Sanlam and MTN have formed a $100m (R1.47bn) joint venture that will see Africa’s largest nonbank financial services group partner with its largest mobile operator to roll out insurance and savings products to the continent’s rapidly expanding consumer market.
Under the 50-50 joint venture, which the two groups are calling a “strategic insuretech alliance”, Sanlam and MTN will each commit $50m to form the partnership that will roll out life insurance, phone insurance, car insurance and basic savings products. MTN sees the deal as a way to grow its burgeoning fintech offering by leveraging its brand and reach on the continent using Sanlam’s licensing and geographical footprint —which extends from the Cape to Morocco — as well as its extensive expertise in financial services products.
“We’re setting up a full-scale JV across Africa, including SA, to provide mobile insurance and investment products to customers,” Sanlam CEO Paul Hanratty told Business Day in an interview. “We’re committing $50m upfront to it — and MTN have committed the same quantum.”
The joining of forces will promote easier and more affordable access to financial services on a continent where mobile internet penetration is expected to reach 39% by 2025, but where insurance penetration remains low.
“What many people forget is that the average African consumer can afford very, very little,” said Hanratty. “The traditional insurance model, and the traditional banking model for that matter, actually just doesn’t work for the vast majority of consumers [in Africa] who have been excluded from financial services. What mobile does is it allows you to reach customers who would otherwise be excluded.”
MTN operates in 17 countries on the continent and has more than 270 million subscribers across its total of 21 markets, including the rest of the world. Sanlam has a direct and indirect presence in 45 countries, the bulk of which is in emerging markets in Africa and Asia, but also extend to developed markets including Australia, France, Switzerland, the UK and Ireland.
Though fintech accounted for only 8.7% of MTN’s latest interim revenue, the segment is one of its fastest growing income streams, thanks to its more than 100-million digital wallets, 800,000 agents and 650,000 signed-up merchants. MTN’s group fintech revenue grew 22.6% in the six months to end-June 2021, totalling R7.5bn.
The collaboration provides Sanlam the opportunity to extend consumer access to its products and grow its Africa operations by providing insurance to MTN’s customer base across the continent. MTN’s InsurTech business unit currently has about 6-million active policyholders and it aims to increase that to more than 30-million by 2025 with the Sanlam partnership. Hanratty says the figure could swell further.
“It’s not going to move the dial on profit for MTN or for Sanlam for quite a number of years, but we ultimately think you could have 50-million customers across the continent from this joint venture,” he said. “You then start having a business that is very valuable.”
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