Frontier Lions

As featured on BizNews

Africa’s rapid urbanisation, its young population, and its growing labour force make it a highly valuable asset says Carrick Chief Executive Officer Craig Featherby. This explains the South African-based company’s intense drive into the rest of Africa. With offices already established in Botswana, Zimbabwe and Mauritius, and regulatory approvals in the pipeline for expansion into Kenya and Uganda, Carrick has also set its sights on Ghana, Tanzania, Mozambique, and Côte d’Ivoire (Ivory Coast). However, he warns that it will not simply be “business as usual” on the new frontier.

We work in an increasingly competitive environment. As asset managers we constantly seek new investment channels for our clients. I think here in Africa we will find our best opportunities.

Numerous reports, such as the PwC report, Africa Asset Management 2020, claim that over the next three to five years assets under management in the South America, Asia, Africa, and Middle East economies will grow faster than in the developed world. In other words, the new pools of assets are in the “new frontiers”.

Some say, however, that the much-heralded growth expected from Africa has failed to happen. Doomsayers are quick to point to the slow-down in growth across the continent — dropping from an average GDP percentage growth between 2000 and 2015 of 5.4 percent to a low of 3.3 between 2010 and 2015. It is undeniable that growth in South Africa and the other large economies — Algeria, Angola, Egypt, Morocco, and Nigeria — has declined. (Some for more obvious reasons than others.)

But these slow-growth figures are misleading. Many countries, including Botswana, Zimbabwe, Cameroon, Côte d’Ivoire, Ethiopia, Gabon, Ghana, Kenya, Madagascar, Namibia, Senegal, and Tanzania — have actually shown an increase in their GDP. For example, Ghana’s projections indicate GDP growth ranging between high of 9.2 percent and a low of 4.3 between 2017 and 2020.

The McKinsey Global Institute call this group of countries the “Lions of Africa”. Its 2016 report, “Lions on the Move II”, a follow-up to an earlier report from 2010 remains positive about Africa’s future. In most of these countries, there are significant social, political, and economic indicators that make them highly valuable assets in securing our company’s future growth.

We know that an increase in a country’s wealth is usually followed by an increase in domestic investment. If governments and financial institutions, at the same time, are improving their regulatory frameworks — which is happening in the countries mentioned — the incentive for even more investment and distribution is heightened.

The McKinsey Global Institute estimates that by 2025 Africa’s household consumption will be worth more than US$2.1-trillion and Business-to-Business spending will be US$3.5-trillion.

As I mentioned, there are a number of important indicators: urbanisation is one. Africa will experience the fastest urbanisation of any region in the world and its cities are key to capturing Africa’s consumer opportunity. In Nairobi, Kenya, for example, per capita consumption is more than double the national average, and the top three cities in Ghana account for more than 65 percent of national consumption.

Another indicator is the massive growth in the working-age population. Within the next 20 years, the working-age population in Africa is expected to be more than 1.1-billion, larger than either India or China.

Having new markets, however, does not simply mean it’s business as usual. To succeed in this future market, companies will require a paradigm shift from a firm-centric view of the world — in which the organisation’s purpose is to make money for itself — to a customer-centric view of the world, in which the purpose of the firm is to add value for customers.

Keep in mind that this young workforce of tomorrow will be “connected”. As a company Carrick understands that connectivity means that its clients will be informed and knowledgeable about investments. They will also be more aware of systemic risk, be it operational, regulatory, and /or fund governance issues. We must recognise that these “frontier clients” will want a customised offering that focuses on their goals, looks at matching asset-liability, and at managing their assets around specific goals and targets.

Tomorrow’s investors’ attitudes are the consequences of connectivity. They will be far more financially literate than the previous generation, because they are the connected individuals connected to the Internet of Things.

During the recent Carrick conference, Neil Jacobsohn from FutureWorld spoke about what it will be like to look back at ourselves ten years from now. For example, how many people today foresaw that Blockchain technology would begin to completely change the global financial system?

The paradigm shift required to succeed in the future is not only disruptive. Blockchain is not simply a “disruptive” technology providing a low-cost solution to replace an incumbent business model. As Marco Iansiti and Karim Lakhani point out in their essay, “The Truth About Blockchain”, it is a foundational technology [that] has the potential to create new foundations for our economic and social systems”.

This is the sort of paradigm shift that the financial services industry needs to understand, assimilate, and implement. And I believe that we are the vanguard of that foundational shift in Africa.

Craig Featherby

Chief Executive Officer

Carrick Wealth