2022 Artsplit/Omenka seminar: ‘Art better as alternative asset’ – Experts

...Demand surges as African art grosses over $50m in 4yrs

Issues bordering on African art as alternative investment and asset for collectors formed the thematic occupation of the latest installment of the decade-long Artsplit/Omenka Gallery seminar series, as experts also explored emerging business trends on the continent’s market.

The 2022 edition of the interactive seminar which gathered experts from the United Kingdom, South Africa and Nigeria also featured a discussion session all highlighting the art market in Africa and collectors’ window for assessing emerging trends, tips on maximising goals, and business strategies for collectors.

The event which held, last Friday, at the Alliance Française/Mike Adenuga Centre in Ikoyi, Lagos, was also a forum for experts to highlight the merits and pitfalls hidden in some of the emerging business and market opportunities on the continent.

Aptly themed; Art as an Alternative Investment,’ the seminar also showcased benefits of art in strategic portfolio diversification for collectors.

Though positing that art collection should be driven by appreciation and not financial gains, the experts however, acknowledged the rewards lurking in the sector for the discerning collector.

Featuring three key presentations, the seminar was formally kick-started by the Director, Modern & Contemporary African Art, Bonhams, Mr. Giles Peppiatt, whose paper titled; ‘Benefits of Art in Strategic Portfolio Diversification,’ called for caution in the assumption that art was a goldmine of investment opportunities, as according to him, it requires careful study and keen observation of market trends by the collector to identify the bargain works.

Peppiatt said failure to do proper research into an artwork could bankrupt the collector as the demand for that work in the secondary market ‘might suddenly collapse,’ even as he also advised that collectors ‘must first be guided by the appreciation of the art, so that even if the price falls, at least you would have gained from appreciating the work by yourself.’

Continuing, Peppiatt said: “There are many fakes and copies out there. You must have to find an expert to verify the authenticity of an art before purchase. You can even consult a body of experts on that field just to verify the genuineness of an item.”

The expert, however, frowned at the media for painting a false image of art by way of sensationalising art sales instead of highlighting the way works affect the audience during exhibitions.

“After an exhibition or an auction, the media is more interested in the high price an art work has been sold for rather than the way that work in question has impacted on the lives of people. This somehow sends the wrong message to the general public that the sector is rich or that there is money in it. The price tag attached to an art makes the news headlines and not the level of appreciation attached to that art,” Peppiatt.

In his paper titled; ‘The Making of a Collector; Guiding Principles, Collecting Strategies,‘ Head of Chambers, Pump Court Chambers and collector, Mr Oba Nsugbe, corroborated Peppiatt on the need for collectors to be more appreciation-driven, as he listed some of the pitfalls inherent in making bad judgement of art as a collector.

Nsugbe who is the Chair of the Africa Centre, and an Africa-related litigation and dispute resolution expert advised collectors to be properly guided in their decision making over art.

“I would suggest that you be sober before making that decision on purchase and consider it as business and pleasure if you are a collector,” he said.

Founding Director of the South African-based Aspire Art Auctions, Mr Ruarc Peffers in his presentation titled; ‘Financial Methodologies Responsible for Key Changes in the Structure of the African Art Market,’ explored the highpoints of the sector for the collector, as he posited that art should be instead be regarded as alternative asset as against conventional bonds.

Backing his theory on the viability of the African art market for the collector, Peffers said Southern Africa and West Africa regions topped market demand by American and European buyers as a combined total of over $50 million was raked in by way of sales of art works over a period of four years ending in 2021.

However, in both countries, only a few artists account for this staggering sales figure; with only two in Southern Africa accounting for over $33 million, while works of a Ghanaian, two Nigerians, including modern art master artist, late Ben Enwonwu grossed over $20 million in the same period under review.

Although, he admitted a paucity of accurate data on Nigeria and African sales statistics, Peffers noted that the market remains robust as African art is currently experiencing a high demand around the world.

