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Climate change talks: Are the negotiations beneficial to Africa?

Climate change talks: Are the negotiations beneficial to Africa?

Southern African News Features – The growing frequency and unpredictable nature of natural disasters such as floods and droughts is a striking reminder and warning that climate change is a serious phenomenon that has the capacity to destabilize the world.

In recognition of this, the global community has put in place various initiatives to combat the impacts of climate change including negotiating for a binding agreement on how to reduce greenhouse gas emissions that cause climate change.

A reduction in greenhouse gas emissions is critical, particularly for developing countries such as those in Africa who naturally produce less emissions yet are the hardest hit by climate change due to limited financial resources to adapt to such changes.

However, since the climate change negotiations begun some decades ago, there have offered very little hope for Africa as issues of climate financing for adaptation remain largely unresolved.

For example, prior to the latest climate talks held in December 2018, the African Group of Negotiators came up with a common position where they outlined priorities and expectations to strengthen climate resilience.

One of the key priorities was the need for developed countries to provide a predictable and adequate financing mechanism to fight the impacts of climate change.

However, the conference failed to come up with a solid position on climate financing, much to the disappointment of Africa.

Developed countries only “urged” to meet their existing commitment of mobilizing US$100 billion in climate finance per year by 2020.

Climate experts in Africa are of the view that in order to keep global temperature rise well below 2°C , developed countries must be held accountable for their past mistakes and should provide a reliable flow of financial resources to developing countries to boost their adaptation and mitigation efforts.

The Zambezi Environment Report 2015, for example, already warns that impacts of climate change are being felt across all sectors in southern Africa including on water resources, human health, food security, tourism and livelihoods.

This implies that any delay in implementing adaptation measures will further worsen the impacts of climate change in the region.

Namibia, which is the current Chair of the Southern African Development Community (SADC) has urged rich nations to deliver on their financial obligations in a transparent manner for developing countries to implement their Nationally Determined Contributions (NDCs).

“In Namibia, the implementation of our country’s NDC is conditioned to the provision of 90% of the financial resources from developed countries,” Prime Minister, Dr Saara Kuugongelwa-Amadhila said at the 24th Conference of Parties (COP 24) to the UN Framework Convention on Climate Change (UNFCCC) held in Katowice, Poland.

SADC and the rest of the African continent argues that such assistance should act as a net transfer of wealth from rich to poor nations mainly in the form of grants as opposed to loans which will further burden developing countries.

In the Paris Rulebook, nations are allowed to count all non-grant instruments as climate finance such as commercial loans and they are only asked to report the grant-equivalence of all these on voluntary basis.

The rulebook is a long-term regulatory framework agreed in Katowice that will help countries to plan, communicate, implement, report and follow up on their commitments under the Paris Agreement.

Another outcome that did not meet the expectations of Africa is that the rulebook for implementing the Paris Agreement failed to put enough emphasis on the question of loss and damage.

The rulebook only indicates that vulnerable countries will have a place to report climate-related losses and what they are doing to deal with them, including information on the kind of help they need.

In Katowice, the issue of loss and damage became one of the sticking points as developing countries wanted loss and damage to be treated as a stand-alone while developed countries were in favour of lumping it with other adaptation initiatives.

The failure by the developed countries to consider loss and damage as a critical component means that funds for increased adaptation will remain a challenge for a long time in Africa.

Despite its major shortcomings, negotiators at Katowice, however, managed to finally agree on the rule the rulebook which now acts as an operating manual for the implementation of the Paris Agreement.

The UN Climate Change Secretariat notes that the rulebook “operationalizes the transparency framework,” which “sets out how countries will provide information about their NDCs that describe their domestic climate actions.

Article 4.3 of the Paris Agreement mentions that each party’s successive nationally determined contribution will represent a progression beyond the party’s then current nationally determined contribution and reflect its highest possible ambition, reflecting its common but differentiated responsibilities and respective capabilities, in the light of different national circumstances.

The countries’ climate pledges in the NDCs mandated by Article 4 of the Paris Agreement and the rules around what should be in them are supposed to make it easier when making comparison between and among countries and when adding them up as a global aggregate.

To this end, climate negotiators highlighted that all countries “shall” use the latest emissions accounting guidance from the Intergovernmental Panel on Climate Change, last updated in 2006, but now in the process of being refreshed next year.

The UNFCCC Parties are set to re-submit or update their NDCs in 2020. A global stocktake to assess the effectiveness of climate action being undertaken by countries will be carried out in


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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