It is not easy for a Botswana-born company to make it big outside the country. However, microlender Letshego is defying all that – emerging as a powerful Pan African financial service operator with an even more ambitious growth plan to get more value from its current services and to diversify offerings. KABELO ADAMSON reports
One of the country’s most successful home-grown companies Letshego Holdings Group hosted a celebration dinner to mark its 17th anniversary on Tuesday at the luxurious resort of Lansmore at the Gaborone Central Business District (CBD). Incorporated in 1998, Letshego has since grown into pan-African financial service provider with footprints in 10 Southern and East African countries.
Letshego’s journey to become the second largest company on Botswana Stock Exchange (BSE) by market capitalisation has seen more joys than upsets. It value at BSE stands at P5.3 billion, beaten only by First National Bank (FNB).
The Tuesday celebrations saw the company recognising those who have been the company for long period of time, rewarding them with long service awards. Among those honoured is Chief Executive Officer of Letshego operations in Botswana, Frederick Mmelesi. He joined Letshego in 1999 shortly after its formation.
Speaking during the ceremony, the group Managing Director, Christopher Low, revealed that when the company was conceptualised close to two decades ago, it started with 30 staff members in a stand-alone office in Gaborone.
Three years ago Letshego acquired micro-finance businesses with operations in Kenya, Tanzania, Uganda and Rwanda; now six percent of group revenues come from these businesses.
The group employs over 1,300 staff representing more than 20 nationalities and is the largest indigenous company by asset and profitability. Over 170 full time staff is employed in Botswana based at the head office and local subsidiary.
Until 2004, Letshego was an entirely Botswana business, but through geographic expansion and acquisitions, today about 60 percent plus of the business is now outside Botswana with countries such as Namibia, Mozambique and Tanzania hailed as the next biggest businesses.
The group would in the last 10 years spread its footprints in the sub-Saharan African countries to penetrate 10 markets.
“Letshego can and will travel to a much higher level of performance, growth and returns to shareholders,” a confident Low said.
The group has become a national pride with a robust performance even in its new markets.
Low, who took over from Jan Claassen as group MD in November 2013, boasts that Letshego is even larger than most banks in the markets in which it operate. “Our Botswana operations made well in excess of P300 million in post-tax profits in the past year,” he pointed out.
A few years after its establishment, Letshego listed on Botswana Stock Exchange in 2002. While the move was to allow the citizens to own part of the group, it also offered revenue to fund its growth strategy.
Chairman of Letshego Financial Services, Botswana Legodile Serema told of how he came to know about the institution. “My first association with Letshego was in 2007, when, as Mayor of Lobatse, I was approached on a number of occasions to officiate at Letshego events in and around the area. I came to learn more about this apparently little known company with a constantly growing ambition to re-define customer experience,” he said, adding that he was invited to come and serve on the board of Letshego Holdings Limited in 2009, for which he accepted. Serema was appointed to serve in the group’s largest subsidiary, Botswana operations.
“I am truly proud to have been associated with this Group, and have seen first-hand how its growth has impacted Botswana positively,” the chairman for Letshego Botswana told those present at the dinner.
Serema said Letshego remains an indigenous Botswana force that is now a multinational company. His believe is that Letshego is exporting Brand Botswana through the skills that are found in 190 plus Batswana most of whom who provide support at group level to the other nine subsidiaries.
The last 17 years has brought much accomplishment to the indigenous company, Letshego is the most heavily traded stock. Low confirmed that the company’s shareholders include 38 percent international investors. The growth of Letshego, financially and in other ways is witnessed year after year. This week the group released its financial results for the period of 11 months ending December 31, 2014 for which it registered an increase of profit before tax by 24 percent to reach P970 million.
In January 2014, a new strategy was approved by the board, which is intended to guide Letshego into becoming leading African financial services group. “This will ensure that our investments in strategic initiatives are aligned with the provision of responsible solutions for our customers,” group chairman, John Burbidge, said on Tuesday.
The strategy will allow Letshego to align its governance practices with international practice and also ensure that the management is committed to deliver financial success, growth and returns to shareholders.
“The group’s agenda aligns with governments in our markets as these relate to financial inclusion and skills deepening,” the group chairman said.
The new five-year strategy is embodied on four building blocks which will help transform the company. The first one is growing franchise. Under this, Letshego intends to enhance its consumer lending solutions, diversify into micro-finance in new geographies and initiate deposit taking.
Next on the agenda is to build capabilities which will see Letshego focus on five key sustainable areas being customer experience, innovation, risk management people development and stakeholder engagement.
What follows will be the roll out of the new operating model which the company seeks to re-balance the roles and accountabilities between operations in Gaborone and local subsidiaries to leverage them as marketing and sales operations that focus on strong customer relationship management and experience.
The next step will be to improve balance sheet management by diversifying sources of funds and lowering overall cost of funds. The strategy is already paying dividends. Results released on Thursday show that profit after tax grew by 22 percent whereas advances to customers increased by 28 percent.
Letshego services more 250 000 customers which are being served by its micro lending subsidiaries across the 10 countries. The subsidiaries provide short to medium-term unsecured loans to customers employed in the formal sector.
Listed in top 40 companies
At the moment Letshego is listed in the Top 40 sub-Saharan companies. The group has in the last decade expanded into Africa from its origins here in Botswana and during that period, it demonstrated growth in advances and profitability. This picture, according to the Low, paints a bright future and an indication that Letshego is well on the way to becoming one of Africa’s leading financial services group.
Once turned down by the Bank of Botswana to acquire a banking license, Low said they are often questioned about their banking aspirations. “Our business today is primarily about the provision of affordable loan solutions with focus on three segments,” he said. These segments are government employees, low income employees as well as micro and small enterprises or businesses.
Low said their segments are not the natural targets of the commercial banking; rather they are at a level where the costs of traditional banking services are prohibitive. “However, to really develop a fully-fledged diversified strategy we need to obtain deposit taking licenses-we have gone live with these in Mozambique and Rwanda in 2014,” he disclosed, adding that they are aiming to do the same in Namibia this year.
Once such licenses have been obtained, Letshego will offer its customers “any channel, anywhere” solutions to their financial needs using the latest technology which will be simple and affordable. Having established itself as biggest company in the industry, now the time is to spread the business.
“We are focusing on diversifying our business and over the last five years have made significant progress on this front,” Low said.
In the six month period ending 31 July 2014 advances increased by 32 percent whereas profit before tax for the same period stood at $556 million while the full year for 2013/14 was $97 million.
Looking ahead, the group says it intends to transform its business through becoming a deposit taking financial institution in a number of markets and expanding further into geographies with high growth prospects.
Deposit taking process has already started in Mozambique subsidiary where it has a micro-bank licence and has started deposit-taking as of February 2014. In Namibia, the company has been granted a provisional banking licence. The process of deposit-taking is expected to diversify the group operating model and help to achieve financial inclusion agenda.