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Pelaelo shares BoB report card

The Bank of Botswana has reported on its financial condition and performance. According to the Bank’s 2018 Annual report, total assets declined by P2.1 billion to P72.2 billion in December 2018 (P74.3 billion in December 2017), of which P71.4 billion was foreign exchange reserves.

In foreign currency terms (United States dollars (USD) and Special Drawing Rights), the foreign exchange reserves decreased from USD7.5 billion to USD6.7 billion and from SDR5.3 billion to SDR4.8 billion in the same period. At this level, the foreign exchange reserves were equivalent to 15 months of import cover of goods and services. The decrease reflects, among others, drawdowns of foreign exchange by government and significant adverse valuations, specifically global equity markets towards the end of the year.

Giving a report on the performance of the BoB, Governor, Moses Pelaelo wrote that the Bank’s net income for 2018 was P2.9 billion, compared to P739.5 million in 2017. After transferring nondistributable currency gains of P4 billion to the Currency Revaluation Reserve and market valuation losses of P5.9 billion to the Market Revaluation Reserve, the net distributable income to Government was P4.8 billion, higher than the P1.9 billion in 2017.

Commenting on the banking industry, Pelaelo pointed out that it was sound, prudently managed, solvent, liquid and profitable. All licensed banks met the minimum prudential requirements as set out in the Banking Act and Banking Regulations. “The banking sector’s statement of financial position (the balance sheet) increased by 9.3 percent, from P83.5 billion in December 2017 to P91.3 billion as at December 31, 2018.

The industry’s total deposits rose by 9 percent from P63.6 billion in 2017 to P69.3 billion in 2018, while loans and advances increased by 7.6 percent from P54.2 billion to P58.3 billion during the same period. Overall, annual credit growth accelerated from 5.6 percent in 2017 to 7.7 percent in 2018, with a faster expansion in credit to business, while growth in lending to households slowed in an environment of modest increase in personal incomes,” he wrote in his foreword.

According to Pelaelo, national and international payments were carried out efficiently through various platforms, including the Botswana Automated Clearing House (BACH). He said the Bank continued to embrace improvements in the payments and settlement landscape that were driven by developments in information and communications technology, competition and customer requirements. “The Bank also implemented related security and risk mitigation measures to avert any possible cyber-attacks, fraud and misuse of payments systems.”

During 2018, Moody’s Investors Service and Standard & Poor’s Global Ratings affirmed Botswana’s investment grade ratings of A2 and ‘A-/A-2’, respectively, for long and short-term bonds in domestic and foreign currency. “The outlook was reaffirmed to be stable by both the credit rating agencies. The strong external and fiscal balance sheet, a well-managed economy and low public debt, as well as the country’s robust public institutions and a stable political environment supported the ratings. However, both rating agencies reiterated the concerns relating to the narrow economic base and relatively slow progress in economic diversification,” continued Pelaelo.

In 2018, the Bank spearheaded the establishment of the Financial Stability Council (FSC), an inter-agency administrative body aimed at strengthening the implementation of the financial stability mandate. Pelaelo said the FSC’s primary focus is to foster coordinated macro-prudential analysis, monitoring and response to financial system imbalances or distress to ensure a sound and stable financial system, which is supportive of sustainable macroeconomic environment.

Supervision, Regulation of Banks, Bureaux de Change

During 2018, the Bank continued to monitor the performance of banks through a system of monthly and quarterly returns; risk-based supervision; on-site examinations; bilateral and trilateral meetings (the Bank, banks and their external auditors); ad hoc consultations as necessary. According to the 2018 report, most banks reported higher profit levels compared to the previous year, with the exception of one bank, which made a loss for the year ending December 31, 2018.

It states that the banking sector’s balance sheet increased by 9.3 percent from P83.5 billion in 2017 to P91.3 billion in 2018. Meanwhile, the industry’s total deposits rose by 9 percent from P63.6 billion in 2017 to P69.3 billion in 2018, while loans and advances increased by 7.6 percent from P54.2 billion to P58.3 billion in the same period. Consequently, the financial intermediation ratio4 fell from 85.2 percent as at December 31, 2017 to 84.2 percent at the end of 2018.

“All banks were adequately capitalised, liquid and complied with the minimum prudential and statutory capital and liquidity requirements. However, one bank had a capital adequacy ratio below 15 percent, which is the prudential limit, as at December 31, 2018. In addition to the prudential supervisory role, the Bank continued to monitor business conduct to ensure that banks treated their customers in a fair, professional and transparent manner.”

