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Integrity of financial sector under attack – Governor

The ongoing reported mismanagement or abuse of public funds and money laundering scandals ensnaring local fund managers who handle public assets worth billions of Pula has far reaching implications which can nosedive the reputation of Botswana’s financial sector, this is much to the chagrin of Bank of Botswana (BoB) Governor Moses Pelaelo.

This week Pelaelo stopped short of calling fund managers accused of financial scandals criminals. When addressing the media just after unveiling the Monetary Policy Statement on Tuesday, Pelaelo complained of illicit activities that seem to have currently dogged the financial sector. Even though he did not mention names or any case in particular, the governor stated the Bank is gravely concerned by apparent criminal activities in the financial sector by those mandated by the public or institutions to look after their funds.

Pelaelo said such criminals should be uprooted and removed for the sake of the financial sector integrity. “We need to take out the people from the system. How do you allow mice to look after seeds….monkeys can’t look after bananas. We must remove the bad apples,” Pelaelo said. Answering media questions on whether the Bank has conducted any study or research on illicit activities by some players in the financial sector, Pelaelo said the central bank is not able to trace them due to them being illegal.

Pelaelo said the Bank would not even have figures because they are not traceable. The governor said the Bank’s job would be limited only to supervisory duties and working in collaboration with other institutions. Pelaelo’s disapproval for bad apples in the financial industry came at the same time with the launch of the Financial Stability Council. This council, according to Pelaelo, was begat after the Bank found the need for a prospective Financial Stabilty Council as articulated by the central bank in the 2018 Monetary Policy Statement.

Pelaelo said the Bank and the Ministry of Finance and Economic Development Working Group, the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) and the Financial Intelligence Agency (FIA) together approved the formation of the Council. The Council is formed by BoB, the Ministry of Finance and Economic Development, NBFIRA and the FIA. However the Financial Stability Council is not established to usurp or dilute the role of the respective institutions which is neither feasible nor desirable according to the Bank.

According to BoB, rather it is to share information and where, desirable, facilitate collective and coordinated approach to financial sector monitoring frameworks and crisis resolution. The Financial Stability Council which was launched this week after the first Monetary Policy Committee Meeting of the year is said by the Bank to be a step towards facilitating collaboration, cooperation and communication amongst the four government agencies for the purpose of implementing macro-prudential policy.

“The other important facet relates to national contingency planning for a financial sector crisis, anchored on proactive macro-prudential assessments, stress testing and a deeper understanding of cross-sectoral interactions of firms and financial markets. Given the nature and construct of financial intermediation and, in particular, the structure of balance sheets of banks, things will and often go wrong.

For these reasons, the strengthening of financial sector safety nets, encompassing effective crisis management, recovery and resolution plans as well as a proposal for the establishment of a deposit insurance scheme in Botswana, will form part of the agenda of the Financial Stability Council in 2019,” said Pelaelo when making the Monetary Policy Statement this week.

When making the Monetary Policy Statement this week Pelaelo said the Bank of Botswana is gravely concerned by the incipient personal greed and reported governance failures in some segments of the financial sector, which has the potential to erode fiduciary responsibilities and, consequently, undermine public confidence in financial markets.

When making his parting remarks during the signing of the Memorandum of Understanding between the bank and the concerned institutions in the Financial Stability Council Pelaelo said the Council’s main mandate is “to decisively address the incipient misconduct and governance challenges in the financial sector, deriving from greed and/or misunderstanding or incompetence with respect to fiduciary responsibilities, as well as opportunistic crime and fraud.”

Pelaelo told journalists that the just signed MoU is just the beginning as there will be consultation during this year. He said 2019 will also involve consideration of a deposit protection scheme for the country, to guarantee access to deposits up to a specified threshold, in the event of bank failure. Speaking at the signing of the MoU, NBFIRA CEO Oaitse Ramasedi agreed to work in partnership with BoB on the Council to protect the institution which is overlooking assets over P123 billion.

For his part, FIA Director Dr Abraham Sethibe said in the financial sector, “a fall of one will impact the other” hence the collaboration of all concerned parties in the Financial Stability Council. According to the BoB Governor other institutions which are expected to work with the Council is the Botswana Unified Revenue Services as Botswana continue to lose billions of Pula in tax evasion.

The latest Global Financial Integrity Report states that Botswana has lost P6.4 billion worth of exports in trade misinvoicing.  On the other hand the same report suggest that deceit was used to under-invoice imports in order to hide around P9.2 billion(US$885 million) from the tax man’s eye.

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Banking on Your Terms: Exploring the World of Self-Service Banking

23rd February 2024

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

 

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Botswana records over P6 billion trade deficit

7th February 2024

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.

 

 

 

 

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Business sector optimistic about 2024

7th February 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.

 

 

 

 

 

 

 

 

 

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