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This week Africa Business Communities speak to Tatenda Mhonde, Director at One Pangaea Financial, Johannesburg Area, South Africa . One Pangaea Financial are experts in providing tailor-made outsourcing solutions to clients where a large volume of work needs to be completed against tight deadlines.
Kindly introduce your company to us.
"One Pangaea Financial aim is to harness financial expertise from around the globe to create exclusive solutions for entities, individuals or corporate. The global industry approach is a generally a “one size fits all,” but with our “outside” expertise combined with an “internal” know how, we at One Pangaea Financial believe in discrete economies that require a distinctive approach to financial problem solving.
One Pangaea Financial main focus is providing independent quality Actuarial Solutions. Our diverse team has an average of 6-8 years, per consultant, of actuarial expertise within the Employee Benefits and Actuarial Services arena."
Do insurance companies have the incentive to change processes to deliver better care in Africa?
"Insurance companies are for the most part profit making organizations and to the extent that there is profit to be made, yes there are incentives to change processes and deliver better care. Most African countries’ insurance industries are just too small and there isn’t the level of competition that would force insurance companies to innovate and change processes in order to improve their offerings. Small financial markets are also very volatile and unpredictable and therefore we do not always have the kind of long term planning required to grow the industry. The lack of skills in most African countries also limits product offerings to the simplest and easy to handle insurance offerings. In some of the countries individual insurance is relatively new and still in early phases."
Do you see the company providing services directly to consumers?
"We currently service corporate, government entities and individual consumers. Most of our clients we service remotely as the nature of the industry does not require physical interface. Data can be sent through email and the final report delivered on the same channels. When conversation is required, we make use of teleconference services."
Who do you compete with?
"We are in competition with actuarial consulting firms either part of insurance companies or stand alone consultants. As mentioned, the service can be performed remotely and as such the origins of the competition is not restricted to geographical location."
Having advised firms internationally, what is the most interesting pension scheme arrangement you have come across in Africa?
"The most interesting pension scheme that we have come across is the negotiated fund which is a fund run through the trade union and is normally capable of bringing large numbers of employees under a multi- employer scheme. This kind of fund is able to exploit economies of scale to reduce costs and make it viable for even the lowest paid to belong to a pension scheme. It is a fund that we would like to believe suits the African environment where salaries are not always high enough and employers not always big enough to make it viable to run a pension fund. It is a vehicle that could be used to allow the informal sector to access retirement fund products more efficiently."
What is your vision for the industry? What will be your role in shaping the industry or participating in its development?
"Our vision for the industry is that someday Africa will wake up to realize that mineral resources are a means to an end but not an end in themselves; that long sustainability of the African economy lies in the efficient generation and deployment of African long term investible capital; that the creation of a viable and dynamic insurance and pensions industries is the bedrock on which all modern sustainable economies lie. In Africa’s case the transformation of mineral wealth into a successful financial services industry becomes the most urgent imperative. We have the resources to train employees setting up retirement schemes on legislative requirements and funding strategies to add to the growth of investible assets in African economies. In addition we have the capacity to train individuals on saving to mitigate future risks such as loss and longevity. Majority of the continent’s citizens have meager information when it comes to saving to mitigate future risks."
What is the biggest single issue facing pension funds and their trustees in Africa?
"Over the last ten years perhaps the biggest single issue facing the industry has been HIV AIDS. The amount of capital consumed by the scourge of HIV AIDS is unbelievable and naturally this has eroded the amounts of money available for the long term and the needs of members who still have to retire. The industry has not always been very pro-active in responding to this threat and up to this day, Funds continue to bleed terribly despite advances in medicine that could reduce its impact on the viability of Funds. Trustee level of competence still remains very poor and this reduces their ability to act decisively on major issues."
How do you believe that enterprise risk management applies to pension funds?
"The pension funds industry needs to re-invent its risk management models in view of the large changes taking place in the industry. Ten years ago, the average fund was a defined benefit scheme, and risk was largely borne by the employer who understood risk reasonably. The average Fund today is a defined contribution fund, with trustees who are for the most part shop floor workers who do not always understand the underlying complexities and risks attendant to running a Fund. There is a misconception that defined contribution funds are less risky than defined benefit fund. The fact that we have this misconception at all illustrates the lack of appreciation of the real risks associated with retirement funds."
What will the African pensions industry look like in the next five years?
"It is difficult to say how the industry will look like in 5 years time. However, in South Africa should the National Savings Fund (NSF) come into effect together with the National Health Service, it would have a profound effect on the retirement. The critical issues with regards to both is whether they will add another dimension to the generation and efficient deployment of long term investible capital or whether they in fact destroy and undermine what is there already. If they happen to add another dimension, then we could see a whole transformation of the entire saving industry."
What impact do you believe proposed NHS reforms will have In Africa?
"We do not think the NHS will have much of an impact on Africa per se, rather on the costs of medical services in South Africa. If well managed and executed, the pooling of resources into one pot and chipping away at administrative costs should result in economies of scale. With increased cover for communities, the population will live longer and healthier adding to the available workforce and this may lead to strengthen economic growth."
Any concluding thoughts?
"We need to educate our public about saving for future risks. This will shift the current mindset and focus of immediate consumption to future and long term planning. The results of such a mentality will create enormous capital resources that will change the fabric of the African community.