Category Archives: Insight

Placing a premium on local insurance knowledge

July 8, 2014 rachel_eaton Leave a comment

July 2014

Sarah Caddy

In the UK, the personal injury insurance industry continues to be beleaguered with the reputation for bogus claims driving up premium costs (reports state that 78 percent of all UK personal injury claims are for whiplash injury, compared to just three percent in France, for example), slow pay-out rates, and poor forecasting.

This reputation for poor value and lack of individual approach is also present in the corporate insurance world, with recent headlines stating that BT’s £40 billion pension scheme has established its own wholly-owned insurance company in order to access the insurance and reinsurance markets directly and “achieve the best value” for the pension scheme. The message left unsaid: the trustees couldn’t find an adequate offering already in the marketplace.

Turn your gaze to the insurance services of the fast-growing markets, which (despite having their own critics) continue to innovate when it comes to service and product provision. There is much we can learn; they highlight the importance of new technologies and an enabling regulatory structure. In Brazil, for example, insurers have created policies for older cars that provide smaller amounts of coverage along with a higher deductible. They also offer one month, third party liability automobile insurance plans that buyers can activate using their mobile phones. Closer to the Gong fold, East African client APA Apollo has launched an agricultural microinsurance scheme, Mifugo Maisha, which uses satellites to survey the availability of pasture for animal grazing, then predicts the number of animal fatalities and provides insurance to cover the potential losses.

This expectation for enabling, inclusive provision may come as a shock for foreign insurance firms looking to expand internationally and capitalize on the growing consumer base that is so attractive to the sector. Not to be left behind – the main players are on the march to the fast-growth economies already; Prudential has bought into Ghana and is looking at East Africa, other rumours abound. Let us not forget that it is local knowledge, expertise, and understanding how technology can be used to improve the everyday lives of the local consumers, which will give British and other global insurers an edge.

To read a case study on the work that Gong has undertaken for APA Apollo in East Africa, please click here.

Insight

Global Asset Management: Game for change?

June 30, 2014 rachel_eaton Leave a comment

Sarah Caddy

Are you bullish about the future of the asset management industry? Recent reports that global profitability levels have recovered post-crisis, and that worldwide assets under management (AuM) levels are on track to exceed $100 trillion by 2020 (from $63.9 trillion today) certainly paint a rosy picture.

We’re not to rest on our laurels though. By all accounts, the journey over the next six years to that elusive £100 trillion figure will not be an easy one. Costs are on the rise in response to ever-increasing regulation and data management, broadening distribution platforms, and the fact that any fees earned are under closer and closer scrutiny by investors. What’s more, according to Chris Flood and Deloitte in today’s FT, only a very small number of funds will control that growing asset base (in the UK at least).

So what’s the key to beat the competition, and to secure the very best talent? A brave new world, PwC’s latest report on the asset management industry, certainly doesn’t hide its authors’ views. It preaches transparency, to build consumer trust (after all, post-RDR, a focus on retail investors is getting too expensive, and consumers will be self-directing services in no time). But most of all, it directs asset managers to ‘Stay close to the decision makers, and to the media’ (page 22 of the report), claiming:

“The industry by 2020 will increasingly focus on articulating its purpose, but on broader messaging and PR campaigns to ensure the community at large ‘gets us’ and views the industry as part of the solution rather than part of the problem.”

Having a dedicated social media strategy is a core part of this engagement. The question is whether asset managers are prepared to seek the requisite professional advice to stay ahead of the competition.

The scenario played out in the opening of the PwC report is a compelling one. I’m sure it’s not long before my friends and I check our retirement funds and choose assets at the same time as logging on to facebook, or reviewing the latest selection of potential dates for the evening. Dear asset management industry – I’m game for change, if you are. Just don’t let rising operational costs put you off spending in those areas that might really make a difference to whether you see your share of the ever-expanding pot of gold.

Insight

2014 Oxford Africa Conference 23-24 May 2014

June 3, 2014 rachel_eaton Leave a comment

Tessa Wilson

The Spring bank holiday weekend meant a trip to Oxford to staff the 2014 Oxford Africa Conference. The 2-day event titled African Transformations was organised by Oxford’s two leading student-run Africa organisations: the Oxford Africa Society and the Oxford Business Network for Africa.

