Democratic foundations have not cut political risk in Africa, but rapid economic growth ensures a better regulated marketplace, according to Willis’ Africa chief  

Engaged Investor March/April 2011

Strong democratic foundations have not reduced political risk in Africa, but rapid economic growth is ensuring a better regulated marketplace, according to Willis chief executive South Africa Ryck Genis.

Political risk is still the number one threat in Africa, but attempts to strengthen the emerging African marketplace are developing in the form of regulatory bodies, according to Genis.

The spread of democracy in Africa may have reduced the frequency of coups and civil wars, but “ethnic, religious and socio-economic rifts still give rise to terrorism and political violence”, he said.

Speaking to GR, Genis added: “Political risks will always remain a prominent threat. We often see investors in Africa buying insurance to protect their investments against political risks in certain territories.”

Genis believes the recent events at the Nairobi Westgate shopping centre in Kenya demonstrate the varying degree and unpredictable nature of political risks in Africa, which is why it remains so high on the agenda for business operations on the continent.  

However, Genis noted the rapid economic growth in parts of Africa is helping to improve infrastructure, health and education and is paving the way for a stronger marketplace. Laying strong foundations for the growing African markets is becoming a priority for the industry, he said, shown by several efforts to reduce compliance and regulatory risks.

Genis said: “In some regions like East Africa and West Africa in particular, the insurance and risk industry have formed regional bodies to address regulatory risk and create a uniform basis of compliance and regulation.

“It has not always been successful, but there is an attempt to do that. Also the African Union and the African Insurance Organisation are helping to shape the insurance and financial service industries to streamline regulation processes and procedures.”