Africa: a continent to discover

Africa is one of the largest continents in the world which is home to 53 nation states.  Africa is the also poorest continent in the world but this might be changing due to a growing middle class; governments that are enacting laws to stem corruption, and public and private institutions that are investing heavily in infrastructure. There are still some poorly run and unstable countries, but the number of African democracies has jumped from just 4 in 1990 to 17 now and many countries have began liberalizing their economies and developing their capital markets.

With many multinationals entering Africa in order to take advantage of the change taking place Generali in association with Hollard Group Risk believe the time is right to increase its foothold in Africa.

Why Africa?  To quote the journalist and analyst Chris Hunter there are seven reasons why Africa could be a winner over the next decade.

  1. A big consumer bulge. Africa’s population reached one billion last year. Africa now has more families than India with an annual income of over $20,000. According to a report by Mckinsey, the number of consumers earning more than $1000 a year will rise by 221 million within five years.
  2. Consumer spending is growing. Consumer spending in Africa rose at a compound rate of 16% between 2005 and 2008.
  3. Steady economic growth. Economic growth has averaged 4.9% a year between 2000 and 2008. This is 1.5% faster than the world economy. Meanwhile, the IMF forecasts that Sub-Saharan Africa’s economy will expand 5.5% next year. That is more than twice as fast as the developed countries.
  4. Strongly positioned for the future. Africa has diverse and abundant resources and minerals wealth. As the world’s population grows…and the demand for resources grows with it…Africa is set to reap big rewards.
  5. China is investing heavily. Resource hungry China is making big investments in Africa already (more than $1 billion so far, according to Société Générale bank). China is also investing heavily in the manufacturing and construction sectors. This will have a big knock-on effect as Chinese money filters through the African economy.
  6. Economic growth will lead to better governance. The more Africa prospers, the better it will start governing itself. Studies show that economic growth leads to less corruption and better governance, not the other way around. This will start a positive feedback loop, which will help boost stability.
  7. Room to grow. In the past 25 years, 11 new securities exchanges have opened their doors in Africa. But African equity markets still make up for only 8% to 9% of emerging markets growth. This small percentage will grow as the economic picture improves.

Africa is moving beyond conceptualization and rhetoric, to concrete work that will help end conflicts, alleviate and ultimately eradicate poverty and create decent work that will improve the quality of life. The decade 2010-2020 could be an “African decade”.

Employee Benefits is not new to Africa. Unfortunately Africa has an insurance penetration in total of roughly one percent, with the exclusion of South Africa, and according to the UNCTAD statistics of 2007, the continent represents 14.5% of the world’s population, yet it contributes only 1.03% to the global gross premium income. The growth opportunity in the African Insurance industry has been rather slow and the great potentials that abound in insurance business have been largely untapped.

Let us not be mistaken, many countries have developed employee benefits industries offering the full array of benefits from pensions to health insurance. The difficulty has been in the demand for these products and the people trusting the existing insurance providers. Governments such as Nigeria have implemented laws requiring all employers to provide mandatory basic pension and life cover to employees. Unfortunately poor monitoring of this has resulted in only few companies providing the benefits. As multinationals increase their presence on the continent and employers bring their employee benefits in line with International standards, the demand for Risk solutions will increase. Hollard Group Risk International (HGRI) and Generali have noted this trend and are prepared to offer the solutions employers require.

Benefit solutions will also require risk coverage for Personal Accident and Workmen Compensation. However, this will be offered on a case by case basis taking into account the legislative environment and the design of the products.

No longer is Health Insurance the forbidden fruit in Africa. Not less than 10 years ago if an employer wanted to purchase comprehensive health insurance for employees they would often need to self insure the risk or seek solutions from international providers. Local Insurers were unlikely to offer health insurance solutions and would definitely not be able to obtain reinsurance. This has changed significantly and in countries such as Kenya, Nigeria and Ghana the health insurance market is becoming a major source of income for Insurance companies.

The healthcare sector in Africa is showing signs of remarkable improvement as the quality and availability of qualified doctors has improved over the last few years.  The challenge for employers is to obtain a medical plan which not only provides the most comprehensive coverage but also has access to a wide network of medical service providers.  More importantly the question to ask would be, “can these medical providers offer a full spectrum of medical care?” Unfortunately, this is not always available and employers are often left with no choice but to evacuate their employees to countries where car e is available.  Appropriate insurance solutions should therefore offer comprehensive coverage and include evacuation benefits allowing for treatment in a defined country.

Generali Employee Benefits (GEB) and Hollard Group Risk have entered into a partnership agreement whereby Hollard Group Risk International (HGRI) is the sole distributor of multinational related risk schemes in South Africa. The Hollard Group Risk partnership has been in place in South Africa since 2003. HGRI and Generali over the last 12 months have started to roll out the product offering to Multinationals who have employees based on the African continent through a network of local qualified insurers that have been identified as providing standards of service that can be considered high end when comparing to what is available in the local market places. To date the partnership has seen the placement of several Group schemes. The main countries of focus over the next months will be Nigeria, Ghana, Angola and Kenya where we will work closely with the local correspondents that are respectively Guaranty Trust Assurance (GTA), Vanguard Assurance/Nationwide, Nossa Seguros and Jubilee Insurance Company . However, HGRI’s footprint includes more than 12 countries in Sub-Saharan Africa.

Africa is the next big challenge and Generali is ready to be a significant provider of Employee Benefits Solutions on the African continent.