Motsepe, Sanlam enter into yet another deal

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Patrice Motsepe, executive chair of African Rainbow Minnerals and African Rainbow Capital. Photo: Elvira Wood
Patrice Motsepe, executive chair of African Rainbow Minnerals and African Rainbow Capital. Photo: Elvira Wood
Patrice Motsepe and Sanlam are set to seal yet another deal which will see the creation of a new business. The continent's biggest insurer announced on Friday that it intends to acquire a 25% non-controlling minority shareholding in African Rainbow Capital Financial Services (ARC FS) which will subsequently create a new subsidiary, ARC Financial Services Sub Co.

Just four months ago, Sanlam and ARC FS Sanlam signed another agreement to establish one of the largest black-empowered asset management companies in South Africa. That deal was the unrealised part of the 2018 broad-based black economic empowerment transactions that also saw the two companies establish a black-owned insurance company, African Rainbow life.

Creating a new subsidiary company

ARC FS is a subsidiary of Patrice Motsepe's investment holding company, African Rainbow Capital, which owns the likes of TymeBank, mobile operator Rain and has major stakes in companies like Alexander Forbes and Sanlam.

Sanlam said once its deal with ARC FS, which is subject to certain suspensive conditions, gets the required nod, ARC FS will transfer all of its financial services assets to the new subsidiary, ARC Financial Services Sub Co. These include the investment holding company's stakes in Alexander Forbes, medical schemes administrator Afrocentric, Rand Mutual Holdings, A2X and African Rainbow Life, among others.

But ARC's banking investments, which include TymeBank, the Artificial Intelligent Fund and mortgage originator, Ooba, will not be transferred to the new subsidiary.

Sanlam CEO Paul Hanratty said this was because the insurer wants to steer clear of owning banking assets.

"Sanlam is very focused on insurance and asset management-related financial services. We are not at all having any appetite for banking type of assets," he said, before adding that the insurer's relationship with Capitec is as far as it's willing to get involved in banking.

Capitec sells the bank-branded funeral products which are underwritten by Sanlam. The partnership has proven to be lucrative for the two parties, thanks to Capitec's broad footprint which reaches corners of the low-income segment that Sanlam's funeral products division, Sanlam Sky, is not able to.  

Capitec said pre-lockdown, it was issuing 100 000 funeral policies per month on average, a sales rate that continued as soon as SA went into level 2 of the lockdown. Since the inception of the partnership, Capitec has sold over 2 million policies.

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