20 December 2016 – JSE-listed African financial services company, Ecsponent Limited, has announced a series of transactions designed to ensure continued focus on the Group’s profit strategy and to further streamline operations. Read the full SENS announcement.
Through these transactions, Ecsponent commits its resources to the core business of small to medium enterprise (SME) finance, enterprise development finance, and private equity investments.
“The focused operational structure is likely to be more beneficial to the Group’s profitability. By reducing the span of our operations we will increase attention on our core business operations. As a result, cash will be deployed into core assets, overhead costs and general infrastructure requirements will be reduced, thereby improving performance ratios,” says Terence Gregory, CEO of Ecsponent Limited.
The Group will be disposing of all assets not aligned to these activities, including its:
- 51 percent interest and loan accounts in Clade Investment Management (for a total consideration of R15.5-million)
- 70 percent interest and loan accounts in Ecsponent Holdings, incorporated in Botswana, (for a purchase consideration of just over R43-million)
The operations of both Clade and Ecsponent Holdings require a more diversified business portfolio, requiring extended management infrastructure and further capitalisation.
At the same time, the Group is disposing of a portion of the business of Ecsponent Development Fund as a going concern to Ecsponent Investment Holdings, incorporated in South Africa (for a purchase consideration of R120.15-million).
Gregory says this transaction targets the corporate sector of the Enterprise Development market and further reduces infrastructure requirements. The demand for enterprise development finance far outstrips the supply, not only in South Africa but across the continent. Therefore, providing enterprise development finance remains an exciting opportunity for the Group. However, as this business has developed, it has become clear that there are distinct markets, requiring different levels of service and support.
The Group’s refined strategy is to provide enterprise development finance and services in the corporate sector. Its aim is to help large corporate businesses to develop and upskill their local vendors and suppliers to not only improve the corporate’s preferred procurement spending thereby maximising BEE recognition, but also enabling the SME sector’s growth.
In addition, the Group has continued its exit from the provision of retail credit. This relates to:
- The Group’s disposal of its 50 percent interest in Sure Choice, incorporated and operating in Botswana, to GetBucks (for a purchase consideration of just under R13-million); and
- Its agreement to dilute its interest in Ecsponent Financial Services Zambia (EFS Zambia) from 100% to 25%, through an issue of shares by EFS Zambia to GetBucks MU.
Gregory explains that these retail operations require both infrastructure and focus which are non-core to Ecsponent’s strategy. These transactions reduce the cost base of credit provision for Ecsponent, while improving its credit risk exposure.
Finally, Ecsponent’s operations in Botswana will acquire a 10.002 percent stake in MyBucks, a financial technology company providing virtual banking solutions to customers around the world. MyBucks provides financial products such as banking, lending, insurance, credit reports, and budgeting tools. It has operations in 14 countries including South Africa, Botswana, Kenya, Malawi, and Zimbabwe.
“This acquisition provides Ecsponent with a minority equity stake in a dynamic and fast-growing financial technology business, which is at the cutting-edge of its industry. The acquisition fits the Ecsponent investment target profile, as MyBucks has significant intellectual property and provides high profit margins,” says Gregory.
“This acquisition forms part of the Group’s strategic intention to capitalise on the growth opportunities in Africa. As technology becomes increasingly accessible and connectivity speeds improve across the continent, companies are embracing the digital age and finding new ways to provide products and services to their stakeholders. For our part, we are looking to further enhancing our value proposition across all our operations in Africa,” says Gregory.
“The transactions will not only result in an increased focus on profit-generating assets and improved cash deployment to Ecsponent’s core assets, they also provide the Group with the platform to leverage the dynamic opportunities that exist in Africa,” he concludes.