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  • Our operating context

    While emerging trends, particularly technological developments, have far-reaching impact and associated risks, they also offer attractive opportunities.

    African trends
    Africa Growth Image
    African growth

    The African continental free trade agreement1 was signed by more than 40 African countries in 2018 and is expected to boost regional integration, commerce and trade, and grow African economies twice as fast.

    We are well positioned to drive and facilitate inter-regional trade, and investment flows across the continent to assist the economic growth of African countries and the expansion of multinationals into Africa.

    Rapid Urbanisation Image
    Rapid urbanisation and youthful population

    By 2050, Africa’s population is expected to double with an estimated median age of 20 and 1.5 billion Africans of working age2. As a result, governments will face increasing demands for investment in education, healthcare and basic services. Opportunities exist to increase financial access through low-cost digital transactions in urban centres and fund housing and small business initiatives. To take advantage of these and other opportunities will require the development of additional skills which will contribute to an upskilled financial services industry.

    Financial Inclusion Image
    Financial inclusion

    43% of adults (over the age of 15) in sub-Saharan Africa now have a bank account3, up from 34% in 2014. 33% have an account at a formal financial institution, while 21% have a mobile money account, up from just 12% in 2014. While an impressive improvement, more than half the adult population across Africa is still excluded from the formal financial system. The Findex report notes that ‘the power of financial technology to expand access to and use of accounts is demonstrated most persuasively in sub-Saharan Africa’, where 34% of adults have made or received digital payments in the past year.

    Food Security and Commodities Image
    Food security and commodities4

    The underutilisation of arable land holds vast potential for increased commercial agriculture and the production of agricultural goods. Mitigating the impact of climate change will be essential to realising this potential. Africa has a third of the world’s mineral reserves which remain largely undiscovered or underexploited in a time when commodities are fundamental to modern economies.

    Infrastructure Development Image
    Infrastructure development5

    The African Development Bank estimates that infrastructure investment of USD  130 to USD  170 billion a year is needed across Africa. To support growth, the continent must make the best use of existing infrastructure while developing new infrastructure. For example, the rapid evolution of transport and the development of autonomous vehicles will require investment in new transport infrastructure.

    Insurance Penetration Image
    Insurance penetration6

    Africa’s insurance industry has the potential to grow through a diverse client base – from a young growing middle class to large infrastructure and agriculture opportunities. Current average insurance penetration rate is 2.9%, representing an opportunity for the financial sector in Africa.

    Politics

    Renewed confidence in South Africa has been tempered by factionalism, policy uncertainty and poor governance in stateowned companies undermining institutional capacity. Increasing global tension continues to disrupt international cooperation and trade relations.

    Sub-Saharan Africa continues to struggle with fragile political stability although increased political reform has improved economic resilience.

    Economics

    The global economic outlook is subdued, with recent momentum in advanced economies expected to slow, partly due to the trade tensions between the United States (US) and China, suboptimal Brexit negotiations, weakening financial market sentiment and concerns around China’s economic outlook.

    Overall, African economies have been resilient and are gaining momentum through increasing economic diversification and structural transformation to create jobs and reduce poverty.

    The IMF7 predicts global growth of 3.5% in 2019. GDP growth in sub-Saharan Africa is projected to rise to 3.5% in 2019 and to 3.6% in 2020.

    Regulations

    Financial supervision, technological innovation and conduct remain key drivers of global regulatory developments as regulators require robust data protection and privacy controls.

    Environment

    High-impact weather events have continued across the world and food insecurity, disease outbreaks, infrastructure losses and migration will remain global challenges as climate change persists.

    Global disruption

    Successfully identifying emerging trends is made more difficult given the nature and ever-advancing technologies of the Fourth Industrial Revolution. The World Economic Forum tracks trends shaping future ecosystems that are fundamental to the operations of economies, governments, industries, researchers, scientists, environmentalists, social engineers and financiers. These trends will result in technologies that could impact on all aspects of life, including financial and monetary systems, and the future world of work and skills requirements.

    Financial Access Icon
    Financial access and increased competition

    Traditional banks face increasing competition from a range of market entrants, including new digital service providers with propositions that are simpler, more convenient, more transparent and more readily personalised. Rapidly changing client expectations and behaviours are driving investment in client-centric technology. The recent launch of TymeBank, with Discovery Bank and Bank Zero set to launch in South Africa in the near future, are examples of new entrants.

    In Africa, advances in digital and mobile technology has improved financial access, particularly in rural areas.

    Data Privacy and Security Icon
    Data privacy and security8

    Global concerns around data, privacy and consumer rights are being addressed through new regulations which place significant obligations on financial institutions to protect and use data responsibly and respect clients’ privacy rights.

    Open banking, which is being pioneered in the United Kingdom (UK), addresses data ownership requirements and more transparent data sharing capabilities through user-friendly tools which give clients better control over their data. It also provides increased opportunities for collaboration with third-parties and access to complementary data, although at the risk of potentially increasing the complexity of shared data.

    Changing Technologies Image
    Changing technologies9

    It is expected that cloud computing will grow to a USD191 billion industry by 2020. Given that the related risks are relatively unknown and the increased use of complex algorithms and cognitive engines like chatbots, a balanced approach to digitisation is needed to manage any negative impacts on clients, reduce unintentional bias in systems and improve data security.

    Artificial Intelligence Icon
    Artificial intelligence

    The need to effectively manage artificial intelligence (AI) will increase as resources become more scarce and digital strategies are adopted. To achieve the culture shift needed to accommodate AI will require investment in both people with the necessary technical expertise and in new ways of working to support more complex thinking, problem solving, flexibility and creativity.

    Digital Currencies and Blockchain Technology Icon
    Digital currencies and blockchain technology10

    Digital currencies and blockchain technology support client privacy and data protection by enabling anonymous transacting. However, the advent of quantum computing has the potential to undermine the security of the digital economy.

    Design Thinking Icon
    Design thinking11

    Design thinking is the application of design principles to everyday interactions. It covers identifying problems, researching potential solutions and forming ideas, followed by prototyping the ideas. Design thinking helps improve client centricity by personalising products and services to each client, making them more intuitive and responsive.

    1 UN Economic Commission for Africa – Africa Continental Free Trade Areas | 2 UN Population statistics | 3 World Bank Findex Report 2018 | 4 African Development Bank – Economics Intelligence Unit | 5 African Development Bank – African Economic Outlook 2018 | 6 Financial Times – Africa’s insurance market is a ‘giant waking up’ (June 2016) | 7 International Monetary Fund (IMF) – World Economic Outlook Update (January 2019) | 8 The Banker – Pioneering an open future | 9 PR Newswire US – Risks of cloud computing still emerging, warns Spohn Security (October 2017) | 10 Information Security Forum – Threat Horizon 2020 | 11 The Financial Brand – Design Thinking: the hottest new trend in banking (January 2018)