Botswana Building Society (BBS) this week launched its tenth branch at the Central District village of Palapye. The bank has offices in Francistown, Gaborone, Kasane, Lobatse, Maun, Serowe, and Selibe Phikwe.
Governor of Bank of Botswana Moses Pelaelo who officially launched the branch said Palapye is evidently one of the fastest growing villages in the country. He said growth, in this instance, is a function of response to economic opportunities, including actual and potential demand for services. “There is greater potential to respond to economic opportunities, drive operational excellence and capacity to meet diverse customer needs; thus enhance the value of services to customers, as well as prospects for sustainable returns and growth,” said Pelaelo.
BBS is an offshoot of United Building Society of South Africa which started operations in Botswana in 1971 and it was subsequently transformed to Botswana Building Society in December 1976, with a primary mandate to provide housing finance against immovable urban property. It later extended in 1986 to cover rural areas and had a facility of commercial loans. The latest transformation from a friendly mutual society to a public limited company, incorporated in April 2018.
BBS recently placed its shares on the Serala platform, which is for unlisted equities, at the Botswana Stock Exchange and has shares of over P564 million and the development provides yet another opportunity for ownership and strategic control of a home-grown, prudently managed and profitable financial institution by Batswana.The assets of Botswana Building Society have increased at an average annual rate of 13.9 percent. This compares with an annual growth rate of 16.2 percent for commercial banks and 12.3 percent average annual increase in nominal GDP. According to Pelaelo, this suggests a meaningful contribution to the economic and financial development of the country.
Dissecting further, the average annual growth in residential mortgage loans was 14.2 percent, compared to 21.8 percent for commercial banks. Another interesting comparison is that outstanding residential mortgages by Botswana Building Society as at the end of June 2018 amounted to P2.9 billion, constituting 31 percent of the total of P9.3 billion for the commercial banks, which for the individual banks, ranged from a smallest value of P2.3 million to the largest amount of P3.2 billion.
Pelaelo thanked BBS for making efforts to enhance its service offering and therefore have a potentially greater impact on society and the economy. The Bank of Botswana Governor implored Palapye residents and the surrounding areas to use BBS and other financial institutions in their area, to save; to access and use credit wisely, for the benefit of their families and sustainable development of the country.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”