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Growing the blue economy for all SADC states, not only those with coastlines

Growing the blue economy for all SADC states, not only those with coastlines

By Joseph Ngwawi

The Southern African Development Community is developing a strategy for a thriving maritime economy, harnessing the full potential of sea-based activities in an environmentally sustainable manner.

The SADC Secretariat plans to commission a study on opportunities and threats to the SADC Blue Economy Initiative.

The SADC Revised Regional Indicative Strategic Development Plan (2015-2020) and the Industrialisation Strategy and Roadmap (2015-2063) both identify the blue economy as a potential area for sustainable growth. The industrialisation strategy requires that the potential of the blue economy be mainstreamed in developing infrastructure for accelerated industrialisation.

Member states like South Africa, the Seychelles and Mauritius have developed blue economy strategies and institutional mechanisms at national level.

Investment in the development and upgrading of regional ports and maritime corridors is regarded as crucial in facilitating viable shipping networks as enablers for participation in regional and global distribution value chains. The wealth of the ocean resources should be exploited in a sustainable manner to minimize the negative impact on environment supported by coherent planning, policies and regulatory frameworks.

The blue economy conceptualises oceans as “development spaces” where coordinated planning integrates conservation, sustainable use, oil and mineral extraction and marine transport.

The initiative breaks the mould of the “brown” development model where oceans have been perceived as a means of free resource extraction and waste dumping.

The concept recognizes the productivity of healthy ocean ecosystems as a way of safeguarding sustainable ocean-based economies, as well as ensuring that Small Island Developing States and other coastal countries benefit from their marine resources.

Ocean and inland waters such as seas, lakes, rivers and reservoirs provide significant benefits to humanity, including Food and nutrition security from fisheries and aquaculture; Economic and social development from fisheries and aquaculture, marine and coastal tourism, shipping, mining and energy; and Ecosystem services such as carbon sequestration, water filtration, atmospheric and temperature regulation, as well as protection from erosion and extreme weather events.

However, southern Africa has been experiencing a rapid erosion of the asset base of oceans and inland waters due to overfishing, pollution from land-based sources, mangrove deforestation, climate change, and ocean acidification.

As a result, there is need for a paradigm shift to realize the full potential of the oceans and inland waters.

This will require that the region embraces a new, responsible and sustainable approach that is more environmentally, socially and economically effective.

This initiative comes at a crucial time when the need for food and resources from the ocean and inland waters is increasing rapidly to meet the needs of the growing population.

The blue economy concept is appropriate for the SADC region since more than half of its 16 member states are coastal or oceanic countries.

Eight SADC member states – Angola, Madagascar, Mauritius, Mozambique, Namibia, Seychelles, South Africa and Tanzania – are coastal or oceanic states.

SADC is exploring ways to develop the region’s blue economy in order to grow renewable energy options by harnessing sources such as tidal power, ocean currents and ocean thermal energy conversion.

The blue economy development strategy is timely for the SADC region, which has witnessed significant discoveries of large reserves of oil and natural gas in countries such as Mozambique, Namibia and Tanzania in recent years, indicating a huge potential for exploitation.

The east coast of Africa has emerged as one of the brightest spots in the global energy landscape, with large natural gas finds in Mozambique and Tanzania.

Exploration has taken place in all SADC member states although the exact amounts of reserves are unknown for most countries.

The discovery of huge reserves of natural gas has resulted in the formation of the SADC Inter-State Gas Committee. The committee is charged with ensuring the inclusion and promotion of natural gas into the regional energy mix and facilitation of an increase in universal access to energy as well as industrial development in SADC.

In addition to the oil and gas discoveries, there is great potential for exploration of other oceanic resources in other member states. Exploration of oceanic resources has not been done exhaustively and there is a lot more to learn about undiscovered marine resources.

The blue economy encompasses a range of stakeholders, including traditional and emerging maritime sectors such as fisheries, aquaculture, shipping, offshore oil and gas, bio-prospecting, marine mining as well as the research community, conservationists, policymakers and civil society.

The link between ocean health and human development is explicitly recognised in the 2030 Agenda for Sustainable Development and the associated Sustainable Development Goals (SDGs), specifically SDG 14, which requires United Nations member states to “conserve and sustainably use the oceans, seas and marine resources for sustainable development”.

These trends are also visible in African policy debates. The former chairperson of the African Union Commission, Dr Nkosazana Dlamini-Zuma, once referred to the blue economy as the maritime dimension of the African Renaissance, while Agenda 2063 of the AU envisages the blue economy as a major contributor to continental transformation and growth.

At the centre of this shift is the 2050 Africa’s Integrated Maritime Strategy (2050 AIM Strategy), a comprehensive plan to “foster more wealth creation from Africa’s oceans, seas and inland waters by developing a thriving maritime economy and realising the full potential of sea-based activities in an environmentally sustainable manner.”

The 2050 AIM Strategy makes it clear that Africa’s approach to the blue economy includes not only its maritime domain but also the continent’s inland water bodies, underscoring the relevance of the blue economy for all African states, including landlocked states.

More recently, the African Charter on Maritime Security, Safety and Development in Africa (also known as the Lomé Charter) was adopted to address key components of the regional blue economy agenda.

The blue economy concept has been debated in various fora and adopted by several institutions such as the Organisation for Economic Cooperation and Development, United Nations Environment, and the Food and Agriculture Organisation.

It featured prominently during Rio+20 of which the outcomes have proven to be a strong catalyst for driving new efforts for the implementation of previous and new commitments on oceans and inland waters to restore, exploit and conserve aquatic resources.


Southern African News Features are produced by the Southern African Research and Documentation Centre (SARDC) which has monitored regional developments since 1985. Website and Virtual Library for Southern Africa at www.sardc.net .


 

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.