critical supportive role in the continent’s development at the seventh KPMG Africa Conversation event held recently in Johannesburg, South Africa

The development is a result of increased consumer spend, public and private sector investment in infrastructure and advances in technology leading to greater connectivity and increasing demand for natural resources by the developing BRIC bloc of countries, KPMG said at the event, which took place in its Wanooka Place office on 27 September 2012.

Other factors playing a role include increasing urbanisation across the continent, a greater number of enabling frameworks such as the continued increasing acceptance of the rule of law and the harmonisation of regulatory requirements at national and regional levels, it added.

Bisi Lamikanra, head of management consulting at KPMG Nigeria, said, “In Nigeria, for example, regulatory reform led by the Central Bank has led to consolidation in the banking sector.

“This has led to more focus on retail banking. Further developments have substantially ‘de-risked’ several factors for local and foreign investors entering African markets,” she added.

Individual models are also being developed for different financial services offered in different regions. Globally, there has been a move from de-regulation to greater regulation, KPMG said.

Junior Ngulube, CEO of Munich Re Africa, added, “The South African banking and insurance sectors have been very well-regulated and we didn’t see any of the turmoil that is still playing out globally. The rest of the continent is also very similar to South Africa in that respect. In Francophone countries, for example, there is just one [insurance] code and one currency. That makes it easy to transact business.”

KPMG commented that although investors should guard against assuming that all markets on the continent are the same, further risk for investors can be reduced through combined expertise.

Nicholas Young, Africa COO at Citibank, said, “Because Africa is an enigma for many investors, a tailored approach should be developed for each market. Combined global and local partnerships work well to unpack different markets.”

Increased connectivity, in Citibank’s experience, has illustrated that national Central Bank debates around policy issues have started to converge around common policy concerns across the continent, said Young.

“Foreign investors should invest now in learning how to operate in Africa. They also need to recognise the importance of continuing to refine their understanding of how to operate in African markets and the role of financial services in the development of Africa,” Lamikanra added.

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