Diverse insights into Africa

Regulators are reviewing legislation, governments are experimenting with unique solutions such as micro-pensions, asset allocations are changing to allow for greater long-term growth and across the continent, the high rate of mobile penetration is being viewed as a significant opportunity to innovate.

A major issue African governments face is that 85.5% of their working population are informally employed. To avert fiscal and social stress, policymaking on pensions and social security in Africa needs to quickly move to enable affordable, convenient, and secure micro-pension products to be established.

The composition of African long-term assets mimics the global picture, where a few countries claim the largest proportion of long-term savings. In Africa, 95% of the assets are concentrated in South Africa, Nigeria, Kenya, Namibia, and Botswana.

For the selected pension funds within this report, South African, Botswanan, and Namibian asset allocations continue to reflect greater allocations to equities, more so than OECD countries. For the rest of the African countries, the picture continues to illustrate a skew to fixed income.

For Africa’s pensions industry, the road ahead will be thorny, and no doubt full of delays, but awareness of the problems is there, coupled with firm intentions to solve them.

Apart from the Stock Exchange of Mauritius (MUSE) that experienced a 57% increase in daily turnover, all other exchanges saw a decline in their daily turnovers for 2019 when compared to 2018.

Insights on the current state of the private equity market in Africa and trends in pricing over time

Before the significant market contraction in early 2020, private equity fundraising activity across Africa continued to show strong growth in the 2019 calendar year.

Fundraising represents the supply of capital available from private equity funds for investment. The extent to which an equal supply of investable opportunities exists is not directly observable.

Along with changes in the supply of capital and investable opportunities, another factor that influences the prices at which asset change hands is the perceived risk and rewards of a particular investment.

Many of the drivers of price changes are unobservable, so it is often difficult to interpret changes over time.

When looking at the prices for private equity assets in South Africa and Africa and the landscape that influences it, we can see market fundamentals reflected.

The total value of the debt outstanding is concentrated in five countries, making up 81% of the total bonds outstanding

The analysis covers the two countries with the largest sovereign debt balances. In both countries, local investors exceed foreign investors.

Africa will have to overcome challenges to gain more private sector investment to meet its infrastructure development funding deficit.

Alternative structures and avenues are opening, allowing investors to access this asset class more readily.

Several road infrastructure development projects are in progress in West Africa and East Africa that could set a precedent for other projects on the continent.

Southern Africa still has the continent’s largest rail network, but East Africa and West Africa have substantial rail expansion projects on the go that could see rail connectivity increase, linking several countries.

Although conventional thermal power makes up the bulk of capacity in South and North Africa, there is good potential for growth in the use of renewable energy on the continent.

Despite the majority of all African trade being through imports and exports at its largest regional ports, the continent’s ports handle only 6% of global water borne traffic and only 3% of global container traffic (Source: World Atlas).

The property market has long received attention from Africa’s institutional investors, especially in countries with relatively small and under-developed capital markets.

New developments in the retail sector over the past ten years have increased the supply of A-grade shopping centres and contributed to increased rental rates in local currency over this time.