The appeal of countries, particularly on the east and west coasts of Sub-Saharan Africa, is demonstrated by a significant uptick in allocation made by a number of providers and advisers in recent months.
The most recent developments in the region can be seen inVAM Funds’ appointment of former Alquity director Simon Smith as its business development manager for Africa, and Josh Clancey’s relocation from Friends Provident International’s Isle of Man office to become the company’s regional sales consultant for Africa.
VAM sales director, Nigel Watson, said although the company has had an exposure to Africa for some time, it has recently taken the strategic decision to step up its activity on the continent.
“Major hub”
Watson explained Africa is becoming a “major hub for high-quality international distribution firms and advisory businesses”, adding that “investor appetite is increasing for more sophisticated investment products than are typically available domestically”.
He said the demand was coming from two sources, the rising number of expats working in Africa as economies grow, and emerging domestic middle classes and high-net-worth investors, whose wealth is increasing “in line with local economic growth”.
Similarly, Brendan Dolan, head of Middle East & Africa at Skandia, who in July appointed Matthew Firman as area manager for Africa to develop its relationships with local IFAs and banks, said a “growing need for international portable solutions that do not rely on the local currency” has created opportunity.
He added the growing high-net-worth segment in the region and the development of its banking system has also helped to “reduce risks and increase distribution opportunities”.
“What about Apple?”
Wade Dawson, Africa regional manager at IFA firm Austen Morris, which has an office in Johannesburg, said advisers had seen value in teaching the region’s growing middle class about international investment.
“Investors primarily invest into the local stock market but we say ‘what about Apple?’ and try to get people to invest outside the local area where they can get larger returns,” he said.
However, he added currency issues and political problems will always be part of the African market: “There are two camps; locals looking to invest offshore because of past and remaining issues in the region, and those from other countries looking to capitalise on the area’s internal growth as diversification of their portfolios.”
Thomas Wright, managing director at Kenya-based IFA firm, VFS International, added the unpredictability of long-term issues such as terrorism could hinder development.
But he added the region’s growing middle class is attractive to international providers and advisers, citing the construction industry as a recent example: “In the absence of Real Estate Investment Trusts, foreign investors cannot put money into property without actually buying houses.
“Instead people profit indirectly through investments into businesses such as cement companies and mortgage advisers.”
