Fresh information from BancABC which is currently undergoing through a process of listing on the Botswana Stock Exchange (BSE) is that the bookrunner had received irrevocable undertakings from institutional investors to purchase 148.6 million offered shares, representing 82.3 percent of the offer.
BancABC shares sale opened on Tuesday and would close on November 23, then the local bank will be officially listed on 10 December. The Pan-African financial services provider ABC Holdings, Atlas Mara subsidiary, has decided to sell 24.9 percent of BancABC to raise P360 million for upgrading its banking infrastructure.
“BancABC has invited selected investors to apply to purchase up to 180 525 000 ordinary shares (“the offer shares”) at a price of P2.00 per share. With 725 million available shares of no par value, ABC Holdings Limited proposes to sell 24.9 percent of the ordinary issued shares. Furthermore, 30 percent of the offer shares will be offered to clients of the Sponsoring Broker and other registered stock broker, who may be members of the public as defined in Section 297 of the Companies Act,” said the banker on a statement released this week.
Of the 82.3 percent offered shares for institutional investors, BancABC Managing Director Kgotso Bannalotlhe revealed that even though their current target is mainly private institutional investors, “members of the public have an opportunity to participate in the offer through the brokers.”An institutional investor is a non-bank person or organization that trades securities in large enough share quantities or dollar amounts that it qualifies for preferential treatment and lower commissions.
If members of the public take up the Offer Shares available to them, the number of shares committed for institutional investors will be reduced pro rata by the number of shares taken up by the public. Of the P360 million which is offered and will be a dedication to develop IT infrastructure and banking platforms not excluding; migrating and upgrading core banking software of all banks, migrating onto a common mobile and internet banking platform, establishment of a centralized card processing platform, ATM upgrades and implementation of a centralized Point of Sale (“POS”) processing platform.
According to BancABC, this is why the bank listed, which is, to attract important stakeholders in Botswana into the shareholding of the bank which will serve the long term interest of the ABCH Group; to enable the Company to attain greater access to efficient capital markets in raising local funding to support future growth plans and to serve as an opportunity for the Selling Shareholder to monetise part of its shareholding in the company.
According to the latest available financial statements of other commercial banks in the industry, BancABC is Botswana’s 4th most profitable bank, and 5th largest in terms of assets. BancABC is confident that it has a competitive advantage over its rivals because it has a platform positioned for scale and profitability.The bank also believes it offers a low non-performing loan book supported by robust credit model. BancABC has a leverage unique and adventageous partnership with key institutions and has a sound performance on key financial metrics.
Challenges of Banc ABC
According to BancABC sponsoring broker Motswedi Securities, the bank needs to work hard on its non-interest income which is a low contribution to the bank.“BancABC lags the industry in terms of non-interest income. This revenue stream is key especially in the current environment where interest rates are at ultra-low levels. Some commercial banks are able to cover their non-interest expenses with non-interest income. For example FNBB non-interest income/total income stands around 45.7 percent while for BancABC it’s around 18.8 percent. The industry average is 38.5 percent according to Bank of Botswana 2017 Banking Supervision Annual Report,” said Motswedi Securities.
The broker further highlighted the bank’s higher cost to income. According to Motswedi Securities BancABC cost to income ratio of 62.1 percent is above the industry average of 59.9 percent and we believe the bank has scope to reduce operating cost.The broker says investment in IT infrastructure will bear fruits in the long term through income growth and improved efficiencies which will help bring costs down. It is understood that BancABC management is targeting a cost to income ratio of less than 55 percent in the medium term and Motswedi Securities approves this move as it is “attainable.”
In its latest analysis received this week, the bank’s loan book skewed to the retail sector.“The composition of BancABC loan book is more skewed towards consumer lending at 73 percent. The corporate and lending book make up 15 percent and 10 percent respectively. The large part of the loan book is unsecured personal loans. However, the bank collects over 96 percent of all repayments directly through deduction codes and this model has worked very well for other micro lenders such as Letshego.
There is need for the bank to diversify its loan book to manage this risk. This can be done through growing the book from the corporate sector, SME’s and mortgage lending.The biggest concern in the banking sector is the high levels of households’ indebtedness and diversifying the book from the household will go a long way in managing this risk.Vehicle and asset finance is another area that the bank needs to focus on as currently it doesn’t have a presence at car dealerships in Botswana,” said Motswedi Securities.
Another point by Motswedi Securities is that the bank has a high cost of funds. According to the broker, as at December 2017, BancABC cost of funding stood at 4.0 percent and is relatively higher than its competitors.The broker says this is due to the fact that the bank’s deposit base is mainly comprised of institutional clients who mostly come with short term deposits that are somewhat costly as compared to retail deposits.In addition competition is very intense for this type of funding and this all reduces margins. Motswedi Securities further advised that the bank needs to diversify its streams and attract more deposits from the retail sector, which is less costly.
