Private sector is key to revitalising South Africa’s economy

Old Mutual, one of South Africa’s largest insurers, is determined to keep African growth and development at the forefront of the global agenda. Its CEO answers our questions on the country’s insurance sector, ESG financing and the prospects for the year ahead.

The financial services sector in South Africa is strong by global standards. What has made it such a strong global performer?

The sector is relatively well capitalised and has worked hard to build resilience against global shocks. During the Covid-19 pandemic, for example, financial institutions worked to mitigate the impact of capital flow volatility through the flexible exchange rate, limiting levels of foreign currency exposure, and prudential limits on foreign investments. 

Financial sector oversight is very strong in South Africa. There is both a commitment to independent supervision and the implementation of international standards within the sector. However, the challenging current environment calls for greater prudential supervision and full implementation of the market conduct framework.

The sector continues to innovate to better understand its customers. More simplified products, driving digital adoption and enhancements in line with growing internet and smart phone access and usage have led to greater overall access and inclusion within the sector. Additionally, greater competition, with innovative new entrants who continue to challenge tradition, has also strengthened the sector, increasing access and affordability in the process.

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How do you see the role of the private sector in revitalisation of South Africa’s economy? 

The private sector has a critically important role to play in revitalising the economy. It is already a significant contributor, employing around three quarters of South Africa’s total workforce and accounting for over two-thirds of investment and research and development expenditure. 

The Covid-19 pandemic emphasised how critical collaboration between players is to effectively address shared problems in both the economy and society. However, there is an urgent need to move from talk to action.

Revisiting existing blueprints, such as “Operation Phakisa” – the plan established in 2014 to fast track the implementation of solutions on critical development issues through greater collaboration between the public and private sectors – is one of the ways to ensure greater commitment to shared growth. 

There is a lot of talk about sustainability and ESG financing. What does this mean for an institution such as Old Mutual? 

It’s about rethinking the financing landscape, given the interconnectivity between the economic, social and environmental systems we operate in. 

We see ourselves as stewards of the resources of future generations and our aim is to use our core competence as a business of gathering capital, investing it, and transferring risk, to transform our collective growth path to be more socially inclusive, low carbon and resource efficient. 

We have a number of current initiatives and commitments relating to ESG financing. Our inhouse-developed Green Economy Taxonomy allows us to track the portion of our investments invested in the green economy. Through our active stewardship programme, we are proactively engaging company boards, market regulators, and stakeholder organisations on material ESG issues. 

In the last year, we concluded 78 company engagements and addressed 168 key issues including ESG integration, Environmental (climate change) and ESG Risk Management. We are the first insurer in South Africa to join the Net Zero Asset Owner Alliance and the second South African Asset Manager to join the Net Zero Asset Managers Alliance. The Group has R150.5bn ($8.67bn) of assets under management invested in the Green Economy .

What are your hopes for the Davos meetings and for Africa in 2023  in general? 

In line with the official theme this year of “Cooperation in a fragmented word”, our commitment as an African business is to foster greater partnerships with a range of stakeholders to address shared challenges and achieve shared growth. 

Throughout the Annual Meeting and beyond, we are determined to keep the African growth and development agenda at the forefront of global action, as well as use our experience and expertise to drive shared value for both our business and society. 

While the operating environment for business in general remains tough, we remain optimistic of the opportunities for growth that exist on the African continent, and we look forward to working with our partners to achieving them.