Commentary from our Group Chairman
2019 was a year of transition for Letshego, and I am pleased that the Business has come through stronger, and better positioned, to deliver long-term success and value for all our shareholders.
Letshego weathered the last year well under its established transitional leadership, producing a solid set of results for the last financial period under review. Results were driven by a focus on improving efficiencies, increasing overall asset quality supported by enhanced credit processes, and impairment write-backs to enable cost savings.
The recent appointment of our Group Chief Executive, Andrew Fening Okai, along with other senior Group Executives, has brought stability to the Group’s leadership team. This was a welcome development for our various stakeholders, including regulators, customers, investors, and employees.
In addition to the executive appointments, we announced the appointment of three new Independent Non-Executive Directors to strengthen our Group Board with complementary skills in banking, risk, and financial technology. The appointments enhance the Board’s ability to exercise effective oversight and fiduciary function. These are progressive steps that have not gone unnoticed by the market, with our share price showing a marked increase since the beginning of 2020.
The strengthening of our leadership credentials took on even greater significance against the backdrop of the COVID-19 pandemic. Since its emergence globally in December 2019, the response required to manage the impact of the Coronavirus pandemic has become a focal point for all businesses across the globe. Together, we share the challenge of minimising the pandemic’s downside risk and impact on our employees, customers, and operations as well as seeking interventions to protect and sustain local economic activity.
As we apply immediate measures to contain current threats imposed by the pandemic, it is also important that we maintain our future perspective, deploying the interventions now that will be needed to adjust to the ‘new normal’ envisaged post this pandemic.
IMPACT OF COVID-19
In February 2020, when COVID-19 became a reality for sub-Saharan Africa, Letshego was swift to initiate our risk and pandemic plans, which include ongoing identification, monitoring, and implementation of effective risk and health measures in line with national and international guidelines. Letshego has established Corona Crisis Committees, comprising senior executive members at both a Group and Country level to facilitate ongoing action and clear lines of execution and accountability.
Pandemic planning has spurred a proactive response, bringing forward medium-term digitalisation investment strategies within our 6-2-5 strategic roadmap. This prompt response has enabled business continuity as well as digital access for our customers, via WhatsApp lines, call centres, and automated WhatsApp channels, without the need to travel into our branches.
Going forward, under the ‘new normal,’ Letshego will continue to prioritise the health and wellbeing of our employees and customers, while taking steps to maintain business continuity, and mitigate operational and financial risks.
In the last month, we have witnessed select sub-Saharan markets progressing toward reviving economic activity with easing levels of lockdown. We expect the region’s gradual easing of lockdowns and economic recovery to reflect a typical “W-shaped” recovery, with potential isolated, viral resurgences precluding smooth and predictable economic recoveries. Letshego’s scenario and operational planning thus accommodates due flexibility and adaptability given current, unpredictable environments.
Private and public sector collaboration remain essential in Africa’s ability to navigate a sustainable path through this pandemic. Letshego has provided relief for our most vulnerable customers, micro and small entrepreneurs, via payment holidays. In addition, Letshego has donated over P3 Million in financial support to government COVID-19 relief efforts across our footprint.
FINANCIAL PERFORMANCE
For the 2019 financial year, we posted solid results with Profit before tax up 11% year on year and Profit after tax up 35%. Return on equity increased from 12% in 2018 to 16% last year, with Earnings per share gaining 41% year on year, with 7.7 thebe as a declared dividend for the second half.
Looking at this year’s performance, we started the year on track through the first quarter. However, following the subsequent onset of COVID-19, we expect our financials to reflect the downside impact of the pandemic from April onwards.
Since varying levels of national lockdowns were implemented across our region, underwriting new business has been limited, however we have maintained a level of prudence with respect to specific industries and segments severely impacted by the pandemic.
The full financial implications of COVID-19 will be more apparent as lockdowns are lifted and economic activity is reignited in the second half of this year.
RETURNING TO GROWTH
For multinationals operating in Africa, the economic transition to the ‘new normal’ will be diverse, as it is disparate. With the lack of predictability, some markets are likely to experience more severe infection rates than others, pushing health and related economic sectors well beyond their limits. Other markets may manage to bypass the extremes of the pandemic, but none will be immune given Africa’s increasing interconnectedness and inter-regional economic activity. Ultimately, this means a ‘one size fits all’ strategy will be inadequate. Letshego will therefore ensure that regional strategies factor in country-focused analysis and action to bolster a holistic risk and operational approach.
OUR STRATEGY
Our 6-2-5 strategy responds to both our short and medium-term aspirations, in line with our future vision to be a world-class retail financial services organisation. Our strategy remains consistent. We are committed to the continuous digitisation of our business, diversifying our solutions and funding base in the medium term, while working in parallel to cement strategic partnerships and build ecosystems that provide exponential stakeholder value well into the future.
MEASURING AND REPORTING OUR SOCIAL IMPACT
Evolving our Environmental and Social Governance (ESG) framework, including the measurement and reporting of our social impact, is an increasingly valuable attribute sought after by our stakeholders and strategic partners. 2019 saw Letshego publish its first Impact Report, a significant step in our ESG journey.
Our 2019 Impact Report evidences how Letshego’s strategy aligns with 11 out of the United Nation’s 17 Sustainable Development Goals. Goals that, collectively, focus on ending poverty, protecting the planet, and ensuring that all people enjoy peace and prosperity by 2030.
From a health perspective, our sponsorship of Non-Communicable Diseases (NCDs) over the last three years has generated just over P114 Million in social returns, by way of supporting a productive workforce, increasing employability, and providing basic healthcare to promote longevity.
In Youth and Education, loans disbursed by Letshego in 2019 to support secondary and tertiary education can be measured in terms of boosting the beneficiaries’ future earning potential. For the 2019 financial year, Letshego’s loans extended to support education, increased earning potential to the value of P893 Million for an estimated 78,000 students.
These statistics are each valuable indicators in demonstrating how Letshego’s commercial operations deliver a tangible, and measurable, economic contribution to our communities.
APPRECIATION
In concluding this year’s commentary, I would like to express my sincere appreciation to those Board Members and Executives who assisted us over the last year. Thank you to Josias de Kock and Christian van Schalkwyk, our Board members who resigned in 2019, for their tangible expertise given in guiding and supporting Letshego through its growth journey over the last few years.
The Board wishes to thank Dumisani Ndebele, Acting Group CEO from March 2019 to January 2020, for providing a steady pair of hands in maintaining business continuity during our leadership transition.
Sincere thanks goes to Colm Patterson, our former Group Executive Director and Group Chief Financial Officer, who left the business at the end of March 2020 after playing an integral leadership role in Letshego’s expansion and legacy over the last 15 years. Many talented individuals have grown and excelled under Colm’s guidance and leadership.
A warm welcome to our three new Independent Non-Executive members: Philip Odera, Abiodun Odubola, and Ronald Hoekman. We stand to gain immense value from your collective expertise and support for the Group in the coming years.
As we progress in refining and refocusing our regional strategy, the Board welcomes and looks forward to working with Andrew Okai, our new Group Chief Executive, who assumed his role on 1 February 2020.
On behalf of the Letshego Group Board, I wish to express my heartfelt appreciation to our diverse and valued stakeholders who make Letshego what it is, create our unique culture and ensure our ongoing success and future potential is realised. Thank you to our people, customers, regulators, investors, as well as our public and private partners as we collaborate and support our stakeholders through the unusual times ahead, and forge a sustainable path for the future.
E. N. Banda
Group Chairman
29 May 2020