There was lots of interesting, direct and honest content and working with Gong’s financial services clients meant my ears pricked up for the ‘Investments in Actions: Private Equity Cases’ session with a discussion between members of CDC and The Abraaj Group, moderated by Private Equity Africa, Managing Editor, Gail Mwamba

There was a strong focus on the progress of African PE over the last decade, with discussion bouncing between the mass of opportunity and the overestimated risks. Yet the panel members were clear that one of the key constraints within African PE is finding superior talent, with David Easton, CDC, citing an important decision-making factor in his firm’s latest investment in the DRC as being its “good management”.

Talent, both at GP and portfolio company level, can be a major limiting factor for PE in Africa. Often not all the skills needed – financial acumen, management experience, African background and operational track record – can be found in one individual.

With such a positive view on other, more ‘obvious’ risks, both political and economic, it is the difficulty in pinning down elusive talent which is often underestimated.

Insight

What goes into a piece of design?

May 20, 2014 rachel_eaton Leave a comment

Ella Rychlewski

Our guiding light here at Gong Creative is to adopt a collaborative approach. We get to know our clients, understanding their commercial needs, and forming as clear a picture as possible as to what they are looking for. This takes time and we realise it’s up to us to be transparent about our creative process.

Our common starting point is to open a dialogue with our clients to capture a thorough brief. We then take some thinking time – sketching out concepts, testing palettes, surveying the competitor landscape. The next step is to collect the design components and to format them. These might be anything from written content to icons, from visual guidelines to photography.

Once the vision is clear and the necessary elements have been collected, the design itself can start. So important is the initial briefing and development phase that it can actually be more involved than the time it takes to complete the first design draft. These early development stages ensure that the final product is cohesive and in tune with the client’s brand story and message.

The last stage, after the prep and execution, is the review period. We work very closely with clients and will share design drafts early on to ensure that we capture their ideas. This demands an extensive and thorough review period with several rounds of changes and revisions. Then the signed off work can be packaged as required.

All in all the actual physical ‘design time’ of a project can represent less than a third of our input. Skipping or skating over the first thinking and final review steps, particularly the foundational prep stage, often leads to an overall increase in the time spent with revisions or a final product neither us nor the client are 100% happy with. That’s a false economy.

Insight

Is infrastructure development the biggest catalyst for economic growth in Africa?

April 11, 2014 rachel_eaton Leave a comment

Isabelle Alenus-Crosby

It is generally accepted that global economic growth will increasingly come from emerging markets. Following more than 20 years of hard-won political and economic reform, sub-Saharan Africa is set to play a very important part.

Before the economic crisis, sub-Saharan Africa had been growing quickly, with an average annual growth rate of 6 % YoY. Only in Africa has annual growth not stalled, reinforcing the belief that they may be overtaking other emerging markets more quickly than previously thought. The continent’s sustained growth is not only due to improved political and macroeconomic stability (and a strong commitment to private-sector growth), but also large investments in infrastructure.

In fact, infrastructure spending now amounts to $45 billion a year according to the World Bank. The importance of this cannot be underestimated. Many big infrastructure projects revolve around accessibility to the continent’s natural resources as sub-Saharan Africa is not only a major supplier of natural resources to the rest of the world, but also the region with the greatest potential for new discoveries.

As global growth resumes, the region should benefit from higher prices as well as higher volumes and the right infrastructure needs to be in place sooner rather than later. Africa’s road density is still sparse and the 48 countries of sub-Saharan Africa (with a combined population of 800 million) generate roughly the same amount of power as Spain (with a population of 45 million).

Africa’s water resources are abundant, but because of an absence of water storage and irrigation infrastructure, they are underutilised. With enough investment in this area, Africa can become self-sufficient in food within a couple of decades, which is key to the entire continent’s success. Investments in solar and wind power will ensure that Africa has enough power to become a world player.

Other areas are no less important. For instance, a recent $600 million private investment in high-capacity fibre-optic cable now connects southern and eastern Africa to the global Internet backbone, which is crucial to all companies across the continent, big and small. With regard to ICT, Africa has already caught up with the rest of the world, and together with Africa’s railway systems being expanded by more than 1,000%, it is clear that the continent is on the right track.

