20 May 2019

Uganda: Alexander Forbes Moves to Exit Uganda Market

South African financial services group Alexander Forbes has announced plans to exit the Ugandan market as the firm reviews its operations in emerging markets.

The firm, one of the largest administrators of retirement benefit funds in Uganda, is leaving the country after years of operation. It says it is committed to an orderly exit from the East African nation and will maintain levels of service and advice to clients.

Headquartered in Johannesburg, South Africa, Alexander Forbes has offices in other African countries including Namibia, Botswana, Zambia, Nigeria and Zimbabwe. But these countries only contribute a combined seven per cent of the Alexander Forbes' revenues, with 93 per cent of the income coming from its South African operations.

The firm says the operating environment for emerging markets businesses has proved difficult due to vulnerabilities faced by economies in the region. These include rising public debt, low GDP growth, fragilities in the financial sector, and inadequate financial buffers to deal with shocks.

"Countries in which Alexander Forbes is doing business experienced paltry growth, which added to the challenging earnings environment," the firm said in its 2018 annual report.

According to the International Monetary Fund, public debt exceeded 50 per cent of GDP in nearly half of sub-Saharan countries in 2016, with debt servicing costs becoming a constraining burden.

The firm says it is now reviewing its entry models into African countries beyond pension fund administration, with a preference for high-margin business that does not require heavy capital investment.

"Areas such as consulting and brokerage that have access to relevant cross-selling opportunities will be pursued. Our approach will be to establish partnerships that enable joint ventures," the company said.

Emerging markets will remain a key long-term growth prospect for the group, with hopes that the growing working-age population and middle-class will positively impact savings rates.

"We see the increasing use of technology as the access point to financial services. This is a long-term, forward-looking view of the growth story in Africa," the firm said.

"We believe it offers opportunities to roll out our financial wellbeing value proposition to sustain and grow our pan-African footprint. Africa is a large continent with different regulations and unique needs per country.

"Our approach will be to roll out our offerings in a platform-based, modular approach."

Alexander Forbes, which is listed on the Johannesburg Stock Exchange, provides financial services such as pension funds, accounting, consulting and actuarial services.

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