Newly established wholly indigenous citizen owned retail chain Payless Retail (PTY) Ltd is set to partake in the first session of Botswana Stock Exchange (BSE)’s Tshipidi Mentorship Program (TMP) on Monday June 29th.
The TMP aims to train and capacitate SMEs so they can operate as corporates and eventually list on the local bourse. According to local bourse, BSE, the program aims to provide practical training to potential issuers through a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
Payless Retail is a newly established supermarket chain whose mission is to become a convenient one-stop shopping destination as it is one of the Botswana oldest retailing brands. It started off as Corner Supermarket in January 1976, and to date boasts of nine stores in, among others, Gaborone, Mochudi, Molepolole and Tlokweng. Payless was recently acquired by Ellis Retail Group, which is led by businessman Elliot Moshoke.
The takeover catapulted Ellis Retail to the envious position of being the first wholly indigenous owned major retail chain. “We jumped at this opportunity because it gave us a chance to prove to Batswana that the retail business is open and lucrative.”
The objective is to create a proudly Botswana retail chain that fully supports our national Vision, economic development and citizen economic empowerment ambitions,” Moshoke told BusinessPost.
He further emphasized that Batswana are capable and able to run large scale businesses hence they need to accept invite foreign investors who will come in to support us not take the business. “Our win as Payless in the Fast Moving Consumer goods (FMCG) industry is a win for Batswana. We need their support in this difficult and challenging journey.
As you are aware, Payless is the only retail chain in the hands of Batswana ba Sekei. We need to take advantage of this to generate employment and create small businesses in retail and Agri businesses,” he explained.
The retailer has also partnered with Botswana Investment & Trade Center (BITC) on their #PushaBW campaign with a view to initiating earnest engagement with local producers to iron out bottlenecks and ensure seamless trading.
“Local producers have to be part of the phenomenal growth of the Payless brand. This will in turn facilitate employment creation and economic growth. We did this because we have the utmost respect for local manufacturers and producers,” he mentioned.
Payless is currently restocking all of its stores; a development that Moshoke says is testament to the retailer’s commitment to growing the brand and ensuring continuity of business. He further revealed that renowned retail suppliers like PST and CA Sales have reignited their trust in Payless, opening their doors for Payless as they have faith in the retailer’s new owners.
The takeover has reportedly saved more than 200 jobs and gave a new lease of life to the previously fledging Payless brand. According to a press release from the management team, the Payless work forces are also extremely excited about what the future holds. The TMP is a comprehensive and interactive program that covers the key themes necessary to position a company to list on the BSE.
The program is administered by experts within the listing ecosystem and seeks to bring the potential issuers closer to the listings advisers, investors and leaders of already listed companies. “As a strategic initiative, the BSE decided to set up this mentorship program in a bid to assist SMEs to strategize, corporatize and acclimatize in order to list to access equity finance and expand operations,” said the BSE.
The TMP will avail to SMEs practical insights, knowledge and feedback from institutional investors, increased awareness of the BSE listing requirements as well as an intimate network of advisors and CEOs of listed companies. After training, Payless will graduate with improve governance structures and better knowledge of articulating its business strategy. The retailer will also gain increased visibility through BSE marketing platforms.
Despite Covid-19 interrupting trade worldwide, exporting companies in Botswana which benefited from the Botswana Investment and Trade Centre (BITC) services realised P2.96 billion in export earnings during the period from April 2020 to March 2021.
In the preceding financial year, the sale of locally manufactured products in foreign markets had registered export revenue of P2, 427 billion against a target of P3, 211 billion BITC, which celebrates 10 years since establishment, continues to carry out several initiatives targeted towards expanding the Botswana export base in line with Botswana’s desire to be an export led economy, underpinned by a robust export promotion programme in line with the National Export Strategy.
The main products exported were swamp cruiser boats, pvc tanks and pvc pipes, ignition wiring sets, semi-precious stones, veterinary medicines, hair braids, coal, textiles (towels and t-shirts) and automobile batteries. These goods were destined mainly for South Africa, Zimbabwe, Austria, Germany, and Namibia.
With Covid-19 still a problem, BITC continues to roll out targeted virtual trade promotion missions across the SADC region with a view to seeking long-lasting market opportunities for locally manufactured products.
Recently, the Centre facilitated participation for Botswana companies at the Eastern Cape Development Council (ECDC) Virtual Export Symposium, the Botswana-Zimbabwe Virtual Trade Mission, the Botswana-Zambia Virtual Trade Mission, Botswana-South Africa Virtual Buyer/Seller Mission as well as the Botswana-Namibia Virtual Trade Mission.
