Botswana Post has registered and passed breakeven point for the first time since 2008, declaring profit before tax of over 4 million Pula. For the past 10 consecutive years, Botswana Post has relied on government bailout, but it appears Chief Executive Officer, Cornelius Ramatlhakwane’s 3 year turnaround strategy has all along been the missing link.
Ramatlhakwane joined Botswana Post in 2015 and at the time promised that the entity would be profitable in three years. Recently, he reminisced that he had a solution which entailed optimizing operational efficiency and reducing operational costs, which the Board of Directors approved at the time.
“With the blessings of the Board of Directors, we embarked on an organizational transformation journey and carried out an operational efficiency scan with the aim of identifying solutions to the challenges that we had as a business, which prevented us from being profitable. We needed to resolve these challenges in a short space of time so that we could reposition the business on a profitability path,” he said.
Botswana Post operational scan, which was concluded in 2016, identified 141 opportunities that could be leveraged on to drive the company towards a new path. Ramatlhakwane explained that since taking the driving seat at Poso House, together with his team they took full advantage of the opportunities and by the end of the 2016/2017 financial year the result of their hard work, determination and dedication were already showing as the company recorded significant improvements in the business.
During that year 2016/17 Botswana Post revenue grew by 6.8%, controllable costs reduced by 7.9%, Cost to income ratio reduced by 3.1%, while losses were reduced by 51.9%. “This business performance took our organization to another level. The level wherein came the increase in our reputation and that of our stakeholders’ confidence in us. We also got sharper and even more determined to achieve profitability,” noted Ramatlhakwane.
According to Botswana Post which relieved its board of directors of their duties last week, the strategy achieved even more efficiency, sustainability and profitability. “With this in mind, our focus, priorities shifted, and we embraced the following steps as a means to unleash our profitability,” he said. The company in this past financial year leveraged new technology and partnerships as additional revenue sources as they continuously increased efficiency and decreased controllable costs.“We also aimed to inculcate a culture of high performance among all members of staff through varied performance improvement measures as well as maximize customer impact at ground level and increase service value,” explained the CEO.
During the financial year under review Botswana Post registered year-on-year Revenue Growth of 3.8%, Cost to Income Ratio of 98.7% while controllable Costs reduced by 5.3%. The company‘s Balance Sheet grew by of 2.9%. “This is incredible output and financial performance, because we realized profit before tax of P4.1M, A first for Botswana Post since the inception of the Icon of Excellence Strategy; almost 10 years ago, I am confident to state that Botswana Post has now reached and gone past the Break–even point. I can say with conviction that we have turned a new leaf; the organization has changed direction forever,” he asserted.
Last week Botswana Postal & Savings Group (BPSG) Board of Directors relieved the entire board of Botswana Post off its duties. Botswana Postal & Savings Group is a holding company established by government to incorporate Botswana Savings Bank, Botswana Courier & Logistics and Botswana Post. The Holding Group was set up following a decision by Government in 2009 to merge the three state owned enterprises .BPSG was commissioned in 2013.
Reports suggest that the decision to constitute a new board at Botswana Post was influenced by the next stage of Botswana Post which is geared to positioning the company as a more profitable state owned Enterprise. It is reported that a whole management overhaul will be instituted in no time as the company is further transformed.
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”