Expansion and diversification stand Letshego in good stead, especially against the backdrop of the choppy economic environment experienced in the past two years.
So believes Okai who was speaking at a briefing to present financial results for the year ended 31 December 2021 in Gaborone recently. By the end of this year, the group will transition to Plan 5 of its five-year strategy and transformation will then kick in fully for the group to become a new kind of Letshego in terms of being a digital first organisation. “The digital agenda is obviously the core of everything we are doing in the transformation,” Okai noted.
As he continued to brief analysts, shareholders and the media, he drew attention to five pointers that Letshego’s strategy is building on – product diversification, digitalisation, geographic rebalancing, enterprise agility and shareholder value.
Okai said Letshego has made huge progress in terms of product diversification and broadening product offering, launching five new insurance products across multiple markets. The core deduction at source (DAS) is being digitised. “We have new digital accounts, which are already live in two of our markets which will help drive up deposit taking,” he told the gathering, adding that the lender has also expanded programmatic lending, which is the bedrock of the transformation of Letshego’s MSE business, and the social impact at the heart of its purpose as an organisation.
The group also launched a $50 million facility for affordable housing, rolling it out in Namibia. What is critical about affordable housing for Letshego is that the group wants to make it possible for customers to be able to buy houses at prices that meet their pockets. “All of these we are bringing to the digital mall,” said Okai, referring to the digital platform where its services will be crammed.
In launching affordable housing in Namibia, Okai said they signed with fintech savvy in processing housing facilities at a much faster rate. On average, he said, it takes 90 days for documentation to be done; Letshego has brought this down to 30 days. “When we talk about affordable housing and programmatic lending approaches, it is about transforming how it is done and making it more digital and accessible to the customer base,” the CEO pronounced.
Letshego has also introduced the 10-minute loan, which is live in a couple of countries, including Uganda where the group currently has over 100,000 registered customers. Okai said these are all examples of how quickly customers are responding emphasising this as proof for digital strength transformation that continues to go “very well”.
Letshego anticipates it will be truly digital-first company; one that serves customers in 360 degree manner with an ecosystem of partners and organisations that will provide services to customer and obviously continue to strengthen the franchise, which will then mean franchise value continuing to grow.
Okai pointed out that progress has been quite phenomenal in the digitalisation. Letshego is driving towards launching its digital platform coined ‘Digital Mall’ across 10 of its markets. When Okai talked about the idea of a digital mall, he envisaged a one stop-shop for retail financial services. Against this background, he said, Letshego needed to also add programmes that are not typically just payments but to offer “beyond banking” services.
Accordingly, Okai said the group has started to tie up with different types of partners who would bring major sorts of capabilities. Literally, Okai imagined this as an “affordable healthcare on a digital platform where you can actually reach out and you can talk to doctors”. “You can receive education on different ways and then you can have an ongoing prophylactic medical regime, and so on and so forth.”
The platform is expected to be live within a month or so, with Okai saying the group has already signed the agreement and started the process of integration. These are the things that the group expects will add and create capabilities which will allow “us to be able to grow our core business of being a financial services provider”.
These developments will also allow Letshego to create an ecosystem through which customers can receive the services that they believe they are looking for. “There are many programmes that we have signed up to expanding the digital mall and providing additional access and additional capabilities for customers,” Okai said calling to attention the digital adoption that went up to 78 percent.
The essence of Letshego’s digital mall is the fact that while it creates a platform that now allows Letshego to create the diversification that it wants, it drives acquisition. “It allows us to be able to scale and scale in an efficient and cost effective way. But more importantly, it allows us to expand our reach to our customers,” Okai said.
As he spoke, he referenced remarkable active customers, that is, customers who are registered on the digital mall. In the six months to 31 December 2021, the group had registered 100,000 users. As at February this year, Okai noted 325,000 registered customers. “It just shows how exponentially our customers are being attracted to the digital mall, a proof point that the strategy is working,” he said.
