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.’”
Banking on Your Terms: Exploring the World of Self-Service Banking
In today’s digital age, banking is no longer just about visiting a branch during business hours. It’s about putting you, the customer, in the driver’s seat of your financial journey. But what exactly is self-service banking, and how do you stand to benefit from it as a customer?
Self-service banking is all about giving you the power to manage your finances on your terms. Whether you want to check your account balance at midnight, transfer money while on vacation, or deposit cash without waiting in line, self-service banking makes it possible. It’s like having a virtual branch at your fingertips, ready to assist you 24/7.
This shift towards self-service banking was catalyzed by various factors but it became easily accessible and accepted during the COVID-19 pandemic. People of all ages found themselves turning to digital channels out of necessity, and they discovered the freedom and flexibility it offers.
Anyone with a bank account and access to the internet or a smartphone can now bank anywhere and anytime. Whether you’re a tech-savvy millennial or someone who’s less comfortable with technology, you as the customer have the opportunity to manage your finances independently through online banking portal or downloading your bank’s mobile app. These platforms are designed to be user-friendly, with features like biometric authentication to ensure your transactions are secure.
Speaking of security, you might wonder how safe self-service banking really is. Banks invest heavily in encryption and other security measures to protect your information. In addition to that, features like real-time fraud detection and AI-powered risk management add an extra layer of protection.
Now, you might be thinking, “What’s the catch? Does self-service banking come with a cost?” The good news is that for the most part, it’s free. Banks offer these digital services as part of their commitment to customer satisfaction. However, some transactions, like wire transfers or expedited bill payments, may incur a small service fee.
At Bank Gaborone, our electronic channels offer a plethora of services around the clock to cater to your banking requirements. This includes our Mobile App, which doesn’t require data access for Orange and Mascom users. We also have e-Pula Internet Banking portal, available at https://www.bankgaborone.co.bw as well as Tobetsa Mobile Banking which is accessible via *187*247#. Our ATMs also offer the flexibility of allowing you to deposit, withdraw cash, and more.
With self-service banking, you have the reins of your financial affairs, accessible from the comfort of your home, workplace, or while you’re on the move. So why wait? Take control of your finances today with self-service banking.
Duduetsang Chappelle-Molloy is Head: Marketing and Corporate Communication Services
Botswana records over P6 billion trade deficit
Botswana has recently recorded a significant trade deficit of over P6 billion. This trade deficit, which occurred in November 2023, follows another deficit of P4.7 billion recorded in October of the same year. These figures, released by Statistics Botswana, highlight a decline in export revenues as the main cause of the trade deficit.
In November 2023, Botswana’s total export revenues amounted to P2.9 billion, a decrease of 24.3 percent from the previous month. Diamonds, a major contributor to Botswana’s exports, experienced a significant decline of 44.1 percent during this period. This decline in diamond exports played a significant role in the overall decrease in export revenues. However, diamonds still remained the leading export commodity group, contributing 44.2 percent to export revenues. Copper and Machinery & Electrical Equipment followed, contributing 25.8 percent and 10.1 percent, respectively.
Asia emerged as the leading export market for Botswana, receiving exports worth P1.18 billion in November 2023. The United Arab Emirates, China, and Hong Kong were the top destinations within Asia, receiving 18.6 percent, 14.2 percent, and 3.8 percent of total exports, respectively. Diamonds and Copper were the major commodity groups exported to Asia.
The Southern African Customs Union (SACU) received Botswana’s exports worth P685.7 million, with South Africa being the main recipient within SACU. The European Union (EU) received exports worth P463.2 million, primarily through Belgium. Australia received exports worth P290 million, while the United States received exports valued at P69.6 million, mostly composed of diamonds.
On the import side, Botswana imported goods worth P9.5 billion in November 2023, representing an increase of 11.2 percent from the previous month. The increase in imports was mainly driven by a rise in Diamonds and Chemicals & Rubber Products imports. Diamonds contributed 23.3 percent to total imports, followed by Fuel and Food, Beverages & Tobacco at 19.4 percent and 15.0 percent, respectively.
The SACU region was the top supplier of imports to Botswana, accounting for 77.7 percent of total imports. South Africa contributed the largest share at 57.2 percent, followed by Namibia at 20.0 percent. Imports from Asia accounted for 9.8 percent of total imports, with Diamonds, Machinery & Electrical Equipment, and Chemicals & Rubber Products being the major commodity groups imported. The EU supplied Botswana with imports worth 3.2 percent of total imports, primarily in the form of Machinery & Electrical Equipment, Diamonds, and Chemicals & Rubber Products.
