Sanlam plans to enter Ethiopia as it seeks to reduce South Africa dependence

By David Whitehouse
Posted on Friday, 20 September 2019 09:56

Ethiopia's Prime Minister Abiy Ahmed has moved to partly liberalize the financial sector. REUTERS/Tiksa Negeri

Africa’s largest insurer Sanlam is in “very advanced” discussions with a prospective partner in Ethiopia to take advantage of the country’s economic growth prospects, Heinie Werth, the new CEO of Sanlam’s emerging markets unit, told The Africa Report in an interview.

The South African company is “very comfortable” with the progress made in the talks and an agreement may be reached “sooner rather than later,” Werth said.

  • While an initial agreement would not need a financial investment from Sanlam, the purchase of a stake in the partner could be discussed at a later stage, he added.

Sanlam has pursued a strategy of geographic and product diversification and operates in 33 African countries, as well as India, Lebanon and Malaysia. The company, Werth says, is targeting multi-national companies with the aim of becoming a “one-stop shop” for non-banking financial services.

Werth, previously the group’s chief financial officer, became Sanlam Emerging Markets CEO on August 1.

  • Ethiopia is “a thriving economy” with a fast-developing construction market, he said.
  • The prospective agreement could involve reinsurance and product pricing, he added.

The existing ban on foreign ownership in Ethiopia makes partnership the only viable route for entry there.

There have been signs of a more liberalized approach. In July, new legislation allowed members of the country’s diaspora to invest in the banking sector. And in August, Ethio Lease became the first foreign-owned company to obtain an Ethiopian financial-services license.

  • According to the Economist Intelligence Unit (EIU), Ethio Lease’s entry could have a transformative impact, as companies will be able to generate revenue without having to invest heavily in equipment.
  • The government targets 11% economic growth in 2019-20, while the EIU predicts an annual average of 7.6% from 2019 to 2023.


Rather than waiting for South Africa’s problems to be fixed, Sanlam has been seeking to reduce its dependence on the country. In its half-year results published on September 5, Sanlam cited a “weak operating environment” in South Africa.

  • The company’s home market currently suffers from “weak investor confidence,” Sanlam said.
  • But net income from financial services in emerging markets jumped by 50%, driven by a 59% profit increase in the company’s pan African portfolio.

The economic ties between Africa and China sets limits to the effectiveness of this diversification strategy.

  • Africa, Werth said, remains “very commodity driven” and therefore vulnerable to a Chinese economic slowdown or the worsening of the US-China trade war.
  • “There are a lot of factors which we can’t control.”
  • But Sanlam’s diversification, he argues, will offer protection in those scenarios. “Not everyone gets hit at the same time.”
  • Francophone Africa and Morocco, he argues, have relatively low dependence on the Chinese economy.
  • Kenya is well diversified, while Botswana and Namibia are driven by factors other than China, he says.

The company is also studying the possibility of a partnership in Egypt, though no talks are as yet under way, Werth said.

  • He sees Egypt as a “powerhouse” economy comparable with South Africa or Nigeria, and which is increasingly attracting international companies.

Bottom Line: The danger for Sanlam is that companies and investors may not be discriminating in identifying which African countries will actually suffer from a Chinese slowdown.

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