Assets under management in Africa’s emerging markets could surpass $1 trillion by 2020, in a further sign of increased demand for investment expertise among the continent’s emerging classes.
Based on an analysis of 12 countries across the continent, PwC’s Africa Asset Management Report 2020 projects that assets under management will grow by some 9.6% a year, driven largely by an expansion of the mutual fund industry.
Although the African industry is expected to make up a small proportion of projected global assets under management of $101.7 trillion, Africa’s projected figures dwarf 2008’s total of $293bn.
Mutual funds, which generally target retail investors, are expected to grab a greater share of a market currently dominated by mandates from institutional investors. The share of institutional mandates in African markets is currently between 75% and 95%, depending on the country.
“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,” the report states.
The asset management industry is also expected to benefit from the ongoing development of the pensions industry across Africa. Countries including Nigeria and Ghana have launched widespread reforms which have encouraged millions of workers to save for retirement. According to figures from the UN, the Nigerian pension industry grew from $7bn in December 2008 to $25bn in December 2013. Ghana’s industry is expected to expand by up to 400% in the four years to 2018.
“As these economies mature, pensions are becoming more significant as a part of the financial sector, although many countries still have virtually no private pension schemes. We believe this is changing and pension assets will continue to grow significantly,” the report states.
PwC predicts that bank assets in Africa are expected to decrease in the years ahead as the market is flooded with new entrants and constrained by new regulations. Banks are pushing into the asset management industry on the continent and are expected to dominate distribution.
Ilse French, Africa Asset Management leader at PwC, said that global asset managers were also likely to enter the market.
“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”.