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.’”
The local mining industry is on the rise again, emerging out of the COVID-19 pandemic induced headwinds.
In 2020 mining operations had to curtail their production in response to plummeting demand across commodity markets. Companies also had to reduce their workforce to comply with COVID-19 protocols such as social distancing in an effort to curb the spread of the contagious plague.
This resulted in low production levels across the sector, however operations are significantly jumping back to pre-COVID-19 output levels albeit another variant that has now surfaced, posing uncertainty for the year 2022.
Just before close of business for the year 2021, Statistics Botswana released the Index of Mining Production, a quarterly measure of output across Botswana’s mining operations and extractive industries.
The Index of Mining Production stood at 95.5 during the third quarter of 2021, showing a year-on-year growth of 31.8 percent, from 72.5 registered during the third quarter of 2020.
The quarter-on-quarter analysis shows an increase of 11.6 percent from the index of 85.6 during the second quarter of 2021 to 95.5 observed during the period under review.
The main contributor to the increase in mining production came from the Diamonds, which contributed 31.2 percentage points.
Gold was the only negative contributor to mining production, at negative 0.4 of a percentage point.
Diamond production increased by 32.2 percent (1.584 million carats) from 4.916 million carats during the third quarter of 2020 to 6.5 million carats during the same quarter of the current year.
The increase was a result of planned strategy to align production with stronger trading conditions.
Similarly, the quarter-on-quarter analysis shows that production registered an increase of 11.6 percent (673 000 carats) during the third quarter of 2021 compared to the 5.8 million thousand carats during the second quarter of 2021.
Botswana’s flagship diamond producer is De Beers – Government jointly owned Debswana, by far the country’ s mining jewel and global leader in rough diamond production.
The other diamond producing operation is Lucara’s 100 % owned Karowe Mine, a relatively small operation but known around the globe for its spectacular diamond recoveries, the likes of which the world has never seen before.
Gold production decreased by 26.9 percent (65 kilograms) during the third quarter of 2021, from 241kilograms during the same quarter of the previous year to 176 kilograms currently
The quarter-on- quarter analysis reflects a decrease of 5.5 percent (10 kilograms) to 176 kilograms during the third quarter of 2021, compared to 186 kilograms in the preceding quarter.
Botswana’s sole gold producer is Galane Gold’s Mupane Mine in North East Botswana, enclaved around the historic gold fields of Francistown.
The decrease in production according to Statistics Botswana was a result of the deteriorating lifespan of the mine. Mupane Gold Mine is currently on a rough run with imminent workers strike over unsatisfactory payments. The impending protests have been heavily endorsed by Botswana Mine Workers Union.
In Sua Pan, the sodium crystals have risen to glory, making Sowa Town great again, Soda Ash production rose by 81.7 percent (29, 312 tonnes) from 35, 883 tonnes during the third quarter of 2020 to 65, 195 tonnes in the same quarter of the current year.
The quarter-on-quarter analysis shows that production went up by 12.5 percent (7, 233 tonnes) during the period under review, from 57, 962 tonnes during the previous quarter.
The increase in production is attributable to the effectiveness of the plant following refurbishment which occurred in the third quarter of 2020.
Salt production went up by 86.1 percent (78, 566 tonnes) to 169, 826 tonnes during the third quarter of 2021, from 91, 261 tonnes during the same quarter of the previous year.
Similarly, the quarter-on-quarter analysis shows that salt production registered an increase of 66.9 percent (68, 050 tonnes) compared to 101, 776 tonnes during the second quarter of 2021.
Botswana’s industrial scale Salt an Soda Soda Ash producer is Botswana Ash (Botash), a 50-50 partnership between Botswana Government and South African Chlor Alkali Holdings (CAH) Group.
Coal production increased by 1.0 percent (5, 434 tonnes), from 543, 793 tonnes during the third quarter of 2020, to 549, 227 tonnes in the current quarter.
The slight increase came as a result of the efforts made to meet both domestic and international high demand, particularly that new markets have been identified.
The quarter-on-quarter comparison shows that coal production went up by 13.1 percent (63, 585 tonnes) compared to 485, 642 tonnes during the second quarter of the current year.
Inthe coal space the only operating mines are the privately developed Minergy’s Masama located near Media Village and the wholly Gorvenment owned Morupule Coal Mine.
Copper-Nickel-Cobalt Matte recorded zero production during the period under review. The affected mines are still under provisional liquidation.
Copper in Concentrates and Silver though there has been exportation of Copper by the newly launched Khoemacau Copper Mine since July 2021, the mine has been engaged in preparatory mining activities in readiness for full operations intended for the year 2022.
The preparatory mining operations yielded rewarding outcomes as copper residues realized have been exported since July 2021.
The period between preparatory and full operations is intended to allow the production to stabilize before reporting production output figures.
Botswana exports took a knock in October 2021 registering only P4,960.7 million, a 22.1 percent decline from the revised September 2021 value of P6,365.1 million, latest International Merchandise Trade Statistics have revealed.
