How IFCs are Supporting the Next Wave of Growth in Africa

Featuring a panel of women leaders, the women-only event attracted more than 80, a mix of finance professionals, entrepreneurs and SME business owners, all of whom were invited to tap into a rich source of inspiration, expertise and insight on gender lens investing, the positive impact of women’s empowerment, how best to raise capital, as well as the challenges and opportunities faced by women in the business space. While we focussed on  ‘unicorns’ – meaning start-up businesses that have been bold and made significant inroads in raising capital – and how to successfully raise large amounts of local and global capital, we also touched on approaches to closing the gender gap in the private equity and venture capital industry. It may seem as though the two topics are unrelated, but this is not the case. Both are critical to achieving the 2030 UN Sustainable Development Goals.

Simply put, when more women work, the economy grows. Women’s economic empowerment increases productivity, diversification and addresses income equality, among other positive development outcomes. I’ll be reflecting on these topics and more in a Jersey Heard podcast series on capital raising in South Africa, due out in October, and in the lead up to Jersey Finance’s South Africa Roadshow event series this winter.

So thinking about this, and with my business development hat on, where do I see potential opportunities and synergies between Africa and international finance centres (IFCs) like Jersey?

IFCs assist in accessing funds to promote access to and use of high-quality financial services, which is critical to achieving inclusive growth. Jersey’s contribution to the continent is increasingly growing. South African funds matter to Jersey. In respect of capital raising, South African managers already account for the seventh largest pool of capital globally, in respect of Jersey-based fund promoters. Using Jersey for South African fund assets is also on the rise; in 2021, statistics reported a 38% year-on-year increase versus the total growth of 23%. They use Jersey structures to attract UK and EU capital. The more capital is raised, the more these funds can assist African entrepreneurs fulfil their dreams and contribute to the economic development of our continent.

Also, IFCs such as Jersey have a long-standing relationship with South Africa which over the past 30 years has helped ultra-high net worth (UHNW) families diversify their investments to ensure capital preservation and effective succession planning.

I recently wrote about why Jersey’s proposition is growing in popularity for South African UHNWIs and wealth managers alike, in which I highlighted an interesting observation: South African HNWIs share a common interest – the greatest portion of their estates are assigned to family. For this client group, it’s clear they will seek the ability to build generational wealth; creating and protecting it for the future. IFCs like Jersey have supported these ambitions for private clients for more than 60 years, using structures such as trusts and foundations to manage, protect and grow assets.

Thinking about the next generation, a compelling study by Merrill on the financial services industry and how advisors and investors interact found that younger generations of female investors are more knowledgeable about wealth management and are more likely to manage their own investments than older female investors. As a result, they expect their financial advisors to be self-aware, proactive and unbiased.

South Africa is home to Africa’s two wealthiest cities in terms of total wealth – Johannesburg managing US$239 billion within its borders and Cape Town US$131 billion.

For those who work with HNWIs and their families, particularly the next generation, a further challenge arises around jurisdictional choice. Unsurprisingly, political and economic instability pose a risk to wealth preservation and asset protection. With HNW families becoming increasingly global – and children living beyond one ‘home’ jurisdiction – they will often seek stability and certainty from a jurisdiction. Offshore solutions found in IFCs like Jersey offer just that: an opportunity to bolster and diversify investment portfolios allowing investors to benefit from a broader, global universe beyond what the South African market offers.