News From Africa.
By Mr. Kasali Salami - Consultant

The performance of the African economy has been ever so impressive in the last few years, with GDP rising from a level of 4.6% in 2003 to 5.1% in 2004. Growth may remain at the same level this year but should move up to an average of 5.4% in 2006, with prospects for further increases in the years ahead. The impact of inflation has also reduced considerably. From a two-digit average of 10.6% in 2003, it dropped to 7.7% in 2004 and may stay at the same level in 2005. It is, however, expected to reduce by a point to 6.0% in 2006. The unfolding scenario may well herald the long-awaited era of economic revival and sustainable growth when Africa would be more inward-looking, willing to depend on its abundant natural resources to gradually move this continent forward and consequently less of a burden to the international community whose support has been of such a great significance to its progress.

There is no doubt about the fact that Africans have made great sacrifices to get this far and never again would performance slow down to the levels recorded in years past when the majority of economies in the region either deteriorated or, at best, remained stagnant. It is in fact expected that the current trend would be sustained, given the continued support from the developed world and the various mechanisms put in place to promote the growth of African trade. The AGOA and “Everything-but-Arms’’ facilities extended to Africa by the United States of America and Europe respectively are particularly relevant in this connection. In order to benefit from these programmes, Africans have to adhere strictly to the various reform schedules, move away from military dictatorship and ensure also that they do not resort to armed conflicts, at the slightest provocation.

As impressive as the performance appears, there are still fears that the size of the Continent’s GDP has yet not given any indications that its economy is ripe enough to support the various infrastructures necessary to provide the basic necessities of life. It is, for instance, estimated that Africa’s GDP is just US$480.0 billion or 1.5% of the world total of US$31,500.0 billion and a meagre per capita income of about US$… Thus, for as long as the majority of people in this part of the continent live on less than US$1.00 a day, so long would the impressive statistics credited to Africa remain meaningless. African leaders are very much aware of the yawning gap between the official statistics and the actual welfare packages on ground and are making efforts to back up these seemingly empty numbers with concrete actions, that are designed to improve the lot of their people. It is, therefore, not surprising that the thrust of the agenda of the fourth Ordinary Session of the General Assembly of the African Union, held in Abuja, in April 2005 was on how food security and access to affordable health care services, among other basic necessities of life could be achieved within the shortest possible time. Hopefully, the concern expressed at the meeting would be translated into concrete action that would benefit Africans.

Clearly, unlike the immediate years after independence when the preoccupation of African leaders was to lead official delegations to scout for aid, there is now a rethink, albeit late, on the part of the leaders. They have now seen the wisdom in looking inwards for solutions to problems facing the continent. From all indications, they seem to have taken the destiny of this continent in their hands and are giving all it takes to pull the continent out of the host of problems facing it. There is need to recognize the fact that the developed countries have attained their current status not by magic or the indignity of having to go cup in hand pestering others for assistance, but through hard work, selfless services and great commitment to the progress of their respective countries. Thus, although Africans still need support from the international world, they are now making all efforts to attract such assistance, on merit and in a more honourable way. Accordingly, a great deal of attention is being given to creating the necessary enabling environment that would make it possible for them to benefit from the ongoing globalization of the world economy, in spite of the sacrifices involved.

It is indeed difficult to believe how African nations are enduring the untold pains inflicted on them by the various reform programmes that are meant to integrate them into the new world socio-economic and political environment. They are adjusting very fast and have so far been able to create the necessary environment that would enable democracy grow and thrive in this part of the world. They have also gone a long way in introducing appropriate reform programmes that would accelerate the economic growth and development of the continent. In this regard, one notes the vigour and speed with which the ownership of public enterprises is being transferred to the private sector. This sector currently makes only a meagre contribution to the GDP of Africa. For instance, the total credits to the private sector, as a percentage of GDP, is just about 20% of the corresponding figure in the emerging Asian economies. Clearly, a lot of work still has to be done, if this sector is to drive the economy.

One also notes with delight the war being waged against corruption. The fight has become ever so intense in the last decade. Hopefully, a new Africa would emerge from this endeavour, which would command greater respect and provide an enabling environment that would attract significant volumes of investment from the international world. The initiative would have to be sustained, as otherwise, all the efforts being made to sort out the affairs of this continent would be in vain.

