The banking sector has been working hard to embrace technology with the rollout of digital products and increased volumes of digital transactions as competition emerges from everywhere. But there is also a need for banks to stand firm on the ground as a digital tug of war is intensifying against Mobile Network Operators (MNOs) for mobile money market.
Many have lauded the revolution of mobile money since about 33 percent of households had no access to any form of financial services ten years ago, while 41 percent accessed the formal banking system. Since its introduction in 2010, mobile money transactions have grown significantly, reaching nearly P1 billion at the end of 2013.
According to Botswana Communications Regulatory Authority’s (BOCRA) latest Telecom Statistics, Mobile Money Subscriptions increased from 412,126 in March 2015 to 1,149,673 this year March. Mobile money subscriptions for MNOs kept increasing for the past four years, a trend which shows continued growth in banking services by MNOs every year. In March 2016, subscribers of mobile money grew to 558 703 from 412 126 in 2015. In March of 2017, mobile banking services increased with 673,741 of subscription from the previous year. March 2018 saw subscriptions increase by 178 000 to 851,719, before going up to 1,149,673 in March this year.
Orange with its Orange Money mobile money platform is the pioneer in the local market for such services and continues to dominate the market since 2015. It is followed by Mascom with its My Zaka services, while BSE listed BTC continues to trail with less subscriptions. BTC’s Be-Mobile has moved from having 2499 subscriptions for three years, since 2016, to dropping drastically to 240 subscriptions this year.
Last year at Orange Botswana’s 20th anniversary celebrations, President Mokgweetsi Masisi saw the advert of mobile money services as having the agility of providing an alternative to the traditional brick and mortar of financial institutions. According to Banking Sector Report for November 2019 from Stockbrokers Botswana, the traditional banking sector continues to face increasing competition from the MNOs mobile money services.
“The sector continues to increasingly embrace technology with the rollout of digital products and increased volumes of digital transactions as competition intensifies. Notwithstanding this, banks have been investing in the refurbishment and relocation of their branch networks amidst this “bricks to clicks” phenomenon,” said Stockbrokers Botswana in a recent analysis on the banking sector.
Stockbrokers Botswana in its banking report said, going forth it appears banks will be looking to consolidate their networks with agency banking outlets to be in lieu of branches, particularly in areas of low footfall. MNOs trump banks geographically with their far wider access points, while banks are more competitive with regards to their pricing, said the stockbroker’s banking sector analysis. “Some banks have managed to increase their financial inclusion reach with mobile wallet disbursement platforms, while the increased adoption of agency banking will increase their access points,” said Stockbrokers Botswana.
The banking sector is not only troubled by competition for digital banking services from MNOs, it has also faced challenging environment of accommodative monetary policy characterized by all-time low rates, a slow-down in credit growth and heightened competition. Despite registering improved profitability according to Stockbrokers Botswana, the latest figures show that commercial banks credit for the year to September 2019, slowed to 6.1 percent(Sept 2018: 8.1 percent).
The stockbroker research further stated that commercial bank credit growth for the twelve months to June 2019 eased to 6.5 percent (June 2018: 7.6 percent). The slow-down was a result of sharply lower credit growth to the business sector, while household credit growth increased, according to Stockbrokers Botswana Banking Sector Report.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”