Reflections from our Group Chairman
Letshego achieved double digit growth in profits in 2021, continuing a healthy trend of delivering strong results. This last financial year’s performance indicates the resilience of our business model during a period of transition, and I take this opportunity to reflect on the transformational journey the Group has navigated with resilience, agility and stamina over the past two years.
AN ASTOUNDING JOURNEY OF TRANSFORMATION
By 2019, Letshego had become well known as a microfinance institution, with the core function of providing Government Deduction at Source (DAS) loans. Although this service had differentiated our offering for over two decades, Africa was fast approaching a technological revolution that could create new ways of bringing services and solutions to our evolving regional markets. Our Board of Directors acknowledged that Letshego was behind in the tech advances that were sweeping through global and regional financial sectors. We therefore commenced a fundamental realignment of Letshego’s strategy and condensed the Group’s strategic imperatives into five conversations, namely: Product Diversification; Digital Transformation; Geographic Rebalancing; Enterprise Agility and Sustainable Shareholder Value. This new Transformation Strategy, announced on 1 September 2020, was underpinned by an ambitious 6-2-5 execution roadmap that aligned to the Group’s short and medium term aspirations. The objective of Letshego’s strategic transformation is to embed sustainable financial performance, invigorate our delivery in customer value and ensure we restore robust returns to our valued shareholders and investor partners over the long term.
Over the past two years, Letshego has seen a notable shift towards digitalisation, embedding an Agile culture, and enhancing enterprise risk frameworks. The Group is already starting to develop a foundation for ‘eco-systems’, expanding multi-tier partnerships and digital hubs, all while upskilling and empowering employees and customers with world-class, digital skills that support sustainable financial inclusion and digital-savvy economies. Adoption of alternate digital channels by customers is well ahead of expectations.
We are making strong progress in transforming our organisation into an entity that leverages digital and end-to-end automation to unlock significant enterprise value, not only for our customers, but also for our investors and shareholders. Although the strides we have made in this journey have been inspiring, we are not done. Letshego is still on the march and on track to achieve its 2025 targets, which will deliver a marked change in growth, impact and value.
OPERATING ENVIRONMENT
Letshego’s pleasing performance during a time of unprecedented transformation takes on an even greater significance against the ongoing backdrop of the COVID-19 pandemic. Waves of COVID, including the Delta and Omicron variants, continued to impact our regional markets and are likely to influence the economic environment through 2022. The good news is that output in many countries saw a gradual return during the course of 2021 after the sharp decline of 2020, while domestic financial crises and foreign debt restructuring has been less frequent than expected in a time of severe global shocks. However, after rebounding by an estimated 5.5% in 2021, global growth is expected to decelerate markedly to 4.1% in 2022. While output and investment in advanced economies are projected to return to pre-pandemic trends in 2023, emerging markets and developing economies may lag markedly behind.
The resurgence of COVID-19 infections around the world accentuated the uneven nature of economic recovery initially noted in the 2020 period, a trend referred to as the ‘K-curve’. Although infections in Africa were low relative to the rest of the world, restrictions on economic activity were widely implemented across the continent, and the impact on our regional economies is still evident. In addition to the pandemic-related economic downturn, a fall in commodity prices and oil production cuts impacted negatively on many economies. Rising public debt, inflationary pressure and growing geopolitical tensions contributed to a challenging operating environment.
However, despite ongoing headwinds related to the pandemic, the Letshego Group has shown strong business resilience. From the outset of the pandemic, Letshego has reiterated its commitment to prioritising the health and wellbeing of our customers and people, while maintaining business continuity through the launch and enhancement of digital access channels and systems, all while tempering risk appetite to accommodate current business conditions.
LEGAL AND REGULATORY COMPLIANCE ENVIRONMENT
During 2021 we appointed a Group Chief Compliance Advisor to lead the Group’s compliance transformation across all our countries of operation, enhancing financial governance in Anti-Money Laundering (AML), financial compliance skills, training and awareness. We have also taken steps to empower our people to appreciate the value of supporting business growth while always maintaining our commitment to the strictest levels of regulation and compliance. Most regulators enforced AML legislation during 2021, with certain markets undergoing AML regulatory reviews. Cybercrime legislation was introduced in some of our markets, partly due to the impact of COVID-19. In most instances, this was accompanied by privacy and data protection legislation.
