Barclays Bank Botswana continues to wave through tough trading environment and sluggish economic trends to deliver impressive measurable performance.
On Thursday the bank announced their financial results for the year ended December 2018. Delivered by the outgoing Managing Director Reneit van de Merwe the Bank raked in statutory profit before tax of P588 million, mirroring 5 percent growth year-on-year when compared to the previous year ended 2017 December 31st.
According to Barclays Executives the performance was influenced by growth in income, contained costs and favourable expected losses. Removing the effect of separation costs the Bank’s normalised profit before tax registered a strong growth of 14 percent year-on-year. "Once again our business showed resilience and tenacity and to this end we realized a Profit before tax (PBT) of P638 million for the year ending 31st December 2018.
This represents a year-on-year growth in profitability of 14 percent in comparison to the previous year on a normalized reporting basis. Our performance has been largely driven by Revenue growth, reduction in impairments and contained underlying cost growth. I am also pleased to note that all our business segments have remained profitable and continue to grow in line with our strategic drive,” said Mumba Kalifungwa Barclays, Finance Director.
On a gross basis, Interest income went up by 6 percent year-on-year, despite the interest rate cut of 50bps in the last quarter of 2017. However, an increase in the interest cost of funding driven by market trends diluted the net interest income growth resulting in the bank’s net interest income increasing marginally by 2 percent year on year. Net fee and commission income increased by 6 percent year- on –year. Kalifungwa further explained that this is on the back of the bank’s focus on driving innovation through investment and enhancement of digital channels.
Net trading income increased by 24 percent year-on-year. “This resulted from an increase in forex sales volumes and our continued focus on client acquisition and penetration; operating costs were well contained with the business achieving a cost to income ratio of 52 percent on removing the effect of Barclays plc separation costs. The ratio remains within our strategic target of the lower 50’s. Year-on-Year costs grew 5 percent removing the effect of Barclays plc separation costs.” Explained Kalifungwa
Effective 1 January 2018 a new accounting standard IFRS 9 replaced IAS 39 Financial Instruments: Recognition and measurement. To this end IFRS 9 introduced a revised impairment model which requires entities to recognise expected credit losses based on unbiased forward–looking information. This replaces the existing IAS 39 incurred loss model which only recognizes impairment if there is objective evidence that a loss was already incurred and measures the loss on the most probable outcome. According to Barclays the day 1 impact of this change that was charged to Retained earnings amounted to an after tax amount of P149 million.
However, despite the more stringent accounting for credit losses, the bank’s expected credit losses/ impairments decreased by 35 percent in comparison to the prior year. “The performance is attributable to our enhanced collections capability and conservative credit extension to high risk sectors mainly in the Retail segment” added Barclays Finance Director
Outgoing Managing Director Reinette van der Merwe said Barclays delivered results that underscore resilience as a business and reaffirms confidence that the bank will continue to capture growth opportunities in the market. “Despite the headwinds, we made progress and remain optimistic to reclaim our number one position as the leading financial services provider in our market focusing on exceptional customer service and bringing possibilities to life, our journey to build a scalable digitally-led business is one key pillar of our Absa Group strategy and we are ready to become a truly transformative bank that is modern, fast- thinking and relevant for future,” she said
Barclays registered a solid balance sheet of 12 percent growth in comparison to the previous year ended 31 December 2017. The Bank Exco further explained that the Balance sheet growth was influenced by customer’s loans which increased by 10 percent year- on-years to P11.8 billion. “This growth was fairly distributed across the segments in line with our strategy and continues to be focused around prudent lending in our chosen business segments, Customer deposits increased 8% year-on-year driven by continued customer focus and penetration across all the segments. Our focus in the short and medium term is to optimize our balance sheet, whilst focusing on revenue generating opportunities,” further shared Merwe.
Reinette Van der Merwe also confirmed that she will be leaving Barclays end of this month with the new MD Keabetswe Pheko-Moshagane taking over officially on April 1, 2019.“In the past five years we have grown the revenue contribution from the Corporate and Business Banking portfolio from 19 percent in 2014 to 29 percent in 2018. We have made significant progress in Business Banking as we delivered the customer value propositions whilst creating strategic partnerships to provide credit guarantees to the underserved small businesses. Testimony to this is our Enterprise & Supply Chain Development offering that was launched in 2017. We continue to innovate ensuring that our Digital solutions are inclusive to our Business Banking customers,” she said.
Barclays Chairman of the Board of Directors Oduetse Motshidisi officially unveiled Pheko-Moshagane as the incoming MD, succeeding Van de Merwe, who has been at the bank for five years. Motshidisi said Pheko-Moshagane has held different positions within the bank. Mogashagane shared that going forward creating a thriving organization, growing corporate and business banking portfolios in our chosen sectors as well as investing in technology and strategic partnerships in pursuit of building a customer centric digitally-led bank will remain key pivotal priorities to Barclay’s strategy going into the future.
The Bulb World Chief Executive Officer (CEO) and entrepreneur, Ketshephaone Jacob has been selected as a 2021 Top 50 Africa’s Business Hero.