Botswana’s recent trade deficit of over P6 billion highlights a decline in export revenues, particularly in the diamond sector. While Asia remains the leading export market for Botswana, the country heavily relies on imports from the SACU region, particularly South Africa. Addressing the trade deficit will require diversification of export markets and sectors, as well as efforts to promote domestic industries and reduce reliance on imports.
Business sector optimistic about 2024
The business sector in Botswana is optimistic about the year 2024, according to a recent survey conducted by the Bank of Botswana (BoB). The survey collected information from businesses in various sectors, including agriculture, mining, manufacturing, construction, and finance, among others. The results of the survey indicate that businesses expect trading conditions to improve in the first quarter of 2024 and remain favorable throughout the year.
The researchers found that firms anticipate improvements in investment, profitability, and goods and services exported in the fourth quarter of 2023 compared to the previous quarter. These expectations, combined with anticipated growth in all sectors except construction and real estate, contribute to the overall confidence in business conditions. Furthermore, businesses expect further improvements in the first quarter of 2024 and throughout the entire year.
Confidence among domestic market-oriented firms may decline slightly in the first quarter of 2024, but overall optimism is expected to improve throughout the year, consistent with the anticipated domestic economic recovery. Firms in sectors such as mining, retail, accommodation, transport, manufacturing, agriculture, and finance are driving this confidence. Export-oriented firms also show increased optimism in the first quarter of 2024 and for the entire year.
All sectors, except agriculture, which remains neutral, are optimistic about the first quarter of 2024 and the year ending in December 2024. This optimism is likely supported by government interventions to support economic activity, including the two-year Transitional National Development Plan (TNDP) and reforms aimed at improving the business environment. The anticipated improvement in profitability, goods and services exported, and business investment further contributes to the positive outlook.
Firms expect lending rates and borrowing volumes to increase in the 12-month period ending in December 2024. This increase in borrowing is consistent with the expected rise in investment, inventories, and goods and services exported. Firms anticipate that domestic economic performance will improve during this period. Domestic-oriented firms perceive access to credit from commercial banks in Botswana to be relaxed, while export-oriented firms prefer to borrow from South Africa.
During the fourth quarter of 2023, firms faced high cost pressures due to increased input costs, such as materials, utilities, and transport, resulting from supply constraints related to conflicts in Ukraine-Russia and Israel-Hamas. According to the survey report, the firms noted that cost pressures during the fourth quarter of 2023 were high, mainly attributable to increase in some input costs, such as materials, utilities, and transport arising from supply constraints related to the Ukraine-Russia and Israel-Hamas wars. “However, firms’ expectations about domestic inflation decreased, compared to the previous survey, and have remained within the Bank’s 3 – 6 percent objective range, averaging 5.4 percent for 2023 and 5.4 percent for 2024. This suggests that inflation expectations are well anchored, which is good for maintenance of price stability,” reads the survey report in part.
However, firms’ expectations about domestic inflation decreased compared to the previous survey, and inflation expectations remained within the Bank’s objective range of 3-6 percent. This suggests that inflation expectations are well anchored, which is beneficial for maintaining price stability.
In terms of challenges, most firms in the retail, accommodation, transport, manufacturing, construction, and finance sectors considered the exchange rate of the Pula to be unfavorable to their business operations. This is mainly because these firms import raw materials from South Africa and would prefer a stronger Pula against the South African rand. Additionally, firms in the retail, accommodation, transport, and mining sectors cited other challenges, including supply constraints from conflicts in Russia-Ukraine and Israel-Hamas, as well as new citizen economic empowerment policies that some firms considered unfavorable to foreign direct investment.
On the positive side, firms highlighted factors such as adequate water and electricity supply, a favorable political climate, an effective regulatory framework, the availability of skilled labor, and domestic and international demand as supportive to doing business in Botswana during the fourth quarter of 2023.
Overall, the business sector in Botswana is optimistic about the year 2024. The anticipated improvements in trading conditions, supported by government interventions and reforms, are expected to drive growth and profitability in various sectors. While challenges exist, businesses remain confident in the potential for economic recovery and expansion.