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Sanlam bullish on long-term prospects for Zim associate units

Mar 30 2017 08:26
Memory Mataranyika

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Sanlam Limited [JSE:SLM]

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Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Harare - Capital shortages in Zimbabwe are pushing down income for insurance and life assurance companies, prompting Sanlam's [JSE:SLM] associate units in the country to immediately turn to the SA finance services group for technical assistance and for capital cover when the need arises.

Sanlam has a 40% stake in Masawara Insurance which holds Zimnat’s insurance, life, asset management and micro-finance operations in Zimbabwe. The company paid about $11.5m for the stake in the Zimbabwean insurance group.

Zimnat has an asset base of $92m and about $54m in total assets under management and competes against Old Mutual in the Zimbabwean market.

"One of the big things they (Sanlam) are bringing is their technical skills both on life, short-term insurance and asset management," said Mustafa Sachak, chief executive officer of Sanlam’s associate units in Zimbabwe.

Sanlam’s exposure in Zimbabwe is through the Sanlam Emerging Markets (SEM) division. Another manager at Zimnat explained that there is currently little capital space on the balance sheets of companies in Zimbabwe.

“The shortage of capital has affected income potential for life and short-term insurance. Sanlam will provide assistance with international products.”

Bullish prospects

SEM also has operations in Zambia, Malawi and Kenya among other regional markets but has been bullish about prospects for the Zimbabwean market, which is battling liquidity challenges

"As we go on and we look at the situation, and if there is a requirement for capitalisation, we can turn to Sanlam," said Sachak. He added that “the first two months of the year (2017) Zimnat has done well” at a time when other companies were struggling to stay afloat.

Junior Ngulube, chief executive officer for Sanlam’s emerging markets operations, said the SA financial services group is optimistic about the long-term prospects of Zimbabwe’s insurance industry.

“The industry is expected to register growth in 2017 and the years after in both the life and non-life sectors,” explained Ngulube.

Growth will come from opportunities in Zimbabwe’s reviving manufacturing sector following the imposition of import restrictions by the government.

Zimnat will also eye potential deals in the agricultural sector, but is banking on infrastructure development following massive damage caused by earlier rains. SEM has recorded higher claims in some of its African markets in the last financial year.

Finance Minister Patrick Chinamasa said this month that Zimbabwe requires as much as $200m to fix the infrastructure damages from tropical storm Dineo.

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