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The fraudulent world of insurance explained

Deputy Secretary of Financial Policy at the Ministry of Finance and Economic Development Elaina Gonsalves said the lack of trust in the world of insurance conceives fraudulent activities which costs the insurance industry approximately US$ 80 billion according to latest global statistics.

Gonsalves raised this point this week when launching new players in the industry; Western Insurance Botswana and Western Life Insurance Botswana. The two are part of the Western National Insurance Group, a subsidiary of the renowned PSG Group in South Africa. Gonsalves said trust is the core of the insurance industry.

Gonsalves gave a scenario where: “Someone gives a premium to someone else, trusting that the person will deliver when the insured event occurs. Someone receives a premium from someone else trusting that the information received is correct and as a result, the premiums, terms and conditions will allow the cover to be given and the claim paid. This is why the process is susceptible to fraud-fraud by the customer or by someone in the insurer’s employ. Globally, fraud costs the insurance industry approximately US$ 80 billion in 2017.”

The deputy director said insurance entities use many different systems to facilitate the delivery of their promises. She said however to date the only system identified with the capacity to restore trust and transparency in the insurance industry is the Blockchain Technology. Gonsalves told Western Botswana that they should establish trust in their business and use the latest technology to improve their businesses. She said the rest of the insurance industry in this country should shape up or ship out.

“Friends, what am I saying? I am saying that we have to get with the programme or get out of business. As with other service industries, if insurers are not able to provide cutting edge service, then their very survival, let alone success, becomes very doubtful. This requires re-skilled and up-skilling of personnel and change in business models,” said Gonsalves.

According to Gonsalves, the new generation of policyholders expects seamless, individualized and transparent service. The successful insurer is one which can win back the trust of policyholders and potential clients according to Gonsalves. The deputy director said the business challenge is to be innovative and control costs, while responding and exceeding customer expectations.   

Gonsalves hailed the pending Insurance Industry Act as a law which will instill professionalism in the insurance industry.  She said the new legislation will help in combating money laundering and finance terrorism.

“The major changes are; provisions pertaining to identification and transparency of beneficial ownership; provisions concerning kinds, spread and location of assets owned by the company; prohibition of the receipts of premiums by insurance brokers and agents, except under certain circumstances; free choice of insurance cover for assets pledged under loans/leases; disclosure of commissions and fees; provision for insurance agents (corporate) to represent one life and one non-life insurer; and discontinuation of individuals as insurance agents and agents for brokers,” said Gonsalves.

Western Insurance Botswana and Western Life Insurance Botswana began trading in the shores of Botswana in June 2018 and was officially launched on Wednesday. Western Insurance Botswana and Western Life Insurance form part of the Western National Insurance group, which in turn stems from the renowned PSG Group in South Africa.

Western Insurance Botswana is under the captaincy of 12 year experienced CEO Victor Nnoi. Marinda Botes is at the helm of CEO of Western Life Insurance Botswana and has 18 years of experience in the industry. Before expanding its prescience to South Africa in 2007, the Western brand was established in 2004 in Namibia, then expanding into South Africa in 2007.

PSG Konsult, is the direct majority shareholder in the Western group. PSG Group is listed on the JSE with a market cap in excess of R52 billion. Together with the holding company of PSG Konsult, it holds strategic investments in the banking sector through shareholding in the renowned Capitec Bank and the education sector via Curro Schools in South Africa. The PSG Group expanded its footprint in Botswana over the last few years and, through subsidiary PSG Alpha who currently holds a controlling share in CA Sales. Curro Schools has also acquired it first school, Baobab School, in Botswana earlier this year. 

Today, Western boasts an African footprint of 8 offices across the continent and has seen gross written premium exceed R1.2 billion in less than 10 years of trading. Expansion into Botswana forms part of the Group’s Southern African strategy, strategy which also includes business interests in Lesotho. Western Botswana is committed to rethinking insurance, and redefining its delivery for clients across Botswana.

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Grit divests from Letlole La Rona

22nd March 2023

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.

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Stargems Group establishes Training Center in BW

20th March 2023

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.

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Food import bill slightly declines

20th March 2023

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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