Sanlam has announced that it is planning a package of transactions aimed at strengthening its South African operations and positioning the company for growth over time through enhancing its economic empowerment credentials and building on its long-standing partnership with Ubuntu-Botho (UB).
Sanlam intends to issue shares constituting in aggregate 5.0% (five per cent) of the enlarged issued Sanlam ordinary shares (net of treasury shares) to a new broad-based group of empowerment shareholders and UB. The proposed transactions will increase economic inclusion as new broad-based beneficiary groups focused on black women and youth as well as Sanlam’s South African employees, will participate in 80% of the new shares to be issued. UB will participate in the remaining 20%.
As a result of the B-BBEE Transaction, Sanlam will be a Level 1 Contributor and will increase direct black ownership in Sanlam to over 18% and black economic ownership (combined direct and indirect) to over 35%, as measured in terms of the Financial Sector Code (FSC). This will place Sanlam in a strong, market leading position in terms of empowerment.
The issuance of new shares will also strengthen Sanlam’s balance sheet. The proceeds from the B-BBEE transaction will be used to redeem the short-term debt facilities recently raised in acquiring the remaining 53.37% shareholding in Morocco-based SAHAM Finances. This will enable Sanlam to retain its balance sheet flexibility and strength, in line with its prudent balance sheet management strategy.
The Group also plans to provide a R2 billion facility to UB or its subsidiaries to support the execution of Sanlam’s empowerment strategy. This will be achieved by enabling UB to acquire, directly or indirectly, an interest in specific operating subsidiaries of the Sanlam Group and will also facilitate investment by UB in financial services companies that will be complementary to the broader Sanlam Group’s vision and strategy. Increased black ownership at Group and operating subsidiary level is important to realising Sanlam’s vision to lead in all market segments in South Africa.
African Rainbow Capital Financial Services (ARC FS) will assist Sanlam in the execution of its South African strategy. Therefore, in addition to providing Ubuntu-Botho facility, there is an in principle agreement that Sanlam or a wholly-owned subsidiary of Sanlam will, subject to definitive agreements, acquire a 25% stake in ARC FS from African Rainbow Capital (“ARC”)
There is general consensus that in order to achieve higher and sustained economic growth in South Africa and thereby enable the conditions for companies to do well, the country must overcome the current situation where the bulk of people do not participate in economic output and consumption. Consequently, institutional clients want to see companies like Sanlam facilitate inclusive wealth creation. While direct broad-based black ownership at listed company level is key, increasingly clients want to see broad-based empowerment in the operating businesses with which they are going to be doing business.
Should these potential transactions at the operating business unit level be concluded, Sanlam expects to have broad-based black economic ownership (as measured in terms of the FSC) in excess of 51% in these operating business units.
“I firmly support the Government’s assertion that our task is to build a country driven by enterprise and innovation and to develop an economy that is diverse, resilient and prosperous. We believe the proposed transactions are well aligned to the national agenda and will build on the highly successful strategic partnership which Sanlam and Ubuntu-Botho have forged over the past 14 years. We anticipate that the economic benefits will outweigh the costs over time, creating value for shareholders and other stakeholders,” said Sanlam CEO Mr Ian Kirk.
While the acquisition of SAHAM Finances strengthens Sanlam’s position as a leading Pan-African financial services player, the Group still generates some 70% of its operating profit in South Africa and this is the market that will continue to be important into the future. South Africa is the largest insurance market in Africa by some considerable margin.
Sanlam believes these transactions will position the Group well in its efforts to gain profitable market share in strategic areas in which empowerment is a priority for key decision makers.
Transformation has been a critical factor in Sanlam’s growth and success over many decades. Specifically, the partnership between Sanlam and UB has been one of the most successful empowerment partnerships in South Africa. It created value of over R14 billion for broad-based black shareholders when the first 10-year transaction matured.
“Sanlam and Ubuntu-Botho have demonstrated that combining strategic relationships between black investors and established business with broad-based black empowerment and entrepreneurship can create long-term value as it delivers both commercial benefits and meaningful economic transformation,” UB Chairperson, Mr Patrice Motsepe, said.
From April 2004, when the original empowerment transaction was signed to maturity in April 2014, Sanlam’s market capitalisation increased from R27 billion to R118 billion, partly due to the successful execution of its strategy which embraced transformation in conjunction with UB. Sanlam’s partnership with UB has contributed to Sanlam’s growth and success over the years. UB has remained supportive and involved with Sanlam’s strategy in South Africa and extended and expanded its strategic relationship with Sanlam.
“The Group’s transformation drive over the past 25 years has demonstrated the importance of strategic partnerships. It has helped to create wealth for black shareholders and to support the creation of new black owned enterprises and has created value for Sanlam shareholders and other stakeholders. These transactions will continue that imperative,” Mr Kirk said.
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Transformation at Sanlam
At Sanlam, we view transformation broadly to include, among others:
Economic transformation, to reduce wealth inequality; transforming our staff to reflect the demographic profile of our client base and societies where we operate;
Transforming our distribution channels and operations in line with technological and regulatory developments; and
Transforming everything we do in line with the changing needs and preferences of our clients.
