What's eating Letshego?

Letshego shareholders meet later this month PIC: MORERI SEJAKGOMO
Letshego shareholders meet later this month PIC: MORERI SEJAKGOMO

Shareholders of the country’s largest microlender, Letshego Holdings, meet in Gaborone on June 24 where the elephant in the room will be the exodus of five top executives in the past year, including the group managing director, group financial officer and a CEO who only spent six months on the job. Staff Writer, MBONGENI MGUNI reports

Letshego’s numbers belie the apparent strife that has gripped top management at the pan-African consumer lender in the past year.

With a presence in 11 African states ranging from eSwatini to Kenya and the tough-to-crack Nigerian market, Letshego as a microlender is the pride of Botswana and the poster child for how the local financial services market is fertile ground for regional growth.

For the year ended December 2018, Letshego posted pretax profits of P1.02 billion up from P1 billion for the previous year. Shareholders, meanwhile, have benefited from P900 million in dividends in the past three financial years, during which time shares on the Botswana Stock Exchange peaked at P3.50 in 2015.

The numbers are not the problem.

The operations and their management could be though, insiders say.

“There is a lot happening and from what we have heard, things are not well,” an analyst tracking Letshego told Mmegi this week.

“There is a lot of disgruntlement within management and staff morale is not at its best.

“The issue is strategic disagreements at board level over the direction of the group.”

Independent director, Robert Thorton set the ball rolling by resigning last August. Group managing director, Chris Louw’s exit was announced the same day.

Louw, who had been with the microlender for five years, is credited with Letshego’s rapid expansion into Africa taking the “deduction at source” model to countries across the continent.

His departure is seen as the pinnacle of the “strategic disagreements” within the Letshego board.

Former International Finance Corporation executive, Smit Crouse took over from Louw in late September and immediately began a review of operations and “transformation agenda” before resigning suddenly six months later in March 2019.

Also in March, Colm Patterson, an 11-year Letshego veteran, quit as chief financial officer, followed by independent director, Christian van Schalkwyk early in May.

“With Louw, it would appear the issue was disagreements with the board on strategy around continental expansions,” Mmegi’s sources said.

“There was growth at first, but the board grew concerned about the bottom line at some point and became more cautious. The board was not happy at all.”

For the year ended December 2018, Letshego Holdings wrote off P298.3 million in bad debts, on the back of poor loan quality in its East and West African footprint.

According to the group’s 2018 results, Tanzania had the highest proportion of impairments as a percentage of total outstanding loans, at about 17.4%, followed by the West African market at 16.6% and its East African presence at 16.4%.

By comparison, Letshego’s Southern African operations had rates averaging 2.2 percent with Namibia at 0.54% and Mozambique at 1.3 percent.

Prior to Louw’s arrival, Letshego had only expanded regionally to Namibia and Zambia. The board’s risk aversion after Louw’s departure can be seen in the withdrawal of Letshego’s banking licence in Botswana, sources told Mmegi.

The attrition at executive level is said to be worrying shareholders, who have up to now been kept satisfied by the solid profits Letshego has been posting. Analysts said the changes had the potential of causing uncertainty.

“The ongoing changes in management have caused uncertainty with regards to the strategic direction Letshego will be taking,” analysts at Stockbrokers Botswana said recently.

Yesterday, Letshego interim group CEO, Dumisani Ndebele told Mmegi the microlender was confident of its leadership, from the board to the management team across its African footprint.

Asked whether there was a concern that ahead of the annual general meeting (AGM), shareholders were losing confidence in the state of the group or its strategic direction, Ndebele was unyielding.

“The AGM remains a strategic highlight in the group’s calendar to proactively engage with our shareholders, gain their feedback and take the opportunity to reiterate the group’s progress in executing our regional strategy, as well as updating them on leadership changes,” he said in a written response to enquiries.

Ndebele, a veteran executive with Letshego, left the group in 2016 after 17 years only to be recalled in March after Crouse left. Ndebele’s recall has been read by many in the market as Letshego’s attempt to bring a familiar face to nervous shareholders and also have an experienced hand to rebalance the boat. Ndebele joined Letshego in 1999 prior to its continental explosion.

 The interim CEO said the board had secured “regulatory approval for its revised group executive committee.”

Asked to elaborate on what the revised group executive committee looked like, Ndebele said: “There have been changes to our executive committee following recent changes in leadership, with a few role revisions in key workstreams to enhance alignment with the group’s strategy.

“Letshego will continue to review roles and senior expertise throughout the Group to ensure we have the right talent in the right places, and maintain momentum in delivering on our strategy.”

He added: “The Letshego board remains confident that the revised group executive team has the capabilities, experience and capacity to manage Letshego’s operational, risk and regulatory requirements as well as to execute the Group’s strategy.”

The ultimate test of the levels of confidence, however, will come on June 24 at the AGM. And with Letshego’s share price having nearly halved from that 2015 peak of P3.50, shareholders could be less forgiving.

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