Vunani: Harvesting BEE in the financial sector

Ethan Dube and his crowed at Vunani, a black economic empowerment (BEE) styled financial service group listed on the JSE, seems to have turned the corner away from the vagary avenue of early stage BEE initiatives.

Many promises of institutionalising BEE styled initiatives which took off at the same time as Vunani have simply flopped with some failing to endure the extraordinarily harsh market conditions of the past five years or so; while others failed the patience test by cashing out too soon. Several have withdrawn from the JSE.

Vunani seems to have come off age. As if following its name which in Zulu can mean harvesting, the group has stayed the course and is now reaping the benefits.

You can read that from the recent transactional noise made by Vunani. The group announced this week an acquisition of an insurance player C4Life. This was the second acquisitive announcement within two months.

Last month Vunani announced that it was venturing into Zimbabwe via the acquisition of a minority stake in a Harare based asset management entity called Purpose Asset Management. On this acquisition Dube said “We are very excited about the opportunities this acquisition represents. Vunani has been providing advisory services in Zimbabwe for some time, but now we are able to emulate the full gambit of our diversified financial services business in this country.

“Even taking into account the political risk, Zimbabwe remains a good investment opportunity which will provide a platform for our expansion further into Southern Africa”.

Vunani has grown into a well-rounded financial services player. The group operates through two main divisions, financial services and investment services. The financial services division include fund management, investment banking and property business units. Investment Services is made of Vunani’s strategic empowerment equity investments.

The C4Life acquisition is critical in launching Vunani’s financial services division into the insurance industry. “The acquisition of a stake in C4Life diversifies our financial services offering into the insurance sector and enables us to participate in one of the fastest growing network multi-level marketing companies in the insurance industry, without incurring the high associated start-up costs,” said Dube.

C4Life currently offers life and funeral cover to customers in the Living Standards Measures (LSM) 1 to 4 lifestyle, with a new suite of complimentary products developed to capture a greater market share in LSM markets 4 to low 10.

“We have done our homework and there is only one other major competitor in the insurance network marketing arena. We have high expectations for the growth of C4Life and the added value it will bring to Vunani’s shareholders,” said Dube.

Vunani is emerging out of a difficult period, especially for BEE styled financial services players. Several names which started with Vunani have since disappeared due to the naturally tight market, controlled by giants like Old Mutual, Investec, and Liberty. Vunani was established in 2004 when Dube led a management buyout from African Harvest. It was listed on the JSE in 2007. Shortly after listing the markets were battered by the financial crisis. Investment values collapsed punching deep holes into Vunani’s balance sheet. Its own stock was hammered.

While the market was going deep into a crisis Vunani was making acquisitions, probably picking up assets for a song. These acquisitions include an additional 35% stake in Edge Holding Company, a fund of hedge funds manager. This increased Vunani’s stake in Edge to 45%. The company also acquired a 51% stake in Integrated Managed Investments. In 2010 Vunani acquired Kagiso Securities. Also in 201o the group formed Vunani Technology Ventures through a 51% acquisition of Jala Group “for a nominal amount”. In 2011 Vunani listed its property fund.

Meanwhile the numbers were looking scary. Attributable earnings for the 2008 financial year decreased by 236% to a R758.2 million loss compared to a profit of R557.6 million in 2007. In 2010 the group was still in the red but the losses were declining coming in at R44.7 million. This is after the group had taken drastic measures during 2010. It raised R313 million through a rights offer to recapitalise its balance sheet. Loss making activities and non-performing investments were disposed of.

As the group noted 2012 half year presented promising performance “amidst a lethargic domestic economy” by returning into into profitability in the six months ended June. According to the group this was  an “indication that the resolve and focus to address the legacy challenges the business has faced is starting to pay off”. But then as advised by the group recently it is likely to remain in the red for the full 2012 financial term but the losses are likely to have declined significantly.

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