Select Page

Rail – Africa’s hope to better regional inter-connectivity

Rail – Africa’s hope to better regional inter-connectivity

As Africa realizes an integrated transport system remains vital to the continent, Governments are feverishly working to push for further railway development. In addition to the continent housing the largest number of landlocked countries in the world, sixteen countries in Africa do not have cross-border railway lines. The national railway networks in sub-Saharan Africa are mostly independent of each other except some parts in the Eastern and Southern African rail systems, which are interconnected.

In Africa, transport networks follow a clear path; mine to port such as the case of in Namibia. This is largely due to the mines pushing for this link. Manager for the Logistics Hub Project at the Walvis Bay Corridor Group (WBCG), Clive Smith, explained that Namibia is actively working to contribute to the plight of regional inter-connectivity.

Transport volumes in the southern African region are increasing and Namibia is rapidly developing into a highly stable gateway and transit hub for neighbouring countries. As a nation, we are undertaking several infrastructure projects such as railway upgrades and the expansion of the Port of Walvis Bay”, he emphasized.

As strong catalysts of economic development that opens up access to markets and facilitates intra-continental trade, rail growth is therefore essential. Reiterating rail’s advantages, Jack Dempsey from Dempsey Multi-Konsult, a leading local company in railway engineering states that facilitating trade via a rail border crossing system, offers a more secure clearance process.

It also provides a higher level of freight security than road systems. High volumes of freight over long distances are transported at a lower cost on rail. As intra-continental trade in Africa is only 17% of the total trade in the world, rail can be used to increase this,”he added.

After Namibia gained independence, roads were favoured because of the lack of interconnectivity derived from rail connections. However, as cargo tonnage is expected to increase, freight should increase the ratio of cargo travelling from road to rail, which will help minimize the extensive and costly deterioration of roads in the country.

Rail is the most suited mode for the transportation of bulky freight over long distances. It has great potential to transport, amongst other things, agricultural inputs and outputs, industrial raw materials and manufactured goods and minerals as well as passengers, in a low cost way. An efficient freight rail is key to maintaining international attractiveness not just for heavy export commodities and long distance continental movements but also for production of high value products like automobiles.

According to the Permanent Secretary of the Ministry of Works and Transport, Willem Goeiemann, Namibia is making sure its inter-regional rail network assists in the economic and social integrations of the region in order to effectively participate in an increasingly competitive global economy.

There are several vital transportation infrastructure projects in the country that are underway. The commencement of the Grootfontein-Rundu-Katima Mulilo railway line is one such project that seeks to improve trade via the Walvis Bay Port to countries such as Zambia, Zimbabwe, Malawi and the Democratic Republic of Congo (DRC)”, he stated.

Other projects include the construction of the Trans Kalahari Railway Line (TKR), which is a bilateral project between the Governments of the Republics of Namibia and Botswana. This railway line will transport coal to the overseas market. The railway line between Sandverhaar-Bucholzbrunn is to be rehabilitated, this includes the creation of a sand tunnel on the 5 km section outside the Port of Luderitz to help combat the problem of desert sand on the railway line. In an effort to allow the movement of Manganese from the mines in the Northern Cape to the international markets via the Port of Luderitz, the Keetmanshoop – Northern Cape Province Railway line is also due for construction. The Walvis Bay – Tsumeb Railway line is also set to receive an upgrade.

Goeieman further said his commitment to this medium as it remains essential for trade, industrialization, socioeconomic development and regional integration.

To complete missing portions of regional transportation corridors between Namibia and its neighbours with the Port of Walvis Bay, Namibia can play a greater role in the Southern Africa Development Community (SADC) as a Logistics Nation,” he said.


 

 

About The Author

Sanlam 2018 Annual Results

7 March 2019

 

Sanlam’s 2018 annual results provides testimony to its resilience amid challenging operating conditions and negative investment markets

Sanlam today announced its operational results for the 12 months ended 31 December 2018. The Group made significant progress in strategic execution during 2018. This included the acquisition of the remaining 53% stake in SAHAM Finances, the largest transaction concluded in the Group’s 100-year history, and the approval by Sanlam shareholders of a package of Broad-based Black Economic Empowerment (B-BBEE) transactions that will position the Group well for accelerated growth in its South African home market.

Operational results for 2018 included 14% growth in the value of new life insurance business (VNB) on a consistent economic basis and more than R2 billion in positive experience variances, testimony to Sanlam’s resilience in difficult times.

The Group relies on its federal operating model and diversified profile in dealing with the challenging operating environment, negative investment markets and volatile currencies. Management continues to focus on growing existing operations and extracting value from recent corporate transactions to drive enhanced future growth.

The negative investment market returns and higher interest rates in a number of markets where the Group operates had a negative impact on growth in operating earnings and some other key performance indicators. This was aggravated by weak economic growth in South Africa and Namibia and internal currency devaluations in Angola, Nigeria and Zimbabwe.

Substantial growth in Santam’s operating earnings (net result from financial services) and satisfactory growth by Sanlam Emerging Markets (SEM) and Sanlam Corporate offset softer contributions from Sanlam Personal Finance (SPF) and Sanlam Investment Group (SIG).

Key features of the 2018 annual results include:

Net result from financial services increased by 4% compared to the same period in 2017;

Net value of new covered business up 8% to R2 billion (up 14% on a consistent economic basis);

Net fund inflows of R42 billion compared to R37 billion in 2017;

Adjusted Return on Group Equity Value per share of 19.4% exceeded the target of 13.0%; and

Dividend per share of 312 cents, up 8%.

