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Weekly overview and short-term outlook to Wednesday 06 March 2019

Weekly overview and short-term outlook to Wednesday 06 March 2019

Visual: Computer generated wind pressure map of Friday 01 March


Recent Developments

This week was in many aspects similar to last week except for the “thick” atmosphere, still under some high pressure control in the alto levels which brought back the swelteringly hot afternoons.

The pattern was interrupted briefly during Tuesday night with a cooler intrusion from the south following the passage of a weak frontal system across the southern Cape. While Wednesday morning was noticeably cooler as far north as Otjiwarongo, the heat resumed that same afternoon as the energetic effect of diabatic compression kicked in.

Note to reader: Diabatic compression derives from the Greek diabaino, loosely translated as to pass through or the move from one position to another. Pilots are familiar with the concept adiabatic lapse rate, which is always a constant for a given temperature and elevation. It refers to the reduction in air pressure as the elevation increases. Diabatic compression refers to the increase in pressure as an air column slowly sinks. It is what brings us Oosweer.

This week’s visual, based on satellite telemetry during Friday morning, provides a snapshot of the general weather pattern for southern Africa and the southern Indian Ocean. The two light blue circles are two developing depressions that will first move towards Madagascar before veering to the south-east in about four days. These low pressure systems are widely accredited for draining moisture from East Africa but that is only on their northern side. On their southern side, as they rotate, they also carry huge amounts of moisture aloft which is picked up by the northern rim of the southern Indian high pressure cell thus transporting a considerable part of that moisture at higher elevations back to the continent. The green line shows the high low interface and the route the moisture travels back to Africa.

Where this transport encounters the south to north airflow of the South Atlantic high pressure cell, it deflects the air movement onto the continent, driving the anti-cyclonic circulation over the sub-continent which is a hallmark of summer weather. This anti-cyclonic circulation is indicated by the yellow curve. It is also the conveyor of warm, moist air from Zambia and Angola into Namibian airspace and it is manifested by a constant north-east to northerly airflow over Namibia.

Where this intruding air meets the outer rim of that part of the South Atlantic high that is still west of the continent, a so-called convergence zone forms, indicated by the red line. The position of this zone shift either to the east or the west depending on the relative strengths of the high versus the anti-cyclonic circulation. If this line moves to Botswana, Namibia is dry. If it approaches the escarpment, chances for rain over the interior improves. This week the convergence zone was well-demarcated with ample cloud formation east of the line.

The white lines indicate the approximate position of the Inter-Tropical Convergence Zone, a very broad band of which only its southern perimeter affects Namibia.

Over the past month, the Inter-Tropical Convergence Zone has shifted deep into Angola, and over the past two weeks, back to the Namibian Angolan border, or very close to it. At this stage, it is the only positive new development.

If the South Atlantic high moves southwards by only 600 to 800 km, it provides space for the anti-cyclonic circulation (yellow curve) to advect moisture from the Inter-Tropical Convergence Zone into Namibian airspace, usually following the local convergence zone (red line) from north to south.

That this is quite possible has been demonstrated two weeks ago, when the core of the South Atlantic high shifted to the south by about 1000 km in about 10 days before it moved back to its “normal” position last week.

The straight purple line is more or less the latitude where the high pressure cores dwell most of the time, immediately showing that the South Atlantic high is still slightly displaced to the north while the southern Indian high is slightly on the south side.

On the Radar

High pressure control remains in force over about two thirds of Namibia during the weekend but it begins to recede late on Sunday.

The South Atlantic high sits west of Lüderitz but its core is far offshore, about 2000 km away. The outer rim at 1016 mB also stays offshore but close to the mainland.

Similar to the pattern of the past two weeks, ample cloud formation is expected at the mid and upper levels (15,000 to 25,000 feet) with even some cloudiness at around 35,000 feet but this is limited to Namibia’s northern half east of the convergence zone.

The weekend’s rainfall prospects are therefore bleak except for Owambo and the northern areas of Kunene.

The same overall picture carries on next week, with wandering high pressure control, suppressed convection, and consequently lessening rainfall probability.

With the South Atlantic high’s core so far offshore, the convergence zone is expected to migrate to the west until it hugs the escarpment. The result is progressively improving rainfall conditions from Monday to Wednesday, pushing west and south. By next Wednesday, the outlook is reasonably positive for rainfall across the whole country, from north to south, above the escarpment.


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