Despite observations that Botswana Insurance Holdings Limited (BIHL) could monopolise the insurance sector by the acquisition of Botswana Insurance Company (BIC), Competition Authority (CA) has approved the acquisition, which will accelerate BIHL’s market share in short-term insurance, making it the ultimate insurance conglomerate, and hike profitability, reports STAFF WRITER.
The blue-chip financial services firm, headed by the outgoing Chief Executive (CE) Gaffar Hassam, announced this week that the transaction, in which the insurance giant wanted to acquire up to 50 percent of the issued share capital of Teledimo Proprietary Limited, has been approved.
Teledimo directly owns 50 percent of the shares in BIC, which now makes BIHL an indirect 50 percent shareholder in BIC. BIHL said that all the relevant authorities, in this case being the Botswana Stock Exchange (BSE) Non-Bank Financial Institutions Regulatory Authority (NBFIRA) and the Competition Authority (CA) have approved the transaction.
The CA approval was delayed after stakeholders felt the acquisition could be anti-competitive, which lead to the CA to make a thorough assessment before deliberating on the matter. Concerns were such that BIHL, through its 100-percent owned subsidiary, Botswana Life Insurance Limited (BLIL), already controlled the long-term insurance market by 80 percent. Allowing the company to own half of BIC will increase its market share in short-term insurance.
BIC is the largest general insurance company with over 23 percent market share in Botswana.
The acquisition will allow BIHL and BIC to leverage collective expertise and resources.
However, the competition watch dog held a hearing in which BIHL attorneys argued that BIHL was only a market leader in life-insurance and not general insurance, which makes it not a monopoly.
Another argument at the hearing was that even BIC, which BIHL was acquiring, was not a monopoly in the short term insurance since it controlled only around 23 percent of the market share while the majority of the market was controlled by various general insurance outfits. Regent Insurance controls 18 percent market share while Hollard Insurance is at 15 percent.
Hassam said the acquisition brought excitement to the diversified financial services behemoth as it drives its stratergy further.
“The acquisition will allow BIHL and BIC to leverage collective expertise and resources. This is on the back of BIHL Group’s 40-year heritage of serving Batswana, and BIC’s reputation as an industry leader in its space, which also spans 40 years. The resultant benefit is enhanced services and development of increasingly competitive products to benefit customers,” said the CE in his announcement.
BIC Managing Director (MD) Johann Claasen added that the acquisition could not come at a better time, as market dynamics continue to unfold.
He said the, shared resources, and alliance will give BIC the chance to break through and further explore market differentiation potential, ascertain competitive advantage, foster partnerships and define focus on continued business performance.
