Africa shows great growth potential, but it needs a push from insurers willing to take a chance
Insurers will need to work harder to provide the catalyst to help develop Africa’s emerging markets, according Fitch Ratings.
Countries in the region are making some ground towards catching up with more developed markets, and with Africa’s biggest market South Africa, but they still have a long way to go, remarks Harish Gohil, head of EMEA insurance at Fitch Ratings.
“South Africa is still by far the most developed and sophisticated market in Africa,” Gohil tells GR at the Dubai World Insurance Congress (DWIC).
“Nigeria and Kenya are also quite developed, but nowhere near as developed as South Africa. Other parts of the continent are catching up with South Africa, but they are a long way behind,” Gohil said.
While these markets are still in their infancy, their potential is huge and could be wildly beneficial for any company looking to penetrate the market at a nascent stage.
Gohil said: “One of the things talked about in Africa is low penetration rates. Penetration rates compared to GDP rates are very low, especially compared to other markets around the world. There is great potential to grow.”
Sanlam is one company that sees growth potential. Emmanuel Brulé, deputy chief executive of Saham Finances at Sanlam made a “From the Cape to Casablanca” on day one of DWIC 2019.
Brulé outlined which territories stand out for him.
“As a group, we looked at the GDP growth of different nations in different regions. We found that the rate of GDP growth in African nations such as Ethiopia and Senegal was a lot more than the average.
“For us, this made it obvious to where we would focus our attention.”
Now, Sanlam considers itself to be the largest insurance company in the region, and Fitch’s Gohil described Sanlam as a “big player.”
But how do other insurers utilise the potential in the region? Gohil says that Africa remains a tough market to penetrate, as insurance’s reputation in the region is still low.
“Insurance doesn’t have the best reputation in mature, developed markets but insurance’s reputation in Africa is a lot worse. People think that they pay into insurance and then that is it. We need GDP to grow and we need to improve trust and awareness,” he says.
Gohil believes a “slow-burning catalyst” is needed to turn the fortunes of insurance in the region.
“Growth in insurance isn’t just going to happen like that, there needs to be a catalyst for that to happen,” he says.
“GDP itself has to grow, when GDP grows, people have more to protect, more assets to protect and will more likely look to insurance.
“The second aspect is education, and insurers need a better representation in the region.”
Gohil noted that this is hard to predict, but he cannot see it happening in the immediate future.
“The catalyst will be slow burning, and it will take maybe years to happen, but we need to make the effort for that to happen because there is a huge potential in that market that hasn’t yet been utilised.”