Statutory Report on the Operations and Financial Statements of the Bank, 2018

The noticeable blight in the report was the liquidation of the defunct Kingdom Bank Africa Limited and the subsequent litigation instituted by one of its major creditors against the Bank of Botswana, for alleged negligence in the performance of statutory duties, was in progress as at December 31, 2018.

Furthermore abandoned funds continued to be administered in accordance with the provision of Section 39 of the Banking Act. “As at December 31, 2018, the balance of abandoned funds was P15.1 million, up from P10.6 million in 2017. During the year, P423 292 was claimed, while P1.3 million was transferred to the Guardian Fund.”

In an effort to strengthen the implementation of the financial stability mandate, the Bank of Botswana spearheaded the establishment of the Financial Stability Council (FSC), an inter-agency administrative body comprising senior representatives of the Ministry of Finance and Economic Development, the Bank, Non-Bank Financial Institutions Regulatory Authority, and the Financial Intelligence Agency.

The FSC’s primary focus is to foster coordinated macro-prudential analysis, monitoring and response to financial system imbalances or distress to ensure a sound and stable financial system, which is supportive of sustainable economic development. According to the Bank of Botswana report, during 2018, five new bureaux de change were licensed, while nine licences of bureaux de change were revoked for two reasons. Four bureaux de change voluntarily surrendered their licences, while five contravened the Bank of Botswana (Bureaux de Change) Regulations of 2004. Therefore, 57 bureaux de change were in operation as at December 31, 2018.

“The Bank carried out full scope on-site prudential and anti-money laundering and combating financing of terrorism (AML/CFT) examinations at selected banks in 2018. In this regard, concerned banks are required to implement remedial and corrective supervisory actions, where deficiencies were found. In addition to adverse citings relating to governance and operational processes, a total of P299 160 in penalties was levied on some banks for legal and regulatory transgressions. Going forward, the combination of supervisory action and response by the banks should result in an improvement in implementation and compliance with respect to AML/CFT requirements and related governance and risk management.”

The 2018 Bank of Botswana report further notes that “The October 2018 meeting of the Financial Action Task Force (FATF) on AML/CFT, determined that progress made by Botswana was not adequate to address identified strategic deficiencies. Therefore, the country was placed under observation by the FATF and a public statement was issued on Botswana pointing out the strategic AML/CFT deficiencies for which an action plan was developed for the country to address.

The FATF will closely monitor the implementation of the action plan, and once a determination is made that Botswana has substantively addressed all the elements in the action plan, an on-site visit will be organised to confirm the implementation of the necessary legal, regulatory and/or operational reforms. If the on-site visit has a favourable outcome, the FATF may decide to remove the country from the ‘grey list.’”

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Pan-African risk advisor Minet Group and Botswana’s Africa Lighthouse Capital acquire Aon Botswana

21st May 2021
Pan-African-risk-advisor-Minet-Group-

Strategic partnership offers inherent benefits of global knowledge, African insights, and local expertise and commitment

Minet Group and Africa Lighthouse Capital today announced that they have received regulatory approval and fulfilled all requirements to acquire Aon’s shareholding in Aon Botswana, and consequently will begin the process to rebrand to Minet Botswana.

Minet Group is a well-known and trusted pan-African risk advisory firm and Aon’s largest Global Network Correspondent and has been rapidly expanding its African footprint since 2017 through the acquisition of operations from global professional services firm Aon in Kenya, Lesotho, Malawi, Mozambique, Namibia, Tanzania, Uganda, and Zambia.   Minet has been delivering world class products and services across Africa for over 70 years.

Africa Lighthouse Capital (ALC) is a leading Botswana citizen-owned private equity firm focused on investing in Botswana companies and propelling them into regional champions, with over BWP 500 million in funds under management.

The new entity will be rebranded to Minet and will inherit deeply rooted respect by its clients for their innovative and locally relevant solutions, responsiveness, and efficient processes. Furthermore, it shall have the benefit of consistency in leadership and staffing, with Barnabas Mavuma, previously Managing Director of Aon Botswana, continuing to lead the business as the MD supported by the local management team.

 “The addition of Minet Botswana to our growing African network affirms our belief in the great opportunities for growth that Africa offers, driven by rising consumer demand, huge investment in infrastructure and quick adoption of new technology,” says Joe Onsando, CEO at Minet Group.

