BIHL’s concerns about Letshego

About two weeks ago, Letshego Holdings unveiled its interim results for the half-year 2023 period. Just a few days later, Botswana Insurance Holdings Limited (BIHL) followed suit by announcing its own half-year financial results. BIHL, holds a 27.61 percent interest in Letshego. As such, the micro-lender is identified as an associate of the financial services Group.[ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="3" ] In her presentation during BIHL’s financial announcement, Group CEO, Catherine Lesetedi reiterated her ongoing concerns regarding Letshego’s performance. “It still doesn’t meet expectations,” she said. And reveals that BIHL has tried to encourage Letshego to exit underperforming markets. While BIHL expresses concerns about its associate’s performance, Lesetedi, on the other hand, affirmed that BIHL still believes there is untapped value within the Pan-African micro-lender. “We do see value in Letshego and this value can be unlocked when it exits some of the markets,” said Lesetedi. Lesetedi is of the view that Letshego's business needs to be reconfigured. The Business Weekly & Review posed detailed questions to uncover BIHL’s concerns regarding Letshego and the markets it should exit. The publication sought to determine whether Letshego’s potential exit from certain markets might have unintended consequences of reducing its loan book and its overall value. Letshego has reported that it is achieving profitability in certain markets where it had previously faced challenges. However, the question at hand pertains to the impact of foreign exchange fluctuations, leading this publication to seek clarity on BIHL’s stance. In addition, BIHL was asked to explain the manner it engages with Letshego at board level in terms of strategic direction as well as to provide its vision for Letshego. Responding to The Business Weekly & Review queries, BIHL spokesperson, Tebogo Keepetsoe, was vague on issues raised. She explained that BIHL Group has a shareholding of a substantive nature in Letshego, and thus will always have a vested interest in its performance. “Letshego’s financial performance in the Interim 2023 Financial Results was not ideal; as a shareholder, we take an interest in this, as we do with all the businesses we have a stake in,” she said. “BIHL's focus is on ensuring our work and our investments must meet shareholder expectations.” Keepetsoe added: “We trust the Letshego strategy has the same objectives in mind and reserve the right to engage further as needed.” Letshego Group CEO Aupa Monyatsi disagrees with BIHL CEO, and her team’s views. “Letshego is progressing with our Transformation Strategy, in line with our 6-2-5 execution plan. We are now in “Plan 5” the third and final phase of our 5-year journey towards achieving a more digitised, future-fit organisation. This final two-year phase seeks to realise and maximise the strategic digital and tech investments concluded in the last two years (Plan2), and achieve a more integrated operational model where Letshego can leverage the benefits of eco-system thinking,” he explained. Further, Monyatsi added that eco-system thinking speaks to maximising outputs by integrating the invested and evolved components within Leshego’s environment. He said this includes upskilled people, digitised platforms, automated processing, strategic partners and partnerships, enhanced governance and reporting standards. All this he said, is geared to achieve greater sustainable value and stakeholder returns for the collective long-term gain and future potential. Around March this year when presenting the Letshego full-year financial results for the year ended December 2022, Monyatsi, said Letshego was looking to grow its East and West African markets, hence countries like Ghana, Kenya, Rwanda, Tanzania, and Nigeria were grouped by the micro-lender as Turnaround Markets with potential for growth. At the time, Monyatsi said the macroeconomic performances in these countries dragged down the overall performance of the group. “At our Full Year Results for 2022 we reiterated our commitment to focusing strategic expertise around what we call our ‘Turn Around Markets’”. This is in full swing, with some green shoots already visible in the last six months, despite ongoing economic challenges in some markets. If one removes the downside impact of foreign currency exchange rates against our reporting currency, the Botswana Pula, we are seeing some positive financial metrics,” Monyatsi explained. Furthermore, he reiterated that various strategic decisions have been implemented to unlock East and West market growth potential in the first half. These, he said, include the successful merger of two Tanzanian subsidiaries into one single entity, ‘Letshego Faidika Bank Limited’. As a single entity, Monyatsi stressed that Letshego can now seize greater operational and execution efficiencies to support its future strategy. He announced that Nii Amankrah Tetteh has taken up the helm as CEO for the Ghana business, bringing vast financial sector experience and deep industry knowledge. “And from a product perspective, we are continuously adapting and diversifying our inclusive finance offering, with the latest being the rollout of Instant Loans into markets across our footprint to expand reach and market potential. Letshego’s philosophy is to remain in markets where we can achieve sustainable earnings and scale. Given the potential of many East and West African markets and Letshego’s commitment to achieving a pan-African impact, we remain committed to giving our Turn Around Markets the support required to deliver on this potential,” he said. Letshego’s Turnaround Strategy During the recent interim financial results presentation, Monyatsi said Letshego’s turnaround strategy which was announced at the beginning of the year is putting the business on a solid footing in East and West Africa markets, saying the resilience is evident. “We are proud of the year-on-year local currency Profit before tax growth in Rwanda (90 percent), Tanzania Faidika (123 percent), Ghana (17 percent) and Uganda (24 percent),” he said. Letshego’s 2023 interim financial results show that profit before tax declined 7 percent year on year to P417 million (H1: 2022: P446 million). Although Profit before tax was down 7 percent, Profit before tax and foreign exchange gain was up 4 percent year on year. The Group says performance in the first half of last year was boosted by a P47 million exchange gain compared to a P1.1 million gain in the current half-year period. Further, the Group states that it has seen volatile currency movements in this first half, more specifically in Nigeria and Ghana. The impact of this volatility for these two markets was a P14 million foreign exchange loss compared to a P23 million foreign exchange gain in the first half of 2022. Profit after tax reduced by 12 percent year-on-year to P219 million (H12022: P248 million). For the past three years since 2019, Letshego’s gross loan book balance across its 11 markets has been rising gradually, from P9.5 billion in FY2019 to P13.3 billion in HY2023. As at HY2023, the Southern African market gross loan book balance stood at P10.3 billion balance while East and West Africa accounted for P3 billion altogether. [/ihc-hide-content]

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BIHL’s concerns about Letshego

As a major shareholder in Letshego Group, BIHL is unsatisfied with the shareholder value it gets from Letshego and is questioning the microfinancier’s strategic direction. But Letshego believes BIHL does not see its bigger picture of creating a monstrous pan-African microfinance firm.

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BIHL’s concerns about Letshego

As a major shareholder in Letshego Group, BIHL is unsatisfied with the shareholder value it gets from Letshego and is questioning the microfinancier’s strategic direction. But Letshego believes BIHL does not see its bigger picture of creating a monstrous pan-African microfinance firm.

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