Africa -- fastest growing insurance market. (Mergers).

"Africa has reached a critical turning point in its history. After an era of decolonisation and a period characterised by civil wars, military rule and economic stagnation, a third wave is beginning in Africa -- one of peace, democracy, human rights and sustainable development", says the UN secretary general, Kofi Annan.

Africa as a whole is the fastest growing insurance market in the world in terms of premium, albeit off a low base. Africa is already showing positive signs. Some 42 of the 53 countries in Africa are democracies -- the majority of which have introduced economic reform programmes. New continental alliances are being established and the long-sought-for African Union has become a reality. It is, therefore, clear that Africa is slowly emerging from many years of economic stagnation.

The number of investment opportunities has grown. Local businesses are beginning to understand that in order to survive and compete with the multinationals, they must have proper financial planning and strategies. This is bringing the insurance equation right into the open.

According to Michael Duncan, chairperson of Afrinet Management Services, a division of Alexander Forbes Risk Services, "there has definitely been an increase in South African businesses opening offices across our country's borders -- and even further north -- since 1994. Industries such as mining, electronics, communications, construction, financial services and big retail groups are all represented."

Mergers and acquisitions have become daily occurrences as companies seek to expand into Africa. And, with any transaction involving different companies, whether it is for a takeover bid, an agreed merger, a disposal, an acquisition or a management buy-out, there is an element of risk.

Afrinet's approach to expansion varies from country to country. For example, it is necessary to understand the legislation and customs of the country. In the event of a start-up, it is important to find suitable people, premises, furniture and equipment.

In certain countries, for example, the insurance industry is currently state controlled, typically comprising a single insurance company and no insurance brokers. Therefore, the only option is to set up a new business, ideally with reputable local partners.

"For our part, we are able to offer our partners access to our risk management and other technical resources and, of course, our client base," says Duncan. "I think that this is the secret of any joint venture -- both parties must see value in the relationship -- either in terms of cost containment or enhanced income. This far outweighs the benefits to be gained by each party competing.

"Afrinet's acquisitions to date," Duncan continues, "have mainly been as a result of approaches made to them -- often when shareholders have come to realise that their future growth and development require the support of an international group such as ourselves. It is obviously important to be selective in order to protect the company's reputation and it is vital to retain good local management."

To an extent, the influence of donor bodies in Africa has reduced the twin threats of expropriation and nationalisation. But some economic risks still remain, such as devaluation and the imposition of exchange controls that make the repatriation of dividends difficult.

Also the regulatory environment and legal systems are often less than transparent, and there are a host of unconventional risks that could arise and need to be assessed.