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TAP, CLICK, BUY

Riding a wave of mobile connectivity, technology is changing the face of investment in Africa

TAP, CLICK, BUY

It is no longer a question of why you should invest in Africa. ‘Our investments are essentially based on themes, and two of those are playing out in Africa: the growing consumer market and the consequent demand for products and services; and the need for infrastructural development, notably in the energy sector,’ says John van Wyk, partner and head of Africa at private equity firm Actis.

With seven of the 10 fastest-growing economies for the period 2011 to 2015 (as forecast by the IMF) being in Africa, Van Wyk argues that the continent provides a very healthy environment for investors.

The question now becomes how you should invest. And on a continent that’s increasingly driven by connectivity, the answer to that inevitably lies in tech.

‘Sub-Saharan Africa is finally realising its potential for economic growth, and now boasts six of the top 10 fastest-growing economies in the world,’ says Mark Walker, regional director for Africa at the International Data Corporation. ‘And ICT is playing a key role in not only supporting this economic boom but also shaping its future direction. The latest ICT trends are set to drive strong GDP growth across the continent, modernising and optimising every sector of the economy and facilitating closer intra-Africa trade.

‘Against this backdrop, those governments with relevant, effective national ICT policies will beginto dominate the economic landscape,’ he says.

On the continent, as much as anywhere else in the world, the lifeblood of today’s business environment is connectivity. African investors – both those who are African and foreigners who want to invest in activities on the continent – know this, as do the ICT companies that are laying the digital foundation for their investments.

According to Vuyani Jarana, chief officer of Vodacom Business, the continent has a vast and largely untapped growth potential.

‘Many global enterprises based in the US, Europe and Asia are focusing on expanding their operations into Africa to establish a presence. As a result, Vodacom Business is seeing a huge demand for connectivity services. Customers want information anytime, anywhere and on any device. We’re able to facilitate that,’ he says, pointing out that all services on Vodacom Business Africa’s network are monitored from a base in SA for stability and against security attacks. ‘We can tell when a link in Gabon starts failing, for example, and can dispatch a local team on the ground immediately.

‘Customers want consistent service across the continent. As more enterprise customers adopt cloud-based services – like centrally hosted applications and financial management systems – they want to be able to deliver these across a secure and resilient network,’ says Jarana.

As the continent becomes more connected, and as the quantity and, crucially, the quality of data from around Africa increases, investors have more to work with. They also have more information with which to make an informed investment decision.

Take, for example, the investment opportunities in Africa’s agricultural sector. According to Paul Jooste, commercial director of international credit insurer Coface, ‘Africa’s agro-ecological potential is much larger than its current output and so are its food requirements.

‘While more than one-quarter of the world’s arable land lies in this continent, it generates only 10% of global agricultural output. This means there is huge potential for growth in a sector now expanding only moderately at a rate of 2% to 5% a year.’

However, Jooste says, the question arises: ‘How reliable are the stats coming from African countries outside of South Africa? African statistics are known to lag behind developed country statistics and may not be as comprehensive.’

Here investors have access to a new country benchmarking tool. Launched by the International Food Policy Research Institute’s Agricultural Science and Technology Indicators initiative, it enables cross-country comparisons and rankings of key indicators. Using this online tool, policy-makers and researchers can better track progress in African research and development investment and capacity over time, and facilitate cross-country comparisons.

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‘As more enterprise customers adopt cloud-based services, they want to be able to deliver these across a secure and resilient network’

VUYANI JARANA, CHIEF OFFICER, VODACOM BUSINESS

Suddenly, the financial services space starts to converge with ICT, and Africa’s booming market in mobile transacting grows from small payments and money transfers into something bigger and more long term. On the back of this innovation, the digital tools used by investors are becoming as user-friendly as the mobile payment app – whether it’s Snapscan or Zapper or FlickPay – you used to buy that espresso en route to the office this morning.

To see how this will affect investors in Africa, we need only look north to witness how dramatically digital investing tools are disrupting the investor-advisor relationship in Europe.

In early February, global management consultancy Accenture released a report based on a survey of 1 200 middle- and high-income, digitally savvy European investors. Accenture calls these investors ‘Generation D’ – as in ‘digital’.

‘Investors are relying more heavily on digital tools to help them better understand investment trends, decisions and potential outcomes,’ said Owen Jelf, global MD of Accenture Capital Markets, on the publication of the report.

‘European wealth management firms have tended to be more reluctant to bring digital tools into their service offerings, focusing their efforts instead on helping to build personal relationships.

‘Our research shows that firms that integrate digital tools into their business models will help strengthen these relationships rather than threaten them, and in fact help them attract the most lucrative investors.’

Accenture’s report reveals how the relationship between Generation D investors and their financial advisors is evolving into what they call a ‘counsellor’ approach, where the investors – driven by their use of digital investment tools – are becoming more and more comfortable conducting their own investment research, rather than waiting for their advisor to create an investment portfolio that they, as the client, signs off on.

‘European investors are becoming more autonomous and increasingly working with their advisors in an unconventional way – using them as counsellors to run investment plans by, rather than as investment managers,’ says Alfredo Avila, MD of Accenture Wealth and Asset Management Services in Europe, Africa, Middle East and Latin America. ‘Firms need to embrace the changing relationship model and empower their advisors with digital education and financial-planning tools that add value and enhance the overall investment experience. These tools will not replace the role of the advisor, but rather help investors understand the advice they are being given and increase their level of trust.’

This new trend isn’t only changing the way those investors interact with their financial advisors. Pointing to the data coming out of Accenture’s research, Avila says it is also changing the way those investors invest. ‘Our research shows that more informed investors tend to be more aggressive investors,’ he says.

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‘For example, millennial respondents who claim to be more knowledgeable in investing are three times less likely to identify as conservative than their less knowledgeable peers.’ He adds that investment firms that integrate advisor-led online education and do-it-yourself digital tools – such as gamification and simulation modules – will be best positioned to serve these Generation D investors.

Typically, though, DIY investing tends to focus on short-term goals – especially when you can enter and exit the markets with a simple swipe of a tablet. What’s more, a financial advisor may be more likely to play a long game with a client’s investment, whereas the client – especially one who’s grown up in the instant-gratification digital age – might expect quicker, short-term returns.

This will have interesting implications as Africa’s own Generation D investors emerge. A short-term investment approach may work in the developed world but in Africa it’s all about the long term.

Speaking at the 2014 Retail Congress Africa in Sandton, Thabi Segoale, group executive of corporate strategy and business development at Tiger Brands, urged patience when reaping return on investments made in Africa. ‘In spite of what you can do to prepare yourself for the journey … some things will not go according to plan. We certainly have our own stories of things we didn’t get particularly right over the past couple of years and have learnt a great deal from our experience,’ he said.

Will a young investor raised on the tap-tap, click-click culture of always-on connectivity be able to exercise the same patience? Or will Africa’s own Generation D discover that, no matter how switched-on your tech is, a smart investor still has to think like an investor?

By Will Sinclair
Image: Gareth van Nelson/HSMimages