Sanlam Group Chief Executive Officer, Mr Ian Kirk said: “We are satisfied with our performance in a challenging operating environment. We will continue to focus on managing operations prudently and diligently executing on our strategy to deliver sustainable value to all our stakeholders. The integration of SAHAM Finances is progressing well. In addition, Sanlam shareholders approved the package of B-BBEE transactions, including an equity raising, at the extraordinary general meeting held on 12 December 2018. Our plan to implement these transactions this year remains on track.”

Sanlam Personal Finance (SPF) net result from financial services declined by 5%, largely due to the impact of new growth initiatives and dampened market conditions. Excluding the new initiatives, SPF’s contribution was 1% down on 2017 due to the major impact that the weak equity market performance in South Africa had on fund-based fee income.

SPF’s new business sales increased by 4%, an overall satisfactory result under challenging conditions. Sanlam Sky’s new business increased by an exceptional 71%. Strong growth of 13% in the traditional individual life channel was augmented by the Capitec Bank credit life new business recognised in the first half of 2018, and strong demand for the new Capitec Bank funeral product. The Recurring premium and Strategic Business Development business units also achieved strong growth of 20%, supported by the acquisition of BrightRock in 2017. Glacier new business grew marginally by 1%. Primary sales onto the Linked Investment Service Provider (LISP) platform improved by 5%, an acceptable result given the pressure on investor confidence in the mass affluent market. This was however, offset by lower sales of wrap funds and traditional life products.

The strong growth in new business volumes at Sanlam Sky had a major positive effect on SPF’s VNB growth, which increased by 7% (14% on a comparable basis).

Sanlam Emerging Markets (SEM) grew its net result from financial services by 14%. Excluding the impact of corporate activity, earnings were marginally up on 2017 (up 8% excluding the increased new business strain).

New business volumes at SEM increased by 20%. Namibia performed well, increasing new business volumes by 22% despite weak economic conditions. Both life and investment new business grew strongly. Botswana underperformed with the main detractor from new business growth being the investment line of business, which declined by 24%. This line of business is historically more volatile in nature.

The new business growth in the Rest of Africa portfolio was 68% largely due to corporate activity relating to SAHAM Finances, with the East Africa portfolio underperforming.

The Indian insurance businesses continued to perform well, achieving double-digit growth in both life and general insurance in local currency. The Malaysian businesses are finding some traction after a period of underperformance, increasing their overall new business contribution by 3%. New business production is not yet meeting expectations, but the mix of business improved at both businesses.

SEM’s VNB declined by 3% (up 6% on a consistent economic basis and excluding corporate activity). The relatively low growth on a comparable basis is largely attributable to the new business underperformance in East Africa.

Sanlam Investment Group’s (SIG) overall net result from financial services declined by 6%, attributable to lower performance fees at the third party asset manager in South Africa, administration costs incurred for system upgrades in the wealth management business and lower earnings from equity-backed financing transactions at Sanlam Specialised Finance. The other businesses did well to grow earnings, despite the pressure on funds under management due to lower investment markets.

New business volumes declined by 13% mainly due to market volatility and low investor confidence in South Africa. Institutional new inflows remained weak for the full year, while retail inflows also slowed down significantly after a more positive start to the year. The international businesses, UK, attracted strong new inflows (up 57%).

Sanlam Corporate’s net result from financial services increased by 4%, with the muted growth caused by a continuation of high group risk claims experience. Mortality and disability claims experience weakened further in the second half of the year, which is likely to require more rerating of premiums in 2019. The administration units turned profitable in 2018, a major achievement. The healthcare businesses reported satisfactory double-digit growth in earnings, while the Absa Consultants and Actuaries business made a pleasing contribution of R39 million.

New business volumes in life insurance more than doubled, reflecting an exceptional performance. Single premiums grew by 109%, while recurring premiums increased by a particularly satisfactory 56%.

The good growth in recurring and single premium business, combined with modelling improvements, supported a 64% (71% on a comparable economic basis) increase in the cluster’s VNB contribution.

Following a year of major catastrophe events in 2017, Santam experienced a relatively benign claims environment in 2018. Combined with acceptable growth in net earned premiums, it contributed to a 37% increase in gross result from financial services (41% after tax and non-controlling interest). The conventional insurance book achieved an underwriting margin of 9% in 2018 (6% in 2017).

As at 31 December 2018, discretionary capital amounted to a negative R3.7 billion before allowance for the planned B-BBEE share issuance. A number of capital management actions during 2018 affected the balance of available discretionary capital, including the US$1 billion (R13 billion) SAHAM Finances transaction. Cash proceeds from the B-BBEE share issuance will restore the discretionary capital portfolio to between R1 billion and R1.5 billion depending on the final issue price within the R74 to R86 price range approved by shareholders.

Looking forward, the Group said economic growth in South Africa would likely remain weak in the short to medium term future, and would continue to impact efforts to accelerate organic growth. The outlook for economic growth in other regions where the Group operates is more promising. Recent acquisitions such as the SAHAM transaction should also support operational performance going forward.

“We remain focused on executing our strategy. We are confident that we have the calibre of management and staff to prudently navigate the anticipated challenges going forward,” Mr Kirk concluded.

Details of the results for the 12 months ended 31 December 2018 are available at www.sanlam.com.