StanChart in P400 million recapitalization
Business
Standard Charted Bank of Botswana (SCBB) announced on Thursday this week an intention to raise capital amounting to a total of 400 million pula in order to continue meeting the minimum capital requirements of Bank of Botswana, and to create a cushion against unexpected impairments caused by a difficult business environment .
The Botswana Stock Exchange (BSE) listed bank which registered losses last year due to tough trading environment explained the capital will be raised by way of an issuance of Undated Unsecured Non Cumulative Subordinated Capital Securities to its parent company Standard Chartered Bank (SCB), which is incorporated in England.
As of January 31st 2018 Standard Chartered Bank Global held 0.831% of the issued ordinary shares of SCBB. The Group outfit is also a holding company of Standard Chartered Holdings (Africa), the latter, as at the last practicable date 31th January 2018 held 74.156% of the issued ordinary shares of Stan Chart Botswana. The terms of the Capital Securities will be documented by way of an agreement between SCB and SCBB.
According to the statement As at 31 January 2018, SCBB had BWP 247.26 million of Tier 2 Capital in issue in the form of subordinated notes issued under the Company’s P500million Debt Issuance Programme and as well as subordinated debt in the total sum of BWP 389 million owing to SCB-StanChart Global.
“In order to continue to meet the minimum capital requirements of Bank of Botswana, and to create a cushion against unexpected impairments caused by a difficult business environment SCBB intends to issue the Capital Securities in the total amount of BWP 400 million, which will comprise Additional Tier 1 Capital for the Bank, to SCB and utilize part of that capital to retire the BWP 247.26 million of Tier 2 Capital by exercise of SCBB’s right of redemption,” explained the statement.
The announcement further submits that the pricing shall be the distribution rate which shall be the bench mark rate plus the spread. The distribution rate means the rate in percentage per annum, notified by the Issuer to the Security Holder, equal to the yield on the Government of Botswana bonds, having a maturity of five years as set forth in the Bank of Botswana PULF Reuters page that is published daily by the Bank of Botswana at 1500hrs July 26 2018
In trading period ended December 2017 StanChart Botswana registered a 6 % decline in income compared to the previous year ended December 2016. This was a result of slight contraction in the company‘s market liquidity and persistent low interest rates. Another contributing factor to StanChart losses was material increase in loan impairments primarily on the back of one exposure in Corporate and Intuitional Banking from the Diamond and Jewelry Sector. The company has since as part of the re-bounce strategy decided to exit the sector.
Further highlights in the company‘s 2017 performances reveals that the Bank suffered diminishing margins as net income declined by 3 percent points. The margin compression is reported to have been led mainly by increasing costs of deposits. Operational expenses excluding impairment increased by 15 % due to continuing technical support and investment in staff.
The bank ‘s performance per segment reveals that Corporate & Institutional Banking revenue shrunk by a whopping 57 million pula as expenses rose by 40.5 % . Retail banking performed very well registering a profit before tax of 123 million pula and a decline on impairment of 80.2 %. The bank’s commercial segment also contributed to the company’s losses in this period under review by recording a loss before taxation of 4.6 million pula. The Bank however managed to reduce the segment‘s operating expenses by 49 %
With the capital raising the Bank notes that the transaction does not involve any assets. It is a capital injection which results in the creation of an asset in the form of cash and a liability of the same amount with a zero net impact. “The effect on the net asset per share is nil,” underscored the statement.
The transaction will benefit SCBB by ensuring an adequate capital position for the bank and provide it with the ability to support asset growth in line with its strategic agenda. “This will assist SCBB to carry out its normal business activities effectively and without possible impediments, which will enhance the performance and soundness of the organization for the future benefit of its shareholders,” observes the Stan Chart Board.
Business
Grit divests from Letlole La Rona
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.
Business
Stargems Group establishes Training Center in BW
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.
Business
Food import bill slightly declines
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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