Sanlam to buy 40% stake in Zim insurer

SANLAM would buy a 40 percent stake in a Zimbabwean insurance firm, South Africa’s biggest insurer said yesterday, betting on the industry’s growth in a country facing a liquidity crunch and weak domestic savings.

Sanlam will pay $11.6 million (R138m) for the stake in Masawara Investments Mauritius (MIM), which runs a life and short-term insurance and asset management business. MIM is a unit of AIM-listed Masawara.

Masawara has diversified investments in the Zimbabwe economy spanning telecoms, hotels, agro-processing and risk advisory.

It said at the end of March that it would turn the corner for the better this year and increase profitability, hoping to ride on regional companies despite biting economic conditions, which executives at the company say are resulting in increased business failures.

The acquisition of a 40 percent stake by Sanlam Emerging Markets would provide the company with the much needed boost to tap into other markets beyond Zimbabwe’s borders, it said.

Acquisitions

Sanlam, the JSE-listed financial services group, has already unveiled a plan to spend as much as R3 billion in acquisitions elsewhere on the continent.

The group has been expanding its presence in the rest of Africa, where rapid economic growth has increased the number of people with money to spend on insurance to protect their wealth.

The deal has yet to get the necessary approvals from regulators.

In March, Masawara reported a $16m profit before tax for the year to December 2014, significantly up from a $10m loss in the previous period.

The profit increase had been attained against the backdrop of biting economic conditions in Zimbabwe that have seen companies scale down or close shop in the worst cases.

“The business environment in Zimbabwe has remained difficult. The trend of tightening liquidity witnessed over the past two years has continued and the formal economy has slowed,” David Suratgar, the chairman of Masawara, said at the time.

“In addition to acquiring an equity interest in MIM, Sanlam Emerging Markets, through its affiliates, will also offer technical support services to the company’s insurance businesses in Zimbabwe.

“MIM and Sanlam Emerging Markets will also explore new opportunities in other countries in Africa,” Masawara said.

Sanlam shares on the JSE fell 0.57 percent to R74.98. – Additional reporting by Reuters