Letshego Botswana embarks on retrenchment
Sharon Mathala - Mbongeni Mguni | Monday May 22, 2023 06:00
Botswana, which is also Letshego Holdings’ headquarters and where it was founded in 1998, contributed 65% of the group’s P801 million in pretax profits for the year ended December 2022 and has anchored Letshego over the years while its West and East African offices have struggled to stay afloat.
While sources within Letshego Financial Services Botswana (LFSB) claim up to 60 employees are being cut from work in an exercise due to be complete by the end of June, the group this week strenuously denied the number and labelled it “false information”.
Sixty employees would amount to about 40% of the 149 workers employed by LFSB as at December 2021, the last period when staff count numbers were publicly available.
“Per the strategic direction of the business for turnaround markets across its footprint, it has become imperative to align the group structure and maintain a lean but effective workforce,” reads a memo seen by Mmegi purportedly written and circulated to local staff last month. “We hereby officially notify employees of the planned organisational design exercise. “The exercise will inadvertently result in the redundancy of 60 employees and is scheduled to be completed by June 2023.”
This week, Letshego Botswana insiders told Mmegi that some workers had already left under a voluntarily scheme offered since the beginning of the year. Those targeted for involuntary exits began leaving at the end of April, but are up in arms over their exit packages.
“There are some challenges because these people were retrenched last month and have not been paid,” insiders said. “Many had budgeted how they would settle their commitments as they leave employment, but the packages have delayed and caused a lot of problems for them.”
LFSB’s streamlining exercise comes as the pan-African group as a whole battles pressures on its financial books, stemming mainly from the COVID-19 impact on economies, rising inflation and interest rates, as well as the impact of a strengthening US dollar on the currencies of African countries where it operates. In East and West Africa, which have perennially been troublespots for Letshego, the microlender saw pretax profits drop 53% to P146.2 million in the year to December 2022.
Shareholder tensions have simmered within Letshego over the pan-African strategy and its fruits, with asset manager, Allan Gray previously publicly expressing concerns.
“The expansion into East and West Africa has been unsuccessful,” Allan Gray managing director, Phatsimo Ncube told Mmegi last June ahead of a tense Annual General Meeting. “The operational performance of the Group has suffered since the expansion began, with the more stable and profitable operations in Southern Africa effectively bankrolling those in other geographies. “The board has defended the expansion and indicated a willingness to continue it despite the apparent struggles.” Letshego has since deployed Fergus Ferguson, its former CEO for Letshego Botswana and regional head for Eswatini and Lesotho, to undertake a turnaround in East and West Africa, where the performance of offices such as Ghana, Tanzania, Kenya, Nigeria, and Rwanda are weighing on the group.
BIHL, which holds nearly 30% equity in Letshego and has stood by the microlender during difficult periods, has also added its voice to concerns about the East and West African performance.
“There are turnaround markets which have been identified by Letshego and those markets must account for themselves,” BIHL CEO, Catherine Lesetedi told Mmegi earlier this year. “There are views that if management doesn’t want to turnaround these, at some point we need to exit because they are really draining resources.”
Responding to Mmegi’s enquiries, Letshego Botswana officials said the local office remained one of the group’s top performers due to continuous change and evolution drive by the five-year transformation strategy.
“An organisation’s design or structure won’t remain static, and needs to adapt and evolve with the business and market to ensure that we have the right people in the right place to support ongoing growth and transformation,” the officials said in a written response. “Following the evolution of our business and strategy, our Botswana business offered its employees a voluntary severance option earlier this year. “Voluntary severance enables those employees looking to explore new career options outside organisation, a springboard off which to seize personal change, while opening up opportunities for other talent both inside and outside the organisation.”
Officials said streamlining the local operations would provide new openings with the evolution of the business, as well as remove potential duplications or redundancies in roles.
“In the case of potential duplications in roles and redundancies through our organisational change, Letshego reiterates its commitment to minimising redundancies by prioritising our #PeopleFirst initiatives in reskilling and redeployment. “In order for Letshego to remain competitive in delivering sustainable value to customers, our business needs to follow a path of continuous improvement, leveraging sector and tech developments to meet evolving customer needs. “Like all our regional subsidiaries, Letshego Botswana’s evolution in systems, products and platforms is evident in recent launches that include Affordable Housing, Instant Mobile Loans and Procurement Finance.”
Letshego Botswana added that the group continues to review and improve its pan-African strategy, organisational structure and customer value proposition in line with commitments affirmed in its transformation strategy.
Shareholders, however, appear impatient for a turnaround in the group, as reflected in Letshego’s share price which dropped 11.3% last year. Between January and press time on Thursday, Letshego had shed a further 8.8 percent.