Insight

Lagos: Notes from the “surprising, not simply rising” continent

April 8, 2014 rachel_eaton Leave a comment

Sarah Caddy

News broke that Nigeria has overtaken South Africa to become Africa’s largest economy as the 500+ delegates at the African Private Equity and Venture Capital Association’s 11^th annual conference in Lagos returned home (in my case, to a Saharan sand-strewn London).

Africa’s most populous country’s government released revised figures that more or less doubled estimates for its GDP, a testament to its increasingly diversified economy and growth of services that tap into the expanding consumer story. Most notably the telecommunications sector has increased from 0.8% of GDP to 8.6%.

Nigeria’s minister for economy and finance, Ngozi Okonjo-Iweala, is cited by the FT stating that the revision will “validate” the investment thesis to foreign investors increasingly searching for returns in the region.

They may not need reminding, however. AVCA/RisCura/SAVCA research released at the conference, noted that 24% of investors into private equity already find West Africa to be the most attractive region.

“What excites you about Nigeria?” asked William Wallis, Africa Affairs Editor at the FT in his interview with Michael Power, Investec, at the conference. “Its people are extraordinarily enterprising” came the reply. “Africa is not just the rising continent, it is the surprising continent.”

Though with Nigerian pension assets under management (currently NGN4 trillion/$25 billion) estimated (at the conference) to double in just three years, local – rather than foreign – capital may be the investment force to be reckoned with.

***

Read more insights from the AVCA conference in Lagos from the Financial Times here.

Insight

The UN climate change report – a catalyst for technological improvements?

April 1, 2014 rachel_eaton Leave a comment

Isabelle Alenus-Crosby

According to a recent UN report, climate change poses a greater threat to food and security than previously thought. The IPCC warns that global warming is leading to more volatile weather patterns that have already begun reducing crop yields worldwide. As temperatures rise, rainfall patterns change, and pests and diseases spread.

Growing up in various countries in Africa, I was often witness to the type of erratic weather patterns described in the report. I vividly remember a particularly harsh drought in Tanzania the early 1980s, where almost no rain fell for several years. Water shortage in Dar es Salaam was such that lines of people were seen hauling sea water to their homes so that their toilets could be flushed. The little water that came out of the taps was carefully boiled and filtered for drinking and food preparation. People did what they could to save water, and prayed for bad weather.

What I also remember, is that the international community reacted rather surprisingly. Instead of simply sending food parcels to the worse hit areas in the North, it was decided to test out a completely new type of agriculture. Especially designed crops, adapted to the worse climates on earth, delivered very impressive results in less than a decade.

In one of my previous blogs “seeds of change” I mention that thanks to various technological advancements, Africa now has access to crops that are resistant to heat, droughts, floods and pests and may signify that in the future Africa will be exporting food, something that could never have been imagined a couple of decades ago.

It was the punishing climate in many parts of Africa that prompted these technological improvements, saving the African continent as a direct result. Perhaps these same crops will now save the world?

Insight

How to fix the broken science of economics once and for all

March 17, 2014 rachel_eaton Leave a comment

Isabelle Alenus-Crosby

Many authors have written about the failure of economic theory but best-selling financial author, George Cooper, has come up with an original solution on how to fix both economic theory and the economies of the world. He has done this by taking the key ideas from the greatest scientific revolutions in history to re-imagine how our economies really work in the first place.

By illustrating how both our economic theories and our economic policies can be fixed, Cooper is setting out to present a simple idea that has the power to revolutionise how we think about our economies and how our governments set their policies – he calls the idea the circulatory growth model in his new book Money, Blood and Revolution.

The circulatory growth model recognises that capitalism has a tendency towards wealth and income polarisation and explains how this problem can be addressed. For example the model makes it immediately obvious how policies designed to promote borrowing lead directly to lower economic growth, higher income inequality and, in the end, to higher government deficits.

Cooper takes his readers on a journey through the history and philosophy of scientific progress. He compares the confused state of economics today to the confusion which dogged astronomy, medicine, biology and geology prior to their respective revolutions. In doing this he builds a persuasive case that economics is long overdue its very own scientific revolution.

The circulatory growth model has some surprising implications. It shows, for example, why some countries have prospered while others have failed. It also shows why government spending and taxation are necessary for economic growth.

These conclusions fly in the face of today’s accepted mainstream economic ideas, which press always for smaller governments and lower taxation.

