South African financial and asset management sector remains untransformed
The financial investment and asset management sector remains largely untransformed how can the sector be more inclusive particularly for women?
Despite the lengthy period of 23 years since democracy, black-owned asset management firms still manage less than 5% of the ZAR8.9trillion total savings industry pool. None of the top 10 South African asset managers are black-owned, with five asset managers managing 52% of industry assets.
Black-owned firms rely disproportionately on mega-funds such the Government Employees Pension Fund (GEPF) and the Eskom Pension & Provident Fund (EPPF). The Public Investment Corp (PIC) handles the GEPF. According to the PIC’s annual report, transformation in the asset management industry, particularly in listed equities, has been slow and much more needs to be done to alter its contours. Regulation 28 of the Pension Funds Act notes that trustees should give consideration to black managers or B-BBEE, but does not explicitly define the term.
Furthermore, there are few women-led asset management firms. Without legislation specifically requiring the participation of women led asset managers, the current situation will continue.
Why are sustainable partnerships such a key focus for Sigma Capital?
When investing over a long period of time, having a sustainable partnership is valuable. When an entity has a sustainable relationship, they can have critical but key discussions on issues without impairment of the relationship. This is important when seeking to create economic value over a long-term period. Business can be cyclical depending on the sector of operation. To this extent, it is critical to have a sustainable relationship when seeking to create value over the long term.
The financial sustainability model that Kagiso Trust has used over the years is intended on ensuring a continual balance between asset growth and programme spend and using its dividends from its investments for development work and programmes. Do you think other NGO’s can replicate this model using low risk and/or high-risk investments to become self-sustainable and have less dependence on donor funding?
Kagiso has an excellent financial model which is underpinned by professionals with highly respectable skills. It is important when looking at entities to carefully consider the skills profile of the organisation. Kagiso Trust has the ability to attract the top talent, this is something that is more difficult for many NGO’s who lack the financial capability and credibility to do so. Access to continuous funding is often a challenging area. An organization with good quality skills has the ability to make sure that it attracts good long-term investments at the right price and at the right time.
It is important for an organization to ensure that it has highly reputable professionals who will undertake their work with the highest responsibility. It is also important that an organization identifies its strengths and based on those strengths, forges long-term relationship with specific partners who can help them in their business growth. An NGO requires a consistent inflow of income; therefore, the investment arm would need to ensure that business partnerships are formed with entities that it can accrue income from over the long term.
How can investors take advantage of investment opportunities on the African continent and what investment sectors are lucrative?
When looking at opportunities, we always have to reflect on the fact that the continent has 54 distinct economies that are weighed with challenges as well as opportunities significant to their economic activities and operating environments. To this extent, there is no singular approach nor language to doing business on the entire continent.
The best way to approach opportunities is to see the extent to which applying your skills and experience in a particular country can be advantageous to both your business as well as the business being invested in. To do so in a country whose language, business culture, currency and sector you understand best.
There are a number of opportunistic sectors on the continent that many countries participate in. These include the three listed below:
- Agriculture is an important sector. 60% of the world’s uncultivated land is in Africa.
Agriculture as an untapped investment opportunity is set to be a major growth driver over the next few years, surpassing mining and metals. Southeast Asia has become competitive for doing agribusiness; it’s time for Africa to take advantage of this opportunity.
- Technology is another key area. There is continuous development in the various parts of technology from telecommunications, information to power and many other industries.
- Access to reliable and affordable electricity is also critical.