SA among top 3 of African economies most susceptible to financial risks

SOUTH AFRICA in top 3 of african economies most ‘at risk’ from Inflation, Weaker Currencies and Climate Change, According to new Survey assessing business confidence across the continent

45% of surveyed CEOs are worried by financial risks

Of these, more than 60% are concerned about currency depreciation

The need to adapt to climate change was the second most pressing issue

Lagos, October 31 2022: South Africa, together with Nigeria and Zimbabwe have been highlighted as the three African economies most susceptible to financial risks, including currency depreciation and inflation, in list of challenges facing the 54 African economies in the year ahead. That’s according to a new survey of the continent’s leading insurance professionals, conducted by the pan-African reinsurer, Continental Reinsurance.

The survey found that especially in Zimbabwe depreciation and inflation are impacting business results and fueling fears of dampened growth over the next twelve months. The need to adapt current business models to climate change was the second most pressing issue.

Continental Reinsurance’s CEO, Lawrence Nazare, addressing leaders of Africa’s insurance sector at the company’s 7^th CEO Summit in Marrakesh, Morocco, earlier this month.

In contrast, the survey’s respondents also identified Kenya, Botswana, Ghana and Rwanda as the countries in which the greatest opportunities related to the same economic factors lie, with 63% of the CEOs surveyed making the positive case for opportunities to grow business.

After a two-year Covid-induced hiatus Continental Re’s used its 7^th CEO Summit in October, 2022* with 65 captains of industry in attendance, to discover what they see as the biggest challenges and opportunities for the sector and Africa’s economies alike in the year ahead. Launched in 2014 and hosted by a different African country each year to reflect the pan-African footprint of the company, this year’s CEO Summit took place in Marrakesh, Morocco.

Commenting on these results, Lawrence Nazare, Group CEO of Continental Reinsurance Plc said: “The only certainty of 2022 appears to be uncertainty. From the challenges of a changing climate to the war in Ukraine, food security and energy cost increases, African economies are facing new risks and threats to their status quo. Events like our CEO Summit enable business leaders to share ideas and solutions and can help mitigate some of the risks that lie ahead.”

90% of the CEOs surveyed warned that their perception of these risks has increased in the past 12 months – compared to 63% who believe opportunities are growing. Only 3% believed that threats were diminishing, a reflection that CEOs are increasingly worried about business prospects in the year ahead.

Some 13% of those surveyed saw climate change risk as a growing threat and warned that businesses must adapt their business models to manage changing weather patterns, whether this is increased drought, cyclones or floods.

Those surveyed were also concerned by the lack of a robust regulatory framework. Without strong frameworks, they said, it is harder to engender confidence in business sectors, including insurance.

Other risks identified by the CEOs included too great a dependence on external economic factors (6%), again a recognition that currency depreciation and inflation are largely beyond their control. Africans need to support African business, they argued, while admitting that in a globally connected world, this was hard to achieve. The harmonization of the continent’s economies on the back of the fledging African Continental Free Trade Area (AfCFTA) was cited neither as a risk, nor as an opportunity.

In terms of opportunities, the CEOs felt that the insurance markets do have an opportunity to broaden consumer understanding of the benefits of insurance and to develop products that were better suited to customer demands.

“For every risk there’s a business opportunity. The insurance industry, which is often cited as a mirror to the economy, is well versed in risk assessment,” explains Nazare.

21% of the CEOs suggested that a lack of understanding of the benefits of insurance was actually an opportunity for their business, while a further 21% admitted that products were not evolving fast enough to suit consumers. However, they saw this as an opportunity to grow their business in more consumer-centric ways.

* Continental Re surveyed 65 leading CEOs during its 7^th annual CEO Summit held in Marrakesh, Morocco, in October, 2022.