In addition to the various steps being taken to promote and enhance the progress of this continent, it is clear that Africa would have to decide and accept the fact that armed conflicts would not resolve any problems in this continent, and indeed in any part of the world. Such upheavals would only extend the catalogue of woes of this problem-ridden community. In fact, at no time in the last four decades has Africa ever known peace. The large scale destruction of properties and human lives resulting from such conflicts has, in no small way, slowed down the progress of this continent, as evidenced by the level of development recorded by countries that have been ravaged by wars. Clearly, not too many investors would commit their funds to investments in an environment where gunshots literally crisscross the sky. Yet without external finance, Africa’s growth and development would be greatly hampered. It is for instance estimated that only 10% of the trade transactions in Africa are carried out among African countries and that just six countries account for 68% of such intra-Africa trade. This scenario is unlikely to alter, to any significant extent, well into the foreseeable future, given that this continent is yet to develop robust financial systems that are able to support such trade. The need to maintain peace would, therefore, remain ever so paramount, if the continent is to successfully contest for investments.

One hopes that, with good governance, characterized by the rule of law, respect for human rights, equity and fairness, the ongoing efforts that are aimed at creating a peaceful society would achieve the desired objective. At the 6th Ordinary Session of the Executive Council of the African Union in Abuja which was held in April 2005, the Executive Secretary of the ECA, observed that substantial support, in the form of official aid, of well over the US$25.0 billion which was provided in 2004, would be required this year, if the continent is to meet the Millennium Development Goals on poverty, health and food security, among others. In fact, the indications are that the required funds would be in the neighbourhood of US$37.0 billion which should rise steadily to US$73.0 billion by 2015--the official date when the United Nations reckons that poverty would have been reduced by 50%. Thus as desirable as Africa would have loved to manage its affairs without such a heavy reliance on external sources, it just cannot raise the huge funds required for its development. The fact is that the necessary infrastructures to support such a desire are either non-existent or weak. For instance, science and technology are at rudimentary stages, managerial skills are still being developed and domestic capital is just too meagre to support and drive the economy.

The international community remains concerned about Africa’s plight and would go to all lengths to ensure that the continent is not left behind, as the world races to the global village. For instance, the African Commission, launched at the instance of the British Prime Minister, Tony Blair, would seem to have taken a step in the right direction, given its concern about the continent’s debt burden. Clearly, Africa’s progress may be stalled by such colossal financial obligations, the settlement of which would seem to run to perpetuity. The continent’s Finance Ministers did discuss this issue at length, at the three-day meeting held recently in Dakar and ended up by calling for the cancellation of the debts to free Africa from servitude and allow it some breathing space and time to plan and grow. In the same vein, the former President of the United States of America, Bill Clinton, did submit at the World Economic Forum held in Davos, Switzerland in April 2005 that a fraction of the US$80.0 billion expected to fund the ongoing campaign in Iraq could well serve as additional aid to Africa to fight poverty and disease.

Clearly, Africa has the necessary support and must live up to expectation to justify the confidence reposed in it and, particularly in order to qualify for the proposed assistance, which the advanced countries intend to extend to the developing world in a bid to wipe off poverty from the face of the earth by 2025. Needless to add that this continent has to steer clear from trouble and remain committed to the various reform programmes in order to be part of an event that promises to set its people and, indeed all poor nations, free from the pangs of hunger and deprivation.

From all indications, and particularly from the efforts being made by African leaders to improve the lot of their people, this continent would ultimately move away from the periphery to the center where it can assert itself and make positive contributions to issues affecting the progress of this world. The process is obviously going to be a long and arduous one and would require significant inputs from the various sectors of the economy, especially the insurance industry, given its traditional role as a pivot of socio-economic stability and development.

Below are highlights of significant events in the industry

NEW COMPANIES

The following companies were established during the period under review.

Benin

Avie Assurances

Cameroon

SAMARIS and PROASSUR VIE

Congo

NSIA

Côte d’Ivoire

Loyale IARD, SONAR, FEDAS, CEA VIE and AVENIR Re – a regional reinsurance company owned by a group of professionals in the Ivorian market, some insurance companies in the Francophone region and a financial institution.

Libya

African Insurance Company Ltd and Sahara Insurance Company Ltd.

Morocco

La Royale Al Wataniya, which is the outcome of a merger of La Royale Morocaine D’assurance and Al Wataniya.

South Africa

Unity Insurance Company Ltd – an associate company of Auto and General Insurance Company Ltd.