On art as an investment option, Peffers insisted that though there were the merits which he listed as its high turnover and yield over time, he, however, noted that it should instead be considered as an alternative asset.

“Art is an alternative asset considering that you are paying tax on holding the item, insurance for a fairly longer period of time even before it begins to yield premium on value, high transaction rate as you spend time covering the hammer price. And if you are need of quick money, it is also not that easy to dispose of considering you have to find the right buyer willing to meet your price since pricing on art is determined by the buyer and not the seller.

“However, as an alternative asset it has its advantages because its value appreciates over a long or longer period of holding or storage time. In other words, it has a longer shelf life,” Peffers said.

On determining appropriate pricing of art, Peffers said: “The price or value of art is affected by a whole chain of off takers, who include but not limited to stationery dealers, historians who chronicle the artist, public and private art galleries and museums, collectors and auction houses, who provide storage for the art, and many others, who all work in synergy to affect the price an art in the secondary market.

This expansive chain of workers to a large extent affects the pricing of an art in the secondary market, but not necessarily the value attached to that piece of work, which is left for the artist and primary market operators based on demand.

“Storage is provided by public and private galleries, museums, private collectors, auctioneers, vaults, who cost their fees into the particular. In Europe, the auction houses charge up 25 per cent for an item of art sold.

“Financing is also provided by financial institutions by way of insurance cover and security and transaction fees for handling payments.

“And then the scholars, writers, scientists and other technocrats who build up data and historical backgrounds and verification for particular art for authenticity of each work.

“So in the end, that one piece of art sustains a whole chain of industries and support groups and their operators and practitioners.

“In effect, when you see an art and you think your child could have done it or even done a better job, then again, your child didn’t.”

Highpoint of the event was the Panel Discussion session was moderated by the Director/Founder of Omenka Gallery, who is also the immediate past president of the Nigerian Society of Artists (NSA), Mr Oliver Enwonwu.

The session featured art experts, including; South African-based Ms Beathur Mgoza Baker, the Co-founder, Madlozi Art Gallery; Ms Bimpe Nkontchou, Managing Principal of the Kensington, United Kingdom-based W8 Advisory LLP; as well as, Ms Onyinye Anyaegbu, the Executive Director, Technology and Communications, ARTSPLIT.

Theme; ‘Fractionalised Art Ownership and Securities Law,’ the session essentially x-rayed the emerging business model in art collection which places ownership of artworks on multiple collectors with each collector owning a piece of share or stake in the particular art in the bidding process.

The business model driven in Nigerian by Artsplit leverages on the idea of enabling small time collectors to own the same art through smaller percentage holdings or stake which are transferable, convertible to liquidity, and assetised, as owners can also exit ownership.

Artsplit is an emerging platform that aims to promote the global profile of African Art by building a diverse community of African art collectors and investors, while also providing the opportunity to own shares (also known as splits) of select African artworks, which collectors can trade in real time.

Explaining the model further, Ms Anyaegbu said the initiative ‘allows the small time collector to own a stake in an artwork which he ordinarily may not have been able to afford by himself.’

“As the value of that art appreciates, the collector’s stake is raised which means more profits for him.

“However, the collector’s stake is covered from loses in the case of a drop in the value of the art. Biddings are conducted via our mobile app only which can be downloaded via the Google Playstore of Apple store,’ Anyaegbu said, adding that though her company is not registered as a securities firm, ‘the processes are regulated by the appropriate bodies.’ 

Remarking, Ms Nkontchou while noting that emerging trends like the Artsplit initiative which targets lowering the entry level for collectors of art are well appreciated, however, noted that the risks and security implications cannot be over-looked, as, according to her, ‘these opportunities can also laced with huge risks.’

According to her, art collecting is a huge asking on the financial ability of an art enthusiast, which means any platform which enables affordability for the small collectors is welcome for the industry and for the growth of art appreciation.

Started back in 2012, the annual seminar aims at raising knowledge amongst collectors, wealth managers and financial institutions alike, as African art continues to rise in value domestically and internationally.