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BIHL brainstorms over shrinking formal sector jobs

MBONGENI MGUNI
Lesetedi PIC: BIHL.CO.BW
Executives at the country’s largest diversified financial services group, Botswana Insurance Holdings Limited (BHIL), are breaking away for a strategy review to tackle an emerging phenomenon where the formal sector is ceding ground to the informal in terms of job creation.

While growth in the formal sector has remained largely flat, even declining by 2,600 jobs between September 2016 and September 2017, informal sector employment, led by the Ipelegeng programme, has been swelling.

The Ipelegeng programme rose by 2,862 jobs over the same period.

With the same trends generally evident in previous years, the situation has meant a shallower pool for BIHL to fish for new business in an increasingly competitive market, and also a downward slide in households’ discretionary incomes.

Two of BIHL’s subsidiaries, Botswana Life and Legal Guard, are heavily reliant on the formally employed, as are the group’s associated companies such as Botswana Insurance Company and Letshego Holdings. BIHL chief executive officer, Catherine Lesetedi told BusinessWeek the group was closely monitoring the trend in formal sector employment. “We are very mindful of the shrinking formal sector as well as the issues of lower discretionary incomes,” she said.

“With the same incomes, those employed are finding themselves responsible for more people than before. “Businesses like ours will have to fight harder for the share of that wallet.”

Lesetedi added: “That’s why it’s important to have that diversification within the group, so that if one of our businesses cannot get a share of the wallet, others can try”.

Botswana Life again anchored BIHL’s

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profits in the year ended December 31, 2017 with net insurance premium income of P2.3 billion. However, the value of new business, which represents the present value of future profits from new business premiums written during the year, decreased by eight percent due to reduced margins.

At a recent results announcement, BIHL executives spoke of how the group resisted competing in an annuities ‘price war’, which analysts believe was a reference to aggressive pricing of life annuities last year.

A statutory manager appointed by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) has said one life insurance player was left on its knees after mismatching its life annuities.

“We did not get involved in the price war in life annuities and ours are still appropriately matched. Pensioners should not be concerned,” BIHL chairperson, Batsho Dambe-Groth said.

The local insurance industry is facing a turbulent period, with its regulator, the NBFIRA, reporting that one in 10 licensed operators closing down last year. Sectoral profits were down 23% as were gross written premiums.

In 2016, gross premiums underwritten in the life insurance sector dropped to P3.2 billion from P3.3 billion in 2015, while after-tax income dropped 22% to P574 million, which NBFIRA’s researchers attributed to loss of jobs in the country’s mining sector.



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