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Investors react to Barclays positive H1 results

Investors moved to grab shares from Barclays this week following the banker’s optimistic cautionary announcement which revealed that the half year results will come positive.  A recent market view shows that Barclays was the biggest gainer this week, going up by 17 thebe to close at 540 thebe from 523 thebe.

Barclays led the domestic companies as the Domestic Index saw a recovery this week by gaining 0.42 percent to close at 7428.64 points, while the Foreign Index was flat, closing at 1564.55 points. The Domestic Index woke from falling at 1.24 to close at 7397.77 points while the FCI was unchanged, closing at 1564.55 points. One transaction by Barclays was noted this week on BSE main board. The banker has 852,161,252 issued securities and market capitalization of P4, 601.67 million. Having a turnover of 891.00 Barclays had 165 securities which traded during week.

Barclays which is yet to adopt the gigantic ABSA brand which had impressive latest financial results, echoing the latest positive cautionary announcements which predicted that the results will be encouraging. The banker in its financial results for the half period year ended 30 June 2019, achieved a profit before tax of P387 million on statutory basis representing growth of 49 percent year-on-year. This was an increase from P260 million registered in 2018 half year.

“This performance was influenced by growth in income, contained costs and favorable credit losses. Total revenue is up year-on-year by P67 million, propelled by balance sheet growth and an increase in our fees and commission income. We continued to drive momentum across all our key segments to negate the effects of compressed margins arising from an increase in cost of funding,” said Barclays in a statement this week.

The Markets

Barclays which registered a change of 17 thebe or 3.25 percent, topped the list of BSE high flyers for this week’s market review, according to Stockbrokers Botswana Weekly Report. Property Company RDCP, moved from 220 thebe to 225 thebe which is a 2.27 percent or 5 thebe change.  New Funds changed up from 5055 thebe to 5122 thebe which is a 67 thebe change or 1.33 percent. The local bourse market turnover amounted to P24, 124,343 as 3,625,709 securities traded. For the ETF basket NewGold accounted for 83 percent of turnover while in BSE main board Letshego contributed 9 percent.

A slight movement was noted from the tourism and hospitality entity Chobe which moved from 1063 thebe to 1064 thebe registering a small change 1 0.09 percent. Some fell down like New Gold which plummeted from 16100 thebe to 16070 thebe, a decline of 30 thebe or 0.19 percent. Far Property Company also fell from 247 thebe to 246 thebe, a 1 thebe or 0.40 percent drop.

Last week BSE CEO Thapelo Tsheole during the opening bell ceremony put forth the Equity Market Performance for 3 January to 30 August 2019. He said the turnover was P1.18 billion while the average daily turnover was P7.16 million. There were 378.2 million shares which traded while the market capitalization was P407.8 billion according to Tsheole. The domestic companies are currently 24 while foreign companies are 9. Serala board has one company registered which is banker BBS.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

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.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

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.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

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”

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