The financial services sector in Africa is playing a critical supportive role in the continent’s development as a result of increased consumer spending and investments in key private and public sectors.

The Bank of Kigali head offices. Financial sector seen driving development in Africa.

This was revealed at the seventh KPMG Africa Conversation that attracted economists from across the continent on Thursday.

It was observed at the meeting, in South Africa, that advances in technology in Africa are leading to greater connectivity and increasing demand for natural resources by the developing BRIC bloc of countries including Russia, China, Brazil and India.

“In Nigeria, for example, regulatory reforms led by the Central Bank have led to consolidation in the banking sector,” said Bisi Lamikanra, Head of Management Consulting at KPMG Nigeria.

“This has led to more focus on retail banking. Further developments have substantially ‘de-risked’ several factors for local and foreign investors entering African markets.”

Other factors that were recognised as stemming out to be crucial include increased urbanisation across the continent, increasing acceptance of the rule of law and the harmonization of regulatory requirements at national and regional levels.

Junior Ngulube, CEO of Munich Re Africa, added that: “The South African banking and insurance sectors have been very well-regulated and we didn’t see any of the turmoil that is still playing out globally. The rest of the continent is also very similar to South Africa in that respect. In Francophone countries, for example, there is just one [insurance] code and one currency. That makes it easy to transact business.”

It was noted that different models are being developed for different financial services being offered in different regions.

However, experts warned that against assuming that all markets on the continent are the same and urged investors to reduce risk by combining expertise.

Nicholas Young, Africa COO at Citibank, suggested that “Because Africa is an enigma for many investors; a tailored approach should be developed for each market. Combined global and local partnerships work well to unpack different markets.”

Increased connectivity, in Citibank’s experience, has illustrated that national Central Bank debates around policy issues have started to converge around common policy concerns across the continent, added Young.

KPMG is a global network of professional firms providing audit, tax and advisory services in 153 countries.

By Ivan R. Mugisha, The New Times