Jacob was chosen from a pool of 12,000 applicants – many of whom are highly-skilled and accomplished entrepreneurs.
Africa’s Business Hero, sponsored by technology entrepreneur, Jack Ma, aims to identify, support and inspire the next generation of African entrepreneurs who are making a difference in their local communities, working to solve the most pressing problems, and building a more sustainable and inclusive economy for the future.
The initiative is as inclusive as possible and applications were open in English and French to entrepreneurs from all African countries, all sectors, and all ages who operate businesses formally registered and headquartered in an African country, and that have a 3 year-track record.
Every year, finalists are selected to compete in the ABH finale pitch competition and participate in a TV Show that will be broadcast online and across the continent.
The finalists will compete for a share of US $1.5 million in grant money.
The Bulb World, is home grown LED light manufacturing company, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017.
The Bulb World operate from the Special Economic Zone of Selibe Phikwe. Early this year, The BulB World announced its expansion to South Africa, setting in motion its ambitious Africa expansion plan.
During the first quarter of 2021, production in Botswana’s economic nucleus- the mining sector contracted by 12 percent. This is according to Mining Production Index released by Statistics Botswana this week.
The country’s central data body revealed that Index of Mining production stood at 74.4 during the first quarter of 2021, showing a negative year on-year growth of 12.0 percent, from 84.6 registered during the first quarter of 2020.
The main contributor to the decline in mining production came from the Diamonds sector, which contributed negative 11.7 percentage points. Soda Ash was the only positive contributor in the mining production, contributing 0.1 of a percentage point. However Soda Ash’s contribution was insignificant to offset the negative contribution made by Diamonds.
The quarter-on-quarter analysis by Statistics Botswana experts shows an increase of 16.3 percent from the index of 64.0 during the fourth quarter of 2020 to 74.4 observed during the period under review.
Diamond production decreased by 12.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. The decrease was as a result of planned strategy to align production with weaker trading conditions mostly linked to Covid-19 protocols restrictions.
Botswana’s diamond sector is underpinned by Debswana, the country’s flagship rough producer- a 50-50 joint venture between government and global mining giant De Beers Group. The other producer is Canadian based Lucara Diamond Corp through its wholly owned Karowe Mine which is a relatively small but significant production that has made a name for itself worldwide with rare diamond recoveries of unprecedented carat size.
On the other hand, quarter-on quarter analysis shows that production has improved, registering a positive growth of 17.5 percent during the first quarter of 2021 compared to the preceding quarter – 2020 Q4.
Though production was significantly lower in the first quarter, the two producers ended Q2 with rare diamond recoveries. Debswana early last month found the world’s third largest gem diamond – weighing 1098 carat at Jwaneng Mine, its flagship gem quality diamonds producer, also regarded the world’s richest diamond mine.
A week later Lucara announced its second biggest recovery, the 1174 carat clivage near-gem dug from its Karowe Mine. The diamond is the world third in carat size after the plus-3000 carat Cullinan found in South Africa back in 1905 and the 1758 carat Sewelo unearthed at its Karowe mine in 2019. Debswana and Lucara are investing billions of pulas in underground mining projects to extend the life of its mines, Jwaneng & Karowe respectively.
In terms of Gold which is produced at Mupani mine near Botswana’s second city of Francistown output decreased by 17.9 percent during the first quarter of 2021 compared to the same quarter of the previous year.
Similarly, quarter-on-quarter analysis reflects that production decreased by 21.4 percent during the first quarter of 2021, compared to the preceding quarter. The decrease was as a result of the deteriorating lifespan of the mine as well as the impact of COVID-19 which slowed down the mining activities.
Soda Ash production increased by 11.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. In terms of quarter-on-quarter Soda Ash production also showed an increase, picking up by 2.1 percent during the period under review. The increase in production is attributable to the effectiveness of the plant following refurbishment which occurred in the third quarter of 2020.
Salt production decreased by 34.0 percent during the first quarter of 2021, compared to the same quarter of the previous year. Similarly, the quarter-on-quarter analysis shows that salt production registered a decrease of 32.9 percent during the period under review. Both salt and Sodash are produced by partly government owned Botswana Ash (BotsAsh) operating from Sowa town near Makgadikgadi pans.
Coal production decreased by 11.2 percent during the first quarter of 2021, compared to the corresponding quarter of the previous year. The decrease was attributed to the reduced demand from Morupule B Power Station following the remedial works being undertaken, as one boiler was in operation during the period under review.
Although production fell, Statistics Botswana says there was no shortfall in supply of coal due to stockpiling. On the other hand, the quarter-on-quarter comparison shows that coal production increased by 20.4 percent compared to the preceding quarter.
Botswana’s flagship coal producer is Morupule Coal Mine; a wholly state owned mining company located in Palapye producing primarily for Botswana Power Corporation (BPC)’s power generation plants Morupule A & B.
The other coal producer is Botswana Stock Exchange listed Minergy which operates a 390 MT Coal Resource mine in Masama near Media in the southwestern edge of the Mmamabula Coalfields.
