HomeOpinionWhat AfCFTA means for insurance sector

What AfCFTA means for insurance sector

Piggy’s Trading & Investing Tips: By Batanai Matsika

ONE of the discussion topics at the 43rd Organisation of Eastern and Southern Africa Insurers (OESAI) Conference that was held from August 21 – 25, 2021 in Mombasa, Kenya was titled, “Financial Services Liberalisation Under the AfCFTA”.

The paper was presented by Roslyn Ngeno, senior expert on Investment (AfCFTA Secretariat).  Generally, the African Continental Free Trade Area Agreement (AfCFTA) will see the creation of the world’s second largest free trade bloc by area and third by population and is set to spur intra-African trade while increasing the appeal of direct investment in Africa. The World Bank estimates that the trade pact could boost regional income by 7% or USD450bn, speed up wage growth and lift over 30 million people out of extreme poverty by 2035. A total of 54 out of the 55 states in Africa have signed the trade pact already. The main advantage is that there will be an increase in the demand for financial services such as banking, payments and insurance. There is therefore a need for innovation on the part of insurance players to support service needs that will emerge from AfCFTA.

By comparison with other countries, the value of global services exports of Egypt (Africa’s largest exporter of services) is still insignificant when compared with the value of trade in services by leading developed and developing countries. This means there is huge scope for intra-African trade in services.  As discussed during the OESAI conference, the trade pact would change the African financial services landscape through;

Increased access to various industries and geographies for financial services players;

Financial services players would have to invest in innovation and technology to cater for the cross-border payment systems;

Financial services players would also have to explore regional value-chains; and

The need for active participation by financial services players in the ongoing negotiations on investment laws, competition and trading terms between African countries.

In conclusion, the AfCFTA aims to connect 1,3 billion people across 55 countries with a combined gross domestic product (GDP) valued at USD3,4 trillion. Beyond its ground-breaking size, the AfCFTA signals a paradigm shift and a commitment to deeper integration of the continent by negotiating goods and services concurrently.

It is thus hailed as an economic game-changer for Africa’s development owing to its potential to boost intra-African trade but also to provide an opportunity for countries in the region to competitively integrate into the global economy, reduce poverty, and promote inclusion.

It is against this background that insurance players in Africa are being encouraged to actively participate in the ongoing AfCFTA negotiations on investment, competition and trading arrangements.

  • Batanai Matsika is the head of research at Morgan & Co, and founder of piggybankadvisor.com. — +263 78 358 4745 or batanai@morganzim.com/batanai@piggybankadvisor.com

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