Why we see a future in the ‘Lions of Africa’: Carrick CEO

Late summer is a time when stories about the year’s annual flotilla of boatsful of African migrants attempting to emigrate to Europe appear in the world’s news media almost daily.

Implicit in the desperation of people willing to risk not just their own lives, but those of their loved ones, in their determination to leave the African continent, unavoidably leaves many observers with the impression that the countries they’re fleeing must be grim places indeed.

Craig Featherby, chief executive and co-founder of Cape Town, South Africa-based Carrick Wealth (Pty) Ltd  (pictured below), acknowledges that poverty and corruption are a fact of life in Africa – as they are, he notes, in many other parts of the world, including Northern Europe.

Nevertheless, he argues here, the continent’s rapid urbanisation, its young population relative to that of the rest of the world and its growing labour force, coupled with the determined efforts of some home-grown visionaries to tackle such problems as corruption and lack of educational opportunities, are beginning to yield results.

And these, in turn, are beginning to attract the attention of individuals and businesses on the lookout for new, fast-growing markets.

It’s also why, he says, that Carrick – which already has three offices in South Africa as well as outposts in Botwana, Zimbabwe and Mauritius, with additional offices planned in Kenya, Malawi and Uganda – is looking to grow its African operations even further over the next few years, as reported here yesterday.  In particular, it will be focusing, Featherby explains here, on some 12 African countries that recently were dubbed the “Lions of Africa” for their growth potential…

Africa, the experts are saying, is increasingly being seen as one of the world’s “new frontiers”. There are a number of reasons for this, including, as a recent PwC report noted, the fact that assets under management in its constituent countries are expected to grow faster, on average, over the next three to five years than the those in developed world, alongside the AuM of countries in other so-called “new frontier” regions as South America, Asia and the Middle East.

Admittedly, there’s no shortage of critics who will argue that previous predictions of Africa’s long-anticipated economic transformation have failed to materialise.

Such doomsayers are quick to point to a recent slow-down in growth across the continent: between 2000 and 2015, Africa’s economies averaged a GDP growth rate of 5.4%, but between 2010 and 2015, the rate was just 3.3%.

South Africa

It’s also undeniable that growth in South Africa and the other large African economies –Algeria, Angola, Egypt, Morocco, and Nigeria — has declined recently.

But these slow-growth figures are misleading. Many other African countries, including Botswana, Zimbabwe, Cameroon, Côte d’Ivoire, Ethiopia, Gabon, Ghana, Kenya, Madagascar, Namibia, Senegal, and Tanzania – have actually shown an increase in their GDP recently.

For example, there are projections that Ghana’s GDP growth rate between 2017 and 2020 will range between 4.3% and 9.2%.

The McKinsey Global Institute has actually given this group of 12 African countries a name: the “Lions of Africa”. And a 2016  McKinsey Global Institute report,   Lions on the Move II: Realizing the Potential of Africa’s Economies, a follow-up to an earlier report from 2010, remains positive about Africa’s future.

That said, among its main points is that if Africa is to realise its potential, its corporations and governments will need to do more.

Corporate Africa

Specifically, it says, “corporate Africa needs to step up its performance… Companies looking to grow across [Africa] should develop a strong position in their home market, use that as a base for expanding into markets well beyond their immediate region, adopt a long-term perspective and build the partnerships needed to sustain success over decades”.

Africa’s governments, meanwhile, it says, “will have to play a stronger role…[by mobilising] more domestic resources, aggressively [diversifing their] economies, [accelerating their] infrastructure development, [deepening their] regional integration, [creating] tomorrow’s talent, and [ensuring] healthy urbanisation”.

‘Potentially valuable assets’

From the perspective of companies like ours, what all of this means is that there are significant social, political and economic indicators that make these Lions of Africa potentially valuable assets in securing our company’s future growth.

We know, for example, that an increase in a country’s wealth is usually followed by an increase in domestic investment. If governments and financial institutions, at the same time, are improving their regulatory frameworks — which is happening in these 12 countries — the incentive for even more investment and distribution is heightened.

The McKinsey Global Institute estimates that by 2025, Africa’s household consumption will be worth more than US$2.1trn (£1.58trn,  € 1.77trn), and that business-to-business spending will be US$3.5trn.

Urbanisation as growth driver

One of the key drivers of growth seen in Africa, as mentioned above, is its urbanisation. Experts are predicting that Africa will experience the fastest urbanisation of any region in the world over the next few years. And as this occurs, its cities will be key to capturing the consumer opportunity this will unleash.

In Nairobi, Kenya, for example, per capita consumption is currently more than double the national average, while in Ghana, the top three cities account for more than 65% of the country’s total consumption.

The McKinsey Global Institute’s Lions of Africa report predicts that over the next decade, “an additional 187 million Africans will live in cities”, which it notes is “equivalent to ten cities the size of Cairo, Africa’s largest metropolitan area”.

Furthermore, it adds, “”between 2015 and 2045, an average of 24 million additional people are projected to live in cities each year, compared with 11 million in India and nine million in China”.

Then there’s the predicted massive growth in Africa’s working-age population. By 2034, it is expected to reach 1.1 billion, larger than that of either India or China.

New markets

Having new markets, however, does not simply mean it’s business as usual for those companies looking to access them.

To succeed in this particular future market, companies will require a paradigm shift from a firm-centric view of the world – in which the organisation’s purpose is to make money for itself – to a customer-centric view of the world, in which the purpose of the firm is to add value for customers.

We also need to keep in mind that this young workforce of tomorrow will be “connected”.

As a company, Carrick understands that connectivity today means that its clients will be informed and knowledgeable about investments.

They will also be more aware of systemic risk – be it operational, regulatory, and /or fund governance issues.
We accept as a given that these “frontier clients” of ours will want a customised offering that focuses on their goals, looks at matching asset-liability, and at managing their assets around specific goals and targets.

Plugged in as they are to the Internet of Things, this these clients will be far more financially literate than the pre-connected generation of clients who preceded them – and they will expect those whom they choose to help them look after their wealth to have be fully connected as well, as a minimum.

Blockchain

The challenges of predicting the future were highlighted at a recent Carrick Wealth conference by Neil Jacobsohn, a founding member of the Gibraltar-based FutureWorld consultancy. Ten years ago, for example, he noted, few people foresaw that blockchain technology would, by 2017, be beginning to change the entire global financial system.

Among other things, this example illustrates how the paradigm shift required to succeed in the future is not only a question of disruption.

For Blockchain, it seems, is not simply a “disruptive” technology that provides a low-cost alternative to an incumbent business model. As Harvard Business School professors Marco Iansiti and Karim Lakhani recently noted in a Harvard Business Review essay entitled The Truth About Blockchain, it is instead “a foundational technology [that] has the potential to create new foundations for our economic and social systems”.

This is the sort of paradigm shift that the financial services industry needs to understand, assimilate, and implement. And I believe that we are the vanguard of that foundational shift in Africa.

To read how Carrick Wealth is looking to hire a few dozen new advisers as it prepares to accommodate the anticipated growth in Africa’s urban economies, click here.  

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