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Banks record lending spread decline

The Botswana banking sector which has historically been characterized by high rates of profitability has recorded a decline in deposit which is often characterized or accompanied by high bank lending interest rates.

According to a report by E Consult, Botswana has registered a lending spread decline from its peak in 2009 and is now below the average. The report which was compiled by Sethunya Sejoe and Keith Jefferis observes that although at an average the decline is not at its lowest these changes have been associated with a dramatic improvement in the efficiency of financial intermediation, with banks now holding far fewer BoBCs and lending out a much greater proportion of deposits.

Amongst the drivers of these changes, E Consult highlights the increased competition in the banking sector; and lower policy interest rates.

They also note that despite increased competition, larger banks can still charge higher spreads than smaller banks. The bulk of the deposit-lending spread is now accounted for by operational costs and non-performing loans, rather than profit. Further reductions in spreads would therefore require more efficient banking operations at lower costs and reduced loan losses.

The report analysis highlights that while the above characterisation of the Botswana banking sector was accurate in the early years of the period examined, it is no longer the case today.It continues to highlight that Profitability has declined substantially, and 2016-17 period was amongst the lowest in the ten countries reviewed. Average bank lending rates have also dropped significantly and are similarly now around the lowest in the country group

In a study the combined deposit-lending spreads for the ten Southern African Development Community (SADC) and the East African Community (EAC) countries is included in the comparative analysis for the period 2007 to 2017. Of the countries considered, South Africa and Namibia had the lowest average spread of 3.6 percent and 4.4 percent over 2007-17 respectively. Uganda and Zambia are reported to have had the highest average spread of 13.8 percent and 11.1 percent respectively during the period.

Deposit -lending spreads in Botswana hoover around the average compared to other countries’ spreads over the years. The spread is noted to have declined sharply in 2013-2015, from 9.4 percent in 2012 to 7.3 percent in 2015, before rising slightly in 2016. It has been reported that capital as a percentage of liabilities is lower in Botswana than in most of the other countries, although commercial banks in Botswana remain adequately capitalised in accordance with statutory requirements.

Jefferis and Sejoe note that the highest levels of capitalisation are seen in Uganda, Zambia and Kenya, where banks are arguably over capitalised, which may in turn contribute to high spreads in those countries. “It may also be that risks are lower in the countries with lower bank capitalisation which include but are not limited to South Africa (SA), Botswana, Namibia and Mauritius.”  The report also states that another explanation of the decline may be that commercial banks in Botswana are more efficient in the use of expensive Capital than other banks in other countries.

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China’s GDP expands 3% in 2022 despite various pressures

2nd February 2023
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.

On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.

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Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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