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BIHL five-year strategy delivers growth

Botswana Insurance Holding Limited (BIHL), an investment group with interests in leading insurance and finance business across Africa continues to increases its market share and retain profitability amid increasing competition from new entrants and evolving regulatory and trading environments.

When delivering a review on the lapsing 5 year strategy which commenced in 2013 BIHL Group Chief Executive Officer (CEO), Catherine Lesetedi-Letegele noted that the strategy delivered sustainability and continued profitability for the group with increasing market share.
Letegele shared these at the BIHL 2018 interim results announcement in Gaborone this Tuesday.

The BIHL chief explained that since the commencement of the “The Tomagano” five-year strategy the company has been able to protect its leading status and position in all its businesses, penetrated new markets as well as introduced new segments. “When growing our businesses we did so closely monitoring profitability and risks in new investments, we did not just aim at increasing our market share without protecting profitability and sustainability,” she said.


She highlighted that in the past five years the Botswana Stock Exchange (BSE) listed BIHL acquired 25 percent stake in Nico Holdings based in Malawi, 50 percent stake in Botswana Insurance Company as well as increased share stake in Pan African outfits Letshego Holdings and Funeral Services Group. She also noted that BIHL disposed some assets that were no longer serving the interests of BIHL‘s strategic expansion targets.

Stakeholders were informed that BIHL increased efficiencies in group operations through establishment of a program office, group business development office, HR and IT administration and monitoring bases. “These business suits have delivered and continue to deliver efficiencies within the group, we also introduced new technologies across the group to harness synergies in ensuring that we run a well managed business and create a pull of individuals that are not just specialists but also generalists,” she said

Letegele also echoed that BIHL has within the five year strategy entered into collaborations with strategic corporate entities in the interest of the company and its workforce.  “We have signed agreements with the likes of Baisago University, sent our people to Gordon Institutes of Business Science, collaborated with Sanlam   and Stellenbosch University amongst others, all of this has been done under clear management processes. We recognized that BIHL does not exist in a vacuum as a corporate citizen, we believe we have executed well on the strategy,” explained Letegele.

She revealed that a new strategy will be launched in March next year. Since 2008 Botswana Insurance Holdings Limited has realized a growth in embedded , raking in  5 billion in profits before tax since  to date , paid 2.7 billion pula  dividends and paid just under 800 million pula  tax to Botswana government. Speaking to the half year results for the six month period ended June 2018, BIHL CEO explained that the Group continues to lead profitable operations amid trading challenges.

 “In our view as management we believe we gathered resilient set of results supported by growth in revenue, growth in value of new businesses, growth in operating profits, growth in group embedded value amongst others,” she said. Letegele explained that overall expenses have been well maintained to output flat growth.  “This is our dedication to ensure that we are managing cost by spending money on areas that we believe are investment geared rather than on consumption operations,” she stated.

 Letegele contend that BIHL raked in an impressive 54 percent increase in premium income, because of new products, strategic partnerships, and schemes adding that the group administration system implemented during the half year under review also contributed to Group’s impressive overall performance. Letegele explained that return on group embedded value grew from 8.3 percent to 17.6 percent attributable to increased value of new business which expanded by 14 percent as well as the fact that the company didn’t incur any impairment.

On segment and subsidiary performance, Letegele  revealed  that  the Life insurance business which is headlined by BIHL largest subsidiary, Botswana Life gathered and increase in Net Premium Income for the first half of 2018  with increase from P1.1 billion in six month  ended June 2017  to P1.15 billion during period  under review. Still under Life Insurance Business total New Business written grew by 7 percent underpinned by strong single premium income performance.

Recurring premium income grew by an impressive 9 percent from P605 million in June 2017 to P659 million in June 2018.  “This line represents a sustainable source of profits in the long term at group level,” she said. The value of new business, which represents the present value of future profits from new business premiums written during the period, increased by 14 percent from prior year on the back of impressive new business volumes from the group lines and term assurance policies.