According to this monthly data, released by Statistics Botswana late December 2021 the decline is attributed largely to the reduction in the exportation of Diamonds by 22.6 percent (P1, 264.8 million) from the revised September 2021 value of P5, 608.4 million to P4, 343.6 million.
Though it registered a decline in export figures , the Diamonds group still remained Botswana ‘s biggest exported commodity accounted for 87.6 percent (P4, 343.6 million) of total exports, followed by Copper and Machinery & Electrical Equipment with 3.1 percent (P152.2 million) and 2.6 percent (P131.3 million) respectively.
During the month Asia was the main destination for Botswana exports, having received 65.5 percent (P3, 249.0 million) of total exports. These exports were mainly destined to the UAE and India, having received 28.1 percent (P1, 395.1 million) and 20.4 percent (P1, 011.8 million) of total exports, respectively. Only Diamonds and Copper were exported to the regional block during the October.
Exports destined to the EU amounted to P1, 066.6 million, accounting for 21.5 percent of total exports during the month under review. Belgium received almost all of the exports destined to the regional union, acquiring 21.4 percent (P1, 062.0 million) of total exports during the reporting period. The Diamonds group was the main commodity group exported to the EU.
The SACU region received exports valued at P423.6 million, representing 8.5 percent of total exports. Machinery & Electrical Equipment and Live Cattle accounted for 28.0 percent (P118.6 million) and 14.1 percent (P59.7 million) of total exports to the customs union.
South Africa received 7.8 percent (P386.7 million) of total exports during the month under review more goods entered Botswana in October than the previous month September.
On the other side the value of imports for the month of October clocked P8, 801.5 million, mirroring an increase of 30.5 percent (P2, 056.1 million) over the September 2021 revised figure of P6, 745.4 million.
The increase was mainly attributed to a more than 100 percent (P1, 755.9 million) rise in the importation of Diamonds from the revised September 2021 figure of P1, 616.2 million to P3, 372.0 during the current period.
Diamonds contributed 38.3 percent (P3, 372.0 million) to total imports. Fuel; Food, Beverages & Tobacco and Machinery & Electrical Equipment followed with contributions of 12.3 percent (P1, 086.6 million), 11.7 percent (P1,034.1 million and 10.0 percent (P882.7 million) respectively. Chemicals & Rubber Products contributed 9.7 percent (P856.1 million).
During the month SACU region contributed 61.4 percent (P5, 405.3 million) to Botswana ‘s total imports. The top most imported commodity groups from the customs union were Fuel; Food, Beverages & Tobacco and Diamonds, with contributions of 19.9 percent (P1, 075.1 million), 17.9 percent (P965.0 million) and 16.3 percent (P882.5 million) to imports from the region, respectively.
South Africa contributed 58.8 percent (P5, 176.0 million) to total imports during the reporting period. Fuel, Food, Beverages & Tobacco and Diamonds made contributions of 18.4 percent (P952.3 million), 18.3 percent (P949.4 million), and 16.0 percent (P826.7 million) respectively to imports from South Africa.
Botswana received imports worth P1, 794.2 million from the EU, accounting for 20.4 percent of total imports during October 2021.
The major commodity group imported from the EU was Diamonds, at 89.8 percent (P1, 611.0 million) of all imports from the union. Belgium was the major source of imports from the EU, with a contribution of 18.7 percent (P1, 643.1 million) of total imports during the month of October.
During the month Imports from Asia were valued at P989.5 million, accounting for 11.2 percent of total imports.
The major commodity groups imported from the regional block were Diamonds and Machinery & Electrical Equipment with contributions of 51.9 percent (P513.8 million) and 13.4 percent (P132.6 million) of total imports from Asia.
China and UAE supplied 2.5 percent (P221.3 million) and 2.3 percent (P202.0 million) of total imports during the period, respectively.
Canada supplied imports worth P364.0 million, representing 4.1 percent of Botswana’s total imports during the current period. Imports from Canada were mainly Diamonds, at 99.6 (P362.3 million) of imports from that country.
The rise in imports and decline in exports resulted in a trade deficit of P3, 840.8 million for the month of October.
During the month exports transported by Air were worth P4, 380.1 million, accounting for 88.3 percent of total exports, while those leaving the country by Road were valued at P567.5 million (11.4 percent) while imports representing 51.7 percent (P4, 554.0 million) were transported into the country by Road.
Transportation of imports by Rail and Air accounted for 24.4 percent (P2, 148.0 million) and 23.8 percent (P2, 098.4 million) respectively.
Debswana Diamond Company, Botswana’s flagship mining business recently received an award from Absa Bank Group in recognition of its commitment to economic empowerment across the supply chain.
The 4th Annual Absa Business Day Supplier Development Awards were held in Johannesburg, South Africa on the 18th November 2021.
The awards celebrate companies that are working towards a better African continent through innovative and impactful supplier development initiatives.
