The country needs you!
One of the most effective recruitment tools during World War II was a campaign poster of Uncle Sam pointing at possible young GIs saying: We Want You! After touching base with old friends and making new ones, the proceedings at the 2016 Insurance Institute of South Africa’s Conference at Sun City got underway and we are reporting live!
A country of growth
From being an African economic powerhouse, South Africa has slid a bit as the world faced the worst economic crisis in recent history. And while we are facing anemic growth targets of less than 2%, the objectives of the National Development Plan seem like a mirage in the desert. A beautiful illusion that is impossible to get to?
But is this reality true? Nomfanlo Magwentshu, Partner at McKinsey & Company, says that we can achieve the objectives of the NDP if businesses work together to encourage investment and job creation. And the insurance industry has got a role to play.
There were a number of suggestions made by McKinsey, but we will concentrate on two of the most important ones.
Advanced manufacturing
South Africa was once a manufacturing power house; this reality changed when new markets opened up and with it economies of scale where manufacturers could get products made at a fraction of a price.
But there is still hope for South Africa. Magwentshu points out that we are still the leading country in the world when it comes to producing centrifuges, which is a key component in the automotive industry. “Coupled with this is the fact that South Africa is still assembling a lot of the cars provided internationally. So if we can produce the parts necessary in this assembly process, we can retake our place as a production hotspot,” said Magwentshu.
With this comes significant risk, but if it is covered adequately by insurers, then there is the peace of mind that is needed to focus attention on production. Along with this comes products such as Professional Indemnity cover and Directors and Officers Liability cover which will also protect the manufacturer in certain situations.
“Advanced manufacturing exports can account for an additional R540 billion to the GDP. It will also create 1.5 million jobs. If we get serious about this now, we can achieve these figures by 2030,” said Magwentshu.
Service exports
While exporting physically made products is important, we can also export services to increase growth in the country. Think of the growth of the call centre industry in India – which handles significant call volumes in the Asian and Australasian region – and Brazil – which handles significant call volumes in South America.
Magwentshu pointed out that South Africa is punching way below its weight when it comes to exporting services to Sub-Saharan Africa; especially when we consider the growth the region has seen over the past 10 years.
“The construction industry in Sub-Saharan Africa has been significant, and has been dominated by China. This has facilitated significant growth across the continent. More growth means an expanding middle class who will have money to spend on insurance products. Estimations show that by 2020, the insurance industry in Sub-Saharan Africa will be worth an estimated $382 billion, which is an increase of 19.6%,” said Magwentshu.
Rethink the challenge
There are a lot of legislative and delivery channel challenges to overcome, but they are far from insurmountable.
Africa has really opened itself up to the world, and trade agreements between countries are possible. The classical way to approach this is to establish a launch pad in South Africa, and we have proved to be a key destination of choice with the announcement of two European insurers establishing bases of operations in South Africa to offer cover for special risks in Africa.
The next challenge is the earnings gap in Africa. If you think there is a gap between the middle income class and lower income earners in South Africa, Africa is worse. However, while many people in Africa may not have a bank account, everybody has a mobile phone or connectivity to mobile technology. This is where products like M-Pesa and cell phone funeral services products are making their mark.
Insurers and brokers need to assess the challenge of technology and where they fit into a digital world. If they can find the solution to this challenge, they can increase growth.
Editor’s Thoughts:
These suggestions sound like practical solutions to our growth problem, and Magwentshu reports that government is very excited by McKinseys’ findings. But are they spot on about how the insurance industry plays a role in these solutions? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
