East African countries have witnessed the discovery of oil and gas in recent years. Continental Re, Nigeria’s largest re-insurance company, launched its regional office in Kenya last year with the hope of bringing its expertise in the energy sector to the region. How we made it in Africa’s Dinfin Mulupi caught up with Continental Re managing director Dr Femi Oyetunji and Calisto Ogaye, acting general manager in charge of East Africa, to discuss the re-insurer’s strategy in building a pan-African company.
How is your business performing in East Africa since you launched in Kenya last year?
Ogaye: We have increased our client portfolio in East Africa in the last six months. The Kenyan elections were not a worry for us. Insurance is about risk and we are here to mitigate against the economic impact of risk. The elections were in fact an opportunity because the entire business community insured against adverse effects of any political misgivings. The insurance industry witnessed a massive accumulation of income in the period just before the elections. The Kenyan economy is now stable and this should lead to improved performance in the tourism and agriculture sectors, which have a lot of foreign interest. Growth in these sectors will naturally spill over to insurance.
Oyetunji: We are expecting 200% growth from East Africa. The region contributes about 20% of our business today. We see a lot of growth prospects on the energy side. Every East African country is discovering huge deposits of oil and gas and this is a sector we have dealt with in Nigeria. Our expectation is to bring the experience of the parent company in Lagos to support the Kenyan office so that we can dominate the energy sector. None of our competitors in East Africa have experience in the energy sector.
Most African countries, with the exception of South Africa, have very low insurance penetration. What is needed to improve adoption?
Ogaye: As re-insurers we are also concerned about the low penetration. We see opportunities in the exploitation of the middle class in emerging economies in Africa. They have the knowledge and purchasing power. The problem is insurance is not a key priority to them because of poor communication. We expect insurance adoption in Africa to get better but that will involve a change in attitude. Currently there is a lot of miss-selling done by agents who are largely driven by earning a commission without ensuring that whatever they sell to the client meets their needs. This has led to the negative perception that insurance companies do not pay claims.
You are opening regional offices and entering new markets across Africa. What is the ultimate goal?
Oyetunji: Our vision is to become the premier African re-insurer and to achieve that we really need to go to the whole of Africa. We don’t see anybody else playing that role. We need to achieve that strategically. We are beginning with places where there is very low insurance penetration because in such markets the opportunity for growth is immense. One of our roles as a re-insurer is to provide training to insurance companies so that they can develop products that will attract more people into the insurance fold. South Africa, which is a specialised and developed market, will be the last step in our five year strategy.
Describe the challenges you face.
Oyetunji: Every market in Africa is unique and therefore we have to address each market differently. Shortage of skills is also a major challenge. We lack skills in underwriting, asset management, actuary and other fields. What we have now decided to do is go to the US and Europe to find the best in the diaspora who are willing to come back. That is the only way to go about it because skills are generally lacking here. We believe in establishing businesses around individuals.
How do you build a pan-African business?
Oyetunji: You start in the market you know best before venturing into other markets. You must acknowledge that African countries are totally different. You can’t have a ‘one size fits all’ attitude. In each new market you enter you need to identify the right local partner. I believe we have been successful in every market we have entered because we identify local people to run the show.
Does Africa have business leaders who can build large firms that can compete with the best of the world?
Oyetunji: Nobody has monopoly of knowledge. There are a number of Africans who are top level executives and even CEOs in some of the world’s largest companies. We do have the ability and capacity. We need to look at people in the diaspora because they have been exposed to bigger businesses. They need to come back and develop companies here. Almost every type of business is looking to Africa for growth and we therefore need the best output from the new generation.
There is a lot of business interest in Africa today. How can the continent truly benefit from this?
Oyetunji: We go back to the issue of capital. Let me restrict myself to insurance. We have a lot of Chinese investment coming into Africa for infrastructure, mining and energy but we are not seeing the same in the insurance industry. We don’t have the capacity and financial muscle. As a continent we must garner investible funds as capital to drive these things. You can’t expect a Chinese company to bring capital here and not get the returns. If all the money going towards harnessing the opportunities in Africa will come from outside the continent, then all the benefits will go outwards too. Both Kenya and Nigeria have 46 insurance companies. Nigeria doesn’t need more than ten insurance companies. We are too fragmented. We need to come together and form larger entities.