Pan-african play­ers

In­sur­ance com­pa­nies have been slower than banks to develop con­ti­nen­tal am­bi­tions. Ex­ec­u­tives from two South African big-hit­ters, San­lam and Old Mu­tual, tell The Africa Re­port about their ex­ist­ing African foot­prints and plans for ex­pan­sion

The Africa Report - - CONTENTS - By Mar­cia Klein in Cape Town

The Africa Re­port talks to ex­ec­u­tives from two South African big-hit­ters, San­lam and Old Mu­tual, about their ex­ist­ing African foot­prints and plans for ex­pan­sion

Two large South African in­sur­ers have their eyes on the con­ti­nen­tal mar­ket : gi­ant San­lam is mak­ing moves in francophone and North African mar­kets, while Old Mu­tual is split­ting up its oper­a­tions so that its emerg­ing-mar­kets en­tity can fo­cus on growth op­por­tu­ni­ties in South Africa and the rest of the con­ti­nent. South Africa is the con­ti­nent’s strong­est in­sur­ance mar­ket, and thus of­fers a strong base for African ex­pan­sion, es­pe­cially as the econ­omy looks some­what brighter un­der a new lead­er­ship. San­lam has a ma­jor head start in the race against Old Mu­tual. It now op­er­ates in 33 other African coun­tries, and its rest-of-africa oper­a­tions ac­counted for 13% of the group’s prof­its in 2017. For its part, Old Mu­tual has been slower to grow on the con­ti­nent, with some in­vestors ar­gu­ing that its US and UK oper­a­tions do not fit well with its emerg­ing-mar­kets port­fo­lio. Old Mu­tual has a pres­ence in 13 other African coun­tries and its rest-of-africa units rep­re­sented just 3% of its prof­its in 2017. Both firms are now mak­ing ma­jor moves to strengthen their po­si­tions in the highly com­pet­i­tive South African mar­ket and to get footholds in economies that are set to grow quickly. The split of the Lon­don-listed in­sur­ance group Old Mu­tual into

its African and other in­ter­ests, which is due to be com­pleted in June with a list­ing on the Johannesburg Stock Ex­change, comes at a good time. Old Mu­tual moved its pri­mary list­ing from Johannesburg to Lon­don in 1999 in the hope of at­tract­ing more in­vest­ment. Af­ter wind­ing down some in­ter­na­tional in­vest­ments that did not com­ple­ment its port­fo­lio well, Old Mu­tual is look­ing at Africa with a new per­spec­tive.


Not quite the prodi­gal son, Old Mu­tual “is look­ing for­ward to its home­com­ing to Africa,” Jonas Mushosho, chief ex­ec­u­tive for Old Mu­tual Rest of Africa, tells The Africa Re­port. Its strat­egy is to be­come “the pre­mium African fi­nan­cial ser­vices group in 17 coun­tries”, which cur­rently in­clude South Africa, Botswana, Malawi, Namibia, South Su­dan, Tan­za­nia, Zim­babwe, Ghana, Kenya, Nige­ria, Rwanda, Swazi­land and Uganda. It of­fers sav­ings, in­vest­ment, in­sur­ance, bank­ing and wealth man­age­ment ser­vices. But its strat­egy, cur­rently, ap­pears to be cau­tious con­sol­i­da­tion with­out much talk of ag­gres­sive or­ganic or ac­quis­i­tive growth : “As a stand-alone public com­pany head­quar­tered in Africa, we will be fo­cused on Africa and are well po­si­tioned in key sub-sa­ha­ran African ge­ogra­phies across mul­ti­ple lines of busi­ness to make the most of the con­ti­nent’s growth po­ten­tial,” says Mushosho, point­ing to the reach of the group com­pared to South African peers. Old Mu­tual has a long way to go to catch up with ri­val San­lam af­ter the lat­ter’s re­cent $1bn deal to take over Mo­roc­can in­sur­ance group Sa­ham. Ju­nior Ngu­lube, the chief ex­ec­u­tive of San­lam Emerg­ing Mar­kets, tells The Africa Re­port that Sa­ham “has a pan-african vi­sion sim­i­lar to ours, but started in the north.” Its foot­print in Maghreb should give Old Mu­tual pause for thought : Morocco is the sec­ond-largest

in­sur­ance mar­ket in Africa af­ter South Africa. The com­bi­na­tion of San­lam and Sa­ham “gives us a unique po­si­tion to op­er­ate in all lan­guage re­gions on the con­ti­nent,” says Ngu­lube. San­lam mainly of­fers life and gen­eral in­sur­ance, as well as re­tail credit and as­set man­age­ment, while Sa­ham is also strong in health and third-party ad­min­is­tra­tion. San lam op­er­ates in Africa through part­ners in al­most ev­ery coun­try .“We know about fi­nan­cial ser­vices, but our part­ners know about spe­cific coun­tries,” Ngu­lube says. This has en­abled it to be among the top three mar­ket lead­ers for life in­sur­ance in eight African coun­tries and for gen­eral in­sur­ance in 11 African coun­tries.


