Asset management business slows down BIHL 2019 H1
Business
Botswana Insurance Holdings Limited (BIHL), the country‘s largest insurance and investment conglomerate has not had it easy in the first half of 2019. According to BIHL financial statement for the half year period ended 30 June 2019 released this week, operating profit for the Group improved marginally by 1% over the 6 months when gauged against the same period in 2018.
Zooming into business operations per segment, BIHL reports that operating profit for the life business increased by 2% over the same period despite difficult economic conditions and intensified competition, while the general insurance business was positively impacted by lower claims registering 18 % growth in operating profit.
On a major highlight, posting negative movement the Group‘s asset management business under its market outfit Botswana Insurance Fund Management (BIFM Holdings) went the opposite direction ending the six months period with a decline of 42 percent in operating profit due to pressure on the fees earned as well as once off provisions that were booked during the period.
“The first half of the year has been a challenging one for BIFM Holdings; operating profit is showing a continued decrease of 20% when compared to the same period last year,” explained BIHL Executives. The Group says this low performance is mainly attributable to competitive landscape BIFM operate in locally which is depicted by pressure experienced in the investment management fees and once off costs that contributed negatively to the operating profit movement.
On a slight positive wave under asset management segment was the Zambia business upswing with a 24 percent increase in operating profit from the previous half year period. However due to its size the Zambia asset management business could not fully offset the decrease in BIFM’s performance. Total Assets under Management including Zambia’s P4.4 billion stands at P28.3 Billion , closing the 2019 half year at a slight increase of 2% on prior year.
Another negative performance was experienced by BHIL associates and joint ventures, closing the six month period at 38 percent decrease on share of profits contributed to the group. The main driver of this decline was a drop in fair value of Letshego Holdings Limited.
The other associates, Funeral Services Group, Botswana Insurance Company Limited and NICO however reported satisfactory results compared to last year. Investment income which comprises dividend income and interest income increased by 104% compared to prior year as a result of dividends from the Offshore Private Equity fund.
On a close look on BIHL in house subsidiaries the life insurance business which operates under Botswana Life experienced significant positives in the period under review , closing the half year at slight operating profit increase from P164 million in June 2018 to P166 million in June 2019. This slight growth is mainly as a result of good new business volumes from the group lines and low new business strain for Botswana Life retail products.
Net premium income for the first half of 2019 grew by 11% from P1.15 billion in 2018 to P1.28 billion, with all income lines posting good growth from prior year, while total new business written grew by 6% underpinned by strong single premium income performance. Recurring premium income grew by 12% from P634 million in June 2018 to P712 million in June 2019. “This line represents a sustainable source of profits in the long term” observed BIHL.
The value of new business, which represents the present value of future profits from new business premiums written during the year, was flat compared to prior year despite the challenging operating environment. Operating expenses increased above inflation as a result of the investment made on the 5-year strategy that was rolled out at the beginning of the year.
In the short term insurance space, Legal Guard, the group’s segment market outfit continued to experience top line pressures which saw revenue declining by 3% compared to the first 6 months of 2018. However operating profit achieved for the first 6 months of 2019 amounted to P1.6 million, a slight increase of P0.2 million higher than for the same period last year.
The business has also managed to contain operating expenses which are 1% lower than the same period last year. “As the results for the half year reflect, top line performance is and must remain the preeminent focus area. The business will continue to implement its comprehensive sales strategy in order to turn around the top line performance,” shared BIHL Executives.
On the overall, BIHL Group’s embedded value increased to P4.38 billion from the P4.37 billion reported as at 30 June 2018. The embedded value allows for P234 million in dividends paid during the first half of the year. The value of new life business is flat at P66 million compared to prior year. Value of new business was subdued for the risk and term assurance products due to lower new business volumes for the period.
BIHL Group Chief Executive Officer Catherin Letegele says prospects for the economy remain mixed reflecting both international economic uncertainty as well as domestic challenges. “Despite these challenges we are focused on delivering sustainable growth and value to our stakeholders,” she said.
