Enormous strides into Africa
The decision to take over Saham creates a Cape to Casablanca empire, with many benefits as well as some challenges
It will be tough for any corporate to replicate Sanlam’s footprint across Africa after it paid a full earnings multiple of 26 to take full control of Saham Finances.
Sanlam needed to raise a mixture of R5.7bn in equity as well as debt to finance the Us$1bn deal. After years of avoiding transformative deals — not least because of the disastrous effects they had on Old Mutual — Sanlam has finally taken the plunge.
It had to make a decision quickly because Saham founder Moulay Hafid Elalamy needed to sell — his term as Morocco’s minister of industry, investment, trade & digital economy had been renewed for five years, so the conflict of interest had to be managed.
Saham and Sanlam overlap only in four countries in Africa: Kenya, Nigeria, Botswana and Rwanda.
Junior Ngulube, CEO of Sanlam Emerging Markets (SEM), says the intention has never been to centralise the two businesses and cut costs. “We have partners invested in each national operation and need to work in consultation with them,” he says.
Sanlam has rights to the Saham brand for eight years, and thankfully Sanlam only differs by a few letters.
There are already some strong operations within SEM, even if they are not firing off much cash just yet.
In Nigeria, Sanlam has built one of the top three life businesses in partnership with local bank FBN. It has a much more recent bancassurance venture in Saham’s home country with Banque du Maroc, which should get some
Sanlam
extra speed now that Sanlam has full control.
Ngulube says Saham and Sanlam have similar philosophies, with a small office supporting African operations. Saham had 72 staff based in Morocco to support the ex-morocco operations and Sanlam has 100 people in SA supporting its operations elsewhere on the continent. But there will need to be some alignment of finance and reporting now that Saham is wholly owned.
There is also likely to be rationalisation of the reinsurance businesses, where it now has three brands: Santam Re, Saham Re and Continental Re.
Sanlam built up its SEM footprint starting with the purchase of African Life in 2005, and with it came Botswana’s dominant insurer and an indirect interest in Letshego, an ambitious multinational microlender.
By 2015 it was even ready to take on Old Mutual’s huge presence in Zimbabwe through Zimnat. But it was only after the acquisition of the first 30% tranche of Saham two years ago that its interests expanded beyond Anglophone Southern and East Africa.
Saham has $1.2bn in turnover and 3,000 employees in 26 countries. The Moroccan insurer still accounts for 45% of the net profit, with the next largest contributor being Saham Re (based in Mauritius).
Lebanon, Ivory Coast and Angola provide the largest profits in the insurance network.
In addition to insurance and reinsurance, Saham offers roadside assistance in 16 countries and has a third-party administration business, MCI, focused on medical insurance.
Saham is weak in asset management, where Sanlam certainly has competence.
Ngulube says it has a strong presence in the Kenyan market since buying Pinebridge East Africa from large global manager Pinebridge.
It is keen to make a similar acquisition in Nigeria to build a West African investment management hub.
Of course, it will be tricky to manage this vast “Cape to Casablanca” empire. It is only a mild culture shock moving from SA into Namibia and Botswana, which for the next few years are likely to provide more than half of SEM’S operating profit between them. Yet these are tiny countries with less than 5m people between them and combined GDP of $21bn.
In the Saham heartland, Tunisia alone is twice as big as this, and almost as big as SA’S neighbours combined, including Zimbabwe and Mozambique.
Ngulube says the days are long gone when SA insurers believed they could take an SA