The proposed transactions are designed to simultaneously cover a number of these areas. The proposed transactions will enhance B-BBEE shareholding at both a Sanlam and subsidiary level in pursuit of inclusive wealth creation.
The broad-based nature of the new shareholding will ensure that wealth created benefits a wide group of beneficiaries, with a specific focus on black women and the youth.
Sanlam’s employment equity will also be enhanced through mutually beneficial partnerships and involving staff in the shareholding structures. By strengthening our position in the entry-level market, we also aim to further improve access to financial services by all South Africans.
Enhancing broad-based participation at a Group level
The B-BBEE Transaction extends the benefits of empowerment to include a broad range of participants, with 80% of the beneficiaries of the B-BBEE transaction being new broad-based black empowerment participants in the following categories which have been identified by Sanlam and Ubuntu-Botho:
Professional black women;
Black women groups;
Black youth and black youth groups;
Black partners and broad-based black groups (including community organisations and black business partners of Sanlam and Ubuntu-Botho); and
Sanlam’s South African employees.
Enhancing broad-based empowerment at key operating subsidiary level and strengthening and expanding the strategic partnership with Ubuntu-Botho
The strategic partnership between Sanlam and Ubuntu-Botho has been one of the most successful business relationships in South Africa. Since the maturity of the original empowerment transaction between Sanlam and Ubuntu-Botho, Ubuntu-Botho has continued to support Sanlam’s strategy in South Africa, extending and expanding the relationship. To date, over 1,000,000 (one million) people have benefitted from the disbursement of funds through Ubuntu-Botho and the Sanlam Ubuntu-Botho Community Development Trust.
Established as a life insurance company in South Africa, the Sanlam Group has transformed into a diversified Pan-African financial services group which is listed on the JSE, A2x and the NSX. Sanlam’s vision is to be the leader in client-centric wealth creation, management and protection in South Africa, to be a leading player in Pan-African financial services with a meaningful presence in India and Malaysia and to play a niche role in wealth and investment management in specific developed markets.
Through its five business clusters – Sanlam Personal Finance, Sanlam Emerging Markets, Sanlam Investments Santam and Sanlam Corporate - the Group provides comprehensive and tailored financial solutions to individual and institutional clients across all market segments. Sanlam’s areas of expertise include insurance (life and general), financial planning, retirement, investments and wealth in both South Africa and selected emerging markets.
In addition to its South African operations, the Group has a direct stake in operations based in Namibia, Botswana, Swaziland, Zimbabwe, Mozambique, Mauritius, Malawi, Zambia, Tanzania, Rwanda, Uganda, Kenya, Nigeria, India, Malaysia and the United Kingdom. It has business interests in the USA, Australia, Burundi, Lesotho and the Philippines. Through the SAHAM Finances holding company, it has direct exposure to insurance operations in Morocco, Angola, Algeria, Tunisia, Ghana, Niger, Mali, Senegal, Guinea, Burkina Faso, Cote D’Ivoire, Togo, Benin, Cameroon, Gabon, Republic of the Congo, Madagascar, Lebanon and Saudi Arabia.
For further information, visit www.sanlam.com or follow us @sanlam
Ubuntu-Botho was created in 2004 with its initial main purpose of building black controlled capital through being Sanlam's broad-based strategic empowerment partner. The partnership has been one of the most successful empowerment partnerships in South Africa.
The vision of Ubuntu-Botho from the outset was to make a difference in the lives of ordinary South Africans by being the premier black-owned and controlled financial services entity. Between 2004 and 2014 this partnership unlocked value of more than R14 000 000 000 (fourteen billion Rand) for broad based black participants in Ubuntu-Botho. In the second phase of this vision, Ubuntu-Botho leveraged a portion of the capital, realised on maturity of the initial transaction, through the establishment of African Rainbow Capital (ARC) and African Rainbow Capital Financial Services (ARC FS), which aspires to become a leading South African based, black owned and controlled financial services company in strategic partnership with the Sanlam Group. ARC is a 100%-owned subsidiary of Ubuntu-Botho.
The broad-based empowerment groups which hold a 17% economic interest (and 21% shareholding) in Ubuntu-Botho are made up of a number investment entities, including 9 provincial public companies, women’s groups and trusts, churches, youth organisations and trade unions.
To date, over 1 000 000 (one million) people have benefitted from the disbursement of funds through Ubuntu-Botho and the Sanlam Ubuntu-Botho Community Development Trust. The Sanlam Foundation and the UB Community Development Trust are the beneficiaries of the Sanlam Ubuntu-Botho Community Development Trust.
Beneficiaries of the Sanlam Foundation include amongst others, 75 schools across South Africa as part of the Sanlam Blue-Ladder Schools project which includes Mathematics programmes focused on customised support, leadership programmes leading to improve school functionality, teaching practice, and learner performance at schools, and nutritional support through Social Enterprise Development at all 75 Blue-Ladder Schools; the Kay Motsepe Schools Cup reaching 4 200 schools in all provinces and in excess of 100 000 learners, the SAICA Thuthuka Bursary Fund, WWF South Africa, ASISA ESD programme and the ASISA Foundation.
Issued by Sanlam Group Communications
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