Africa’s key decision makers must shape the transformation necessary for Africa to thrive as a destination for business.
Africa’s own pension funds must invest in growing Africa’s economy, despite the clouds gathering over the 2016 economic outlook. Over 130 experts in the field of pension funds and asset management met in Mauritius on the 25 November 2015 for the 3rd AIFAM Forum 2015. The investment case for Africa dominated the day 1 discussions with a key message was the opportunity, and expectation, that Africa’s pension funds would make skilled decisions on long-term investment in the real economy with the multi-year investment horizons of patient capital.
AIFAM2015 is produced by MNCapital Group, a South African investment advisory and communications firm and was hosted at the Intercontinental Mauritius Resort Balaclava Fort.
“A key message was the opportunity, and expectation, that Africa’s pension funds would make skilled decisions on long-term investment in the real economy with the multi-year investment horizons of patient capital,” said AIFAM2015 Forum Chairperson Mr Graham Sinclair, Principal of SinCoESG LLC and co-founder of AfricaSIF.org.
Speaking on behalf of Honourable Roshi Bhadain, Minister of Financial Services, Good Governance, Institutional Reforms, Technology, Communication and Innovation, the incoming Chief Executive Officer of the Financial Services Promotion Agency (FSPA), Harvesh Seegolam, highlighted that efforts are being geared towards spearheading Mauritius to its next level of development as a globally recognized and trusted international financial centre of substance and excellence.
And in this respect, a number of systemic issues which may impede the growth of the Mauritius IFC are being addressed, while equally focusing on revamping capital market transactions, and creating the necessary parameters to make Mauritius attractive to world class liquidity providers, international brokerage firms, investment banks and world-renowned fund managers.
He further added that the defunct Financial Services Promotion Agency (FSPA), has been reactivated to give the necessary momentum to the promotion and development strategy of the Mauritius IFC. The FSPA will work towards developing a new dimension of the Mauritius IFC, which connotes high value-addition product offerings, high-end professional jobs, a sophisticated eco-system and diversified market base.
He invited foreign asset managers participating at the conference to establish full-fledged offices locally to conduct both front line operations, such as investment advisory and management, as well as support services that can be insourced into Mauritius. The FSPA will facilitate such expansion. He equally highlighted that Mauritius is seeking to position itself as a development partner for Africa through the new Africa Strategy and initiatives of the Government.
“The clouds are gathering,” was the candid assessment of economist Mr Axel Schimmelpfenning, Senior Representative of the IMF in South Africa. The near term economic outlook is looking grey for Sub-Saharan Africa. Investment decisions must be made, as always, looking into an uncertain future.
Three forces shaping African growth are 1. China’s remodel to consumption-led growth, 2. weakened commodity demand and 3. the overhang of US monetary policy. Mr Schimmelpfenning described growth in sub-Saharan Africa had weakened to around 3.75% in 2015, the slowest since 2009. Schimmelpfenning conceded that Africa has limited scope to counter the drag in growth in the near term. But with the right policies, including execution of healthcare and education infrastructure policies deploying revenues from improved tax collections, African growth should strengthen again in the medium term.
The investment case for Africa dominated the day 1 discussions. All AIFAM2015 practitioners agreed the case was there, if less rosy than 2009. Speakers disagreed on whether it is too early or too late to enter into the first-mover advantage investment growth.
African governments ease of doing business and facilitating investments was seen as mixed, for local and global investors with portfolio investment or FDI. Jabir Sardharwalla, Investment Strategist at Skybound Capital Group, highlighting that the South African regulatory body was extremely transparent, while Stephane Henry, CEO of Mauritius-based iPRO Investment Professionals, thought it was difficult to predict what would happen in Nigeria.
While Mauritius has a proactive open-door policy, execution of regulations runs into human resources constraints. Counter-intuitively given the China-Africa narrative, US-headquartered companies were the largest investors into Africa last year according to Enest & Young analysis, launching 101 FDI projects, and accounting for 13.8% of total FDI projects in Africa. South African investors were again prominent, initiating the second-most FDI projects in Africa in 2014.
Ms Wanjiru Kirima, Chairperson of the Investment Committee of the $500m Debswana Pension Fund in Botswana, highlighted that Kenya only has 1% of the pensions base of South Africa with the same 50m population. Mr Guy Phiri of NAPSA (Zambia) addressed the political dimension of large African pension funds. Ms Prasheen Singh, Director and Head of Investment Advisory Services at RisCura, commented that the volatility of asset value is less of an issue for pension funds, and stressed that equity has a place within a strategy for pensions. Ms Singh has worked closely with institutional investors on bringing Africa into their portfolios, with the larger appetite from Africa and Europe, than from America or Asia-Pacific.
In prepared comments and interactive discussion with investment industry peers, AIFAM2015 covered Africa’s interaction with international investors based in the Asia-Pacific region with perspective from Hong Kong, agriculture and agribusiness investment tracing an arc from tulips of The Netherlands to the fertile veld of Africa, the challenges of investing in Zambian small business sector given the Zambian kwacha 23% devaluation, the complexity of managing African currency risk impacts on portfolios, and how asset owners are accountable to investment committees but also the expectations of fund members and broader society in Africa.
“Africa is undergoing monumental changes in its investment climate with ever-increasing opportunities for growth and development”, said Mr. Michael Ndinisa, CEO of MNCapital Group. “Africa’s key decision makers, business leaders and opinion formers must shape the transformation necessary for Africa to thrive as a destination for business. Institutional investment and good governance must underpin Africa’s growth. We are honoured to present this third edition of AIFAM Forum.”