Nigeria, South Africa, Zimbabwe most at risk of inflation, depreciation – ConRe
A survey by Continental Re, the pan African reinsurer, has found that Nigeria, South Africa and Zimbabwe are the three out of 54 African economies most at risk from financial risks that include currency depreciation and inflation, the top challenges they face in the year ahead.
The survey, which polled Africa’s leading insurance professionals, found that business results are being affected by depreciation and inflation and fuelling fears of dampened growth over the next 12 months.
Insurance professionals also said the need to adapt current business models to climate change was the second most pressing issue agitating their minds.
After a two-year COVID-induced hiatus Continental Re polled 70 captains of industry who attended the 7th CEO Summit in Marrakesh in Morocco in October 2022, to discover what they see as the biggest challenges and opportunities for the sector and Africa’s economies alike in the year ahead.
Lawrence Nazare, chief executive officer, Continental Reinsurance, 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 that can help mitigate some of the risks that lie ahead.”
Key findings of the survey include
Ninety percent 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.
Thirteen percent 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 harmonisation of the continent’s economies on the back of the fledgling African Continental Free Trade Area (AfCFTA) was cited neither as a risk nor as an opportunity.
But there are opportunities
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, both cited by 21% of the CEOs as silver linings for the sector over the next 12 months.
In all, 63% of the CEOs surveyed felt that there is still an opportunity to grow the business in 2023 and they identified Kenya, Botswana, Ghana, and Rwanda as the countries in which the greatest opportunities lie.