Page 97

MICROFINANCE

LETSHEGO HOLDINGS Letshego Financial Services Limited (Zambia) Prospects looking good as Michael Sata is declared new president… Zambia has created a new record for itself in Africa by successfully concluding “free and fair” elections, with opposition Patriotic Front (PF) president Michael Sata winning the presidential elections. While Sata’s campaign “mantra” was largely inclined on labour market reforms and a sterner approach towards foreign investors and equitable distribution of wealth, we expect the Zambian economy to continue on a positive growth trajectory. In 2010, GDP growth was 7.1%, marking twelve consecutive years of positive GDP growth averaging 5.12% p.a. A projected 2011 GDP growth rate of c6.5% is expected to be driven by key sectors such as manufacturing, transport, communication and construction,

BWP/ZMK 740.00 720.00 700.00 680.00 660.00 640.00 620.00

03-Oct11

03-Sep11

05-Jul11

04-Aug11

05-Jun11

06-May11

06-Apr11

07-Mar-11

05-Feb11

06-Jan11

07-Dec10

07-Nov-10

600.00

Source: Joab’s Technologies and Research. Capital Joab’s Technologies and Research.

The recovery in global trade has seen strong demand for commodities from BRIC nations such as India, China and Brazil. Agriculture and mining have been the key growth drivers in Zambia. For example, the increased copper production of about 720,000 metric tonnes on the back of buoyancy in global copper prices that averaged cUSD 7,600/MT in 2010 was a major contributor to growth. Furthermore, the country recorded bumper maize production in the agricultural sector of about 2.8m MT (2009: 1.9m MT) and increased production from NTE’s (non-traditional exports) such as tobacco, sugar and cotton. Zambian operations commenced in October 2007. Despite the fact that Letshego Zambia remains relatively small in the market, we think it is well positioned to take advantage of the economic growth in Zambia. With an estimated population size of 13.3m and approximately 500,000 formally employed individuals, government employees are estimated at around 150,000. The company currently has about 1,834 customers (market penetration of 1.0%). As of 31 July 2011, the net advances book was BWP 7.3m (representing 0.3% of the group’s loan book). In addition, the division contributed 0.7% to profit before tax, with an above average cost to income ratio 71.2% and collection rate of about 93%. Micro Africa Limited: Letshego at the “end-game” for final approvals on the MAL acquisition... In line with the Pan-African expansion, Letshego finalised the acquisition of a 62.52% interest in the issued share capital of Micro Africa Limited (MAL) for USD 3.3m. MAL is a private company incorporated in Kenya and has been operating in the country since 2000 with subsidiaries in Rwanda, South Sudan, Uganda and an associated company in Tanzania. According to management, the company has a loan book valued at USD 7.2m, 21 branches and a customer base of over 17,000. It is expected that the controlling share purchase of Micro Africa Limited will be finalised by the 31 October 2011.

BWP/KES 16.0000 14.0000 12.0000 10.0000 8.0000 6.0000 4.0000 2.0000

03-Oct-11

03-Sep11

04-Aug11

05-Jul11

05-Jun11

06-May11

06-Apr11

07-Mar11

05-Feb11

06-Jan11

07-Dec-10

07-Nov10

-

Source: Joab’s Technologies and Research. Capital Joab’s Technologies and Research.

Joab’s Technologies and Research, Natu Court Flat B.

Short to medium term economic prospects in Kenya are currently “bleak” given the drought, inflationary pressures (around 17.3% y-o-y) and high interest rates. Increased food insecurity is likely to raise food prices in the short to medium term thereby raising the inflation rate further and political uncertainties surrounding the soon- to-be held elections in the country could further dampen foreign investments. While we have our concerns however, we strongly feel that the MAL acquisition will position Letshego on a level footing with other micro finance contenders in the East African region.

Page 95 of 104

Equity Research in Africa, Like an Electric Train Africa is picking up, a True Emerging Market  

Economic analysis of Africa as a whole, as well as of particular countries and sectors, with special regard to their potential as investment...

Equity Research in Africa, Like an Electric Train Africa is picking up, a True Emerging Market  

Economic analysis of Africa as a whole, as well as of particular countries and sectors, with special regard to their potential as investment...

Advertisement