A report compiled from research into the state of skills development, recently commissioned by Inseta, indicates that the business opportunities offered in emerging markets should be more seriously considered – especially those in Africa.
“There is already a clear shift in the balance of power within markets, as growth slows in aging, saturated first world markets and innovation sets the tone for companies arising from the emerging markets,” says Len Deacon, author of the Inseta research report.
Inseta’s CEO, Sandra Dunn adds: “Opportunities in the emerging markets indeed offer substantial rewards to insurers, provided of course they get their ducks in a row, are well prepared and in it for the long haul.”
While most local insurance services companies are including the rest of Africa in their growth strategies, there is a real danger that SA businesses will be ‘crowded out’ in the next “rush for Africa”.
Nigeria has already overtaken South Africa, by becoming Africa’s largest economy. While SA remains Africa’s most important developed and competitive economy, it is imperative that South African business significantly expand their interest in the rest of Africa.
The report’s findings in regard to business opportunities globally, and in particular Africa, are highlighted:
* The developed world is facing uncertain growth and strict regulation, and developed economies were most affected by the financial crisis of the last decade.
* Demographic variations govern the differences in appeal between developed and emerging markets.
* In the developed world, the old outnumber the young. In emerging markets except China, the working age population will continue to outnumber the dependent population for the foreseeable future, leading to more productive growth and creating a more viable market for life assurance and investment products.
* The rising middle class in emerging markets accounts for increased consumption, leading to small business growth, and generating commercial insurance opportunities.
* Government infrastructure investment, population growth, new business and wealth creation are fuelling construction, land development, energy and transportation, generating a demand for insurance.
* Outside of South Africa, the main growth points are Nigeria, Angola and Kenya as well as possibly Egypt and Ghana.
The potential of the African market is based on:
* Need for new areas, such as micro-insurance and funeral business;
* Compulsory insurance;
* Improved communications network; and
* Large uninsured population.
Adam Samie, CEO of Lion of Africa Insurance says, “It’s especially infrastructure development that offers South African business a beachhead to enter markets in Africa. There is a real need for high insurance technical expertise to both design and underwrite suitable insurance for the many large and mega projects in the rest of Africa.
“South Africa undoubtedly has the professional base to meet this need – currently much of this business is going to traditional western-based insurers, but South African companies have substantial competitive advantages.
“These include benefiting from the many African expats working in South African insurance companies – they know the local conditions which should enable our companies to develop insurance products suited to local conditions. Moreover, we have a long and successful track record in underwriting large and mega-projects as evidenced in us hosting a very successful FIFA football world cup in 2010.”
“It’s a two way street though, African expats benefit from the technical and academic experience and knowledge that they acquire in South Africa – this means that once they are back in their countries, much of the scarce and critical skills needed to support and grow the local insurance industries will be available.
Despite the huge opportunities, poverty, unemployment, income inequality and deteriorating health and education are still a problem in many African countries.
These countries will only be able to offer limited HR resources, and South African companies will look to the local pool of skills to meet their needs. In particular, they will need people skilled in compliance and risk management and able to cope with the demands of different environments.
“It is not a question of whether South African companies should expand into Africa and participate in developing Africa’s insurance industry but when and how they should do so. The skill sets needed to successfully expand into Africa, is of particular importance and it is in this area that INSETA is preparing itself to assist. After all, we rely on people to implement strategy”, concludes Dunn.