BITC has introduced an e-Exporting programme aimed at assisting Botswana exporters to conduct business on several recommended e-commerce platforms. Due to the advent of COVID-19, BITC is currently promoting e-trade among companies through the establishment of e-commerce platforms and is assisting local companies to embrace digitisation by adopting e-commerce platforms to reach export markets as well as assisting local e-commerce platform developers to scale up their online marketplaces.
During the 2019/2020 financial year, BITC embarked on several initiatives targeted at growing exports in the country; facilitation of participation of local companies in international trade platforms in order to enhance export sales of local products and services into external markets.
BITC also helped in capacity development of local companies to compete in global markets and the nurturing of export awareness and culture among local manufacturers in order to enhance their skills and knowledge of export processes; and in development and implementation of trade facilitation tools that look to improve the overall ease of doing business in Botswana.
As part of building export capacity in 2019/20, six (6) companies were selected to initiate a process to be Organic and Fair Trade Certified. These companies are; Blue Pride (Pty) Ltd, Motlopi Beverages, Moringa Technology Industries (Pty) Ltd, Sleek Foods, Maungo Craft and Divine Morula.
In 2019 seven companies which were enrolled in the Botswana Exporter Development Programme were capacitated with attaining BOBS ISO 9001: 2015 certification. Three (3) companies successfully attained BOBS ISO 9001:2015 certification. These were Lithoflex (Pty) Ltd, General Packaging Industries and Power Engineering.
BITC’s annual flagship exhibition, Global Expo Botswana (GEB) to create opportunities for trade and strategic synergies between local and international companies. The Global Expo Botswana) is a premier business to business exposition that attracts FDI, expansion of domestic investment, promotion of exports of locally produced goods and services and promotion of trade between Botswana and other countries.
The portal also provides information on; measures, legal documents, and forms and procedures needed by Botswana companies that intend on doing business abroad. BITC continues to assist both potential and existing local manufacturing and service entities to realise their export ambitions. This assistance is pursued through the ambit of the Botswana Exporter Development Programme (BEDP) and the Trade Promotion Programme.
BEDP was revised in 2020 in partnership with the United Nations Development Programme (UNDP) with a vision to developing a diversified export-based economy. The programme focuses mostly on capacitating companies to reach export readiness status.
Prices for goods and services in this country continue to increase, with the latest figures from Statistics Botswana showing that in May 2022, inflation rate rose to 11.9 percent from 9.6 percent recorded in April 2022.
According to Statistics Botswana update released this week, the largest upward contributions to the annual inflation rate in May 2022 came from increase in the cost of transport (7.2 percent), housing, water, electricity, gas & other Fuels (1.4 percent), food & non-alcoholic beverages (1.1 percent) and miscellaneous goods & services (0.8 percent).
With regard to regional inflation rates between April and May 2022, the Rural Villages inflation rate went up by 2.5 percentage points, from 9.6 percent in April to 12.1 percent in May 2022, according to the government owned statistics entity.
In the monthly update the entity stated that the Urban Villages inflation rate stood at 11.8 percent in May 2022, a rise of 2.4 percentage points from the April rate of 9.4 percent, whereas the Cities & Towns inflation rate recorded an increase of 1.9 percentage points, from 9.9 percent in April to 11.8 percent in May.
Commenting on the national Consumer Price Index, the entity stated that it went up by 2.6 percent, from 120.1 in April to 123.2 in May 2022. Statisticians from the entity noted that the transport group index registered an increase of 7.3 percent, from 134.5 in April to 144.2 in May, mainly due to the rise in retail pump prices for petrol and diesel by P1.54 and P2.74 per litre respectively, which effected on the 13th of May 2022.
The food & non-alcoholic beverages group index rose by 2.6 percent, from 118.6 in April 2022 to 121.6 in May 2022 and this came as a result of increase in prices of oils & fats, vegetables, bread & cereal, mineral waters, soft drinks, fruits & vegetables juices, fish (Fresh, Chilled & Frozen) and meat (Fresh, Chilled & Frozen), according to the Statisticians.
The Statisticians said the furnishing, household equipment & routine maintenance group index rose by 1.0 percent, from 111.6 in April 2022 to 112.7 in May 2022 and this was attributed to a general increase in prices of household appliances, glassware, tableware & household utensils and goods & services for household maintenance.
The prices for clothing & footwear group index moved from 109.4 to 110.4, registering a rise of 0.9 percent during the period under review. Bank of Botswana has projected higher inflation in the short term, associated with the likelihood of further increases in domestic fuel prices in response to persistent high international oil prices and added that the possible increase in public service salaries could add also upward pressure to inflation in this country.