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.
10 Best forex brokers that accepts Botswana Traders ( 2021 )
The best handpicked forex brokers for Botswana traders revealed for 2021. Trade with confidence with any of these licenced and regulated brokers.
1. Exness
Exness is a popular and well-regulated broker based in Cyprus and the UK which offers traders with a variety of account types, powerful trading platforms, competitive trading conditions and more.
PROS | CONS |
| 1. Globally recognized broker | 1. US clients not accepted |
| 2. Negative balance protection offered | 2. Limited tradable financial instruments |
| 3. MetaTrader offered | |
| 4. Demo account and Islamic account option offered | |
| 5. Adequate leverage and reasonable minimum deposit requirements |
2. AvaTrade
AvaTrade is a popular and multi-award-winning Market Maker and STP broker which is regulated to offer comprehensive trading solutions in several jurisdictions.
PROS | CONS |
| 1. Strict regulation | 1. US clients not accepted |
| 2. Negative balance protection | 2. Variable spread accounts not offered |
| 3. Optimum execution speeds | |
| 4. Multiple trading platforms offered | |
| 5. Social trading supported, hedging and scalping allowed |
3. XM
XM is a popular and reputable broker which has been in operation since 2009. XM is strictly regulated by several regulatory entities and offers traders from around the world with access to global financial markets.
PROS | CONS |
| 1. Strict regulation | 1. US clients not accepted |
| 2. Negative balance protection | 2. Fixed spread accounts not offered |
| 3. Competitive trading conditions | |
| 4. Variety of accounts offered | |
| 5. High leverage ratio of 1:888 |
4. eToro
eToro is a reputable and popular Market Maker broker in addition to being the leading social trading platform in the industry. eToro caters for various traders and investors from 140 countries, offering comprehensive trading solutions to both beginners and experts.
PROS | CONS |
| 1. Strictly regulated | 1. US clients not accepted |
| 2. Client fund security guaranteed | 2. Limited leverage for retail traders |
| 3. Commission-free trading | 3. Fixed spreads not offered |
| 4. Large online community | 4. MetaTrader not offered |
| 5. Demo account and Islamic account option provided |
5. IC Markets
IC Markets is an ECN broker based in Australia and Seychelles with regulation and authorization through ASIC. Established in 2007, IC Markets is one of the largest true ECN brokers in the world that offers traders access to global financial markets.
PROS | CONS |
| 1. Well-regulated | 1. US clients not accepted |
| 2. True ECN broker | 2. Fixed spread accounts not offered |
| 3. Low trading and non-trading fees | |
| 4. Tight and competitive spreads | |
| 5. Hedging and scalping allowed, social trading supported |
6. FBS
Established in 2009, FBS is a strictly regulated and reputable STP and ECN broker which has around 16 million registered traders from 190 countries worldwide.
FBS offers traders with more than 75 financial instruments which can be traded through powerful trading platforms, competitive trading conditions, a variety of account types, and more.
PROS | CONS |
| 1. Ultra-low deposit requirement | 1. US, UK, Japan, Israel and several other countries not allowed |
| 2. Social trading supported | 2. High spreads and commissions on some accounts |
| 3. Multiple account types offered | 3. Limited trading tools |
| 4. MetaTrader offered | |
| 5. 24/7 dedicated customer support |
7. FxPro
FxPro is a UK-based NDD broker which is regulated by FCA, CySEC, FSCA, and SCB in facilitating the trade of more than 260 financial instruments spread across six asset classes.
PROS | CONS |
| 1. Multi-regulated | 1. US, Canada, Iraq and others not accepted |
| 2. Multiple trading platforms offered | 2. Social trading not supported |
| 3. Premium trader tools | 3. Not the tightest spreads |
| 4. NDD Execution | 4. Not the lowest commissions |
| 5. Expert analysis and VPS offered | 5. Managed accounts not offered |
8. Alpari
Alpari is a well-regulated STP and ECN broker with nearly two decades worth experience in offering comprehensive trading solutions. Alpari boasts with 2 million registered traders from more than 150 countries worldwide.