San­lam’s geo­graphic foot­print is large, with the big­gest gaps in parts of North, East and Cen­tral Africa. Ngu­lube says San­lam Emerg­ing Mar­kets is still in­ter­ested in Egypt and Ethiopia, though reg­u­la­tions cur­rently pre­vent it from pur­su­ing the lat­ter. “Our geo­graphic foot­print is pretty much com­plete,” Ngu­lube says. “The next phase is to en­sure we have strong, lead­ing busi­nesses in ev­ery coun­try. Sec­ondly, at this point, we don’t have all our prod­ucts in ev­ery coun­try. We need to make sure we ex­pand our prod­uct of­fer­ing and cov­er­age over the con­ti­nent.” A key strat­egy is to be a part­ner to multi­na­tion­als, sev­eral of which are al­ready signed up. “If you are a multi­na­tional in 20 coun­tries and we are in 33, you would be cov­ered in all the coun­tries you op­er­ate in by talk­ing to San­lam,” he says. “We are look­ing at the needs of their em­ploy­ees on the ground […] spe­cific em­ployee ben­e­fit needs like travel, health, emer­gency evac­u­a­tion and cor­po­rate so­lu­tions.” San­lam Emerg­ing Mar­kets also pro­vides so­lu­tions for other in­ter­na­tional in­sur­ers who have clients in Africa but are not in Africa them­selves. San­lam started to grow its Africa foot­print with the 2005 ac­qui­si­tion of African Life, and no­table ex­pan­sion ac­tiv­i­ties since then in­clude a part­ner­ship with Nige­rian bank FBN, ban­cas­sur­ance deals in Morocco with Banque du Maroc and as­set man­age­ment in Kenya fol­low­ing the ac­qui­si­tion of Pine­bridge East Africa in 2017. It also has the lead­ing life in­sur­ance mar­ket share in Tan­za­nia and Rwanda. In ad­di­tion, in 2016, Old Mu­tual and the Nige­ria Sov­er­eign In­vest­ment Author­ity laid the ground­work for two joint funds that seek to raise a com­bined $700m to in­vest in agri­cul­ture and real-es­tate projects. Per­for­mances range across its var­i­ous in­vest­ments, but cur­rently Botswana, Namibia and Morocco are do­ing quite well. “Per capita in­comes and dis­pos­able in­comes are quite de­cent, and this re­flects in the [in­sur­ance] pen­e­tra­tion. Look­ing at our port­fo­lio, they con­trib­ute quite sig­nif­i­cantly. Other economies may not be grow­ing fast or may not have high lev­els of in­come per capita, but if we have ap­pro­pri­ate prod­uct for these mar­kets, we see strong growth, like in the life busi­ness in Nige­ria.” San­lam also signed a deal with Tan­za­nian firm Max­com Africa in May to ac­cept pay­ments via mo­bile-money plat­forms for in­sur­ance pre­mi­ums. At the re­cent Afr ican CEO Fo­rum in Abidjan, San­lam won African com­pany of the year, while the boss of Sa­ham, Na­dia Fet­tah, was named the chief ex­ec­u­tive of the year. These are tes­ta­ment to San­lam’s suc­cesses on the con­ti­nent, Ngu­lube con­cludes. Old Mu­tual’s strat­egy, sim­i­larly, is to build a pan-african, re­gion­ally dif­fer­en­ti­ated brand. Rest-of-africa chief ex­ec­u­tive Mushosho says the com­pany is the mar­ket leader in the South­ern African De­vel­op­ment Com­mu­nity (SADC). In East Africa, it is fo­cus­ing on its ex­ist­ing busi­nesses while its ap­proach in West Africa “is to grow the busi­ness by lever­ag­ing re­la­tion­ships with strate­gic part­ners, such as ban­cas­sur­ance.”


