Mobile network operator Bharti Airtel this week announced that it has entered into a strategic agreement with Sanlam, a South African-based financial services group. The partnership allows for the distribution of Sanlam’s insurance and health funding products in seven African countries – Kenya, Ghana, Tanzania, Zambia, Uganda, Malawi and Nigeria. [hidepost=9][/hidepost]
Both parties stand to benefit from this strategic cooperation. Bharti Airtel will be enhancing value for its African customers by increasing their access to insurance, while the agreement will assist Sanlam with the marketing and selling of its insurance products using Bharti Airtel’s telecommunications networks in those seven countries.
Margaret Dawes, executive director for Africa at Sanlam Emerging Markets, told How we made it in Africa that the cooperation agreement was non-exclusive and a strategic move for both companies.
“Airtel was a logical partner for Sanlam in this initiative because of our mutual objectives in the developing markets and because of our overlapping geographic footprint in the rest of Africa. We will together be developing low cost insurance and health funding products for distribution via Airtel’s customer base, initially using their mobile money platform,” she said. “We are their preferred but non-exclusive product provider for life, general insurance and medical offerings.”
Bharti Airtel currently operates in 17 African countries. In a recent press release, Chidi Okpala, Bharti Airtel’s director and Airtel Money’s Africa head, said the company is delighted to be partnering with Sanlam on this initiative.
“This will offer our customers in Africa access to a broad range of sophisticated products and services to support their lifestyles and aspirations, and this partnership will enable us to significantly enhance the value we offer our loyal customers,” said Okpala. “Our customers stand to benefit from access to Sanlam’s world-class life, general and health insurance products.”
Sanlam Emerging Markets is responsible for the company’s financial services in emerging markets outside of South Africa. It currently has business interests in Namibia, Botswana, Malawi, Tanzania, Ghana, Zambia, Nigeria, Kenya, Uganda, Swaziland and India.
“We are passionate about supplying sound financial solutions to the wider African market and are delighted by this opportunity to provide our services and solutions through Airtel’s network,” said Dawes in a statement. “We look forward to providing competitive products that meet the client’s needs – drawing on our collective years of experience and research in these markets.”
How we made it in Africa recently published an article focused on the opportunities for South African insurers who are expanding into other African markets, such as Leapfrog, Old Mutual and Sanlam.
KPMG national head of insurance and partner Gerdus Dixon said that “the South African life and short-term insurance markets are relatively mature, with few obvious merger and acquisition opportunities, it is also ultra competitive, well regulated and, in all likelihood, facing ongoing challenges regarding regulation”.
While the South African insurance environment may be crowded, other African countries offer South African insurance companies new markets. However, Dixon cautioned insurers against expecting African countries to provide them with a short-term growth solution. “Africa’s gross domestic product is expected to reach US$2.6 trillion by 2020, but expanding into African countries is not a short-term growth fix, it will take deep pockets and committed sustainable long-term business plans to develop the insurance market in these African countries – particularly the much vaunted retail or individual life insurance markets.”
It is important that shareholders understand the return profile of expanding into Africa. Those companies that do unlock the potential stand to benefit from improved margins on products coming from the fastest growing employed population on the planet. There are 500 million people of working age in Africa and the expectation is that this will outnumber China and India by 2040.
“The underdeveloped formal economy and infrastructure will demand that innovative solutions need to be found with regard to strategy, product design and distribution. The barriers to entry are high, but Africa is simply too big and growing too fast for insurers to ignore,” said Dixon.