Africa, traditionally associated with gold and diamond mines, offers thriving asset management opportunities throughout the continent. The industry is growing while you read, with South Africa, Kenya, Ghana and Nigeria leading the long list of markets with promising asset management opportunities. If growing at the current pace, the total amount of traditional assets under management could reach USD 1,086 billion by 2020. PwC Luxembourg together with LuxAfrica Investment Association organised a conference on 18 February dedicated to the key reasons why asset managers’ should pin their eyes on Africa.

Endogenous growth conditions
With its over 1-billion population and substantial regulatory changes to pension schemes ahead, Africa is for international asset managers a land of peerless opportunities.

"The continent’s demographic advantage, its growing middle class, the increased use of technology and its rapid urbanisation all play an important role in the development of asset management industry," highlights Ilse French, partner at PwC Luxembourg.

The numbers speak for themselves: the African middle class represented only a quarter of the population in 1980 and already 34% in 2010, in absolute terms rising from 115 million to almost 327 million people. Nigeria alone will add 7.6 million middle-class households by 2025, Ghana 1.6 million and Angola another million people . The demand for financial services, life insurance and sophisticated investment products, such as retail investment funds, will naturally follow.

"Opportunities will diversify and they will be different from those of developed countries, says Ilse French. One example are mobile financial services creating a new banking model. Most Africans don’t have a bank account but almost all of them have phones. The lack of banking infrastructure and the flexible regulation have allowed telecom operators to offer an alternative payment system via mobile phones. 183 million Africans have an electronic wallet on their mobile phone. If the current momentum continues, in five years every African will possess one."

Urbanisation, an important game-changer
With the rapid growth of the African population, a further stimulus to the economic growth is expected.
“By implementing policies to create enough jobs for the growing labour force, the falling dependency ratios will probably increase both savings and investments, as well as create significant demand for financial products," notes Ilse French.

Furthermore, population growth and rapid urbanisation should translate into real estate and infrastructure development. Insufficient funding by governments creates an opportunity for private investors to get involved through direct investment or public-private partnerships. Even if the size of most transactions remains low for the moment, provided the economy and regulatory frameworks evolve, it should increase to match that of other markets.

A role for Luxembourg
Luxembourg, from its international position of investment funds centre, has an important role to play in developing the asset management industry in Africa. Whether traditional or alternative asset management, the Grand Duchy already has the relevant financial infrastructure and should be an important industry partner for Africa.  In order for it to happen, missions on the continent should be multiplied.

“Luxembourg must start with listening to the needs of African markets and closely working with its regulators.  The continent’s countless opportunities will then hatch in the long-term," concludes Ilse French.