Insight

Madagascar elections: what happened next? An update from Emilie Filou.

March 13, 2014 rachel_eaton Leave a comment

Emilie Filou

A month and a half has passed since Madagascar’s new president, Hery Rajaonarimampianina, was sworn in and the results of the parliamentary elections were validated by the electoral court. Yet Madagascar seems no closer to having a new prime minister and a government.

Many expected the new PM to be nominated shortly after the national assembly’s first session on 18 February but the omission of a key word in the 2010 constitution has thrown members of parliament and constitutional law experts alike into a furious debate. The key word is “absolute”, in relation to the majority required in parliament to nominate the Prime Minister.

The constitution simply says that it is the party with a majority in parliament who has the right to nominate the premier (who must then be approved by the president). In the current context, this privilege falls to MAPAR, the party supporting coup leader Andry Rajoelina, who won 76 seats out of 151 in parliament. This has been widely disputed by constitutional experts, who argue that a relative majority would make it impossible to govern.

Case in point, a coalition of 95 MPs opposed to MAPAR set up the Plateforme pour la Majorité Présidentielle (PMP, Platform for the Presidential Majority) in a bid to claim absolute majority in parliament and trump MAPAR’s PM nomination.

Both MAPAR and PMP have therefore put forward a candidate: MAPAR has suggested Haja André Resampa, former general secretary of the presidency during the transition, while PMP has nominated Rolland Jules Etienne, a disqualified candidate in the first round of the presidential elections (who, incidentally, nominated Rajaonarimampianina as his replacement in the presidential race).

The president has so far refused to choose. He’s agreed with the principle that MAPAR should have the right to choose but he’s asked that the party consult with other political entities. Current Premier Jean-Omer Beriziky, who is popular with the international community, is thought to be favoured by the president, although MAPAR isn’t so keen. Rajoelina for his part announced earlier last month that he would no longer seek the PM’s job after it became clear that the president was keen to distance himself from the transition regime.

There is no deadline in the constitution by which the president must choose a Prime Minister and given the importance of the appointment, it’s unlikely Rajaonarimampianina will rush. Madagascar will have to wait a while longer for the post-coup era to start in earnest.

Read our previous blog on our Madagascar event

Insight

Will Equity Crowdfunding have the power to revolutionise the way in which entrepreneurs seek finance in the future?

February 25, 2014 rachel_eaton Leave a comment

In a poll, 88% of those who attended MJ Hudson’s Future of Crowdfunding panel event believe that this is the case and the numbers speak for themselves.

Equity Crowdfunding is witnessing increasing levels of interest, especially from SMEs, with 5000 in the UK seeking funding through alternative finance. Over a 3 year period, crowdfunding has increased by 371% (Karma Sandup, Partner at MJ Hudson). This rapid growth of interest in alternative finance has attracted the attention of regulators, resulting in the recent publication of the FCA’s consultation paper.

In light of potential regulation, on February 19th 2014, MJ Hudson, the Alternative Assets Law Firm hosted a panel event around the issues arising from the FCA’s consultation paper for the future of crowdfunding. The event brought together senior management from across a range of predominant crowdfunding platforms such as, CrowdCube, Seedrs, SyndicateRoom and InvestingZone and centred around two main points of interest;

How will regulation affect crowdfunding?
Will crowdfunding survive?

Although some view future regulation of innovative finance as potentially damaging, members of the panel were united in stating that they did not see the FCA’s consultation paper as a threat to the future of crowdfunding. If anything, panel members supported regulation, as a way to brand crowdfunding as a credible financial option. Legal & Financial Director of Seedrs’, Karen Kerrigan highlighted that crowdfunding platforms are not cowboy companies and already adhere to regulation and stated that, “official regulation is a sensible move by the FCA”.

Commenting on the future of crowdfunding, Tom Britton, CTO of SyndicateRoom informed the audience, primarily made up of entrepreneurs and investors that, “the industry will survive, banks don’t want to touch this space, even venture capitalists aren’t keen, unless the prospects are very big”. To support this statement, during the panel event, the audience voted on a live poll. When asked, “Will Equity Crowdfunding have the power to revolutionise the way in which entrepreneurs seek finance in the future?” 88% of people said yes, whereas only 12% said no.