 Operating profit grew 15 percent on prior year mainly because of good new business volumes from the group line, low new business strain and cost savings from the streamlining exercise carried out second half of last year. Operating profit increased from P142 million in June 2017 to P164 million in June 2018.

Under the Botswana Insurance Fund Management (BFIM) Letegele shared that despite the challenges of mixed economic performance reflecting both international economic uncertainty as well as domestic challenges BIHL’s asset management outfit managed to retain mandates and existing clients. However BIFM group’s overall operating profit in the 2018 first half showed a decline of 8 percent year on year.

BIHL explained that this is due to direct result of Zambia operations not performing as expected because of unrealized activities that were anticipated to take place in the year 2018. “Despite the current difficult trading conditions, where we have witnessed several new entrants into the market and pension funds adopting new strategies of splitting mandates, BIFM has continued to show resilience and continued to gain market confidence and maintain its position as a leading Asset Management Company,” explained Letegele.

Total Assets under management including Zambia’s P4.7 billion stands at P26 billion. Regarding the Short term insurance business, Letegele explained that the segment continued to face pressure on the top line resulting in an 8 percent decline in income compared to prior year.
Despite the top line pressures, Legal Guard has achieved an operating profit of P1.8 million to June 2018 up from a P0.9 million loss for the same period last year.

“With the introduction of a new core operating system last year, the business has been able to provide an enhanced platform for claims administration which has resulted in turn in a decline in claims costs,” she said. Botswana Insurance Holding Limited Board Chairperson, Dambe Groth said BIHL Group remains well positioned in terms of capital management and solvency.

She explained that the board has confidence in the Group’s ability to maintain dividends at this level while ensuring that its capital position remains solid and aligned with future capital requirements across the Group, at sustained levels of Return on Group Equity Value.
The Group’s embedded value increased to P4.37 billion as compared to the P4.31 billion in the half year ended June 2017. The embedded value allows for P288 million dividends paid during the period

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Debswana-Botswana Oil P8 billion fuel partnership to create 100 jobs

18th May 2022
Head-of-Stakeholder-Relations

The partnership between Debswana and Botswana Oil Limited (BOL) which was announced a fortnight ago will create under 100 direct jobs, and scores of job opportunities for citizens in the value chain activities.

In a major milestone, Debswana and BOL jointly announced that the fuel supply to Debswana, which was in the past serviced by foreign companies, will now be reserved for citizen companies. The total value of the project is P8 billion, spanning a period of five years.

“About 88 direct jobs will be created through the partnership. These include some jobs which will be transferred from the current supplier to the new partnership,” Matida Mmipi, Head of Stakeholder Relations at Botswana Oil, told BusinessPost.

“We believe this partnership will become a blueprint for other citizen initiatives, even in other sectors of the economy. Furthermore, this partnership has succeeded in unlocking opportunities that never existed for ordinary citizens who aspire to grow and do business with big companies like Debswana.”

Mmipi said through this partnership, BOL and Debswana intend to impact citizen owned companies in the fuel supply value chain that include transportation, supply, facilities maintenance, engineering, customs clearance, trucks stops and its support activities such as workshop / maintenance, tyre services, truck wash bays among others.

“The number of companies to be on-boarded will be determined by the economics at the time of engagement,” she said. BOL will play a facilitatory role of handholding and assisting emerging citizen-owned fuel supply and fuel transportation companies to supply Debswana’s Jwaneng and Orapa Letlhakane Damtshaa (OLDM) mines with diesel and petrol for their operations.

“BOL expects to increase citizen companies’ market share in the fuel supply and transportation industries, which have over the years been dominated by foreign-owned suppliers. Consequently, the agreement will also ensure security of supply for Debswana operations, which are a mainstay of the Botswana economy,” Mmipi said.

