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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Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.
Food import bill slightly declines
The latest figures released by Statistics Botswana this week shows that food import bill for Botswana slightly declined from around P1.1 billion in November 2022 to around P981 million in December during the same year.
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