Togo

FIDELIA Assurances

MAJOR LOSSES

Algeria

• The biggest insured loss ever recorded in Africa and the Arab world, Algeria SKIKDA LNG, which occurred in January 2004 has now been provisionally estimated at US$470.0 million FGU.

Burkina Faso

• The cost of a fire incident which affected a cotton-separating factory of SOFITEX on 31st January 2004 in Bobodioulasso has now been put at CFA 496,035,778.

Côte d’Ivoire

• The boiler explosion of 29th January 2004 in a Sugar factory at Ferkessedougou may cost the industry CFA 836,676,987.

• An accident at Abidjan airport involving an aircraft of CAM Air may cost (equipment only) US$14.0 million.

• A fire incident occurred at a furniture company (ARTIS) in Abidjan on 7th May 2005. The cost is put at CFA700,000,000

On 26th November 2004, a Tsunami was triggered off by a seaquake, off the coast of Indonesia, which affected ten countries including Kenya, Madagascar, Somalia and Seychelles. Well over 250,000 lives and properties estimated at about US$15.0 billion were claimed by the incident.

LEGISLATION

Algeria

Insurance against natural hazards became compulsory with effect from 1st September 2004.

Libya

Motor tariffs were increased by 20%, with effect from February 2005.

Nigeria

A new Pensions Reform Act came into effect in June 2004. Among other things, the Act has established contributory Pension Scheme for employees in the Public and Private sectors and has also set down the requirements that have to be met by the Pensions Fund Administrators and Pensions Fund Custodians - the two institutions that are to manage Pension Schemes.

Sierra Leone

• A new insurance commission has been established in Sierra Leone. Prior to this, the commission was a department in the Central Bank.

• Two, out of the ten insurance companies operating in the market, have been deregistered namely, Motor and General Insurance Company Ltd and Commercial Insurance Company Ltd.
South Africa

Apart from the introduction of the Financial Advisers and International Services Act effective 30 September 2004 which required all insurers, financial advisers and the like to comply and register in terms of the Act, the March 2005 bulletin of SAIA also provides the following highlights.

Financial Intelligence Centre Act: (Money Laundering) – Short – term Insurers are excluded from the ambit of this Act at present.

Demarcation of Medical Schemes and Health Insurance and Reinsurance – Senior Counsel opinion has been forwarded to the Financial Services Board and results are being awaited.

Policy Holder Protection Rules – The new draft rules have been gazetted.

Deregulation of Commission – It is currently on hold.

Financial Services Ombuds Schemes Bill - It has been approved by Parliament.

Road Accident Fund - Amendment Bill has been published for comment. It will effectively limit payments to R25,000.00

OTHERS

Ethiopia

• A directive issued by the National Bank of Ethiopia – Directive No.SIB/24/2004, which took effect from 1st May 2004 prohibits Insurance Companies from issuing a Financial Guarantee Bond or any form of Unconditional Bond.

Gabon

• The A.N.G “Assurances Nouvelles du Gabon” became Nouvelles Société Interafricaine after it had been bought over by NSIA Group.

Malawi

• NICO (Malawi) took over CGU (Malawi) with effect from 1st April, 2005.

Mauritius

• Jubilee Insurance (Mauritius) Company Ltd ceased to write new business from June 2004 and has since been on run-off.

Morocco

• ARIG’s share in CNIA was sold to a private Moroccan group in February 2005.

Nigeria

The certificates of registration of the following companies were cancelled with effect from 2nd August 2004: Accelerated Insurance Company Ltd, Altimate Trust Insurance Company Ltd, Amicable Assurance Plc, Financial Assurance Company Ltd, Fortress Insurance Company Ltd, Gateway Insurance Company Ltd, Lake Insurance Company Ltd, Marine and General Insurance Company Ltd, New Era Insurance Company Ltd, Security Assurance Plc, Stallion Assurance Company Ltd, Triumph Assurance Company Ltd, Val Insurance Company Ltd and Unity Life & Fire Insurance Company Ltd.

Uganda

• UAP of Kenya acquired a controlling share in United Assurance Company Ltd in a deal that was concluded in the last quarter of 2004.

• The name of Imperial Insurance Company Ltd has changed to NICO Insurance (Uganda) Ltd following its acquisition by NICO (Malawi).

• The Industrial and General Insurance Company of Nigeria has won a bid to buy 60% of the share of the National Insurance Corporation of Uganda which has been put up for privatization. The remaining 40% shares would be sold through the Stock Exchange.