Sanlam BEE deal funds Patrice Motsepe’s new life insurance company
BUSINESS LIVE / 31 OCTOBER 2018 - 18:31 / LONDIWE BUTHELEZI
African Rainbow Life will be SA’s second black-managed life insurance company, created by a Sanlam and Ubuntu-Botho partnership
Patrice Motsepe’s African Rainbow Capital (ARC) is set to launch SA’s second black-managed life insurance company following an empowerment deal struck with Sanlam on Wednesday.
Patrice Motsepe Picture: SUPPLIED
Sanlam, which has partnered with his Ubuntu-Botho (UB) company and a number of black groups to increase its black ownership to 18%, said it will provide R2bn to UB. The money will be used by UB subsidiary ARC to form a new insurance company, African Rainbow Life.
The new insurer will focus on the lower- to middle-income markets as well as small- and medium-sized enterprises (SMEs). It will compete with entry-level market players, such as Metropolitan and Hollard, and will be the second mainstream insurer to have a black management team after Hollard.
“We’ve said we need to lift our position in the entry-level life [insurance market] and African Rainbow Life will help our position in that market,” said Sanlam CEO, Ian Kirk.
Sanlam will hold a 51% stake in the new insurer and ARC will own the remaining 49%. The R2bn will also be used to buy ARC a 25% stake in Sanlam’s asset management business.
Kirk said there are other initiatives being pursued by the two companies that will be announced in due course. The creation of African Rainbow Life is one part of the deal that Sanlam has reached with UB. The other part is an additional R8.2bn stake that UB will hold in Sanlam.
Who will benefit?
UB already owns a 14% stake in Sanlam. Apart from UB, other groups that will benefit from Sanlam’s increased empowerment stake are primarily black women, female professionals, youth groups and Sanlam’s black South African employees. The total amount these groups and UB will pay to Sanlam is R7.41bn. The insurer will use the proceeds to repay the short-term debt facilities recently raised to acquire the remaining Saham Finances stake.
“It’s an imperative for all financial services companies to have shareholdings and employment that reflects the environment in which they operate. It helps in retail, but it’s really critical in the institutional market,” said Kirk.
Temba Mvusi, CEO of market development at Sanlam, said having a good empowerment status is critical when dealing with institutional clients, especially government departments and state-owned enterprises (SOEs).
“In the pension funds industry you have a board of trustees, and in some instances, there are trade union-influenced and trade union-controlled funds, and we’d like to have our fair share of that market. Given that some of the services we provide are commoditised, empowerment becomes a differentiator,” Mvusi said.
Commenting on the asset management BEE deal, which is now 51% black-owned following the UB transaction, Kirk said the unit “can now compete with black asset managers and this is just a start.
We’ve said that with our partners we can look broader because we think that’s an area where we are in a position now to open up to new black asset management businesses ... We are busy with a number of initiatives but we are not in a position to announce them yet”.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER