The reasons for why wealth managers should take Africa more seriously as a potential source of business are mounting up.

For far too long Africa has suffered from a troubled image and probably won’t have been the first place to come up in conversation among wealth managers prospecting for business. But in recent months, the volume of positive noise about the continent has risen.

I hear from recruiters that there is considerable interest in bankers and relationship managers with knowledge of markets in places such as Nigeria and Kenya, for example. More than once I have been asked something on the lines of “do you know any decent Africa wealth managers?”  

The economic backdrop has been encouraging. The MSCI EFM Africa ex-ZA [excluding South Africa] Index of equities shows total returns (reinvested dividends plus capital gains) of 15.75 per cent; on a five-year annualised basis, that index has chalked up a very respectable 8.7 per cent. In this year’s annual World Wealth Report survey by RBC Wealth Management and Capgemini, Africa had a total high net worth ($1 million-plus investable assets) of 140,000 with total wealth of $1.3 trillion. Perhaps more significantly, its growth rate in the number of such millionaires – 9.9 per cent – was faster than the global growth pace of 9.2 per cent. The actual total amount of wealth rose by 11.5 per cent, faster than the global average of 10 per cent.

South Africa, Egypt and Nigeria have tens of thousands of millionaires, while other countries like Ethiopia and Ghana are climbing the wealth statistics. According to an analysis of the African high net worth community by New World Wealth, an Oxford-based wealth consultancy, Ethiopia has been the fastest growing African market for millionaires over the past six years followed by Angola, Tanzania, Zambia and then Ghana.

Adding to the noise around Africa recently was the story that Bob Diamond, the former chief executive of Barclays who resigned in dramatic fashion last year as his bank was engulfed in the LIBOR-rigging scandal, is back in a new guise. This time he is leading investment into the African financial sector. According to the Financial Times, Diamond’s Atlas Mara fund, a London-listed cash shell, is raising $325 million, aiming to start trading from 20 December. According to the FT, the company will “focus on acquiring a company or business in the financial services sector with all or a substantial portion of its operations in Africa”.

Earlier in 2013, Alvaro Sobrinh, chairman of Banco Valor, the Angola-based firm, took to the pages of this news service to point out the investment promise – and some challenges – in Africa. Significantly, not all of the wealth being generated in the continent is based on the extractive industries such as minerals – although this remains a vital sector.

In October this year, France's Societe Generale Maroc, the subsidiary of Societe Generale group in Morocco, announced it was launching a private banking offering for top-tier wealth management clients in the country. Rival BNP Paribas has also opened offices in countries such as Nigeria and has a presence in other parts of the continent. (This is perhaps unsurprising given the traditional French ties to north and west Africa, for example.)

UBS is going after wealthy clients in Nigeria and Angola, for example. Switzerland's largest bank recently told Bloomberg of the "tons of opportunities still relatively untapped". The bank said it sees potential in nations such as Kenya, Ghana, Uganda and Botswana. 

What excites bankers is that although sub-Saharan Africa, for example, is relatively “under-banked” – only about a quarter of its population have a bank account at all – the upside potential if growth can produce a large, and expanding middle class is considerable. There are, of course, considerable challenges. Africa suffers still from a reputation (it varies a lot between countries) for corruption and poor governance, and unevenly enforced property rights. The global drive against money laundering and push for more due diligence about client suitability has a long way to go there, to put it mildly.

For all such concerns, some banks with strong roots in the continent are expanding their coverage. South Africa-headquartered Standard Bank (not to be confused with Standard Chartered, another strong player in Africa) has made a number of recent appointments, naming a business development head for Africa. Barclays' South African unit, Barclays Africa Group (formerly Absa Group), is combining its wealth, asset management, stock broking and investment administration businesses; earlier in 2013, Barclays raised its stake in Absa, explaining that it sees business prospects in the continent are strong.

China

Another continued theme in Africa worth monitoring is the role of China, both as an investor, and potential partner. China has been a big buyer of land and raw material supplies in parts of the continent to fuel its voracious demand – although a deceleration of Chinese economic growth may have had some impact. In September, South Africa’s Nedbank and Bank of China entered a strategic agreement to boost trade and investment between Africa and China.

In the past, any sign of faster wealth growth would lead people to assume that such money would find its way to secret bank accounts in places such as Switzerland. This may change not just due to inter-governmental deals on tax information exchange and the erosion of bank secrecy, but if there are real signs of progress in reducing corruption and attacks on property rights in Africa. Clearly, the upheavals in the north of the continent – the so-called “Arab Spring” – will give bankers pause. Nigeria suffers from ethnic and religious strife. This article from the Economist (December, 2011) contains a passage that does show, however, how far the region has come: “Africa is still not entirely peaceful and democratic. But it has made huge strides. The dead hand of the Soviet Union is gone; countries such as Mozambique and Ethiopia have given up on Marxism. The dictators, such as Congo's leopard-skin-fez-wearing Mobutu Sese Seko, that superpowers once propped up have fallen. Civil wars like the one which crippled Angola have mostly ended. Two out of three African countries now hold elections, though they are not always free and fair.”

Africa has a mountain of challenges, but they appear less intractable than might have been the case over a decade ago. If developments continue in the right direction, then wealth management firms around the world will have to become better acquainted with it, and soon.