Old Mutual eyes African expansion

29 July 2009

South Africa’s Old Mutual cites Africa’s rapidly growing middle class, low financial services penetration, increasing market reforms and good growth prospects as reasons for expanding its operations on the continent.

“Expansion into Africa forms an integral part of Old Mutual’s growth and building an African franchise is consistent with our long-term strategy,” Old Mutual Africa MD Johannes Gawaxab said in a statement in last month.

“By investing in Africa, we are investing in our own future and success.”

He said the company intended to explore opportunities in countries that made sound business sense, adding they wanted to establish Old Mutual Africa as a growth platform for the group, contributing at least 10% of Old Mutual South Africa’s earnings by 2012.

In Africa, the group currently operates in South Africa, Namibia, Kenya, Malawi, Swaziland and Zimbabwe, and aims to become “the continent’s long-term savings and investment provider of choice”.

Doing business in Africa

According to Old Mutual, doing business on the continent was once perceived as a complex and risky undertaking, but in the last 10 years the business climate had improved significantly.

In 2008, Africa had a record year for regulatory reforms making it easier to do business, with 28 countries completing 58 reforms, according to Doing Business 2009, the sixth in an annual series of reports published by the World Bank.

Three of the world’s top 10 reformers of business regulations in 2008, namely Senegal, Burkina Faso and Botswana, were from Africa.

“Improved governance including democratic reforms, fewer political conflicts and macro-economic stability has improved perceptions of Africa as a viable investment destination for local and global capital,” Gawaxab said.

Untapped markets, better growth

Africa offered a huge untapped market of more than 800 million-people who were without homes, formal financial services and infrastructure, Old Mutual said, with the continent offering an opportunity for companies to invest in all those markets.

According to the International Monetary Fund (IMF), Africa’s average annual economic growth for 2004 to 2008 was six percent better than any developed economy. The African Development Bank expects the continent’s economy to grow at around 2.6% this year, though the growth is expected to be negative in southern Africa.

“Improved macro-economic stability, with interest rates and inflation down from the high twenties to around 12%, improved governance and transparency and the recent surge in commodity prices have all contributed to growth in Africa,” Gawaxab said.

“While Africa is not immune to effects of global economic slowdown, the continent is still expected to record positive economic growth, albeit lower than initially predicted.”

SAinfo reporter

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