Barclays Bank of Botswana announced its financial results for the half year six month ended 30 June 2018, recording P260 million profit before tax mirroring a 4 percent growth year-on-year compared to the half year period ended June 2018.
When briefing its stakeholders and members of the media in Gaborone on Thursday morning, Barclays top brass observed that the performance attributable to growth in income, well contained costs as well as favourable credit losses. Deliberating on the financial figures Barclays Finance Director Mumba Kalifungwa said on a gross basis, interest income went up by 4 percent year-on-year despite the interest rate cut of 50bps in the last quarter of 2017.
Mumba, however highlighted that an increase in the interest cost of funding driven by market trends diluted Net interest income growth in the bank‘s net interest income resulting in flat figures year on year. Barclays further revealed a satisfactory net and commission income increase of 10 percent year –on –year during the period under review. “This is on the back of our focus on driving innovation through investment and enhancement of our digital channels,” explained Finance Director Mumba Kalifungwa.
The Botswana Stock Exchange Limited (BSEL) listed banking outfit registered a 18 percent hike on net trading income attributable to increase in forex sales volumes. Kalifungwa noted that the bank’s continued focus on client acquisition and penetration had a positive impact on the net trading income growth. “Operating costs were well contained with business achieving a cost to income ratio of 54 percent which is in line with our strategic target of lower 50 s. Year on year costs grew by 6 percent ,largely driven by an increase in technology spend as part of the separation journey from Barclays PLC,” he said.
Barclays Finance chief also revealed that the bank was currently coming up with ways to manage and contain expenses. “We continue to exploit cost saving opportunities through a review in all our cost lines and various supplier contracts in order to identify opportunities for savings,” he said.
With regards to the new accounting standards IFRS 9 which was introduced beginning of January this year to replace the old IAS 39 Financial tool, Barclays says so far the new standards bring in a revised impairment model which requires entities to recognize expected credit losses based on unbiased forward-looking information.
“This replaces the existing IAS 39 incurred loss model which only recognizes impairment if there is objective evidence that a loss was already incurred and measured the loss on the most probable outcome, The day 1 impact of this change that was charged to our Retained earnings on the balance sheet amounted to an after tax amount of P129 million,” explained Mumba. Despite the more stringent accounting for the credit losses Barclays’s expected credit losses/impairments decreased by 12.3 percent in comparison to the prior period.
According to Finance Head the performance is predominantly due to enhanced collections capability and conservative credit extension to high risk sectors especially in the retail segment. Barclays outgoing Managing Director Reinette van der Merwe told stakeholders that the bank ‘s first 2018 half year results mirrored resilience as the business continues to operate in a highly competitive and modest local banking environment.
“This result were realized in the midst of various external challenges such as the declining credit growth across the sector, low interest rates and a general recovery commodity prices, this did not deter us from our ambition to be the leading financial services partner in Botswana,” she said. Van der Merwe noted that Barclays continues to make progress in supporting key segments in various sectors of the economy.
“We are excited to be part of a financial services group that Africa can be proud of, the transition from Barclays Group to Absa brand present a more modern, fast thinking and relevant organization that is truly an African bank that is for the people,” she said. Barclay’s balance sheet grew by 12 percent ending the half year period at 16.9 billion pula. According to bank Finance Boss the expansion was influenced by loans and advances to customers which increased by 14 percent year –on –year to 11.4 billion pula.
“The growth was fairly distributed across the segments in line with our strategy and continues to be focuses around prudent lending in our chosen business segments,” he said. Customer liabilities increased by 6 percent year on year driven by continued customer focus and penetration across all segments. Mumba noted that the growth compares favourably against the banking industry growth of 4 percent year –on –year.
“ We continue to strive to providing world-class customer services and products to existing and potential customers with a view to providing access to finance and various payment solutions, to this end we continue to focus on way of optimizing our balance sheet and the resultant funding sources” reiterated Kalifungwa. He added that given Barclays‘s strong profitability the bank’s return on equity remains solid at 22 percent and compares favourably against the banking industry average of 16.7 percent .
“Our regulatory capital position stood at 2 billion pula representing a ration of 19.4 percent against the regulatory minimum requirement of 15 percent, this is testament to how our balance sheet continues to remain prudently positioned with strong liquidity and capital levels, and sound provisioning for expected credit losses,” he said. The bank announced a proposed interim dividend payout of P80 million at 9.38 thebe per share subject to regulatory approval.
Barclays MD noted that in light of continued modest growth in household income as well as restrained economic expansion the bank remains mindful of challenges which call for continued caution while exploring opportunities within chosen segments. She added that the recently declared economic recession in South Africa posts possible challenges that will require close monitoring of expenditure and banking systems to remain operational with strong capital levels and internal capital generation capacity, she however observed that anticipated increased government spending sparks confidence as its likely to open new business opportunities in the market as well as increase house hold spending. “We are committed to deliver on our strategy and through endurance and tenacity, we remain optimistic of the future,” she said.
The Bulb World Chief Executive Officer (CEO) and entrepreneur, Ketshephaone Jacob has been selected as a 2021 Top 50 Africa’s Business Hero.
