FIFI PETERS: Alexander Forbes announced two major transactions with Sanlam today, as well as reporting its interim financial results. The country’s largest pension funds administrator reported a 20% jump in assets under management to R423 billion in the six months to September. This was helped by an increase in new business over the period.
We do have the CEO, Dawie de Villiers, on the Market Update to review the numbers as well as the deals. Dawie, perhaps let’s start there – with the transactions that you announced with Sanlam today. You are buying their standalone retirement business, and you’re selling to them your clients’ administration business. Just talk to us about exactly what is going on here, and what the end game of these deals is.
DAWIE DE VILLIERS: Thank you for the opportunity, Fifi. Firstly, we are very excited about the opportunities that have led to these transactions which are 100% in line with our strategy and what we’ve hoped to execute since we started the journey.
We are buying the large standalone administration business of Sanlam, which will be about 350 000 members under administration. That enables us, in our core capability of doing this retirement administration, to have scale to build capabilities and really get the synergies over time out of that business. That then enables us to have massive growth opportunities there.
The other part of our business is where we basically give advice to the members of these funds – that’s our retail consulting business, retail advice business. We obviously now have an opportunity to talk to more members, which is the first point. But where we’ve lagged is an administration platform to enable these members to transact with us and communicate with us – and our platform was pretty old. So to partner with Glacier and put the members on that platform helps us a lot. They’re a world-class platform and now to work with intermediaries, our intermediaries and our clients will immediately see a massive enhancement in their service. That will help us then to do much better in terms of landing those members and getting the assets over time from them.
FIFI PETERS: The onboarding of the 300 000 or 340 000 or so members from Sanlam – what does that bring your total membership base to?
DAWIE DE VILLIERS: That adds about 40% to our active members under administration. It’ll land us above 1.2 million members that we’ll have under administration then.
FIFI PETERS: And these transactions – are they a done deal or are there still a few regulatory hoops to go through?
DAWIE DE VILLIERS: We still need to get all the regulatory approvals – the Competition Commission and the other approvals. Once we get that, we’ll have the effective date and then we’ll start the transition.
FIFI PETERS: I imagine you’re not expecting any hurdles.
DAWIE DE VILLIERS: We’ve done a lot of work. It’s a complex transaction. It involves a lot of people, clients, staff. So we made sure of all the angles and hopefully we did our homework well enough for it to go through all the approvals.
FIFI PETERS: Dawie, just going to the numbers that you did report today, the period under review did include the [Covid-10] third wave and also the severe lockdowns under Level 4. Can you tell us a bit about how companies responded under this particular wave in terms of the contributions you saw them making to the pensions of some of their employees compared with September 2020?
DAWIE DE VILLIERS: It’s been very different from the first period, the first two waves, where we saw a severe effect on the companies – lots of entrenchments, people asking for lower contributions – whereas I think most of that is out of the system now. There are very few retrenchments at the moment. We’ve seen normal levels for the last two or three months, like we saw before Covid, and we see normal contributions from these members who are in the funds as well.
In some sectors like the financial sector people have positive employment numbers. Obviously in the affected areas like the entertainment area the numbers aren’t increasing yet, but we don’t see a lot more retrenchments happening and hopefully that signals that it is part of the turnaround.
FIFI PETERS: What we also saw was a lot of people cashing in their pensions over this period when they lost their jobs, just adding to the long-term challenge of having people with enough savings. I know that right now the industry is talking about how best to go forward in improving the savings culture. There are quite a number of regulations being proposed on the table. Talk to us about that and perhaps your view as Alex Forbes on how to achieve an adequate savings culture in South Africa.
DAWIE DE VILLIERS: We saw the unfortunate circumstance where people had to live off their pension money when they were retrenched, and that is money out of the system and it is obviously is going to be a burden on the state in the future if those people don’t get new jobs. In fact their pension money has been decimated because they had to live off it. That was very unfortunate. What we think, looking forward, with lots of work being done by Treasury and by all the savings institutions, is to increase preservation. But we do realise that people need money when unforeseen circumstances happen, like when you lose your job, or there’s a divorce or something like that.
So we want to create a system where there’s an element that is definitely preserved to the end, so that people do have something for the end. We have to make that compulsory. I think that’s the only way you can increase savings levels – and then we make an element of the savings accessible. It seems like this concept has landed very well with labour and with the regulator, with Treasury. So hopefully we’ll see something to that effect quite soon which will have a massively positive effect on members and on the industry.
FIFI PETERS: You also reported an increase in new business coming in this time around. Give us a sense of where these inflows are coming from.
DAWIE DE VILLIERS: This was a highlight for me. I always feel as a business, if new clients want to join you and partner with you, that says good things about what you’re doing and where you are in your life cycle. So for me that’s heart-warming. The other positive part is that new business has been across the board in all the different areas of our business, from investments to consulting, and peer consulting – and individual consulting has been a star. Our individual business has grown much more than the market and [there’s] lots of new business.
Healthcare consulting has been quite positive. So since our turnaround in our administration functions we’ve landed three or four big standalone clients in addition to this acquisition now. I think things are coming together nicely and the fact that it’s across the board is very positive.
FIFI PETERS: All right. Just lastly, you have a new chairman coming in sometime next year in the form of Daniel Mminele.
It’s good to see his face popping up again, by the way. Nonetheless, how did that happen, and why was he the perfect candidate for the job?
DAWIE DE VILLIERS: Well, firstly, Marilyn Ramplin, who’s our current chair, did a sterling job. She’s been with Alexander Forbes for more than 10 years in different positions, and as chair in the last year or two. She has been one of the biggest positive influences in the company, even outside of the company. But she’s got a massive business that is growing quite quickly with a young family, so she decided to focus on that. But again, [in line with] her personality, she said until we have a suitable candidate and need enough time to onboard and have the proper succession, she’ll stay on.
We looked to Daniel – I think Daniel is perfectly suited for our environment, for what we want to do. A lot of regulatory effects are going to come through. His stature in the market in terms of the future that we want to go to, the impact that we want to have on the country, and I’m very excited about him coming in.
FIFI PETERS: Quite a number of us are excited to see his name pop back on the formal corporate scene.
Dawie, we’ll leave it there for now, sir. Thanks so much for your time. Dawie de Villiers is the CEO of Alexander Forbes.