PROS | CONS |
| 1. Well-regulated | 1. US, Japan, Russia, and several other countries not accepted |
| 2. MetaTrader offered | 2. Limited financial instruments |
| 3. PAMM accounts offered | 3. No fixed spreads |
| 4. Multilingual customer support |
9. FXTM
FXTM is a UK, Cyprus, South Africa, and Mauritius-based broker which offers traders with more than 250 financial instruments to trade.
FXTM caters for both retail and professional clients and has tailormade solutions despite the trading needs and objectives of traders.
PROS | CONS |
| 1. Strict regulation | 1. US clients not allowed |
| 2. Variety of financial instruments | 2. Restricted leverage for EU traders |
| 3. Multiple account types | |
| 4. Commission-free trading offered | |
| 5. Low minimum deposit |
10. Olymp Trade
Olymp Trade is based in St. Vincent and the Grenadines and offers traders with a wide range of tradable financial instruments.
Olymp Trade, as opposed to conventional brokers, offers traders with fixed time trades which can be done through a powerful proprietary trading platform.
PROS | CONS |
| 1. Low minimum deposit | 1. High commission fees |
| 2. Training resources offered | 2. Social trading not offered |
| 3. Controlled risks and rewards | 3. Not regulated |
| 4. Market news and analysis | 4. No support for automated trading |
| 5. 24/7 dedicated customer support | 5. MetaTrader not offered |
| 6. |
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Business
Diamond industry crises not over yet – De Beers Chief
Following a devastating first half of the year 2020 due to COVID-19, the global diamond industry started gaining positive momentum towards the end of the year as key markets entered into thanks giving and holiday season.
However Bruce Cleaver, Chief Executive Officer of De Beers Group cautioned that the industry is not out of the woods yet, citing prevailing challenges ahead into 2021.
The first half of 2020 was characterized by some of the worst challenges in history of global diamond trade.
The midstream, where rough diamonds are traded in wholesale and bulk to cutters and polishers, was for the most part of second quarter 2020, suffocated by international travel restrictions as countries responded to the contagious Corona Virus.
This halted movement of buyers and shipment of the rough goods , resulting in unprecedented decline of sales, in turn ballooning stockpiles as the upstream operations produced with little uptake by the midstream.
The situation was exacerbated by muted demand in the downstream where jewelry industries and tail end retailers closed to further curb the spread of COVID-19.
However towards the end of third quarter getting into the last quarter of the year, demand in both midstream and downstream started to steadily pick up as countries relaxed COVID-19 restrictions.
De Beers, the world’s largest diamond producer by value started reporting significant recovery in sales in the sixth and seventh cycle, figures began to reflect an upswing in sentiment as well as increase in uptake of rough goods by midstream.
Sales for the sixth cycle amounted to $116 Million, following a sharp downturn in the previous cycles, significant jump was realized during the seventh cycle, registering $320 million, an over 175 % upswing when gauged against the proceeding cycle.
De Beers noted that diamond markets showed some continued improvement throughout August and into September as Covid-19 restrictions continued to ease in various locations.
“Manufacturers focused on meeting retail demand for polished diamonds, particularly in certain product areas, accordingly, we saw a recovery in rough diamond demand in the seventh sales cycle of the year, reflecting these retail trends, following several months of minimal manufacturing activity and disrupted demand patterns in all major markets,” said De Beers Chief Executive, Bruce Cleaver in September last year.
The diamond mining behemoth continued to register impressive sales in the eighth and ninth cycle signaling the industry could end the year on a positive note.
The momentum was indeed carried into the last cycle of the year. The value of rough diamond sales (Global Sightholder Sales and Auctions) for De Beers’ tenth sales cycle of 2020 amounted to $440 million, a significant increase from the 2019 tenth sales cycle value.
Against what seemed like a positive year end that would split into the New Year Bruce Cleaver, CEO, De Beers Group, however warned the industry not to count eggs before they hatch.
“Positive consumer demand for diamond jewellery resulting from the holiday season is supporting the continuation of retail orders for polished diamonds from the diamond industry’s midstream sector. This in turn supported steady demand for De Beers’s rough diamonds at our final sales cycle of 2020,” Cleaver had said in December.
In caution the De Beers Chief noted that “While the diamond industry ends the year on a positive note, we must recognise the risks that the ongoing Covid-19 pandemic presents to sector recovery both for the rest of this year and as we head into 2021.”