In Botswana, the customer base ranged between 30 000 and 40 000 when the group is doing its traditional DAS business. As Letshego released its results last week, it revealed that Botswana had over 90 000 registered customers on the digital mall. “It shows that not only are we sort of moving our own customers onto the mall but more than 50 percent of the customers who are registering are new,” Okai said. “We are starting to now look at offering them the products that will then allow them to become even more loyal and then improve enhanced engagement.”
The chief executive of Letahego said this strategy has positioned them to meet the aspirations of 1 million customers whom “we are trying to reach” at end of 2022 and 5 million in five years. Letshego is adding almost 100 000 customers per month, which keeps them very much on track and which will be a fundamental shift in the way “we do business and the fundamental shift to the size and scale of Letshego as a business”.
Along with this, Okai said, Letshego is doing other things. “It’s not just signing up onto the mall,” he noted. “We are using the digital platform to also enhance our customer experience. One of the things that we have always known as a critical competitive advantage is our ability to be able to use our data and digital capability to service our customers in record time.”
At the core of its digitalisation is investment in new skills, which fits into enterprise agility. Okai said the group has continued to bring specialists on board. “As we grow, for instance, if we look at the data space, we are investing in that data space for our own people internally as well as working with partners to make sure we skill up,” he said, adding that this is the key driver of the revenue growth that Letshego anticipates. “It means that our people are also sort of aligned with the vision. People are seeing the opportunities that it brings and it allows them to have the capability to shift as the company shifts.”
Instead of people who work manually, the CEO emphasised the need for more data scientists; people who will be able to analyse data and be able to make sure that systems are working well and that “we are keeping up with matrices”. Okai said the number of roles that Letshego has opened within the digital framework is over 130. “We are hiring a new set of people who are joining Letshego,” he said.
The group has launched a digital mastery programme which recruits top digital talent to grow into digital entrepreneurs and digital leaders. To that end, Letshego is looking for people who want to explore ideas into the digital future. “We commit to invest in those ideas,” Okai said.
The big news for this theme is that Kenya has joined the club of markets that make P100 million profit before tax. According to Okai, Ghana joined that club last year and has maintained its status. With the addition of Kenya, said Okai, this means that Africa’s Eastern and Western markets are also now continuing along the journey of transformation. In the 12 months ending December 2021, Eastern West African markets’ profit before tax increased by 23 percent year-on-year with good growth coming through from Kenya at 146 percent profit before tax year-on-year. Letshego wants to be able to move from an 80/20 profit share to a 45/55 by the year 2025 for Southern markets versus East and West markets.
Uganda also came to the party in the reporting period, with pre-tax profit increasing by over 100 percent year-on-year. With the improvements in performances like Kenya and Uganda, Letshego CFO, Gwen Muteiwa, commented: “We have actually been able to see some subsidiaries beginning to increase their dividends to us.”
She said Mozambique in the past has not really given dividends but “we are happy to say that with improved performance, we are seeing good traction coming through”. But Muteiwa was quick to note that the even so, group still has a challenge around foreign tax credits under tax laws. “So we are not always able to claim on the dividends,” she added to the conversation. She is wary that while the group is extracting more dividends, effective tax rate is going up, triggering fluctuations. “But I think what we have always said is that in the long-term, we expect it to be 40 percent.”
As Okai held forth about transformation, realising shareholder value is the ultimate goal. In the course of transformation, enterprise value has been created, although he believes that there is more that needs to be created. “We are starting to turn our attention to valuation and how this business is valued,” he said. He revealed that Letshego has engaged an investment bank which will help them think through the process. “When that is done, we will come with an intrinsic value for the company,” he noted. “The challenge is how do you bring that intrinsic value as close to your market value as possible? We will work with them on that.”
As most would agree, whilst there is trending up of the share price, it still has room for growth. “Now that the transformation is in high gear, we need to turn our attention to bringing that full benefit to our shareholders,” Okai said.