In line with the same focus of continuously enhancing our levels of governance, Letshego concluded the appointment of a specialist tax team to ensure our long-standing commitment to shareholders to optimise our tax rate. Success in our focus on tax efficiencies is already generating positive returns in the downward trend of the Group’s effective tax rate in 2021.
ETHICS, LEADERSHIP AND CORPORATE GOVERNANCE
While the Group leverages technological advancements to improve delivery and support for customers across our 11 markets, the business is also taking responsible steps to balance the evolution of its operations by applying solid governance and world-class risk management frameworks. Our governance framework is informed by the principles of ethical trade, transparency, accountability and sustainability.
A Board evaluation was performed in 2021 in line with King IV requirements. To promote objectivity, the 2021 appraisal was facilitated by the Institute of Directors in Southern Africa (IoDSA), an independent governance facilitator. Of the governance areas evaluated, the strongest performance was found within Board Committees and Board Role Players. Although Letshego’s Group Board achieved a strong overall score, we always gain by identifying opportunities where we can apply our commitment to continuous improvement. As a Board of an international organisation, we strive to align with world-class practices and global fiduciary research and guidelines.
In October 2021 Rose Mwaura joined the Letshego Group Board as an Independent Non-Executive Director, further boosting the Board’s gender diversity and relevant specialist skills. Rose has over 25 years’ experience in providing commercial and financial advisory, audit, assurance and governance services to various international organisations.
Throughout the year, we continued embedding the principles of good governance and all applicable codes and standards wherever possible. A particular focus was expanding the Board’s oversight of cybersecurity. The effective implementation of the Group’s Three Lines of Defence within our Enterprise Risk Management Framework (ERMF) provided the Board with the required assurance on this inherent risk as the organisation transforms into a digital-first organisation. The Board also devoted considerable time in reviewing and approving the Group’s strategy in progressive workforce transformation and Agile Enterprise ways of working.
APPOINTMENT OF INTERIM GROUP CHIEF EXECUTIVE OFFICER
Subsequent to the 2021 financial year, the Board terminated the employment of Mr. Andrew Fening Okai as Group Chief Executive due to an irreparable breakdown in trust and confidence.
Following the separation, Letshego appointed its Chief Operations Officer, Mr. Aobakwe Aupa Monyatsi, as the Interim Group Chief Executive and Executive Director. The Board fully supports and has confidence in Mr. Monyatsi and his Executive Team to continue to drive the Group’s strategy.
SUSTAINABILITY AND SOCIAL IMPACT
As a business that is trusted across Africa, Letshego’s aim is to be a force for social good. We are proud of the Group’s achievements in delivering measurable social impact to our customers and the communities in which we operate.
During 2021, Letshego took a great stride towards achieving our vision in further developing our Programmatic Approach solution that will ultimately see Letshego offering a variety of social impact solutions that include Affordable Housing, Education, Health and Green Lending. Research has shown that housing has profound benefits in supporting broader communities by increasing general social health and wellbeing. Being able to access and fund your own home enables more mass income households to access sustainable levels of self-sufficiency. The Board proactively supports the chosen selection of economic segments as they are proven to have the highest impact in supporting social development in Africa. Letshego’s commercial offering supports 10 out of the 17 UN Social Development Goals (SDGs), and we look forward to sharing our statistical success as our Programmatic Approach solutions gain momentum.
Our choice of impact programmes such as green initiatives, health, education affordable housing enables us to align with international partners who share our sustainable thinking. Letshego’s education and affordable housing offering with the International Finance Corporation (IFC) in Namibia marked the start of a truly exciting partnership and we appreciate the support, synergy, and partnership that the IFC brings to our strategy.
