Sanlam looks at buying assets in Africa, UK, India

| Monday September 13, 2010 00:00

Speaking at the insurer's half-year results presentation on Friday, van Zyl tempered his worry about a slow recovery in SA and Africa with a promise to shareholders that the group would continue to seek out opportunities to grow.

van Zyl said despite the tough economic environment in SA and slow recovery in Africa, Sanlam would not ease up on its efforts to grow the business, pointing out that the group's excess cash should find a suitable home.

'We do not think it is difficult to grow and we are going to continue to make money,' he said, and that apart from possible acquisitions, the group would also exit unprofitable businesses.

The group closed the half-year with R2,8bn in capital, which he said would potentially be employed to finance growth opportunities, particularly in Africa.

The group was earning about 10% of its annual profits from its African operations, which although dented by the recession, were now showing signs of recovery.

van Zyl said of the total capital available as of June, about R500m could be set aside for share buy-backs, depending on the share price. But he was not certain whether such a sum would be spent for that purpose.

'Our strategic objective is a differential one. We do not want to do the same things in the regions we operate.'van Zyl said Sanlam presented a compelling investment case based on its two-pronged strategy; driving increased returns by continually focusing on efficient use of excess cash, and cutting costs and maximising efficiencies.

Old Mutual analyst Paul Kahumuza said Sanlam has never been in 'a hurry' to spend its excess capital, but has always impressed the market with its choice of investments. 'The good thing about them is that they tell you exactly how much they have and what they are going to use it for.'

van Zyl said there were growth opportunities in Africa and offshore markets such as India and the UK. In addition to completing a transaction in Nigeria, Sanlam was also eyeing markets such as Malawi 'and others' which he said he preferred not to mention at present.

'There is tremendous untapped potential in these countries where we are already either number one or in second position. We believe that the model that we have, particularly for SA and Africa, serves us well.'

Referring to the available capital, he said: 'We have a perfect opportunity in Africa and SA where we particularly want to broaden our footprint and diversification of our products. In India, we want to put additional capital.'

In the UK, Sanlam was not trying to compete head-on with 'the big elephants there', but would rather grow its business and find ways of achieving synergies with its South African assets and get a decent return for shareholders.

van Zyl said he was particularly pleased with the promise shown by Sanlam's operations in such markets as Ghana, Kenya, Tanzania and Zambia. The business in Botswana was also showing promise, though it had struggled during the six months under review. 'If we look at a basket of (these) businesses in rand terms, they are down by 2% in terms of growth but in the currencies of these countries, we are up 10%.'  (Business Day)