Mushosho says the group con­tin­ues “to see a great deal of op­por­tu­nity, es­pe­cially con­sid­er­ing the un­der­de­vel­oped in­sur­ance sec­tor in Africa.” Among the group’s pri­or­i­ties is get­ting East Africa right. It is spend­ing “much time and energy op­ti­mis­ing” its 2015, $155.5m in­vest­ment in UAP, an in­sur­ance com­pany head­quar­tered in Kenya. The UAP deal rep­re­sented about half of the funds Old Mu­tual had set aside for big African in­vest­ments sev­eral years ago. In West Africa, it is con­cen­trat­ing on grow­ing its oper­a­tions in Nige­ria and Ghana “in a way that op­ti­mises the use of cap­i­tal, lever­ag­ing our ban­cas­sur­ance part­ner­ships”

Our geo­graphic foot­print is pretty much com­plete

Ju­nior Ngu­lube, chief ex­ec­u­tive of San­lam Emerg­ing Mar­kets, , on the in­surer’s large pres­ence in Afric ich it now wishes to con­sol­i­da­tee

in a dif­fi­cult eco­nomic en­vi­ron­ment. Mushosho says Old Mu­tual’s strat­egy for SADC coun­tries is to “ex­ploit pock­ets of growth as and when they arise, and we will con­tinue to main­tain the strength of our lead­ing busi­nesses through ser­vice ex­cel­lence and prod­uct rel­e­vance.” Peter Moyo, the chief ex­ec­u­tive of Old Mu­tual Emerg­ing Mar­kets, said lit­tle about Africa dur­ing the group’s fi­nan­cial re­sults pre­sen­ta­tion in mid-march other than that its oper­a­tions de­liv­ered an im­pres­sive pre-tax ad­justed op­er­at­ing profit that was 33% above the prior year, with the SADC re­gion driv­ing the growth.


As of Au­gust 2017, Old Mu­tual Emerg­ing Mar­kets had 11.6 mil­lion cus­tomers, up from 10.9 mil­lion at the end of 2016, with six mil­lion in South Africa and 4.9 mil­lion in the rest of Africa – some­thing it will no doubt build on as it homes in on Africa with its sep­a­rate list­ing. But the group’s ac­tiv­ity in Africa is not lim­ited to in­sur­ance. Through Old Mu­tual In­vest­ment Group the firm has more than R61bn ($4.7bn) in in­vest­ment across the con­ti­nent, split be­tween in­fra­struc­ture, pri­vate eq­uity and im­pact funds, listed eq­uity through the Old Mu­tual African Fron­tiers Fund, and agri­cul­tural in­vest­ments. In May, Old Mu­tual Pri­vate Eq­uity ac­quired a 50% stake in Med­hold Group, a prom­i­nent sup­plier of med­i­cal de­vices across South­ern Africa. Paul Boyn­ton, chief ex­ec­u­tive of Old Mu­tual Al­ter­na­tive In­vest­ments, told me­dia that the out­look for in­vest­ment in Africa in 2018 is good: “In­fra­struc­ture is Africa’s most ur­gent de­vel­op­men­tal ne­ces­sity and thus most promis­ing in­vest­ment op­por­tu­nity for those pre­pared to take a longer-term po­si­tion,” he said, con­tin­u­ing: “African in­frastr uc­ture needs around $100bn in in­vest­ment an­nu­ally for the next decade, 600 mil­lion peo­ple in sub-sa­ha­ran Africa still lack ac­cess to power, three quar­ters of roads are still un­paved, whilst mov­ing goods through African ports is three to four times more ex­pen­sive than in Europe. Large well-struc­tured, well-man­aged African in­fra­struc­ture projects pro­vide steady, re­li­able re­turns over the longer term and will con­tinue to at­tract the at­ten­tion of in­vestors.” Ran­dolph Oosthuizen, an an­a­lyst for the Old Mu­tual African Fron­tiers Fund, said there is an in­ter­est­ing pipeline of com­pa­nies com­ing to the mar­ket in Egypt, where the gov­ern­ment is also plan­ning to sell down some of its own­er­ship. The South African gov­ern­ment, in its new bud­get an­nounced in Fe­bru­ary, in­creased the al­low­able in­vest­ment limit for pen­sion funds to the rest of Africa from 5% to 10%. While in­vestors have not rushed to fill their al­lo­ca­tions, this should lead to in­creased in­vest­ment on the con­ti­nent, and San­lam and Old Mu­tual stand to ben­e­fit from it.

Old Mu­tual’s ‘Mu­tual Build­ing’ in Cape Town, a rock-solid land­mark

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