An Extraordinary General Meeting (EGM) on the matter is due to be held on October 25 in Gaborone.
The homegrown group, which boasts a presence in 10 other African countries, has seen its share price fall by a net of nearly eight percent since January, after having led the Botswana Stock Exchange in the first five months with a growth of about 29%.
The fall has largely been the result of shareholder unease over the axing of the CEO, Andrew Okai in May, as well as long-running disagreements around executive and board fees. Shareholders have also been at odds over the group’s strategy in Africa, where some regions continue to support less profitable ones.
The disagreements boiled over at the June AGM, with a battle for board seats that saw then chair, Enos Banda and two other directors resign on the eve of the meeting.
In a notice to shareholders this week, board chair, Philip Odera said the proposed cuts in directors’ fees would take total compensation for the seven board members down to P6.8 million from P9.3 million.
“At the 2022 AGM, shareholders did not approve the non-executive directors’ remuneration for financial year ending December 2022 which had been tabled, for approval,” reads the EGM notice. “This follows concerns raised by shareholders on the remuneration of the board in the past few years. “The main concern from shareholders appeared to be the sharp increase in the retainer fee that was done in the years 2015, 2016, and 2017.”
According to Letshego’s Annual Report for 2021, the board chair was entitled to an annual retainer of P917,031 while non-executive directors received P360,000. The chair was also entitled to P29,000 per main board meeting, while directors received P27,285.
Directors in committee meetings were awarded an additional P15,000 per sitting and P10,000 per ad hoc meetings.
Under the proposal set for the EGM, the chair will receive an all-inclusive annual fixed fee of P950,000 and no sitting allowance. Director’s annual retainers have been cut to P240,000 while the fee of P27,285 per main board meeting has been retained.
Directors’ fees for committee meetings have been raised to P15,000 while the payment for ad hoc meetings has been revised to an hourly rate of P2,000 capped at P10,000.
Prior to the June AGM, local asset manager, Allan Gray, which held 1.2 percent equity in Letshego on behalf of shareholders, had spoken out about the issue of executive remuneration.
“The various CEOs at Letshego have cumulatively been remunerated P53m from 2015 to the present day,” Allan Gray managing director, Phatsimo Ncube, told Mmegi. “This was during a period of significant deterioration in operational performance and shareholder value suffered substantially. “It is our opinion that a deficient executive remuneration structure and inappropriate performance-based remuneration targets contributed to this, as a sufficiently robust structure would have either kept executive remuneration materially lower in response to poor performance or encouraged superior operational performance and hence better shareholder outcomes.”
Meanwhile, market analysts said besides investor turbulence, Letshego’s downtrend on the BSE was due to perceptions of pressure on the microlenders’ financial performance as a result of rising inflation and interest rates in the various markets within which it operates.
Letshego’s pretax profits for the half year ended June 30 dropped 18% to P446 million.
“Their business model is such that they don’t just pass on interest rate increases to their customers on existing loans,” an analyst told BusinessWeek. “With interest rates and inflation continuing the rise, there is sentiment that profitability will continue declining.”
Letshego has deposit-taking licences in some of its markets in Africa, but critically not in Botswana which accounted for a quarter of the total loan book as at June 30.
BIHL, which holds 28% in Letshego, recently backed the microlenders’ ability to withstand the pressure on its margins.
“There’s an opportunity for that business to really turn around and in terms of margins, these will continue being under pressure but the management has to look for cheaper funding which does not just come around,” BIHL group chief executive, Catherine Lesetedi, told a results briefing recently. “What the (Letshego) management is trying to achieve is to drive retail deposits through digitisation which is underway and in the first half, we have seen these retail deposits rise and outperform corporate deposits. “While the retail deposits are still small, this is still right directionally.”
