Following subdued performance in 2016, Group 4 Security (G4S) Botswana reported a sterling come back during the financial year ended December 2017. The Botswana Stock Exchange (BSE) listed security services outfit raked in over 25 percent increase in profit before tax in 2017.
This is in comparison to the 2016 financial year which the Group faced a number of challenges owing to economic, political and social forces. The uncertainties, complexity and volatility hit G4S hard as it realised profit before tax decline of 19 percent against 2015. Chairman of Board of Directors, Lebang Mpotokwane, observed in the company‘s 2017 annual report released on Wednesday that 2017 brought a change in fortunes for the company. Mpotokwane noted that the reorganization of the company’s portfolio beard fruits as G4S became more resilient and competitive during the period under review.
“We are now more stable and on more sound financial footing” he said. The company recorded profit before tax of P40.22 million, mirroring an increase of 25.6 percent from 2016 while revenue grew by 2.2 percent, considering the subdued economy; G4S said the revenue performance struggled to break the 4 percent growth mark amid a record number of closures in the mining sector.
“This is by far the best performance, from a Profit before Tax perspective, that G4S has ever recorded and it buttresses the trust we have placed in our financial prudence and good governance approach to issues, “underscored Mpotokwane. G4S explains that on the backdrop of a weaker performance in 2016, management implemented stabilisation plan, which focused on restoring growth to both top and bottom lines in an overly tough trading environment.
This renewed focus meant that G4S went back to the basics in which it is firmly rooted, which are improved customer service and operational efficiency. The growth, reflected by the gross profit, which stands at 16.3 percent, indicates a highly efficient organization, which has re-assigned resources to its core business in order to service its customers better.
“What is pleasing is that we saw a turn-around in financial performance that was coupled with a general rise in employee satisfaction. Our employee satisfaction survey carried out in 2017 posted a 4 percent improvement in the staff morale index. This depicts a hopeful workforce that believes in the direction and future of the company,” submitted the company Chairman.
Mpotokwane lamented credit to the Re-Organization and Stabilization strategy which the business used to ameliorate from the 2016 challenges which led to a subdued performance. “These challenges necessitated the implementation of a plan to stem the tide as well to offer a rapid turn-around to our business” he said. According to the annual report this plan was anchored around motivated employees, operational excellence, customer centricity, cost containment and profitable revenue growth.
“It is evident from the massive growth in our gross margin that the plan yielded the desired results in the areas of efficiency and optimization. Even more gratifying is the fact that through implementation of this plan, the business was able to generate more revenue,” reiterated the G4S Chairman. G4S Managing Director Mokgethi Magapa alluded that the company‘s overall 2017 performance can be described as a watershed year given the impressive results.
“Under the current trading conditions, a net profit growth of 22.4 percent is incredible by any standard given the environment of foreclosures in the mining sector, increased unemployment and a generally sluggish economy. What is even more exciting for us is the fact that we managed to grow our gross margin by a 16.2 percent increase over the previous year,” he said.
Magapa emphasized that the company’s satisfactory performance was mainly driven by the stabilisation plan that was put into effect in June 2017, spearheaded by core strategy of re-aligning processes and systems and repositioning the business in the market as a customer centric one . He said great emphasis was placed on value chain review and the outcome was the freeing up of resources for re-investment in critical areas.
“Our drive on customer excellence underpinned by operational excellence managed to achieve revenue growth of 2.2 percent. The gross margin growth of 16.2 percent over last year, demonstrates that our plan yielded the desired results as we realized very high conversion rates,” he said. G4S MD also noted that employee-focused Change Management Programme embedded within the stabilisation strategy also significantly contributed to financials quick turn-around.
“Our view as Management was that prioritising employee engagement as well as the health and safety of our employees, would give us the required traction, employees were not only part of the change process but actually drove change within our transformation agenda,” he noted. He explained that going forward having developed and deployed the stabilisation plan, his company adopted five key pillars which were the main focus areas for the business in 2017 and beyond (2020) to ensure keen focus on what would yield the desired results quicker and sustainably.
Finance Director Peter Kgomotso said 2.2 percent revenue growth was primarily bolstered by mixed category benefits, new business and positive contract adjustments. “Our balanced portfolio offering presents opportunities for future growth reflecting both product mix and customer retention benefits – We have a solid foundation on which to build a sustainable business”
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”