Masawara divests from Uganda insurer

HARARE - Southern Africa focused investment firm, Masawara, has disposed its Ugandan insurance unit, Lion Assurance Company Limited (Lac) for $5,7 million.

Maureen Erasmus, a director with the Jersey-registered firm, said proceeds from Lac will be utilised to settle a long-term loan repayment of $1,1 million which is due on Friday, and settle early a significant portion of the same loan which matures in February 2018.

“The agreement for the disposal of the group’s investment in Lac was entered into on May 22, 2017 and is subject to conditions precedent inter alia the receipt of regulatory approvals,” she said, adding that the timing of the receipt of the regulatory approvals will have an effect on the timing of the receipt of the sales proceeds that will be utilised to settle the group’s long-term loan facility.

“The group is reliant on outside Zimbabwe cash flows to extinguish this facility due to the uncertainty of the timing of dividend remittances from Zimbabwe,” she added.

In terms of the Reserve Bank of Zimbabwe Exchange Control Operational Guide 8, any foreign payments that are made by Zimbabwean companies are ranked in accordance with the RBZ prioritization criteria.

Erasmus noted that as a consequence of these controls over foreign payments, Masawara was reliant on cash inflows from outside of Zimbabwe to meet certain external liabilities.

“There is therefore material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern.

“The directors also assessed the probability of the regulatory approvals not being received as unlikely and therefore have a reasonable expectation that the sales proceeds will be available for the settlement of the loan facility.

“Based on the review of the Group’s cash flow forecasts, the directors believe that the group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of these financial statements and accordingly, the financial statements have been prepared on the going concern basis,” she said.

Masawara made a small profit after tax of $0,58 million in the full year to December 2016 compared to a loss of $4,7 million recorded in the prior year on turnover of $98,7 million.

In the period under review, Masawara increased its net asset value per share to $0,63 per share against $0,61 in 2015, while the group’s total assets were stable at $288 million.

The investment firm said partnership with Sanlam Emerging Markets across the insurance and life insurance businesses developed further in 2016 through the acquisition of 50 percent of Botswana Insurance Corporation — Masawara’s short-term insurance business based in Botswana.

“The relationship has continued to deepen in the first months of 2017 through further joint approaches to business in other Southern African markets.

“Importantly, the Zimbabwean insurance and other financial businesses have recently been rebranded to include the Sanlam association. This core partnership offers opportunities to improve further the existing businesses within the group, to take advantage of the trend towards industry consolidation and to enter new markets with a powerful platform,” the company said.

Overall the insurance sector investments contributed $13,8 million, representing the bulk of Masawara’s investments.

“This strong performance was driven largely by excellent performance of the Zimbabwe insurance cluster which benefitted both from strong operational results across all lines and increased levels of capital in the reinsurance and short term businesses.

“The improved performance of the Zimbabwean insurance cluster outweighed the 56 percent decline in Botswana Insurance Company Limited’s profit before tax which was mainly driven by a reduction in investment income,” Masawara added.

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