Jacob was chosen from a pool of 12,000 applicants – many of whom are highly-skilled and accomplished entrepreneurs.
Africa’s Business Hero, sponsored by technology entrepreneur, Jack Ma, aims to identify, support and inspire the next generation of African entrepreneurs who are making a difference in their local communities, working to solve the most pressing problems, and building a more sustainable and inclusive economy for the future.
The initiative is as inclusive as possible and applications were open in English and French to entrepreneurs from all African countries, all sectors, and all ages who operate businesses formally registered and headquartered in an African country, and that have a 3 year-track record.
Every year, finalists are selected to compete in the ABH finale pitch competition and participate in a TV Show that will be broadcast online and across the continent.
The finalists will compete for a share of US $1.5 million in grant money.
The Bulb World, is home grown LED light manufacturing company, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017.
The Bulb World operate from the Special Economic Zone of Selibe Phikwe. Early this year, The BulB World announced its expansion to South Africa, setting in motion its ambitious Africa expansion plan.
During the first quarter of 2021, production in Botswana’s economic nucleus- the mining sector contracted by 12 percent. This is according to Mining Production Index released by Statistics Botswana this week.
The country’s central data body revealed that Index of Mining production stood at 74.4 during the first quarter of 2021, showing a negative year on-year growth of 12.0 percent, from 84.6 registered during the first quarter of 2020.
The main contributor to the decline in mining production came from the Diamonds sector, which contributed negative 11.7 percentage points. Soda Ash was the only positive contributor in the mining production, contributing 0.1 of a percentage point. However Soda Ash’s contribution was insignificant to offset the negative contribution made by Diamonds.
The quarter-on-quarter analysis by Statistics Botswana experts shows an increase of 16.3 percent from the index of 64.0 during the fourth quarter of 2020 to 74.4 observed during the period under review.
Diamond production decreased by 12.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. The decrease was as a result of planned strategy to align production with weaker trading conditions mostly linked to Covid-19 protocols restrictions.
Botswana’s diamond sector is underpinned by Debswana, the country’s flagship rough producer- a 50-50 joint venture between government and global mining giant De Beers Group. The other producer is Canadian based Lucara Diamond Corp through its wholly owned Karowe Mine which is a relatively small but significant production that has made a name for itself worldwide with rare diamond recoveries of unprecedented carat size.
On the other hand, quarter-on quarter analysis shows that production has improved, registering a positive growth of 17.5 percent during the first quarter of 2021 compared to the preceding quarter – 2020 Q4.
Though production was significantly lower in the first quarter, the two producers ended Q2 with rare diamond recoveries. Debswana early last month found the world’s third largest gem diamond – weighing 1098 carat at Jwaneng Mine, its flagship gem quality diamonds producer, also regarded the world’s richest diamond mine.
A week later Lucara announced its second biggest recovery, the 1174 carat clivage near-gem dug from its Karowe Mine. The diamond is the world third in carat size after the plus-3000 carat Cullinan found in South Africa back in 1905 and the 1758 carat Sewelo unearthed at its Karowe mine in 2019. Debswana and Lucara are investing billions of pulas in underground mining projects to extend the life of its mines, Jwaneng & Karowe respectively.
In terms of Gold which is produced at Mupani mine near Botswana’s second city of Francistown output decreased by 17.9 percent during the first quarter of 2021 compared to the same quarter of the previous year.
Similarly, quarter-on-quarter analysis reflects that production decreased by 21.4 percent during the first quarter of 2021, compared to the preceding quarter. The decrease was as a result of the deteriorating lifespan of the mine as well as the impact of COVID-19 which slowed down the mining activities.
Soda Ash production increased by 11.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. In terms of quarter-on-quarter Soda Ash production also showed an increase, picking up by 2.1 percent during the period under review. The increase in production is attributable to the effectiveness of the plant following refurbishment which occurred in the third quarter of 2020.
Salt production decreased by 34.0 percent during the first quarter of 2021, compared to the same quarter of the previous year. Similarly, the quarter-on-quarter analysis shows that salt production registered a decrease of 32.9 percent during the period under review. Both salt and Sodash are produced by partly government owned Botswana Ash (BotsAsh) operating from Sowa town near Makgadikgadi pans.
Coal production decreased by 11.2 percent during the first quarter of 2021, compared to the corresponding quarter of the previous year. The decrease was attributed to the reduced demand from Morupule B Power Station following the remedial works being undertaken, as one boiler was in operation during the period under review.
Although production fell, Statistics Botswana says there was no shortfall in supply of coal due to stockpiling. On the other hand, the quarter-on-quarter comparison shows that coal production increased by 20.4 percent compared to the preceding quarter.
Botswana’s flagship coal producer is Morupule Coal Mine; a wholly state owned mining company located in Palapye producing primarily for Botswana Power Corporation (BPC)’s power generation plants Morupule A & B.
The other coal producer is Botswana Stock Exchange listed Minergy which operates a 390 MT Coal Resource mine in Masama near Media in the southwestern edge of the Mmamabula Coalfields.