As Letshego increases access to productive capital across our footprint, the Group is working to continuously improve on our social impact reporting. In 2021 we contracted the help of 60Decibels, a global, tech-enabled impact measurement company, to conduct social impact surveys across all our 11 footprint countries. These surveys were conducted to understand our customers better, get to know personal motivating factors, daily challenges, financial habits and individual needs. One of the outputs of this survey is to gauge what Letshego loans are used for, analyse these insights and establish how to deliver greater impact going forward.
Personal loans were the most common in all countries, with funds generally being used to pay for school fees (32%) or the construction of houses (31%). 45% of our customers use their loan for business purposes such as establishing new ventures or purchasing a vehicle. Nearly 9 in 10 customers feel they can trust Letshego with their money. Our surveys show that Letshego is making a positive difference to the financial situation of its customers, but there is an opportunity to further improve customer experience and to reach more underserved customers.
We are not only here to improve the lives of our customers, but also those of our own people, by upskilling and empowering our employees with contemporary digital skills that will secure the long-term sustainability and growth of our business well into the future. Resilience, adaptability and a solid grounding in digital literacy is no longer a unique asset for individuals, but an essential attribute for people to live and thrive in future economies. The launch of our LetsGO Digital Mastery programme in our three sub-regional digital hubs, namely Botswana, Kenya and Ghana, is intended to empower more individuals from our footprint communities to share our passion through digital literacy and skills.
PROSPECTS
The success of the Group was enabled by our focus on people both within and outside the business.
From the outset, the Group adopted a customer-centric approach to doing business, with its operations structured to deliver value at affordable prices. This has translated into a resilient business that can withstand external shocks and remain sustainable into the future. Nevertheless, to remain competitive in today’s world, we need to go beyond affordability to address individual customer needs. More than ever, Letshego must leverage its agile ways of working to help us prepare for our future potential. This window of technological opportunity will close unless we continue to deliver fast and with the right quality.
In the next financial year, we will remain committed to creating meaningful and sustainable value for all stakeholders. Done right, this will allow Letshego to continue operating at the forefront of banking innovation. Further, we will continue to pursue our diversification strategy, using the momentum gained from this past year to propel us forward. While many challenges lie ahead, the Group’s robust strategic plan and resilient business model will drive our transition from a traditional micro finance institution to a pan-African ‘Retail Tech’ brand and entity.
Acknowledgements
The positive results achieved by Letshego in the past couple of years would not have been possible without an exceptional executive management team that is backed by a supportive and capable Board. The level of commitment and competence demonstrated by the Group’s leadership has made it possible for the business to pursue the right initiatives at the right time.
On behalf of the Letshego Group Board, I express my heartfelt appreciation to our diverse and valued stakeholders who make Letshego what it is, and create a unique culture that will ensure Letshego’s future potential is realised. I have been inspired with the launch of our first ‘Chairman’s Award’ that recognises employee intrapreneurship, individual excellence, effective collaboration and broader impact within our business. I wish to acknowledge and congratulate Michael Inhambao again for winning our first award, and inspiring others to achieve their respective, individual potential.
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 still to come.
I extend my appreciation to my fellow directors, with specific thanks being extended to Stephen Price and Runa Alam. Stephen Price is currently our longest serving member and retires from the Group Board after nine years of service and dedication. Runa Alam tendered her resignation to the Group Board this first quarter, following the timed conclusion and gradual sale of the ADP I Holding 2 equity stake in Letshego Holdings Limited. I would like to thank Stephen and Runa for their unwavering dedication, partnership, expert input and friendship provided to the Board and Letshego as a whole, as we wish them both much success and fulfilment in their future ventures. We have enjoyed engaging with you and commend you for all your hard work and insightful leadership.
My sincere gratitude to our customers for trusting Letshego as a partner in your financial journey, and to our strategic partners that assist us to continue delivering sustainable value now and for generations ahead. We will continue to work hard each day to find new and innovative ways to serve your needs and earn your trust.
MR ENOS BANDA
Group Chairman