The selection process acknowledges and recognizes corporates who go beyond the scorecard to open access, empower SMEs, foster learning, build a community of best practice and encourage a collaborative spirit within their industries and within the communities in which they operate.
Explaining how Debswana scooped the award Absa Bank Botswana Managing Director Keabetswe Pheko-Moshagane said: “At Absa Bank Botswana, we were excited that for the first time since inception, the 2021 awards were extended to include nominations from Sub-Saharan Africa.”
She explained that the judges special recognition awards for Sub Saharan Africa corporates (excluding South Africa) were made under four categories being: commitment to Economic Empowerment across the Supply Chain, commitment to women inclusion in the supply chain, Commitment to localization of the supply chain and lastly commitment to a pioneering supplier development.
“We immediately thought of the transformative and inspiring work that Debswana is doing locally and what the company continues to achieve through its Citizen Economic Empowerment Program,” she said.
Pheko-Moshagane explained that in recognition of this commitment and outstanding leadership Absa nominated Debswana Diamond Company into the competition under the category: “commitment to economic empowerment across the supply chain”, for which the company was selected as the winner.
The Absa Bank Botswana MD hailed Debswana Citizen Economic Empowerment Program as a true example of how the private sector can contribute to rebuilding the economy through and post the Covid -19 pandemic.
“Your commitment to citizen economic empowerment resonates with us at Absa bank, because we are also committed to and passionate about growing Small and Medium businesses as they represent a vital part of our economy,” she said.
In 2017 Absa, launched the Enterprise and Supply Chain Development (ESD) in the local market as a response to address some challenges faced by the SMEs. The main objective of ESD is to unlock lending to SMEs in corporate value chains.
The introduction of the ESD program has streamlined some of the stringent financing requirements like the provision of financial statements, security, historical performance and weak credit ratings.
The relaxation of the financing requirements has therefore enabled the SMEs to execute on the provision of goods or services for the clients and positively impacted their growth.
ESD uses non-traditional bank lending solutions to provide financing to SME’s. Through this program Absa offers 100% finance to Enterprises in corporate supply chains.
Moshagane said this approach has allowed Absa to unlock the opportunities within the large corporate as they are now assured that their suppliers and contractors will be able to deliver and in addition releasing the corporate cash flows.
“We continue to explore various partnership agreements with various corporates to see how best we can assist the SMEs in response to government’s call for Citizen Economic Empowerment by propelling the support of the SMMEs” she said.
Speaking to Absa & Debswana partnership Mrs Keabetswe Pheko-Moshagane said the relationship thus far has seen Debswana extend contracts to the value of BWP1.2 billion to SMEs on a joint program, and Absa has financed close to half a billion to these SMEs, some of which would not have ordinarily qualified for funding under normal banking circumstances.
“To date no SME on the program has had its banking or contract facility terminated, which speaks to the commitment on both our ends in ensuring the success of these SMEs”
Receiving the award, Debswana Acting Managing Director, Lynette Armstrong explained that Debswana started its Citizen Economic Empowerment journey with ABSA Bank in 2017, borne out of the realisation of access to finance challenges by citizen owned enterprises.
This partnership, initiated with a deliverable to implement a pilot project at Orapa Letlhakane Damtshaa Mines within the crushing and drilling spaces.
The two projects delivered the desired results in project KPI’s with impeccable safety records with Absa providing the required access to finance that enabled the citizen suppliers to acquire machinery for the projects.
In 2019, Debswana set up the Citizen Economic Empowerment Programme office a factor that accelerated the signing of a MoU in 2020 on access to finance between Debswana and ABSA and in that, ABSA has pledged to avail access to finance totalling an unprecedented BWP1billion over a period of 3 years.
To date, ABSA has financed 23 projects since 2020 at a total impact of BWP1.5 billion pula in Contract amount with more than BWP700 million advanced to citizen suppliers.
These funds enabled citizen suppliers to pay salaries on time, procure machinery in various areas such as drilling and crushing and participate in the recent LTE installation at Jwaneng Mine.
Armstrong said in the coming year 2022, CEEP will see Debswana focused on implementing plans aimed at supporting local manufacturing and local repairs and maintenance.
“This is where access to funding is key as the two areas of local manufacturing and local repairs and maintenance have a potential to create meaningful and sustainable employment in the medium to long term to achieve Debswana’s target of 20 000 jobs by 2024”
She noted that Debswana has committed to heightened efforts of connecting the Youth and Women in the Debswana Citizen Economic Empowerment conversation, capacitation series and participation in the economic opportunities to further, totally involve all possible demographics and diversify the creativity of building sustainable communities and Make Life Brilliant for all, a total commitment of our Debswana Strategy 2024.
The Debswana Acting MD said the recognition of Debswana for its commitment to economic empowerment across the supply chain by is an encouragement to the Debswana – ABSA partnership and “gives us hope to further intensify our efforts to create opportunities for our fellow citizens and support Government’s efforts towards achieving prosperity for all in terms of Vision 2036”