Letshego Holdings Limited, the BSE-listed consumer lender, which is also setting its eyes on retail banking, has revealed it will continue to seek ways to grow its loan books and explore new countries to set up in a bid to extend the group’s footprint in the continent.
At the company’s results presentation for the financial year ended 31 January 2012, it was revealed Sudan and Ghana are in the radar although due care should be taken before entering these territories.
Group Managing Director, Jan Claassen, acknowledges the challenges and obstacles in South Sudan, especially that the market is unbridled, no interest rates, unstable currency and non functional Central Bank.
“People are busy with regulations in South Sudan,” Claassen said, adding it was still early at ‘this moment’ to say what deduction model will be used. One SMMEs lender that Letshego is on the verge of acquiring already has a footprint in South Sudan.
One analyst raised concerns on the risks inherent in South- Sudan, which are heavily influenced by the history of fighting with its bitter neighbour, Sudan.
“There are still political problems between Sudan and South. They are bombing each other,” Claassen added.
Letshego reports in Pula and currency is another factor considered when it enters a market and exchange rates have been changed in Ghana and Sudan recently.
“Our concern is the devaluation of the Sudan currency”. Letshego, which is a Botswana listed and domiciled consumer lender, operations in Botswana, Mozambique, Namibia, Swaziland, Tanzania, Uganda and Zambia.
Swaziland is also a complicated market the economy there is heavily reliant on SACU revenues with 50 percent of the GDP reliant on custom takings.
Claassen said this is made by loss of investor confidence in South Africa, which has seen the Africa’s largest economy losing investors to countries like Kenya and Brazil, which could affect SACU receipts.
“It affects us here,” Claassen noted.
The Mozambique operation that was launched in February is already playing a significant role in the group’s margins.
The Maputo operation is expected to help reduce profitability over-reliance on Botswana.
Claassen estimates that Mozambique has the potential to contribute 20 percent of the group’s profits in the future. The company plans to have a branch in each province of the country by the end of 2012.
Currently Letshego is the one micro lender with a deduction code in that market, which is not easy for competition to come in.
Letshego has 7, 000 customers in Mozambique and has accumulated P160 million worth of assets since it started operations there.
The company is also in the process of acquiring 62.52 percent of the company’s issued capital in Micro Africa Limited (MAL), a private company incorporated in Kenya that will give it direct access to markets in the Eastern and Central Africa.
MAL currently has operations through subsidiaries in Rwanda, South Sudan and Uganda and an associated company in Tanzania.
The group results for the period ended 31, January, 2012 showed advances to increased by 32 percent to just over P3 billion mark from P2.3 billion in 2011.
The group’s profits before taxation increased 13 percent to P711.2 million while profit after taxation increased 22 percent to P577.8 million.
Letshego said 37 percent of profits before taxation were generated outside Botswana, versus 34 percent same measure last year, indicating that a steadily growing component of the group’s business is being diversified across Africa.
Botswana’s loan book is currently bigger that other subsidiaries, but the gap is narrowing.
In a circular earlier this year, Letshego said loan book outside of Botswana now represents 40 percent of total loans compared to 33 percent in the same period in 2011 as shown by the audited results for the year ended 31 January 2012.
Previously, the Botswana subsidiary accounted for between 80 ÔÇô 90 percent of the group’s loan book explained mainly because the company originated here.