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Sanlam in $11.6m Zim insurance deal

Victoria Falls - Sanlam [JSE:SLM] is to receive a 40% stake in Zimbabwean life insurance and reinsurance businesses after agreeing to a $11.6m deal with London-listed investment firm Masawara.

Experts say there is significant room for insurance companies in Zimbabwe to tap into the economy. However, economic hardship has also resulted in lower uptake of insurance products compared to other periods, an economist at a local finance institution said.

Masawara said on Thursday it has entered into a strategic and equity relationship with Sanlam Emerging Markets which will see the indirect Sanlam subsidiary “acquire a 40% interest in Masawara Investment Mauritius Limited” for $11.6m.

However, said Masawara, finalisation of the deal is still subject to securing relevant regulatory approval.

If approved, the deal will see Sanlam’s unit Sanlam Emerging Markets receive a 40% stake in Masawara group’s interests in the short-term and life insurance and reinsurance businesses in Zimbabwe, which comprise Zimnat Lion Insurance, Zimnat Life Assurance Company and Grand Reinsurance.

The transaction valuation is at a premium to the combined net asset values of the insurance businesses, Masawara said. In addition to securing the 40% equity stake, Sanlam Emerging Markets will also provide technical support services to Masawara’s insurance businesses in Zimbabwe and launch a foray into other African markets.

Masawara and Sanlam Emerging Markets will also explore new opportunities in other countries in Africa. Earlier this year, Sanlam said it was seeking to sink as much as R3.3bn into acquisitions across the Africa and southeast Asia regions.

The indigenisation issue

Under Zimbabwean laws, all foreign companies have to own no more than 49% in local businesses. The empowerment law has been criticised for scaring away investors, but fund managers say the longer-term outlook for doing business in Zimbabwe outweighs current problems.

“Indigenisation has been around for a while and there is now realisation from the government that blanket implementation of the policy will not work. This is why we are seeing companies such as Sanlam seeking exposure in the country through its emerging markets subsidiary,” said a fund manager attending an Imara investment conference in Harare.

In Zimbabwe, Masawara has investments and exposure in the country’s telecommunications, hospitality and insurance industries.

Its website says it focuses on seeking investment opportunities that offer cash returns. It has also set its sights on the southern Africa region eyed by other regional companies, especially those in South Africa as competition intensifies back home.

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