“This transaction significantly adds to the diversity and skills base of our team and will have a positive impact on the range of products and services we provide. Our Correspondent agreement with Aon gives us access to global expertise and data driven insights and uniquely positions us to deliver risk advisory solutions that reduce volatility, thus driving improved performance for our clients. This is a very exciting time to be Minet in Africa.”

“The significantly increased Botswana citizen shareholding effected by this transaction gives rise to an exciting era of local market focus and growth for Minet Botswana,” says Bame Pule, Founder and CEO of Africa Lighthouse Capital.  “We intend to work with Minet Botswana’s local management team to further localise the business in terms of product development, while at the same time investing in local skills development and business development.  We look forward to this exciting journey, which will result in a significantly enhanced service offering for Minet Botswana’s clients.”

Consequently, and similar to the other members of the Minet Group, Minet Botswana becomes an Aon Global Network Correspondent, retaining its access to Aon’s resources, technology, and best practises, combined with the benefit of independent, local agility. This transaction furthermore significantly increases local shareholding, enabling operations to become even nimbler and better positioned to unlock new and existing growth opportunities.

Clients of Minet Botswana will experience continuity of product and service delivery standards in the short term. In the near future, they can expect an enhanced offering that combines agility with technology and product innovation, tailormade for their specific needs.

Together, Minet and ALC bring a sound understanding of local market conditions, strong governance, and an established track record in the region. These qualities, combined with Aon’s global capabilities and expertise, will bring clear benefits for clients.

This transaction vastly increases citizen ownership with shareholders who are going to be active in the business. The transfer of equity interests in Botswana to investors with local and regional expertise, presence and commitment will allow the businesses to move quickly in line with market movements, and to introduce products that are tailored to the local market.

“Minet’s commitment and drive to incessantly adapt to changing market conditions, and to innovate to meet the unique insurance demands of the African continent, while maintaining the high standards customers have come to expect – Onsando concludes – will continue to grow and give Minet a powerful competitive edge within the African market”.

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Africa scores $285 Billion IMF deal

21st May 2021
IMF-Managing-Director-Kristalina-Georgieva

French President Emmanuel Macron received 21 Heads of state and government officials from Africa during the recent summit on the Financing of African Economies that focused on Africa to take full advantage of the tectonic shifts in the global economy and the call for a joint effort for financial and vaccination support for the continent.

President Emmanuel Macron stressed that “Most regions of the world are now launching massive post-pandemic recovery plans, using their huge monetary and fiscal instruments. But most African economies suffer the lack of adequate capacities and such instruments to do the same. We cannot afford leaving the African economies behind.

We, the Leaders participating to the Summit, in the presence of international organizations, share the responsibility to act together and fight the great divergence that is happening between countries and within countries.

This requires collective action to build a very substantial financial package, to provide a much-needed economic stimulus as well as the means to invest for a better future. Our ambition is to address immediate financing needs, to strengthen the capacity of African governments to support a strong and sustainable economic recovery and to reinforce the vibrant African private sector, as a long-term growth driver for Africa.”

For her part, International Monetary Fund (IMF) Managing Director Kristalina Georgieva highlighted that “there is urgency to focus on financing Africa. Last year, the pandemic-caused recession shrank the GDP of the Continent by 1.9 percent – the worst performance on record. This year, we project global growth at 6 percent, but only half that 3.2 percent for Africa.” Adding that Africa needs to grow faster than the world at 7 to 10 percent to meet the aspirations of its youthful populations, and become more prosperous and more secure.

Georgieva revealed that the price tag on the shot is estimated to be “$285 billion through 2025. Of this $135 billion is for low-income countries. This is the bare minimum. To do more – to get African nations back on their previous path of catching up with wealthy countries – will cost roughly twice as much. These are large numbers. They may seem out of reach. But to quote Nelson Mandela: impossible until it is done.”

The main areas of interest to achieve this include; first, end the pandemic everywhere, 40 percent of the population of all countries is targeted to get vaccinated by the end of 2021, and at least 60 percent by mid-2022.

Second, bilateral and multilateral development financing grants and concessional loans ought to go up. Over the last year, the IMF have swiftly ramped their financing for the Continent, including providing 13 times their average annual lending to sub-Saharan Africa. And are working to do much more. The IMF has also received support to increase access limits so they can scale up their zero-interest lending capacity through the Poverty Reduction and Growth Trust.

