We want Patrice — Sanlam

Stake in insurer will boost Motsepe’s diversification drive

● Sanlam, one of the country’s largest insurers, plans to sell a further 5% stake in the business, worth about R7-billion, by the end of this year to a black investment consortium led by Patrice Motsepe, further entrenching one of South Africa’s most prominent businessman’s diversification away from mining and into the financial services sector.

Ian Kirk, Sanlam CEO, told Business Times this week that the insurer wanted to increase its empowerment shareholding to 19%, adding that the deal would have to be broader than previous incarnations.

The partnership with Motsepe “. . . has been very successful for us, so he must control the whole thing . . . but it must be broader”, Kirk said.

“It was our intent to do an additional 5%. Now in terms of the rules, that needs to be a bit broader, you can’t just do it with Patrice and ARC [African Rainbow Capital]. But we don’t want a whole lot of partners, we want Patrice. Anything that is being done is being done on the Sanlam side. Patrice is not driving this, Sanlam is.”

Motsepe, who emerged in 1997 with his acquisition of some of Anglo American’s unwanted gold-mining assets, has sought to diversify his wealth away from the sector. Through his Ubuntu Botho he first bought into the 100-year-old Sanlam in 2004, a move that was renewed a decade later.

As part of Motsepe’s strategic shift, he established African Rainbow Capital two years ago, which is headed by former Sanlam executives Johan van Zyl and Johan van der Merwe. The company has a significant stake in one of the country’s new digital banks, TymeDigital. Since Motsepe was introduced as Sanlam’s empowerment shareholder 14 years ago, the insurer’s stock has gained 685%, outperforming its older rival, Old Mutual, which has gained 242%.

The Adrian Gore-led Discovery has been the standout performer in that time, gaining 1 271%, during that time. However, since the start of the year Sanlam’s shares have fallen 18% and closed 1.5% lower on Friday at R68.98, valuing the firm at R153-billion.

Historically, Sanlam was the cornerstone of Afrikaner empowerment. In the mid-40s, Bonsukor, a unit set up by the insurer, was registered for the reinvestment of policy bonuses, allowing it to mobilise capital for the development of businesses owned by Afrikaners. In the early ’90s the insurer was at the forefront of early empowerment deals, selling Metropolitan Life to a company with an 85% black shareholding consortium.

Kirk said the insurer ultimately wanted to increase its black shareholding to 25%.

According to Bloomberg, Sanlam’s top shareholders are the Public Investment Corporation, which owns the largest stake at 10.65%, followed by Motsepe’s Ubuntu Botho Investments, which owns 10.4%.

Kirk said the deal was dependent on completion of the third phase of its Moroccobased Saham Finances acquisition, for which the group is seeking regulatory approval in 19 jurisdictions. The deal may require the insurer to undertake a rights issue.

“We have really never had to raise capital in Sanlam, so if you can raise capital and at the same time improve your empowerment status, we would like to do that.”

Sources said Motsepe was also interested in acquiring an interest in Sanlam asset management business Sanlam Investment Management. The unit is one of the biggest asset managers in South Africa and was once led by Van der Merwe. Motsepe was not immediately available for comment.

Kirk said there was no deal on the table to bring any empowerment shareholder into its asset management business but it would be beneficial to have a black investor on that level. The “asset management people will tell you in the institutional market, if you could have 51% it would be great, but remember, you must also have black executives and black asset managers,” he said.

He added more than a 50% stake would be “very difficult” for Sanlam as asset management is an integral part of its business and the group would have to maintain control. “You could have a higher level of sharing but you can never not be in control. These are just scenarios, there is nothing on the table,” he said.

We’d like to improve our empowerment status and raise capital