All segments of the supply chain were severely impacted by the global lockdown measures introduced in response to the Covid-19 pandemic in the first half of 2020.
After a strong US holiday season at the end of 2019, the rough diamond industry started 2020 positively as the midstream restocked and sentiment improved.
However, from February 2020, the Covid-19 outbreak began to have a significant impact on diamond jewellery retail sales and supply chain, with many jewelers suspending all polished purchases and/or delaying payments to their suppliers.
Rough diamond sales were materially affected by lockdowns and travel restrictions, delaying the shipping of rough diamonds into cutting and trading centers and preventing buyers from attending sales events.
These resulted in significant decline in total revenue for the business in the first six months of 2020. Total revenue decreased by 54% to $1.2 billion from $2.6 billion registered in the prior half year period ended 30 June 2019.
For the entire first six (6) months of the year 2020 De Beers Rough diamonds sales fell drastically to $1.0 billion from $2.3 billion in the prior H1 period ended 30 June 2019. Sales volumes decreased by 45% to 8.5 million carats compared to 15.5 million carats registered in the prior period.
Business
Gov’t coffers depleting to record low levels
Next month Minister of Finance & Economic Development, Dr Thapelo Matsheka will face the nation to deliver Botswana‘s first budget speech since COVID-19 pandemic put the world on devastating economic trajectory.
The pandemic that broke out in late 2019 in China has put the entire world on unprecedented chaos ,killing over P1 million people across the globe , shattering economies and almost rendering the year 2020 – a 12 months stretch of complete setback.
The 2021/22 budget speech will come at time when Botswana’s economy is still trying to emerge out of this.
National lockdowns and local travel restrictions have hit small medium enterprises hard, while international travel restrictions halted movement of both good and people, delivering by far some of the heaviest and worst catastrophic blows on the diamond industry and tourism sector, the likes of which this country has never seen before on its largest economic sectors.
As Minister Matsheka faces parliament next month, the reality on the ground is that Botswana’s national current cash resource, the Government Investment Account (GIA) is depleting at lightning speed.
On the other hand the COVID-19 economic mess is prevailing, the virus is reported to have taken a new dangerous shape of a deadly variant, spreading like fueled veld fire and causing some of the world’s super powers back to tough restrictions of lockdown.
According official figures released by Bank of Botswana, in October 2020 the GIA was running at P6 billion compared to the P18.3 billion held in the account in October 2019.
However reports indicate that the account could be currently holding just about P3 billion. The draw down from the GIA has been by exacerbated by declining diamond revenue, the country‘s largest cash cow. The sector was experiencing significant revenue decline even before COVID-19 struck.
When the National Development Plan (NDP) 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at a 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.
Taking into account the COVID-19 economic mess in 2020/21 financial year, the budget deficit could add up to P20 billion after revised figures.
Drawing down from government cash balances to finance these budget deficits meant significant withdrawals from the Government Investment Account, hence the near depletion of this buffer.
Meanwhile should Botswana’s revenue streams completely dry up to zero levels; the country would only have 11 months, before calling out for humanitarian aids and international donors, because foreign reserves are also on slow down.
During 2019, the foreign exchange reserves declined by 8.7 percent, from Seventy One Billion, Four Hundred Million Pula (P71.4 billion) in December 2018 to Sixty Five Billion, Three Hundred Million Pula (P65.3 billion) in December 2019.
The reserves declined further in 2020, falling by 2.3 percent to Sixty Three Billion, Seven Hundred Million Pula (P63.7 billion) in July 2020. This was revealed by President Masisi during State of the Nation Address in November last year.
The decrease was mainly due to foreign exchange outflows associated with Government obligations and economy-wide import requirements.
However latest statistics(October 2020) from Bank of Botswana reveal that Botswana’s foreign reserves are estimated at P58.4 billion, with government’s share of these funds significantly low.
Government has since introduced several measures to contain costs and control expenditure with the most recent intervention being the halting of recruitment in government departments and parastatals.
Furthermore, Value Added Tax has been signaled to go up from 12% to 14% in April this year with more hikes and service fees anticipated as government embarks on unprecedented domestic revenue mobilization.