Kitty for African ex­pan­sion

CityPress - - Business - GOD­FREY MUTIZWA busi­ness@city­

San­lam may spend as much as R5 bil­lion in three to five years to ex­pand its pres­ence in Africa, which means it will take ad­van­tage of some of the low­est in­sur­ance pen­e­tra­tion rates in the world.

As­sum­ing good re­turns, that would in­crease the rest of Africa’s con­tri­bu­tion to group rev­enue to about 35% from about 20% at the mo­ment, CEO Ian Kirk told City Press this week.

While India and Malaysia would also re­ceive at­ten­tion, South Africa would prob­a­bly main­tain its con­tri­bu­tion at more than 50% dur­ing the pe­riod, he said.

San­lam, like other South African com­pa­nies, is look­ing to Africa for op­por­tu­ni­ties amid tepid growth at home, where gov­ern­ment is strug­gling to stim­u­late an econ­omy suf­fer­ing from low in­vest­ment con­fi­dence amid po­lit­i­cal scan­dals, low prices for key ex­port earn­ers such as gold and plat­inum, and the ef­fect of the worst re­gional drought in more than a cen­tury. South Africa dom­i­nates the in­sur­ance mar­ket in Africa with al­most three-quar­ters of all pre­mi­ums, ac­cord­ing to Swiss Re.

In 2013, the in­surer es­ti­mated the to­tal value of Africa’s in­sur­ance pre­mi­ums at $70 bil­lion (R998 bil­lion), or just 2% of the world to­tal.

Nige­ria, the con­ti­nent’s most pop­u­lous coun­try and big­gest econ­omy, is es­ti­mated to have a pen­e­tra­tion rate of less than 1%.

Kirk said: “Africa is a top pri­or­ity for the San­lam Group to de­liver a con­stant level of prod­ucts and ser­vices to com­mer­cial and re­tail clients.

“We are talk­ing ev­ery­thing – gen­eral in­sur­ance, life in­sur­ance, as­set man­age­ment, re­tire­ment prod­ucts and health­care.”

The com­pany’s strat­egy would be to con­tinue to work with part­ners rather than ac­qui­si­tions or go-italone ven­tures, Kirk said, obliquely ref­er­enc­ing MTN Group’s woes in Nige­ria, where the com­pany is pay­ing $1.7 bil­lion in reg­u­la­tory fines af­ter be­ing found guilty of not dis­con­nect­ing in­ac­tive cus­tomers.

In Nige­ria, San­lam was the sec­ond-big­gest in­surer in part­ner­ship with First Bank, the coun­try’s big­gest bank by as­sets.

In Morocco, Africa’s sec­ond­largest in­sur­ance mar­ket af­ter South Africa, San­lam’s part­ner­ship with the re­cently ac­quired Sa­ham Group had taken the com­pany into 34 coun­tries.

“We are very happy with our part­ners,” Kirk said. “They pro­tect our in­ter­ests along­side theirs.”

At a me­dia brief­ing, Kirk said he thought South Africa had more than an even chance of avoid­ing a rat­ings down­grade next month be­cause of the hard work be­ing put in by Fi­nance Min­is­ter Pravin Gord­han, gov­ern­ment and the busi­ness com­mu­nity, which are in­creas­ingly be­gin­ning to speak with one voice.

“We might be lucky again – we got lucky in June,” he said.

“Gord­han played a few cards in June. He is play­ing his cards now … It’s more than an even chance.”

He said a down­grade would in­crease the cost of bor­row­ing and take re­sources away from gov­ern­ment pro­grammes to al­le­vi­ate poverty and other pri­or­ity ar­eas.

Big busi­ness had to play its role, Kirk said.

While the coun­try was in dif­fi­culty, it would prob­a­bly take be­tween 2 500 and 3 000 peo­ple in the right jobs to turn things around as long as in­vestor con­fi­dence was re­stored.

State-owned en­ter­prises in par­tic­u­lar re­quired fix­ing.

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