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Sharpening African manufacturers’ competitive edge with technology

Sharpening African manufacturers’ competitive edge with technology

By Matthew Kibby

Vice President: Sage Enterprise, Africa and Middle East

African countries from South Africa to Ethiopia to Nigeria are pinning some of their hope for economic growth and job creation on industrialisation. With its young population, dynamic growth and rapidly improving infrastructure, sub-Saharan Africa has the potential to become a manufacturing powerhouse in the years to come.

But first, African manufacturers must boost efficiency, productivity and quality if they are to compete with low-cost producers in Asia as well as with the high-tech, tightly integrated supply chains in North America and Europe. A new industrial revolution is rapidly transforming how and where goods are made, and the African industry needs to keep up.

For example, advanced robotics and a range of innovative materials are making it cheaper and faster to produce even complex technical goods in factories across the world. Leading manufacturers are using tools such as the Internet of Things, big data, cloud computing, and artificial intelligence (AI) to improve productivity, reduce energy and resource consumption- and African companies stand a chance of getting left behind.

To stand out in a globalised market, African manufacturers need to be able to compete with low cost overseas competitors. Taking control of data for better customer insight is key – it will enable manufacturers to anticipate customer demands and become more agile.

Delivering the right product, at the right time and at the right price requires manufacturers to take total control of their product development process, from initial design to final production. By using specialist technology will help shorten the time-to-market for products, improve product quality, and increase customer satisfaction.

Better business management – better business:

Before jumping into advanced robotics or AI, sub-Saharan Africa’s manufacturers should be looking at their business management systems to ensure they are fit for purpose. Many of them are using legacy systems or even heavily manual processes, rather than integrated, enterprise applications. A robust business management solution can be a real game changer, helping manufacturers meet the evolving challenges of today’s business world.

According to a recent Forrester report, manufacturers can realise up to 218% return on investment (ROI) within four months by implementing effective business management solutions. The report also found that, as well as receiving significant ROI within a short amount of time, manufacturing organisations reported strong improvements in: financial management; purchasing; sale management; inventory management; and customer service.

Business management solutions enable manufacturers to meet the challenges of today’s business world, helping them to accelerate collaboration and reporting, providing real-time insight into costs and operational performance, and providing information for smarter and faster business decisions. This, in turn, allows them to enhance efficiency, diminish costs, and increase sales and profitability.

Next generation business management systems enable a company to optimise the end-to-end manufacturing process – including production planning, project management, process scheduling, compliance, and mobile supply chain management, while reducing overall total manufacturing costs.

Removing the heavy-lifting and mundane tasks that slow down productivity, stifle flexibility and inhibit growth can transform an organisation into a world-class player. Improved visibility between the front- and the back-office will lead to better insight and improved decision making across key company operations.

An investment worth making:

Next-generation business management solutions take the complexity out of running a manufacturing business, simplifying operations to allow enterprises to grow faster and stay agile. With minimal IT investment and resources, companies can enjoy rich, integrated functionality to support all core business processes. And they’re easy to adapt to fit unique processes, roles and preferences.

Automated solutions and consistent processes lead to time and cost savings, easier collaboration and faster outcomes. Integrated reporting allows regular and real-time operational insights, enabling better, quicker business decisions. The right solution will allow African manufacturing companies to consistently deliver and take advantage of new commercial opportunities.

The efficient, streamlined processes that stem from the right business management solutions enable improved productivity and profitability – and accelerated growth.


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.