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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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Dark days as Aviation industry collapses

22nd November 2020
Air Botswana

As the Aviation industry takes a COVID-19 pummeling, for Africa the numbers are staggering, Chief Executive Officer of the International Air Transport Association (IATA), Alexandre de Juniac has observed.

Speaking recently at the African Airlines Association (AFRAA) has been hosting an Annual General Assembly, de Juniac said traffic is down 89% and revenue loses are expected to reach $6 billion. And this figure is likely to be revised downwards in the next forecast to be released later this month. “But the impact is much broader. The consequences of the breakdown in connectivity are severe,” he surmised.

According to de Juniac, five million African livelihoods are at risk while aviation-supported GDP could fall by as much as $37 billion. That’s a 58% fall.

“We have a health crisis. And it is evolving into a jobs and economic disaster. Fixing it is beyond the scope of what the industry can do by itself.”

He said they need governments to act, “And act fast to prevent a calamity.”

“We are in the middle of the biggest crisis our industry has ever faced. As leaders of Africa’s aviation industry, you know that firsthand. Airline revenues have collapsed. Fleets are grounded. And you are taking extreme actions just to survive. We all support efforts to contain the COVID-19 pandemic.  It is our duty and we will prevail. But policymakers must know that this has come at a great cost to jobs, individual freedoms and entire economies,” he said.

de Juniac used the AFRA general assembly platform to amplify IATA’s call for governments to address two top priorities: “The first is unblocking committed financial relief. Airlines will go bust without it. Already four African carriers have ceased operations and two are in administration. Without financial relief, many others will follow.”

Over US$31 billion in financial support has been pledged by African governments, international finance bodies and other institutions, including the African Development Bank, the African Union and the International Monetary Fund.

Unfortunately de Juniac pointed out, in his words, “Pledges do not pay the bills. And little of this funding has materialized. And let me emphasize that, while we are calling for relief for aviation, this is an investment in the future of the continent. It will need financially viable airlines to support the economic recovery from COVID-19.”

The second priority, according to IATA is to safely re-open borders using testing and without quarantines.

“People have not lost their desire to travel. Border closures and travel restrictions make it effectively impossible. Forty-four countries in Africa have opened their borders to regional and international air travel. In 20 of these countries, passengers are still subject to a mandatory 14-day quarantine. Who would travel under such conditions?” de Juniac quizzed rhetorically.

He suggested that countries should adopt systematic testing before departure provides a safe alternative to quarantine and a solution to stop the economic and social devastation being caused by COVID-19.

He admitted that it’s a frightening time for everyone, not least the millions of people whose livelihoods depend on a functioning airline industry. Right now, de Juniac said there essentially is no airline industry. He cited the example that China’s largest airlines sound optimistic, but in a vague way. “They gave no hard data about current yields, loads, or forward bookings, discussing only developments in 2019. Boy, does that seem like ages ago.”

Aviation’s darkest days

The IATA CEO said these are the darkest days in aviation’s history. “But as leaders of this great industry I know that you will share with me continued confidence in the future.

Our customers want to fly. They desire the exploration that aviation enables. They need to do international business that aviation facilitates. And they long to reunite with family and loved ones.”

He said the industry will, no doubt, be changed by this crisis, but flying will return. “Airlines will be back in the skies. The resilience of our industry has been proven many times. We will rise again,” he said.

de Juniac said Aviation is a business of freedom. “For Africa that is the freedom to develop and thrive. And that is not something people on this continent will forget or lose their desire for.”

 

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Inflation increased to 2.2% in October 2020

22nd November 2020

Headline inflation increased from 1.8 percent in September to 2.2 percent in October 2020, but remained below the lower bound of the Bank’s medium-term objective range of 3 – 6 percent, and lower than the 2.4 percent in October 2019.

According to Statistics Botswana, the increase in inflation between September and October 2020 mainly reflects the upward adjustment in domestic fuel prices {Transport (from -3.9 to -2.5 percent)}, which is estimated to have increased inflation by approximately 0.29 percentage points.

“There was also a rise in the annual price increase for most categories of goods and services: Alcoholic Beverages and Tobacco (from 6.2 to 6.6 percent); Clothing and Footwear (from 2.5 to 2.7 percent); Communications (from 0.6 to 0.9 percent); Housing, Water, Electricity, Gas and Other Fuels (from 6.4 to 6.6 percent); Recreation and Culture (from 0 to 0.2 percent); Miscellaneous Goods and Services (from 0.7 to 0.9 percent); Food & Non-Alcoholic Beverages (from 4.2 to 4.3 percent); and Furnishing, Household Equipment and Routine Maintenance (from 2 to 2.1 percent). Inflation remained stable for: Education (4.7 percent); Restaurants and Hotels (3 percent); and Health (1.5 percent). Similarly, the 16 percent trimmed mean inflation and inflation excluding administered prices rose from 1.8 percent and 3.1 percent to 2.2 percent and 3.4 percent, respectively, in the same period.”

[Source: Bank of Botswana]

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BDC injects further P64 million into Kromberg & Schubert

22nd November 2020
BDC

Botswana Development Corporation (BDC) has to date pumped a total of P100 million into the expansion of Kromberg and Schubert, a car harnessing manufacturing company, operating from Gaborone Old Naledi.

At the official ground breaking ceremony of the company‘s new warehouse today, BDC Managing Director, Cross Kgosidiile revealed the wholly state owned investment corporation has pumped P64 million into the expansion which entailed building of the new warehouse.

Kgosidiile explained that this follows another expansion project which was successfully launched in 2017, in which BDC invested P36 million, bringing the total investment into Kromberg at P100 million. The MD also acknowledged Botswana Investment and Trade Centre (BITC) as a partner in the project and for having facilitated the acquisition of the land.

 

Giving a keynote address, Minister of Investment, Trade & Industry, Peggy Serame highlighted the importance of infrastructural development in growing the local manufacturing sector and transforming the economy of Botswana.

Serame underscored the value of strategic partnerships between Government and the private sector, noting that when the two work together and pull together in one direction results will be evident and jobs will be created.

“With the prevailing conditions of depressed economy occasioned by COVID-19 pandemic, government is reliant on entities like BDC to bring in revenue and acceleration of private sector development in line with its mandate and strategic plan. This plan is supported by the need to invest in growth sectors and accelerate the implementation of the Economic Diversification Drive,” Serame said.

Minister Serame noted that the partnership between BDC and Kromberg & Schubert begun in 2017 when the P36 million, 4100 square metres factory expansion for the company was launched.

 

She said the launch of the 7320 square meters factory expansion, to be built at the tune of P64 million signals the continuation of the good partnership between the two companies.

 

“I must commend BDC for their continuous efforts to build partnerships with the private sector geared towards contributing to economic development of this country.”

 

Minister Serame also added that BITC through its robust investor aftercare programme continues to provide value added and red carpet to Kromberg and Schubert under their One Stop Service Centre.

 

“In this regard BITC facilitated acquisition of land to enable this expansion. I therefore would like to commend BITC for their timely facilitation to make this expansion possible,” the minister said.

 

Kromberg & Schubert was incorporated in Botswana in 2009; The Company has grown to asset its position as a significant player in the regional automotive industry value chain.

 

The company is also a critical player in the economic development of Botswana, it currently employs 2100 Batswana across its operations. Kromberg exports on average P2.0 billion worth of goods annually, contributing significantly to foreign exchange.

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