The reduced economic activity and no salary increment for government employees are starting to bite one of Botswana’s largest companies.According to Sanlam Chief Executive Officer (CEO), Johan van Zyl, Botswana Insurance Holdings Limited (BIHL) will have to downscale its business in order to boost profi t margins for its South African based largest shareholder. BIHL is the country’s largest life insurer and the group has extensive asset and investment management portfolios which amount to just over P18 billion. Van Zyl told South African publication, the Financial Mail (FM) that, the Botswana business (BIHL) will need to be downscaled as it has been hit by the country’s economic problems – its civil servants have not had pay increases for four years, and Sanlam relies on escalating premiums to make good returns.
Reached for comment on how exactly the company was planning on this downscaling, Communications and Marketing Manager, Tebogo Keepetsoe, told Gazette Business in a press release that,“The specifi c downscaling that is being referred to in the article (the FM article) relating to BIHL forms what is already a strategy pillar for BIHL and was indicated at the BIHL 2012 fi nancial operating results presentation.” The release added, “This downscaling refers to BIHL’s continuous focus on cost optimization in all the business units due to the more mature businesses that we are in and the pressure BIHL is experiencing on sales. Due to the increased competition for our customers’ wallet and decrease in household income, BIHL has seen it fi t to develop a pillar that speaks to maximizing operational efficiencies and profi table growth. This, amongst our other strategic pillars, will enable BIHL to maximize shareholder value.”
However, the press release failed to address specifi c questions on the intricacies of the downscaling. Gazette Business enquired about the exact nature of the downscale, which Van Zyl referred to. We enquired about products and services, if any, that would cease and if there would be any future staff lay-offs. According to a market analyst who preferred anonymity, BIHL group was bound to reach a tipping point due to the nature of itsbusiness. “It is not a crisis, however, the company will have to restructure itself as the Botswana economy is still going through shocks.”
He said if the Botswana government’s 2011 announced five per cent civil service reduction is implemented, BIHL will have to restructure its business as this (reduction) would have a detrimental effect on its trading. The group Chief Executive Offi cer of the Botswana Stock Exchange listed company, Gaffer Hassam, two weeks ago announced that they had recorded a three per cent reduction in operating profit during the fi nancial year ended 31 December, 2012.