“Furthermore, BOL will, under this agreement, transfer skills to citizen suppliers and transporters during the contract period and ensure delivery of competent and skilled citizen suppliers and transport companies upon completion of the agreement.”

Mmipi said the capacitating by BOL is limited to providing citizen companies oil industry technical capability and capacity to deliver on the requirements of the contract, when asked on helping citizen companies to access funding.

“BOL’s mandate does not include financing citizen empowerment initiatives. Securing funding will remain the responsibility of the beneficiaries. This could be through government financing entities including CEDA or through commercial banks. Further to this, there are financial institutions that have already signed up to support the Debswana Citizen Economic Empowerment Programme (CEEP),” Mmipi indicated.

While BOL is established by government as company limited by guarantee, it will not benefit financially from the partnership with Debswana, as citizen empowerment in the petroleum value chain is core to BOL’s mandate.

“BOL does not pursue citizen facilitation for financial benefit, but rather we engage in citizen facilitation as a social aspect of our mandate. Citizen facilitation comes at a cost, but it is the right thing to do for the country to develop the oil and gas industry,” she said.

Mmipi said supplying fuel to Debswana comes with commercial benefits such as supply margins. These have traditionally been made outside the country when supply was done by multi-nationals for a period spanning over 50 years. With BOL anchoring supply for Debswana, this benefit will accrue locally, and BOL will be able to pay taxes and dividends to the shareholders in Botswana.

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VAT in Africa Guide 2022 – Africa re-emerging

18th May 2022

PwC Africa has presented the eighth edition of the VAT in Africa Guide – Africa re-emerging. This backdrop of renewal informs on the re-emergence of African economies and societies which have been affected by the COVID-19 pandemic.

In this edition, which has been compiled by PwC Africa’s indirect tax experts, covers a total of 41 African countries. It is geared towards sharing insight with our clients based on the constantly changing tax environments that can have a significant impact on business operations.

Within Africa, governments continue to focus on expanding the tax net by improving revenue collection through efficient compliance systems and procedures. PwC Africa has observed that revenue authorities also continue to take a keen interest in indirect taxes as part of revenue mobilisation initiatives.

Maturing VAT system and upskilling SARS 

“In South Africa, VAT is becoming more relevant as a revenue source for the government,” says Matthew Besanko, PwC South Africa’s Indirect Tax Leader. “Strides have been made to upskill South African Revenue Service (SARS) staff and identify VAT revenue leakages, particularly in respect of foreign suppliers of electronic services to people and businesses in South Africa.”

Broadening the tax base and digital economy

In the past year, South Africa, Mozambique and Zimbabwe saw updates to their VAT legislation, or introduced specific legislation targeting electronically supplied services (ESS), which is in line with the global trend of attempting to tax the digital economy. “The expectation is that Botswana will also introduce VAT legislation in due course, while the National Treasury in South Africa has also made mention of revising the rules to account for further developments in the digital economy,” Besanko says.

South Africa’s National Treasury has also drafted legislation with the intention to introduce a reverse charge on gold, which is expected to come into effect later in 2022. While in Zimbabwe, revenue authorities have introduced a tax on the export of raw medicinal cannabis ranging between 10% and 20%, which came into effect on 1 January 2021.

ESG and carbon tax 

Key strides have also been made within the Environmental, Social and Governance (ESG) space. “ESG leadership, strategising and reporting is essential now for organisations that wish to flourish and remain relevant,” Kabochi says. He adds that companies need to consider how ESG and tax intersect, since tax is a significant value driver when businesses need to deliver on their ESG goals.

In South Africa, a carbon tax regime, which is being implemented in three phases, has been adopted. The second phase was scheduled to start in January 2023, however phase one was extended by three years until 31 December 2025.

Until then, taxpayers will enjoy substantial tax-free allowances which reduce their carbon tax liability. At the beginning of 2022, the South African government increased the carbon tax rate to R144 (about US$9), which is expected to increase annually to enable South Africa to uphold its COP26 commitments.