The IMF has also devised exceptional measures. Their membership backs an unprecedented new allocation of Special Drawing Rights (SDR) of $650 billion, by far the largest in their history. Once approved, which is intended to be achieved by the end of August, it will directly and immediately make about $33 billion available to African members. It will boost their reserves and liquidity, without adding to their debt burden.

Over the course of the last year, the IMF has built experience in facilitating the on lending of SDRs – thus managing to triple their concessional lending capacity as a result.

The Third being, actions at home. According to Georgieva “a crisis is an opportunity for transformational domestic reforms that increase domestic revenue, improve public services, and strengthen governance. For instance, digitalization can improve tax administration and revenue collection, and the quality of public spending. And with radical transparency, Africa can tap into new sources of finance – such as carbon offsets.

There is ample scope for countries to encourage private investment, including in social and physical infrastructure. New IMF research, published today, highlights that domestic and international investors could provide at least 3 percent of GDP per year of additional financing by the end of this decade.”

Reforms of international taxation can also support Africa’s growth. For a long time, the IMF has been in favor of minimum corporate tax rates to reduce the race to the bottom and tax avoidance. And they strongly support an international agreement on digital tax, something France has been a leading voice for. It is important to secure fair distribution of tax revenues, so they can contribute to closing Africa’s financial gap.

Georgieva called on to each and every one to step up. Reminding the attendees that from history they are all familiar with what a shock of this magnitude can do if not countered forcefully and effectively.

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Indian COVID-19 variant hits Botswana diamond sales

20th May 2021
Indian-Covid--19-variant-hit-rough-diamonds-sales---De-Beers-

De Beers’ Group, the world’s number one diamond producer by value, this week attributed the downfall of its sales for the fourth cycle week to the second wave of the Covid-19 variant (B.1.617.2) which was first discovered in India.

Diamond trading conditions have been hit by the Covid-19 crisis in India which is a major cutting and polishing centre for the world’s diamond trade.

The outbreak of the new variant has led to a humanitarian crisis with 280, 284 fatalities of the disease reported.

The London headquartered company said the sales in its fourth cycle fell to $380m (about P4.1 billion) down from $450m (about P4.8 billion) in the third cycle though it was higher than the fifth cycles of last year when the group shifted only $56m (P600 million).

De Beers emphasized that they continued to implement a more flexible approach to rough diamond sales during the fourth sales cycle of 2021, with the Sight event extended beyond its normal week-long duration.

The De Beers group Chief Executive Officer (CEO), Bruce Cleaver said the company continues to see robust demand for diamond jewellery in the key US and China consumer markets.

“However, the scale of the second wave of Covid-19 in India, where the majority of the world’s diamonds are cut and polished, has led to reduced midstream capacity and subsequently lower rough diamond demand, during what is already a seasonally slower time of year for midstream purchases,” said Cleaver.

Meanwhile Botswana health officials have confirmed the new Covid-19 variant in Botswana. The Ministry of Health and Wellness -through a press statement- informed members of the public that the variant (B.1.617), was confirmed in Botswana on 13th May 2021.

According to Christopher Nyanga, spokesperson at the Ministry, this followed a case investigation within Greater Gaborone, involving people of Indian origin who arrived in the country on the 24th April 2021.

Moreover the World Health Organization (WHO) recently announced that the Indian Covid-19 variant was a global concern, with some data suggesting that the variant has “increased transmissibility” compared with other strains.

The India variant (B.1.617.2) – is one of four mutated versions of the coronavirus which has been designated as being “of concern” by transitional public health bodies, with others first being identified in Kent, South Africa and Brazil.

Nevertheless when speaking at Bank of America Global Metals and Mining conference, Anglo American Chief Executive Officer, Mark Cutifani said the company portfolio is increasingly tilted towards future enabling products and those that need to decarbonise energy and transport in order to meet consumers’ needs – from home appliances, electronics and infrastructure, to food and luxury goods.

“We see material opportunity for Anglo American to continue to set itself apart in terms of the performance of our diversified business, further enhanced through sector-leading 25% volume growth over the next four years, led by copper and the platinum group metals,” said Cutifani.

“Most importantly, as the supplier of such critical materials, it is the duty of our industry to ensure that in everything we do, we act responsibly and deliver enduring value for our full breadth of stakeholders, including our planet.”

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