Department of Mines in the Ministry of Mineral Resources, Green Technology & Energy Security has awarded mining licence to Tshukudu Metals-a subsidiary of Aussie firm Sandfire Resources ,giving the company a green light to start piecing the ground at its Motheo Copper Project near Gantsi.
Lefoko Moagi, minister in charge of mineral resources in Botswana confirmed to weekendpost on Tuesday. Minister Moagi revealed that “the licence has been approved , but Sandfire Resources as a listed company will report to its shareholders and investors then make an official public statement” he said.
Based on a forecast copper price of US$3.16/lb (reflecting current long-term consensus pricing) the Base Case 3.2Mtpa – Ghantsi copper project is forecast to generate US$664 million (over P7 billion) in pre-tax free cash-flow and US$987 million (over P10 billion) in EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), at a forecast all-in sustaining cost of US$1.76/lb over its first 10 years of operations.
In December 2020, the Board of Sandfire Resources approved the commercial development of the Motheo Copper Mine located in the Kalahari Copper Belt in Botswana, marking a key step in its transformation into a global, diversified, and sustainable mining company.
Tshukudu Metals Botswana (Pty) Limited (Tshukudu) a 100% owned subsidiary will be the owner and operator of the Motheo Copper Mine which is scheduled to produce up to 30,000 tonnes per annum of copper in concentrate over a 12 year mine life.TMB is targeting development of its Motheo Copper Mine in 2021 and 2022, with its first production in 2023.
GOVERNMENT NOT TAKING UP 15 % STAKE ON OFFER
Beginning of this year presentations were made to the Department of Mines as part of the Mining Licence approval process and to the Ghanzi Regional Council, additional information was requested by Department of Mines in April and was duly supplied by the company.
As part of the Mining Licence approval process, the Government of Botswana has a right to acquire up to a 15% fully contributing interest in all mining projects locally. Quizzed on whether government through Mineral Development Corporation Botswana (MDCB) would be taking up stake in the project Minister Moagi said, “No consideration is being made on that regard”.
“Government is not considering taking up a stake in the Ghantsi Copper Mine project, every opportunity is assessed on all risks, but Government makes money all the while from leases, taxes and royalties, remember if you take stake you are liable for liabilities of the project as well,” Moagi said.
Last month Sandfire announced that it has awarded over P5 billion worth mining contract to African Mining Services (AMS), a subsidiary of Perenti, to deliver the open cast operation.
The contract, which has an estimated value of US$496 million (over 5 billion), is the largest single operational contract for the new Motheo Project covering a period of 7 years and 3 months, with provision for a one-year extension.
The contract according to Sandfire Resources was awarded following a competitive 3-stage tender process which saw a number of key factors taken into consideration when selecting the preferred contractor.
These included Citizen Economic Empowerment, safety culture, equipment suitability and availability, commercial terms and identified improvement opportunities. Under the terms of the contract, AMS has agreed to form a 70:30 Joint Venture with a suitable local Botswana partner or partners.
The JV is expected to be finalized ahead of commencement of mining in early 2022. African Mining Services has been operating in Africa for over 30 years. AMS’ parent company, ASX listed diversified mining services group Perenti, already has a presence in Botswana through Barminco, their underground mining division, at the large-scale Khoemacau Copper Mine located 200km north-east of Motheo.
Last month Sandfire executives said the award of the open pit mining contract represents another key milestone in advancing the Motheo Project towards production, with all components of the contract in line with the key parameters outlined in the December 2020 Definitive Feasibility Study (DFS).
The company said full-scale construction of the US$279 million (over P 3 billion ) mine development is expected to commence immediately upon receipt of the Mining Licence, with mining scheduled to commence in early 2022 ahead of first production in early 2023. This week Sandfire Resources advertised over 10 positions in calling on applications from geologists, mining engineers and geotechnical engineers.
The Motheo mine has an initial mine life of 12.5 years based on production from the T3 pit. The initial development is expected to generate approximately 1,000 jobs during the construction phase and 600 direct full-time jobs during operations, with at least 95% of the total mine workforce expected to be made of up of Botswana citizens.
Later in the week Sandfire Resources announced in the company website that it has received the licence. Sandfire’s Managing Director and CEO, Mr Karl Simich, said the award of the Mining Licence represented a major milestone that would see a significant increase in construction and development activities on site.
“We are absolutely delighted to now be in a position to move to full-scale construction at Motheo, with our construction crews expected to mobilise to site over the next few days. I would like to thank the Government of Botswana for their support throughout the approvals process, which will see Motheo come on-stream in 2023 as one of very few new copper mines commencing production globally.”
Simich said the project is expected to generate approximately 1,000 jobs during construction and 600 full-time jobs during operations, and represents the foundation for Sandfire’s long-term growth plans in Botswana.
“Our vision is that Motheo will form the centre of a new, long-life copper production hub in in the central portion of the world-class Kalahari Copper Belt, where we hold an extensive ground-holding spanning Botswana and Namibia,” he said.