With effect from 1 January 2023, carbon tax payers in South Africa will also be required to submit carbon budgets and adhere to the provisions of the carbon budgeting system which will be governed by the Climate Change Bill. Where set carbon budgets are exceeded, the government plans to impose penalties. “At PwC, we are continuously focused on our renewed global strategy, ” The New Equation,” Kabochi says. “Through this strategy, a key focus area for PwC Africa is to support clients in adding value to their ESG ambitions and building trust through sustained outcomes.”

The New Equation is also an acknowledgement of the fundamental changes in the business environment in which PwC’s clients and other stakeholders operate. PwC continues to reinvent and adapt to these changes as a community of problem solvers, combining knowledge and human-led technology to deliver quality services and value.

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Economists project lower economic growth for Botswana

18th May 2022
CBD

Local and international economists have lowered their projections on Botswana’s economic growth for 2022 and 2023, saying the country is highly likely to fail to maintain high growth rate recorded in 2021 hence will not reach initial forecasts.

Economists this week lowered 2022 forecasts for Botswana’s economic growth rate, from the initial 5.3% to 4.8% and added that in 2023 growth could further decline to 4.0%. The lower projections come on the backdrop of an annual economic growth that recovered sharply in 2021 with figures showing that year-on-year real Gross Domestic Product (GDP) growth increased to 11.4%, up from a contraction of 8.7% in 2020.

Economists from the local research entity, E-consult, this week stated that the 2021 double digit growth that exceeded projections made at the time of the 2022 budget may be short lived due to other developments taking place in the global economy. E-consult Economist Sethunya Kegakgametse stated that the war in Ukraine has worsened supply problems in the global economy and added that before the war, macroeconomic indicators were seen as improving and returning to pre-COVID levels.

According to the economist the global economy was projected to improve in 2022 and 2023. Recent figures show that global growth projections have been revised downwards from the initial forecast of 4.9% in 2022 with the World Bank’s new estimate for global growth in 2022 at 3.2%.

The statistics also shows that International Monetary Fund revised their growth projections for 2022 and 2023 down by 0.8% and 0.2% respectively, falling to 3.6% for both years. “The outbreak of war has severely dampened the global recovery that was under way following the COVID-19 pandemic,” said the economist.

She stated that despite Botswana being geographically removed from the conflict, the country has not and will not be exempt from the disruptions in the global economy. “The disruptions to global supply chains resulting from the war will have a negative effect on both Botswana’s growth and trade activities.

The economic sanctions against diamonds from Russia will add uncertainty to the market which will have knock on effects to Botswana’s growth, exports, and government revenues,” said the economists who added that the disruptions are driving prices up and result with very high inflation in the local economy.

Kegakgametse projected that in an attempt to limit inflation Bank of Botswana will be forced to raise interest rate “Should the sharp increase in both global and local inflation persist, Bank of Botswana much like other central banks around the world will be forced to raise interest rates in a bid to control rising prices. This would mean an end to the expansionary monetary policy stance that had been adopted post COVID-19 to aid economic growth,” she said.

In the latest projections, the UK based economic research entity Fitch Solutions lowered 2022 real GDP growth forecast for Botswana from 5.3% to 4.8% “In 2023, we see economic growth rate decelerating to 4.0%,” said Fitch Solutions economists who also noted that the 2022 and 2023 economic growth projections may come out lower than the current forecasts, as it is possible that new vaccine-resistant virus variants may be identified, which could result in the re-implementation of restrictions. “In such circumstances, we cannot rule out that Botswana’s economy may post weaker growth than our baseline scenario currently assumes,” said the economists.

According to the projections, Fitch Solution stated that there is limited scope for Botswana government to increase diamond production and exports, following the economic sanctions imposed on Russian diamond mining companies operating in Botswana. The research entity added that De Beers is unlikely to scale up diamond output from Botswana in order to prop up diamond prices.

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