Department of Mines in the Ministry of Mineral Resources, Green Technology & Energy Security has awarded mining licence to Tshukudu Metals-a subsidiary of Aussie firm Sandfire Resources ,giving the company a green light to start piecing the ground at its Motheo Copper Project near Gantsi.
Lefoko Moagi, minister in charge of mineral resources in Botswana confirmed to weekendpost on Tuesday. Minister Moagi revealed that “the licence has been approved , but Sandfire Resources as a listed company will report to its shareholders and investors then make an official public statement” he said.
Based on a forecast copper price of US$3.16/lb (reflecting current long-term consensus pricing) the Base Case 3.2Mtpa – Ghantsi copper project is forecast to generate US$664 million (over P7 billion) in pre-tax free cash-flow and US$987 million (over P10 billion) in EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), at a forecast all-in sustaining cost of US$1.76/lb over its first 10 years of operations.
In December 2020, the Board of Sandfire Resources approved the commercial development of the Motheo Copper Mine located in the Kalahari Copper Belt in Botswana, marking a key step in its transformation into a global, diversified, and sustainable mining company.
Tshukudu Metals Botswana (Pty) Limited (Tshukudu) a 100% owned subsidiary will be the owner and operator of the Motheo Copper Mine which is scheduled to produce up to 30,000 tonnes per annum of copper in concentrate over a 12 year mine life.TMB is targeting development of its Motheo Copper Mine in 2021 and 2022, with its first production in 2023.
GOVERNMENT NOT TAKING UP 15 % STAKE ON OFFER
Beginning of this year presentations were made to the Department of Mines as part of the Mining Licence approval process and to the Ghanzi Regional Council, additional information was requested by Department of Mines in April and was duly supplied by the company.
As part of the Mining Licence approval process, the Government of Botswana has a right to acquire up to a 15% fully contributing interest in all mining projects locally. Quizzed on whether government through Mineral Development Corporation Botswana (MDCB) would be taking up stake in the project Minister Moagi said, “No consideration is being made on that regard”.
“Government is not considering taking up a stake in the Ghantsi Copper Mine project, every opportunity is assessed on all risks, but Government makes money all the while from leases, taxes and royalties, remember if you take stake you are liable for liabilities of the project as well,” Moagi said.
Last month Sandfire announced that it has awarded over P5 billion worth mining contract to African Mining Services (AMS), a subsidiary of Perenti, to deliver the open cast operation.
The contract, which has an estimated value of US$496 million (over 5 billion), is the largest single operational contract for the new Motheo Project covering a period of 7 years and 3 months, with provision for a one-year extension.
The contract according to Sandfire Resources was awarded following a competitive 3-stage tender process which saw a number of key factors taken into consideration when selecting the preferred contractor.
These included Citizen Economic Empowerment, safety culture, equipment suitability and availability, commercial terms and identified improvement opportunities. Under the terms of the contract, AMS has agreed to form a 70:30 Joint Venture with a suitable local Botswana partner or partners.
The JV is expected to be finalized ahead of commencement of mining in early 2022. African Mining Services has been operating in Africa for over 30 years. AMS’ parent company, ASX listed diversified mining services group Perenti, already has a presence in Botswana through Barminco, their underground mining division, at the large-scale Khoemacau Copper Mine located 200km north-east of Motheo.
Last month Sandfire executives said the award of the open pit mining contract represents another key milestone in advancing the Motheo Project towards production, with all components of the contract in line with the key parameters outlined in the December 2020 Definitive Feasibility Study (DFS).
The company said full-scale construction of the US$279 million (over P 3 billion ) mine development is expected to commence immediately upon receipt of the Mining Licence, with mining scheduled to commence in early 2022 ahead of first production in early 2023. This week Sandfire Resources advertised over 10 positions in calling on applications from geologists, mining engineers and geotechnical engineers.
The Motheo mine has an initial mine life of 12.5 years based on production from the T3 pit. The initial development is expected to generate approximately 1,000 jobs during the construction phase and 600 direct full-time jobs during operations, with at least 95% of the total mine workforce expected to be made of up of Botswana citizens.
Later in the week Sandfire Resources announced in the company website that it has received the licence. Sandfire’s Managing Director and CEO, Mr Karl Simich, said the award of the Mining Licence represented a major milestone that would see a significant increase in construction and development activities on site.
“We are absolutely delighted to now be in a position to move to full-scale construction at Motheo, with our construction crews expected to mobilise to site over the next few days. I would like to thank the Government of Botswana for their support throughout the approvals process, which will see Motheo come on-stream in 2023 as one of very few new copper mines commencing production globally.”
Simich said the project is expected to generate approximately 1,000 jobs during construction and 600 full-time jobs during operations, and represents the foundation for Sandfire’s long-term growth plans in Botswana.
“Our vision is that Motheo will form the centre of a new, long-life copper production hub in in the central portion of the world-class Kalahari Copper Belt, where we hold an extensive ground-holding spanning Botswana and Namibia,” he said.