A new research from PwC projects that traditional assets under management (AuM) in 12 markets across Africa will rise to around $1,098 billion by 2020 from a 2008 total of $293 billion.
This represents a compound annual growth rate (CAGR) of nearly 9.6 percent.
Traditional asset management, in particular the mutual fund industry, is expanding aggressively across Africa.
This will largely be driven by a number of factors: economic growth and the subsequent rise in wealth will boost the demand for pensions and life insurance products, the demand for retail investment funds will consequently increase, and the widespread adoption of technology will make delivery of new products cheaper, bringing more consumers into the formal financial sector.
The report, Africa Asset Management 2020, is an in-depth study which examines the asset management industry across 12 African countries which have financial markets of varying levels of development.
The countries, which represent a sample from Northern, Eastern, Western and Southern Africa, were assessed by a range of relevant indicators in order to capture their true investment potential.
The countries were categorised into three groups: advancing markets, promising markets, and nascent markets. In addition, the report outlines and analyses the future game changers for investment into Africa as a whole as well as addressing the impacts for these specific markets.
Ilse French, PwC Africa Asset Management Leader, says: “As Africa has entered the 21st century, economic growth has surpassed expectations and stimulated investor interest across a broad range of asset classes. Although the fund industry in Africa is, in most countries, still developing and has much to prove, global and local asset managers are likely to become more active as the industry continues to flourish.”
PwC also predicts that:The global rise in the volume of investable assets which has taken place over the last two or three decades is set to continue to increase in the future and investable assets are set to be significantly higher in 2020 than today.
Recent research conducted by PwC projects that global AuM will rise to around $101.7 trillion by 2020. Although Africa is a small part of the global industry it is a region that is experiencing significant growth.
Retail investors form a small proportion of investors in asset management in Africa. However, the report suggests that the number of retail investors in these markets could be increased by way of education about products, encouragement of a savings and investment culture, and overall economic growth.
Capital market regulation varies widely across Africa as legislation and regulatory structures differs between countries, reflecting both market and varied historical conditions.
In some countries, capital market regulations falls under the realm of the central bank, while in others they are under the auspices of the independent regulatory commission.
Although the GDP growth rate in Africa is on the rise, the savings and investment culture has not yet caught up and for the most part, capital markets remain small and illiquid. Regulations to boost the capital markets are under discussion in some countries, such as encouraging pension funds to invest in locally listed companies.