Business
Payless to partake in BSE’s Flagship Tshipidi program
Newly established wholly indigenous citizen owned retail chain Payless Retail (PTY) Ltd is set to partake in the first session of Botswana Stock Exchange (BSE)’s Tshipidi Mentorship Program (TMP) on Monday June 29th.
The TMP aims to train and capacitate SMEs so they can operate as corporates and eventually list on the local bourse. According to local bourse, BSE, the program aims to provide practical training to potential issuers through a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
Payless Retail is a newly established supermarket chain whose mission is to become a convenient one-stop shopping destination as it is one of the Botswana oldest retailing brands. It started off as Corner Supermarket in January 1976, and to date boasts of nine stores in, among others, Gaborone, Mochudi, Molepolole and Tlokweng. Payless was recently acquired by Ellis Retail Group, which is led by businessman Elliot Moshoke.
The takeover catapulted Ellis Retail to the envious position of being the first wholly indigenous owned major retail chain. “We jumped at this opportunity because it gave us a chance to prove to Batswana that the retail business is open and lucrative.”
The objective is to create a proudly Botswana retail chain that fully supports our national Vision, economic development and citizen economic empowerment ambitions,” Moshoke told BusinessPost.
He further emphasized that Batswana are capable and able to run large scale businesses hence they need to accept invite foreign investors who will come in to support us not take the business.
“Our win as Payless in the Fast Moving Consumer goods (FMCG) industry is a win for Batswana. We need their support in this difficult and challenging journey.
As you are aware, Payless is the only retail chain in the hands of Batswana ba Sekei. We need to take advantage of this to generate employment and create small businesses in retail and Agri businesses,” he explained.
The retailer has also partnered with Botswana Investment & Trade Center (BITC) on their #PushaBW campaign with a view to initiating earnest engagement with local producers to iron out bottlenecks and ensure seamless trading.
“Local producers have to be part of the phenomenal growth of the Payless brand. This will in turn facilitate employment creation and economic growth. We did this because we have the utmost respect for local manufacturers and producers,” he mentioned.
Payless is currently restocking all of its stores; a development that Moshoke says is testament to the retailer’s commitment to growing the brand and ensuring continuity of business. He further revealed that renowned retail suppliers like PST and CA Sales have reignited their trust in Payless, opening their doors for Payless as they have faith in the retailer’s new owners.
The takeover has reportedly saved more than 200 jobs and gave a new lease of life to the previously fledging Payless brand. According to a press release from the management team, the Payless work forces are also extremely excited about what the future holds. The TMP is a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
The program is administered by experts within the listing ecosystem and seeks to bring the potential issuers closer to the listings advisers, investors and leaders of already listed companies. “As a strategic initiative, the BSE decided to set up this mentorship program in a bid to assist SMEs to strategize, corporatize and acclimatize in order to list to access equity finance and expand operations,” said the BSE.
The TMP will avail to SMEs practical insights, knowledge and feedback from institutional investors, increased awareness of the BSE listing requirements as well as an intimate network of advisors and CEOs of listed companies. After training, Payless will graduate with improve governance structures and better knowledge of articulating its business strategy. The retailer will also gain increased visibility through BSE marketing platforms.
Business
BITC assisted companies rake in P2.96 billion in export earnings
Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.
In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.
The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.
With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.
Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.
BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.
During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.
BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.
As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.
In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.
BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.
Another tool used for export development by BITC is the Botswana Trade Portal, which has experienced some growth in terms of user acceptance and utilisation globally. The portal provides among others a catalogue of information on international, regional and bilateral trade agreements to which Botswana is a party, including the applicable Rules, Regulations and Requirements and the Opportunities for Botswana Businesses on a product by product basis.
The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.
BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.
Business
Inflation up 2.3 percent in May
Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.
According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).
With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.
In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.
Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.
The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.
The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.
The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.