Taking it one step at a time–AXA profile

Building business relationships that will stand the test of time is key to the philosophy of AXA in Africa, but that does not stop it from having ambitious goals and being eager to explore new markets. Yves de Mestier, Head of International Networks for AXA Corporate Solutions, explained: “We have had a long history in Africa and have four main Sub Saharan bases—Cameroon, Gabon, Ivory Coast and Senegal and two north African bases—Morocco and Algeria. “Algeria is a good example of how we approach a new market. AXA has launched the first foreign property and casualty company in Algeria. We launched with ambitious goals and already it is doing tremendously well. We went into Algeria because our clients were there and it made sense but we are also ambitious and want it to grow.”hideMr de Mestier is hopeful that AXA will soon open its doors elsewhere on the continent, including in English-speaking countries. Thierry Kepeden, [pictured, top-right] General Manager of the Cameroon office, added: “Our CEO Henri de Castries was in Africa recently and he said the AXA Group was considering its strategy. That means that today it is in six countries, tomorrow it will be in more. “However, it is very important to have judicial security. The group is looking for countries where there is good governance and a secure environment for investment.” BY THE RULES Mr de Mestier added: “It is key and is true for all companies in the whole AXA network. We need to know all the legal and regulatory systems are in place. Sometimes this is hard to explain to our customers but it can be the case that it is alright for a company from another sector to invest somewhere but it is not alright for an insurance company.” AXA’s west and central African operations are all non-life. Mr Kepeden said the company’s four Sub Saharan operations had enjoyed a 15% increase (€74m) in activity in 2013 and are set for further growth this year. The firm works via brokers, with general agents and also direct to the insured so offers three ways in which to conduct business. In terms of areas of business, AXA offers support to manufacturing sectors, motor, health and cargo—which is particularly important in Senegal. Construction too is another key class for the African businesses. Mr Kepeden explained: “The IMF cancelled the state debt, taking the pressure off our governments but the debt relief was conditional that the countries invested more heavily in large infrastructure projects. This has given construction insurance even greater importance in the region.” Gabon is the richest of the four territories in terms of oil wealth, but, as Mr Kepeden said, “The whole continent has a wealth of minerals. We not only have oil but mines, forestry and agriculture. We are a continent full of raw materials. “We also know that Africa will be a huge market in the future. The experts predict that within 20 to 25 years, Africa will account for around 20% of the world’s population. This is not only important in terms of numbers but also because it gives the continent a huge opportunity in terms of human resources.” He went on to say that several African nations are already seeing an explosion in the size of their middle classes—key for insurers because they are the people who will need insurance in the future. All investors should benefit from that emerging middle class, believes Mr Kepeden, because they will also be the consumers of the future. In terms of insurance that investors are demanding as they make inroads into the continent, political risk remains top of the list. “Stability in the country is still the number one concern,” said Mr Kepeden. “It is about judicial security but also about the existing political framework and also the tax regime. These all build up to large political risks—investors need to know there is a regulatory framework in place, the right political support and the right tax system to allow them to export profits and benefits out of the country, for example.” Human resource is another key concern for investors. Mr Kepeden said they need to know that they will find the right people in place, properly trained and able to do the job. Investors also have to consider any local rules on the use of expatriate workers. However, while the risk of expropriation may also be high on the list of foreign investors’ concerns, Mr Kepeden said: “Expropriation can happen anywhere at any time. It is a risk whenever and wherever you do business. Perhaps it is more important in Africa but really it is no different to elsewhere. LARGE RETURNS “Something that is important to remember is that in Africa investors are generally enjoying a large return on their investment—much larger than in many other places. However, investors must accept that to get those returns, risks will also exist.” One of the challenges for many foreign investors is learning the culture of doing business in Africa. As Mr Kepeden said: “We do have customers who have not considered that it is a different culture and a different way of doing things. Companies need to commit to the markets. They must be convinced that doing business in Africa is what they want to do and to work with confidence.” Competition for business is hotting up across the continent. “It is not just about European firms, but about the Chinese and Indians who are all investing heavily in the region. There is also a growing community of Turkish investors in Gabon, for example,” said Joël Muller, Directeur Général for the Gabon office. He stressed: “It is important to be optimistic because if you watch TV you see another side to Africa. For many investors it is a shock to arrive in the continent and find it so very different to those TV images. It is important to have vision. The future is very exciting and it is possible to put a business in place now. But you do have to put precautions in place too. Key to that is having the right people on the ground—risk managers included. It is no good trying to risk manage the operations from your office somewhere in Europe. People need to put their feet on the ground.” Mr de Mestier said those lessons are as important for insurers as for any other type of business. In terms of spreading across the region, he said: “Developing in the French-speaking countries is helped enormously because there is one regulatory system for all 14 of the francophone countries. “There are also organisations designed to help investment regionally and, importantly, there is a single currency for all countries which is pegged to the euro. This gives enormous stability but also confidence because investors know that the French central bank stands behind these countries.” Added to that, he said: “There are a lot of synergies and similarities in approaches to business between them. We are seeing the growth of global relationships between regulators and other authorities—it is not the same in every country but there is a certain consistency. It is the same law for some 14 African countries but the business law is consistent across 20 countries. “If you compare Africa with Latin America, these countries don’t have the same currency or the same regulatory framework. This makes it harder work for investors who want to cross-border with their business. Africa has some key advantages.” TURF WAR While the Chinese and Indian investors may be seen by some to have ‘stolen a march’ on European investors by moving quickly into the region through the global financial crisis, there is definitely hugely increased interest now from Europe and the US. Mr Kepeden pointed to the impending meeting of 40 African states with the US White House later this year—a clear sign, he believes, that the US wants to emphasis its interest in the continent. But he also said that future growth will not just be about bigger markets ‘moving in on’ less mature or experienced African states, but also about growth between emerging markets. Those opportunities, said Mr Kepeden, open up a whole new raft of possibilities for commerce and for the insurance market. Pointing to the recent initiative by the French risk management association AMRAE to launch a collaboration with risk managers in francophone countries, all three men said it has to be a good idea. “Risk management in most of Africa is in its infancy,” said Mr Kepeden, “I think there are plenty of ways to cooperate—in areas such as training, for example. It will help risk managers in the region develop with the same rigorous approach to risk management as elsewhere. “I also believe it will benefit the broader risk environment—brokers and insurers too can benefit from this kind of collaboration.” As Mr de Mestier concluded: “Today risk management is not recognised across much of the region. This needs to be refocused and this is an opportunity to help achieve just that.”

Taking it one step at a time–AXA profile

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